Zedge, Inc.

Note 1—Description of Business and Summary of Significant Accounting Policies

Description of Business

We build and operate creator communities that collectively serve approximately 19.3 million monthly active users across the Zedge Marketplace and GuruShots. Zedge Marketplace, our flagship platform, is a leading marketplace for mobile personalization content and includes pAInt, our generative AI creation suite. GuruShots is a photo competition game in which photographers of all skill levels compete, vote and improve through gamified photo challenges. DataSeeds.AI (“DataSeeds”) is our business-to-business offering, delivering multimodal datasets spanning images, video and audio, including egocentric video for robotics training, that are rights-cleared and built to customer specification. Except where the context clearly indicates otherwise, the terms “Company,” “Zedge,” “we,” “us,” or “our” refer to Zedge, Inc. and its consolidated subsidiaries.

The Company is headquartered in New York, New York, and has international office locations in Lithuania and Israel.

Our 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 2026 refers to the fiscal year ended July 31, 2026).

The Spin-Off

The Company was formerly a majority-owned subsidiary of IDT Corporation (“IDT”). On June 1, 2016, IDT spun off its interest in the Company to IDT’s stockholders and the Company became an independent public company through a pro rata distribution of the Company’s common stock held by IDT to IDT’s stockholders (the “Spin-Off”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reportable Segments

The Company has two reportable segments: Zedge Marketplace and GuruShots, as further discussed in Note 14,Segment and Geographic Information.

Use of Estimates

The preparation of our 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.

Revenue Recognition

We generate revenue from the following sources: (1) advertising; (2) paid subscriptions; (3) other sources, primarily Zedge Premium (the section of our marketplace where we offer premium content for purchase), and (4) digital goods and services. The substantial majority of our revenue is generated from selling our advertising inventory (“Advertising Revenue”) to advertising networks and advertising exchanges. Our weekly, monthly, yearly and life-time subscriptions allow users to prepay a fixed fee to remove unsolicited advertisements from our Zedge App. In Zedge Premium, we receive 30% of the net purchase price, after payment of fees to Google Play or the App Store, when users purchase licensed content using Zedge Credits or unlock licensed content by watching a video or taking a survey on Zedge Premium. Sales and other similar taxes are excluded from revenues.

Advertising Revenue: We generate the bulk of our revenue from selling the Zedge Marketplace’s advertising inventory to advertising networks and advertising exchanges.

We recognize advertising revenue as advertisements are delivered to users through impressions or ad views (depending on the terms agreed upon with the advertiser). For in-app display ads, in-app offers, engagement advertisements and other advertisements, our performance obligations are satisfied over the life of the relevant contract (i.e., over time), with revenue being recognized as advertising units are delivered, which is Zedge’s performance obligation. The advertiser may compensate us on a cost-per-impression, cost-per-click, cost-per-action basis.

Paid Subscription Revenue: Beginning in January 2019 and April 2023, we started offering paid subscription services sold through Google Play and the App Store, respectively. When a customer subscribes, they execute a clickthrough agreement with Zedge outlining the terms and conditions between Zedge and the subscriber. Google Play and the App Store process subscription prepayment on Zedge’s behalf, and retain a fee of up to 30%. Subscriptions are nonrefundable after a period of seven days. Paid subscriptions are automatically renewed at expiration unless cancelled by subscribers. While customers can cancel at any time, they will not receive any refund, and will continue to receive the service until the end of the subscription period. The duration of these contracts is daily, and revenue for these contracts is recognized on a daily ratable basis. The payment terms for subscriptions sold through Google Play is net 30 days after month-end. The payment terms for subscriptions sold through the App Store is net 45 days after month-end. We recognize subscription revenue ratably over the subscription periods which range from weekly, monthly, yearly and lifetime with lifetime subscriptions having an estimated lifespan of 30 months.

Zedge Premium: Zedge Premium is our marketplace where artists and brands can market, distribute and sell their digital content to our users. The content owner sets the price and end users can purchase the content by paying for it with Zedge Credits, our closed virtual currency. Alternatively, the content owner may opt to place some items behind video ad gates, in which case end users can acquire the content by watching a brief video ad. A user can earn Zedge Credits when taking specific actions such as watching rewarded videos or completing electronic surveys. Alternatively, users can buy Zedge Credits with an in-app purchase. If a user purchases Zedge Credits, Google Play or the App Store retains a fee of 30% of the purchase price. When a user purchases Zedge Premium content using Zedge credits or watching a rewarded video, the artist or brand receives 70% of the actual revenue after the Google Play or iTunes fee (“Royalty Payment”) and we receive the remaining 30%, which is recognized as revenue.

Digital Goods and Services: GuruShots generates the substantial majority of its revenues from the sale of virtual tokens that players can redeem for in-game goods and services (e.g., power-ups, entry fees, or resource bundles). GuruShots distributes its game to users through mobile platforms such as Apple’s App Store and Google Play, as well as via the internet. Through these platforms, users can download the free-to-play game and can purchase virtual goods which are redeemed in the game to enhance their game-playing experience.

Players can pay for their virtual item purchases through various widely accepted payment methods offered in the game. Payments from players for virtual goods are required at the time of purchase, are non-cancellable and relate to non-cancellable contracts that specify GuruShots’ obligations and cannot be redeemed for cash nor exchanged for anything other than virtual goods within the GuruShots’ game. The purchase price is a fixed amount which reflects the consideration that GuruShots expects to be entitled to receive in exchange for use of virtual goods by its customers. The platform providers collect proceeds from the game players and remit the proceeds to GuruShots after deducting their respective platform fees. Sales and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in revenues or operating expenses. GuruShots’ performance obligation is to display the virtual goods in game play based upon the nature of the virtual item.

GuruShots categorizes its virtual goods as consumable. GuruShots’ game sells only consumable virtual goods. Consumable virtual goods represent items that can be consumed by a specific player action and do not provide the player any continuing benefit following consumption. GuruShots has determined - through a review of game play behavior - that players generally do not purchase additional virtual goods until their existing virtual goods balances have been substantially consumed. This review includes an analysis of game players’ historical play behavior, purchase behavior, and the amounts of virtual goods outstanding. Revenue is recognized once the virtual goods are sold. GuruShots monitors its analysis of customer play behavior on a quarterly basis.

As discussed above, GuruShots concluded that revenue related to the promise of enhancing users’ gaming experience through in-game resource purchases should be recognized ratably over the period of benefit period (i.e., the period over which the enhanced gaming experience is provided). However, for practical reasons, GuruShots does not defer the portion of revenue attributable to future uses of resources as of any given balance sheet date. This is due to the duration of the enhanced gaming experience that is provided being, in substantially all of the cases, and applying the portfolio approach (as GuruShots reasonably expects that the effects on the financial statements of applying Accounting Standards Codification (“ASC”) 606 guidance to the portfolio would not differ materially from applying ASC 606 guidance to the individual contracts), a very short time frame ranging from a few hours to less than two weeks. Therefore, the result of recognizing the related revenues at the point in time which user first consumes the respective resource would yield a result that is not substantially different then ratable recognition over the period of benefit. Accordingly, revenue is recognized once the virtual goods are sold.

In fiscal 2025, we introduced DataSeeds.AI (“DataSeeds”). DataSeeds offers rights-cleared multimodal - image, video, and audio - datasets that companies use to build and train their AI models. We draw on a large and long-standing creator ecosystem built through GuruShots and the Zedge Marketplace, complemented by an extensive global network of vetted professional photographers, videographers, and domain specialists to create “Made-to-Order” bespoke datasets. This unified sourcing model gives predictable, spec-driven control over subject matter, diversity parameters, environments, and capture conditions. It enables fast, high-volume delivery of custom datasets used to support frontier model training, robust computer vision performance, and grounded generative AI. We recognize DataSeeds revenue when datasets are delivered and accepted by our customers.

Gross Versus Net Revenue Recognition

We report revenue on a gross or net basis based on management’s assessment of whether we act as a principal or agent in the transaction. To the extent we act as the principal, revenue is reported on a gross basis. To the extent we act as the agent, revenue is reported on a net basis. The determination of whether we act as a principal or an agent in a transaction is based on an evaluation of whether we control the good or service prior to transfer to the customer.

We generally report our advertising revenue net of amounts due to agencies and brokers because we are not the primary obligor in the relevant arrangements, we do not finalize the pricing, and we do not establish or maintain a direct relationship with the advertiser.

GuruShots is primarily responsible for providing the virtual goods, has control over the content and functionality of games and has the discretion to establish the virtual goods’ prices. Therefore, GuruShots is the principal and, accordingly revenues are recorded on a gross basis. Payment processing fees paid to platform providers are recorded within selling, general and administrative expenses. We report DataSeeds revenue on a gross basis as we are the principal in the transaction.

We report subscription revenue gross of the fee retained by Google Play and the App Store, as the subscriber is our customer in the contract and we control the service prior to the transfer to the subscriber.

With respect to Zedge Premium, Zedge, as provider of the platform, is effectively operating as a broker or intermediary connecting online content providers with the end user. While we use gross revenue (net of the 30% fee retained by Google Play or the App Store when a user purchases Zedge Credits) as a performance metric, we record revenue on a net basis from Zedge Premium which consists of a 30% platform fee, in-app purchases profit and breakage. Content providers are paid their portion of revenue which is a 70% share of the gross revenue calculated.

Concentration of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents and trade accounts receivable. We hold cash and cash equivalents at several major financial institutions, which may exceed FDIC insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions. While we may be exposed to credit losses due to the nonperformance of the holders of its deposits, we do not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition.

We routinely assess the financial strength of our customers. As a result, we believe that our accounts receivable credit risk exposure is limited and have not experienced significant write-downs in our accounts receivable balances. In fiscal, 2026, two largest customers represented 34% and 7% of our revenue. In fiscal 2025, two largest customers represented 37% and 6% of our revenue. At July 31, 2026, three customers represented 37%,16% and 15% of our accounts receivable balance and at July 31, 2025, two customers represented 48% and 13% of our accounts receivable balance. All of these significant customers are advertising exchanges operated by leading companies, and the receivables represent many smaller amounts due from advertisers.

Direct Cost of Revenues

Direct cost of revenues for the Company consists of fees paid to third parties that provide the Company with internet hosting, content serving and filtering, data analytic tools and marketing automation services. Such costs are charged to expense as incurred. Direct cost of revenues also include production costs related to DataSeeds.

Property and Equipment, net

Property and equipment is recorded at cost less accumulated depreciation and amortization, and depreciated or amortized on a straight-line basis over its estimated useful lives, which range as follows: capitalized software and technology development costs—3 years; and other—5 years. Other is comprised of furniture and fixtures, office equipment, video conference equipment, computer hardware and computer software. Normal repairs and maintenance are expensed as incurred. Replacement property and equipment is capitalized and the property and equipment accounts are relieved of the items being replaced or disposed of if no longer of value. The related cost and accumulated depreciation of the disposed assets are eliminated and any gain or loss on disposition is included in the results of operations in the year of disposal.

Capitalized Software and Technology Development Costs-Internal-Use Software related to Zedge Marketplace

Software and technology development activities generally fall into three stages:

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

During the Application and Infrastructure Development Stage, we begin to capitalize costs when the project has been properly authorized and we determine that completion is probable. If a project is subsequently cancelled prior to placement in service, costs that have been capitalized to date will be reviewed for potential impairment. Capitalization ceases no later than the point at which a computer software project is substantially complete and ready for its intended use. Amortization, which is generally over three years, begins for each project when the code is ready for use, whether or not it is actually placed in service at that time (an exception being if the project’s functionality completely depends on the completion of another project, in which case, amortization begins when that other project is ready for use).

During the Post-Implementation/Operating Stage, we expense training costs and maintenance costs as incurred. However, upgrades and enhancements, defined as modifications to existing internal-use software that result in additional functionality (modifications to enable the software to perform tasks that it was previously incapable of performing, normally requiring new software specifications and perhaps a change to all or part of the existing software specifications) are treated as though they were new projects, and are assessed utilizing the same stages and criteria on a project-by-project basis. As such, internal costs incurred for upgrades and enhancements are expensed or capitalized based on the requirements noted above, while costs incurred for maintenance are expensed as incurred. These projects are tracked individually, such that the beginning and ending of the capitalization can be appropriately established, as well as the amounts capitalized therein.

We evaluate these long-lived assets for impairment whenever circumstances arise that indicate the carrying amount of an asset may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value. We recorded $0.1 million impairment charges in Q2 of our fiscal year ended July 31, 2026 related to Emojipedia’s capitalized software development costs. See Note 6,Intangible, Net and Goodwill, for additional information.

Capitalized Software and Technology Development Costs-Software to Be Sold, Leased, or Marketed related to GuruShots

We expense research and development costs incurred in the process of software development until technological feasibility has been established for the product. Once technological feasibility has been established, software costs are capitalized until the product is available for general release to customers. Costs incurred from the time that the product is available for general release to customers are expensed as incurred. Costs related to upgrades and enhancements are capitalized only if they result in added functionality or marketability of the original product.

The amortization of these capitalized costs begins when a product is available for general release to customers and is computed on a product-by-product basis at a rate not less than straight-line basis over the product’s estimated economic life. At each balance sheet date, we compare the unamortized capitalized costs to the net realizable value of that product and write off the amount by which the unamortized capitalized costs of that product exceed its net realizable value.

We evaluate these long-lived assets for impairment whenever circumstances arise that indicate the carrying amount of an asset may not be recoverable. The Company’s strategic reassessment of GuruShots’ operations in connection with the restructuring initiative resulted in a $0.8 million impairment of capitalized software and technology development costs which is recorded in the Company’s consolidated statements of operations and comprehensive income (loss) for the fiscal year ended July 31, 2025. See Note 17,Restructuring, Impairments, and Related Charges, for additional information.

Intangible Assets, Net

We test the recoverability of our intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We test for recoverability based on the projected undiscounted cash flows to be derived from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset, we will record an impairment loss, if any, based on the difference between the estimated fair value and the carrying value of the asset. We generally measure fair value by considering sale prices for similar assets or by discounting estimated future cash flows from such asset using an appropriate discount rate. Cash flow projections and fair value estimates require significant estimates and assumptions by management. Should the estimates and assumptions prove to be incorrect, we may be required to record impairments in future periods and such impairments could be material.

Intangible assets are carried at cost, less accumulated amortization, unless a determination has been made that their value has been impaired. Intangible assets are amortized on a straight-line basis over their estimated useful lives of between five tofifteen years. We review identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value. We recorded $3.7 million impairment charges in Q2 of our fiscal year ended July 31, 2026 related to Emojipedia’s intangible assets. See Note 6,Intangible, Net and Goodwill, for additional information.

Goodwill

Goodwill represents the excess of purchase price and related costs over the fair value of assets acquired and liabilities assumed of the business acquired. Under ASC 350,Intangibles-Goodwill and Other, goodwill is not amortized, but instead is tested for impairment annually, or if certain circumstances indicate a possible impairment may exist.

We test goodwill for impairment on the first day of the fourth fiscal quarter or upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired. Goodwill is assigned to our reporting units, which are our operating segments, or components of an operating segment, that constitute a business for which discrete financial information is available, and for which segment management regularly reviews the operating results. During the annual impairment review process we have the option to first perform a qualitative assessment (commonly referred to as “step zero”) over relative events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, or to perform a quantitative assessment (“step one”) where we estimate the fair value of each reporting unit using primarily a market capitalization approach.

We would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit. Additionally, we consider income tax effects from any tax-deductible goodwill on the carrying amount of its reporting unit when measuring the goodwill impairment loss, if applicable.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were $12.3 million and $13.9 million in cash equivalents as of July 31, 2026 and 2025, respectively.

Income Taxes

The accompanying consolidated financial statements include provisions for federal, state and foreign income taxes. We recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. We consider the scheduled reversal of deferred tax assets and liabilities, projected future taxable income and tax planning strategies in its assessment of a valuation allowance. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change.

We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. We determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. Tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of tax benefit to recognize in the consolidated financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the consolidated financial statements will generally result in one or more of the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase in a deferred tax liability.

We classify interest and penalties on income taxes as a component of income tax expense included in the income tax expense (benefit) line item in the accompanying consolidated statements of operations and comprehensive income (loss).

Contingencies

We accrue for loss contingencies when both (a) information available prior to issuance of the consolidated financial statements indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can reasonably be estimated. When we accrue for loss contingencies and the reasonable estimate of the loss is within a range, we record its best estimate within the range. When no amount within the range is a better estimate than any other amount, we accrue the minimum amount in the range. We disclose an estimated possible loss or a range of loss when it is at least reasonably possible that a loss may have been incurred.

Earnings Per Share (“EPS”)

Basic earnings per share is computed by dividing net income attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increase is anti-dilutive.

As disclosed in Note-8Equity, the rights of holders of Class A common stock and Class B common stock are identical except for certain voting and conversion rights and restrictions on transferability. As such, the Company is not required to break out EPS by class.

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

The following shares were excluded from the diluted earnings per share computation because their inclusion would have been anti-dilutive (in thousands):

For the fiscal years ended July 31, 2026 and 2025, the diluted loss per share equals basic loss per share because the Company incurred a net loss during these periods and the impact of the assumed exercise of stock options and vesting of restricted stock and deferred stock units (“DSUs”) would have been anti-dilutive.

Stock-Based Compensation

We account for our share-based compensation arrangements in accordance with ASC 718,Compensation-Stock Compensation (“ASC 718”) which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors based on estimated fair values on the grant date. Compensation cost for awards is recognized using the straight-line method over the vesting period or the graded vesting method if awards with market or performance conditions include graded vesting features, or if an award includes both a service condition and a market or performance condition. Stock-based compensation is included in selling, general and administrative expense in the consolidated statements of operations and comprehensive income (loss). We account for forfeitures for all awards as they occur.

Fair Value Measurements

Fair value of financial and non-financial assets and liabilities is defined as an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs to valuation techniques used to measure fair value, is as follows:

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

Derivative Instruments – Foreign Exchange Forward Contracts

The Company’s earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, primarily the U.S. Dollar (“USD”)-EUR and USD-ILS exchange rates. The Company’s risk management policy allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate exposure. Foreign currency derivative activities are subject to the management, direction and control of the executive management. Foreign exchange forward contracts are recognized on the consolidated balance sheets at their fair value in “Prepaid expenses and other receivables” or “Accrued expenses and other current liabilities”, and changes in fair value are recognized in “Net loss resulting from foreign exchange transactions” in the consolidated statements of operations and comprehensive income (loss).

Functional Currency

The U.S. Dollar is the Company’s functional currency. The functional currencies for the Company’s subsidiaries that operate outside of the United States are USD for GuruShots, NOK for Zedge Europe AS and EUR for Zedge Lithuania UAB which is a wholly-owned subsidiary of Zedge Europe AS, which are the currencies of the primary economic environments in which they primarily expend cash. The Company translates assets and liabilities denominated in foreign currencies to U.S. Dollars at the exchange rate in effect as of the consolidated financial statement date, and translates accounts from the consolidated statements of operations and comprehensive income (loss) using the weighted average exchange rate for the period. Gains or losses resulting from foreign currency translations are recorded in “Accumulated other comprehensive loss” in the accompanying consolidated balance sheets. Foreign currency transaction gains and losses including gains and losses from currency exchange rate changes related to intercompany receivables and payables are reported in “Net loss resulting from foreign exchange transactions” in the accompanying consolidated statements of operations and comprehensive income (loss).

Allowance for Credit Losses

The allowance for credit losses reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The allowance is determined based on known troubled accounts, historical experience and other currently available evidence. Bad debts are written-off upon final determination that the trade accounts will not be collected. There was no allowance for credit losses as of July 31, 2026 and 2025.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to gains and losses that are recorded as an element of stockholders’ equity and are excluded from net income (loss). The Company’s other comprehensive income (loss) and accumulated other comprehensive income (loss) are comprised principally of foreign currency translation adjustments.

Operating and Finance Leases

The Company has operating leases primarily for office space. The determination of whether an arrangement is a lease or contains a lease is made at inception by evaluating whether the arrangement conveys the right to use (“ROU”) an identified asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset. Operating leases are included in other assets, accrued expenses and other current liabilities, and other liabilities, on the Company’s consolidated balance sheets. The Company does not have any finance leases.

Leases with a term greater than one year are recognized on the consolidated balance sheets in the line items cited above. The Company has elected not to recognize leases with terms of one year or less on the consolidated balance sheets. Lease obligations and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. As the interest rate implicit in lease contracts is typically not readily determinable, the Company utilizes the materially approximate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Restructuring Charges

The restructuring charges incurred by the Company in fiscal 2025 consist primarily of cash expenditures for compensation and severance payments, employee benefits, payroll taxes and related facilities restructuring costs associated with the Company’s workforce reduction implemented in the second quarter of fiscal 2025. Employee termination benefits are recognized as a liability at estimated fair value, at the time of communication to employees, unless future service is required, in which case the costs are recognized ratably over the future service period. Ongoing termination benefits are recognized as a liability at estimated fair value when the amount of such benefits is probable and reasonably estimable. Charges related to facilities restructuring actions are comprised of costs related to early termination of the lease agreement and impairment of the right-of-use asset in connection with the abandonment of the property. We recorded an impairment of ROU asset of $140,000 in the fourth quarter of fiscal 2025. See Note 17,Restructuring, Impairments, and Related Charges, for additional information. The related early lease termination costs have not been determined as of July 31, 2026. See Note 10,Operating Leases, for additional information.

Recent Accounting Pronouncements (Issued 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.

We reviewed all other accounting pronouncements issued during fiscal 2026 and concluded that they were not applicable to the Company.

Note 2—Revenue

Disaggregation of Revenue

The following table summarizes revenue by type of monetization for the Zedge Marketplace and GuruShots for the periods presented:

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. As of July 31, 2026, the Company’s deferred revenue balance related to subscriptions was approximately $5.7 million, representing approximately 1.3 million active subscriptions, including approximately 1.1 million lifetime subscriptions. As of July 31, 2025, the Company’s deferred revenue balance related to subscriptions was approximately $5.1 million, representing approximately 984,000 active subscriptions, including approximately 693,000 lifetime subscriptions. As of July 31, 2024, the Company’s deferred revenue balance related to subscriptions was approximately $2.9 million, representing approximately 669,000 active subscriptions, including approximately 210,000 lifetime subscriptions.

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 redeem Zedge Credits to acquire Zedge Premium content or upon expiration of the Zedge Credits upon 180 days of account inactivity. As of July 31, 2026, 2025 and 2024, the Company’s deferred revenue balance related to Zedge Premium was approximately $344,000, $248,000 and $251,000, respectively.

The amount of deferred revenue recognized in fiscal 2026 that was included in the deferred revenue balance at July 31, 2025 was $3.2 million. The amount of deferred revenue recognized in fiscal 2025 that was included in the deferred revenue balance at July 31, 2024 was $1.9 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 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 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. 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 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):

Fair Value of Other Financial Instruments

The Company’s other financial instruments at July 31, 2026 and 2025 included prepaid expenses and other current assets, and 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 EUR exchange rate. 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 15Revolving Credit Facility). The Company does not apply hedge accounting to these contracts because these are not qualified as hedging accounting pursuant to Accounting Standards Codification (“ASC”) 815; therefore the changes in fair value are recorded in the 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. As such, there isno outstanding NOK forward contracts and the outstanding EUR contracts at July 31, 2026 was as follows:

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

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

Note 5—Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Depreciation and amortization expense pertaining to property and equipment was approximately $0.3 million and $0.7 million for the fiscal years ended July 31, 2026 and 2025, respectively.

Note 6—Intangible Assets, Net 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 tofifteen 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 July 31, 2026 and 2025 (in thousands):

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 beginning in the second quarter of fiscal 2026, and have reduced, and are expected to continue 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:

Estimated future amortization expense for intangible assets as of July 31, 2026 is as follows (in thousands):

The Company’s amortization expense for intangible assets were $349,000 and $447,000 for the fiscal years ended July 31, 2026 and 2025, respectively.

Goodwill

The following table summarizes the changes in the carrying amount of goodwill for the fiscal year ended July 31, 2026 (in thousands):

The total accumulated impairment loss of the Company’s goodwill as of July 31, 2026 was $8.7 million.

Note 7—Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

Note 8—Equity

Class A Common Stock and Class B Common Stock

The rights of holders of Class A common stock and Class B common stock are identical except for certain voting and conversion rights and restrictions on transferability. The holders of Class A common stock and Class B common stock have the right to receive identical dividends per share if and when declared by the Company’s Board of Directors. In addition, the holders of Class A common stock and Class B common stock have identical and equal priority rights per share in liquidation. The Class A common stock and Class B common stock do not have any other contractual participation rights. The holders of Class A common stock are entitled tothree votes per share and the holders of Class B common stock are entitled toone-tenth of a vote per share. Each share of Class A common stock may be converted intoone share of Class B common stock, at any time, at the option of the holder. Shares of Class A common stock are subject to certain limitations on transferability that do not apply to shares of Class B common stock.

Note 9—Commitments and Contingencies

The Company may from time to time be subject to 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 material adverse effect on the Company’s results of operations, cash flows or financial condition.

Note 10— Operating Leases

The Company has operating leases primarily for office space located in Vilnius, Lithuania and Tel Aviv, Israel.

The Company reviews the impairment of right-of-use assets (“ROU”) assets consistent with the approach applied for the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.

In connection with the restructuring we implemented in January 2025 (See Note 17Restructuring, Impairments, and Related Charges for more details), we determined that the carrying value of the ROU asset for our office in Trondheim were not recoverable and recorded an impairment charge of approximately $140,000 in the fourth quarter of fiscal 2025. The remaining $61,000 lease liabilities as of July 31, 2026 related to the office in Trondheim is included and presented under accrued expenses and other current liabilities. The Company will continue to make lease payments under the lease until the end of the lease term on March 31, 2027, or sooner upon signing of an early lease termination agreement.

The Company’s ROU assets recorded and included inother assets were approximately $226,000 and $64,000 at July 31, 2026 and 2025, respectively.

The following table presents the lease-related assets and liabilities for leases recorded on the consolidated balance sheets (in thousands) as of July 31, 2026 and 2025:

The following table includes the components of our occupancy costs in our consolidated statements of operations and comprehensive income (loss):

The following table summarizes the weighted average remaining lease term and weighted average discount rate as of July 31, 2026 and 2025:

Future minimum lease payments under non-cancellable leases at July 31, 2026 are as follows (in thousands):

Effective October 1, 2025, the Company commenced a new lease with a three-year term for a 3,600 square foot office space. The annual lease cost is approximately $103,000, including eight parking spaces.

Note 11—Income Taxes

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

Income tax expense (benefit) consisted of the following (in thousands):

The income taxes paid by the Company are as follows:

Income taxes paid (net of refunds) exceeds 5 percent of total income taxes paid (net of refunds) in the following jurisdictions (in thousands):

The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes reported were as follows (in thousands):

The Company is subject to taxation in the United States and certain foreign jurisdictions. Earnings from non-U.S. activities are subject to local country income tax.

The material jurisdictions where the Company is subject to potential examination by tax authorities include the United States, Norway and Lithuania.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) contains a provision which subjects a U.S parent of a foreign subsidiary to current U.S. tax on its global intangible low-taxed income (“GILTI”). The GILTI income is eligible for a deduction, which lowers the effective tax. The Company will report the tax impact of GILTI as a period cost when incurred. Accordingly, the Company is not providing deferred taxes for basis differences expected to reverse as GILTI.

U.S companies are eligible for a deduction that lowers the effective tax rate on certain foreign income. This regime is referred to as the Foreign-Derived Intangible Income deduction (“FDII”).

Significant components of the Company’s deferred tax assets and are as follows (in thousands):

At July 31, 2026, the Company had available gross U.S. federaland state net operating loss (“NOL”) carryforwards from domestic operations of approximately $1.4 million and $1.1 million, respectively, to offset future taxable income. The state NOL carryforwards will begin to expire in 2040. In addition, the Company has approximately $8.0 million of Foreign NOLs (Israel) which are available to offset future taxable income in Israel without time limit.

The change in the valuation allowance is as follows (in thousands):

At July 31, 2026 and 2025, the Company didnot have any unrecognized tax benefits and doesnot anticipate any significant changes to the unrecognized tax benefits within the twelve months of the date of filing of this annual report. In the fiscal years ended July 31, 2026 and 2025, the Company recorded $0 and $4,500, respectively, in interest and penalties on income taxes. At July 31, 2026 and 2025, there wasno accrued interest included in income taxes payable.

The Company currently remains subject to examinations of its U.S. federal, state, and foreign tax returns generally for fiscal years 2021 through 2025.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which enacts significant changes to the U.S. tax and related laws. Some of the provisions of the new tax law that affect corporations include but are not limited to expensing of domestic specified research or experimental expenditures, increasing the limitation on the deductibility of business interest expense under IRC §163(j) to thirty percent of EBITDA, and one hundred percent bonus depreciation on eligible property acquired after January 19, 2025. The Company does not expect that the new tax law will have a material impact on its financial condition and results of operations.

Note 12—Stock-Based Compensation

2016 Stock Incentive Plan

In November 2025, the Company’s Board of Directors amended the Company’s 2016 Stock Option and Incentive Plan (as amended to date, the “2016 Incentive Plan”) to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional 150,000 shares to an aggregate of 2,781,000 shares. This amendment was ratified by the Company’s stockholders at the Annual Meeting of Stockholders held on January 14, 2026. At July 31, 2026, there were approximately 289,000 shares of Class B common stock available for awards under the 2016 Incentive Plan. These shares were transferred to the 2026 Stock Incentive Plan, see below.

2026 Stock Incentive Plan

In July 2026, the Company’s Board of Directors approved the Company’s new 2026 Stock Option and Incentive Plan (the “2026 Incentive Plan”) upon the expiration of the 2016 Incentive Plan in June 2026, and approved the reservation of the following shares of the Company’s Class B common stock, par value $0.01 each (“Shares”), for issuance pursuant to grants made under the 2026 Plan:

The Company’s Board of Directors also approved the submission of the 2026 Incentive Plan to the Company’s stockholders for their approval at the 2027 Annual Meeting and for inclusion in the Company’s proxy statement relating to the 2027 Annual Meeting.

Stock-based compensation

The Company recognizes stock-based compensation for stock-based awards, including stock options, restricted stock and deferred stock units based on the estimated fair value of the awards and recognized over the relevant service period and/or market conditions. The Company estimates the fair value of stock options on the measurement date using the Black-Scholes option valuation model (“BSM”). The Company estimates the fair value of the restricted stock and DSU’s with service conditions only using the current market price of the stock. The Company estimates the fair value of the DSU’s 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, the expected term of options or awards, a risk-free interest rate and dividend yield. The Company recognizes stock-based compensation using the straight-line method over the vesting period or the graded vesting method if awards with market or performance conditions include graded vesting features, or if an award includes both a service condition and a market or performance condition.

In fiscal 2026 and fiscal 2025, the Company recognized stock-based compensation for its employees and non-employees as follows (in thousands):

As of July 31, 2026, the Company’s unrecognized stock-based compensation expense was $160,000 for unvested stock options, $63,000 for unvested restricted stock and $49,000 for unvested DSUs.

In the fiscal years ended July 31, 2026 and 2025 there was no income tax benefit resulting from tax deductions in excess of the compensation cost recognized for the Company’s stock-based compensation.

Stock Options

The Company’s option awards generally have a term of 10 years from grant date, are exercisable upon vesting unless otherwise designated for early exercise by the Board of Directors at the time of grant and are pursuant to individual written agreements. Grants generally vest over a three-year or four-year period.

In fiscal years 2026 and 2025, the Compensation Committee approved grants of options to purchase 21,750 and 85,100 shares, respectively, of the Company’s Class B common stock to various executives, consultants and employees, vesting mostly over a three-year or four-year period. Unrecognized compensation expense related to these awards granted in fiscal 2026 and 2025 were $51,000 and $163,000 respectively based on the estimated fair value of the options on the grant dates.

In fiscal 2026, the Company received proceeds of $244,912 from the exercise of stock options for which the Company issued 202,329 shares of its Class B common stock. Also in fiscal 2026, our CEO exercised options to purchase 181,616 shares of Class B common stock and elected to net settle the aggregate exercise price. Accordingly, the Company withheld 104,384 shares with a fair value of approximately $315,000 in satisfaction of the exercise price. Additionally, the Company withheld 27,842 shares with a fair value of approximately $84,000 to satisfy tax withholding obligations. The exercise price settled through share withholding represents a non-cash financing activity.

In fiscal 2025, the Company received proceeds of $62,000 from the exercise of stock options for which the Company issued 105,000 shares of its Class B common stock.

The Company cancelled or forfeited options grants of 26,392 shares and 5,000 shares in fiscal 2026 and fiscal 2025 respectively primarily due to employee resignations and option expirations.

The fair value of stock options was estimated on the date of the grant using the BSM and the assumptions in the following table. Expected volatility is based on historical volatility of the Company’s Class B common stock. The Company uses the simplified method to estimate the expected term of the stock-based payments granted due to the limited history of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

The Company used the following weighted average assumptions in its BSM pricing model:

The following represents option activity for the fiscal years ended July 31, 2026 and 2025, including options granted prior to our separation from our former parent in a spin-off on June 1, 2016 and options granted under the 2016 Incentive Plan adopted on June 2, 2016:

The following table summarizes the weighted average grant date fair value of options granted, intrinsic value of options exercised and fair value of awards vested in the periods indicated:

At July 31, 2026, there was approximately $160,000 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a period of 2.5 years.

At July 31, 2025, there was approximately $219,000 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 2.8 years.

Restricted Stock

In April 2022, in connection with the GuruShots acquisition, the Company issued 626,242 shares of the Company’s Class B common stock with a grant date fair value of $4 million to the founders and employees as a retention bonus pool which is managed by a trustee based in Israel. These shares vested, in equal tranches, over three years assuming that the recipients remain employed by the Company or a subsidiary through the vesting dates. In fiscal 2025, the Company amortized the final remaining $0.8 million in stock-based compensation expenses related to these shares.

At July 31, 2026, there were 38,736 non-vested restricted shares of the Company’s Class B common stock. At July 31, 2026, there was $63,000 unrecognized compensation cost related to these non-vested restricted shares, which is expected to be recognized over a weighted-average period ofsix months.

At July 31, 2025, there were 77,000 non-vested restricted shares of the Company’s Class B common stock. At July 31, 2025, there was $190,000 of total unrecognized compensation cost related to these non-vested restricted shares, which is expected to be recognized over a weighted-average period of 1.5 years.

In fiscal 2026 and fiscal 2025,39,000 and 219,000, previously restricted shares vested, respectively. There were no shares repurchased in connection with tax withholdings related to these vesting events.

The following represents restricted shares activity for the fiscal years ended July 31, 2026 and 2025:

Deferred Stock Units

Deferred Stock Units Equity Incentive Programs

In November 2024, the Company adopted an equity incentive program (under the 2016 Incentive Plan) in the form of grants of DSUs that, upon vesting, will entitle the grantees to receive shares of the Company’s Class B common stock. The number of shares that will be issuable on each vesting date will vary between 33% to 300% of the number of DSUs that vest on that vesting date, depending on the market price for the underlying Class B common stock on the vesting date relative to the grant price approved by the Compensation Committee of the Company’s Board of Directors of $2.76 per share.

The Company estimated that the fair value of the DSUs on the date of grants was $388,000 in aggregate, which is being recognized on a graded vesting basis over the requisite service periods ending in September 2027. The Company used a risk neutral Monte Carlo simulation method in its valuation of the DSUs, which simulated the range of possible future values of the Company’s Class B common stock over the life of the DSUs. The Monte Carlo simulation model incorporates the likelihood of achieving the stock price targets and requires the input of assumptions including the underlying stock price, expected volatility, risk-free rate and dividend yield.

In fiscal 2026, the Company purchased 4,312 shares of Class B Common Stock from various employees for $13,000 to satisfy tax withholding obligations in connection with the vesting of DSUs. In fiscal 2025, the Company purchased 6,903 shares of Class B Common Stock from various employees for $22,000 to satisfy tax withholding obligations in connection with the vesting of DSUs.

The DSUs with both service and market conditions granted in September 2021 were valued using a Monte Carlo Simulation valuation model, with a valuation of $7.19 per DSU. Total grant date fair value for these DSUs was approximately $1.5 million. On September 7, 2024, DSUs award with respect to approximately 170,000 shares were canceled without the reversal of compensation expenses of approximately $1.2 million because the market condition was not achieved.

The following represents DSU activity for the fiscal years ended July 31, 2026 and 2025:

At July 31, 2026, there were 52,939 non-vested DSUs and the unrecognized compensation expense related to unvested DSUs was an aggregate of $49,000 which is expected to be recognized over a weighted-average period of 1.1 years.

At July 31, 2025, there were 90,883 non-vested DSUs and the unrecognized compensation expense related to unvested DSUs was an aggregate of $184,000 which is expected to be recognized over a weighted-average period of 2.1 years.

Note 13—Related Party Transactions

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. Following the Spin-Off, IDT charges the Company for services it provides, and the Company charges IDT for services it provides, pursuant to Services Agreements.

In fiscal 2026 and 2025, the Company was charged by IDT a total of $131,000 and $126,000, respectively, for legal services. In addition, the Company charged IDT approximately $89,000 and $86,000, respectively, for consulting services provided to IDT by a Zedge employee. As of July 31, 2026 and 2025, the Company owed IDT $9,000 and $1,000 respectively.

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

On June 19, 2024, the Company signed a revenue sharing agreement with National Retail Services, Inc. (“NRS”), a wholly owned subsidiary of IDT, whereby the Zedge group of companies (Zedge, Emojipedia and GuruShots) will provide a selection of their digital content for display on NRS’s screens and share in the revenue generated from the resulting advertisements.

In fiscal 2026 and 2025 the Company’s revenue generated in accordance to the NRS revenue sharing agreement was $17,000 and $147,000, respectively. As of July 31, 2026 and 2025, the Company was owed $2,000 and $10,000, respectively, from NRS which is included in prepaid expenses and other receivables.

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 and the Chairman of the Audit Committee owns a significant minority stake in Activist. The Company paid $60,000 to Activist in each of the fiscal years ended July 31, 2026 and 2025.

Note 14—Segment and Geographic Information

Segment Information

The Company determines its operating segments based on how itschief operating decision maker (“CODM”) manages the business, allocates resources, makes operating decisions and evaluates operating performance. The Company’s CODM was its Chief Executive Officer as of July 31, 2026.

The CODM evaluates the performance of each operating segment using segment income (loss) from operations. The Company defines segment income (loss) from operations as revenue less costs and expenses. Expenses include indirect costs that are allocated to operating segments based on a reasonable allocation methodology, which are generally related to sales and marketing activities and general and administrative overhead. Revenue and expenses exclude transactions between the Company’s operating segments.

The CODM uses segment income (loss) from operations to allocate resources during the annual budgeting and forecasting process. The CODM considers segment income (loss) from operations when making decisions on operating and capital resource allocation. Additionally, the CODM uses segment income (loss) from operations to evaluate operating strategy and assess segment performance by comparing the results of each segment.

There aretwo reportable segments, which are the Zedge Marketplace and GuruShots (which includes DataSeeds). The following table provides information about these two reportable segments (in thousands):

The CODM does not evaluate operating segments using asset information and, accordingly, the Company does not report asset information by segment.

Geographic Information

Net long-lived assets and total assets held outside of the United States, which are located primarily in Israel and Lithuania, were as follows (in thousands):

Note 15—Revolving Credit Facility

On October 28, 2022, the Company entered into an Amended and Restated Loan and Security Agreement (“Amended Loan Agreement”) with Western Alliance Bank (“WAB”). Pursuant to the Amended Loan Agreement, WAB agreed to provide the Company with a new term loan facility in the maximum principal amount of $7 million for a four-year term and a $4 million revolving credit facility for a two-year term. Amounts outstanding under the term loan and credit facility of the Amended Loan Agreement bear interest at a per annum rate equal to the Prime Rate (as published in The Wall Street Journal) plus 0.5%, with a Prime “floor” rate of 4.00%.

Pursuant to the Amended Loan Agreement, $2 million was advanced in a single-cash advance on October 28, 2022, with the remaining $5 million available for drawdown during twenty-four (24) months after closing. Each drawdown must be in an amount of not less than $1 million. On May 11, 2023, the Company entered into a Modification Agreement pursuant to which the Company agreed to modify the Amended Loan Agreement to reduce the remaining $5 million availability to $0. On November 15, 2023, the Company elected to prepay the entire principal amount of $2 million which cannot be reborrowed.

On October 28, 2024, the Company entered into an Amended and Restated Loan and Security Agreement Modification Agreement with WAB. Pursuant to the modification agreement, WAB agreed to renew the $4 million revolving credit facility for another four-year term through October 28, 2028, and remove certain provisions, including financial covenants, in respect of the $2 million term loan which has been repaid and cannot be reborrowed.

The Amended Loan Agreement also includes customary negative covenants, subject to exceptions, which limit transfers, capital expenditures, indebtedness, certain liens, investments, acquisitions, dispositions of assets, restricted payments and the business activities of the Company, as well as customary representations and warranties, affirmative covenants and events of default, including cross defaults and a change of control default.

As of November 16, 2016, the Company entered into a Foreign Exchange Agreement with WAB to allow the Company to enter into foreign exchange contracts not to exceed $5.0 million in the aggregate at any point in time under its revolving credit facility. This limit was raised to approximately $7.5 million pursuant to the Loan and Security Modification Agreement dated May 30, 2018. The available borrowing under the revolving credit facility is reduced by an applicable foreign exchange reserve percentage as determined by WAB, in its reasonable discretion from time to time, which was set at 10% of the nominal amount of the foreign exchange contracts in effect at the relevant time. At July 31, 2026, there were $3.6 million of outstanding foreign exchange contracts, which reduced the available borrowing under the revolving credit facility by approximately $363,000.

Note 16—Defined Contribution Plan

In September 2016, the Company adopted a 401(k) Plan, effective August 1, 2016, available to all employees based in the United States meeting certain eligibility criteria. The 401(k) Plan permits participants to elect pre-tax or after-tax salary deferrals that will be contributed to the 401(k) Plan, not to exceed the limits established by the Internal Revenue Code. The 401(k) Plan provides for enhanced safe harbor employer matching contributions. All contributions made by participants and safe harbor matching contributions by the Company will be fully vested. The Company’s Class B common stock is not an investment option for elective deferrals by the 401(k) Plan’s participants. However, matching contributions may be made in shares of Class B common stock of the Company.

The Company’s cost for matching contributions to the 401(k) Plan were $53,000 and $52,000 for the fiscal years ended July 31, 2026 and 2025, respectively. In lieu of making cash contributions, the Company opted to contribute 14,268 shares and 20,225 shares of the Company’s Class B common stock to the 401(k) Plan for fiscal 2026 and fiscal 2025, respectively.

Note 17—Restructuring, Impairments, and Related Charges

In January 2025, the Company implemented a corporate restructuring aimed to reduce headcount at GuruShots and other operating expenses, and ultimately resulting in the closure of our Norway operations. This restructuring allows us to consolidate our workforce in Lithuania and Israel, streamlining operations, driving efficiency and reducing expenses beyond compensation, and is designed to position the Company for sustainable growth and support its strategic objectives.

In connection with this initiative, the Company instituted moves expected to result in the reduction of its total global headcount by approximately 22% and recognized a restructuring charge of $1.6 million primarily consisting of employee termination benefit which is recorded in the Company’s consolidated statements of operations and comprehensive income (loss) for the fiscal year ended July 31, 2025.

The Company capitalizes certain costs related to software to be sold, leased, or marketed in accordance with ASC 985-20,Costs of Software to Be Sold, Leased, or Marketed related to GuruShots. The Company evaluates these long-lived assets for impairment whenever circumstances arise that indicate the carrying amount of an asset may not be recoverable. The Company’s strategic reassessment of GuruShots’ operations in connection with the restructuring initiative resulted in a $0.8 million impairment of capitalized software and technology development costs which is recorded in the Company’s consolidated statements of operations and comprehensive income (loss) for the fiscal year ended July 31, 2025.

The following table provides information about restructuring, impairments, and related charges for the Company’s two reportable segments (in thousands):

The following table shows a roll forward of restructuring reserves, primarily consists of employee termination benefits, that will result in cash spending. These amounts exclude asset impairment charges and other asset disposal activities (in thousands):

As of July 31, 2025, the restructuring initiated in January 2025 has been substantially completed.

Note 18—Dividends and Distributions

Cash Distributions

During the fiscal year ended July 31, 2026, the Company declared and paid four quarterly cash distributions to its stockholders totaling approximately $940,000. The distributions were as follows (in thousands):

Tax Status of Distributions

For U.S. federal income tax purposes, the tax treatment of distributions to stockholders is determined based on the Company’s current and accumulated earnings and profits (“E&P”), which may differ from income determined in accordance with U.S. GAAP due to differences in the tax and financial reporting treatment of certain items. Based on the Company’s analysis of its current and accumulated E&P, the distributions made during the fiscal year ended July 31, 2026 were determined to constitute taxable dividends for U.S. federal income tax purposes.

Financial Reporting Treatment

For financial reporting purposes, because the Company had an accumulated deficit at the time each distribution was declared, the distributions were recorded as reductions to additional paid-in capital. Accordingly, the distributions had no impact on the Company’s results of operations for the fiscal year ended July 31, 2026.

Note 19—Subsequent Events

Operating Lease

On August 6, 2026, the Company renewed its lease for the office space in Tel Aviv for aone-year term through October 2027.

Future minimum lease payments related to this lease renewal are as follows (in thousands):

DataSeeds expansion supported by a $7.7 Million Direct Investment and the Appointment of a New CEO

On August 31, 2026, the Company announced a significant expansion of its DataSeeds.AI (“DataSeeds”) strategy, supported by an approximately $7.5 million direct investment led by Vice Chairman Howard Jonas. Additionally, Morris Berger has been appointed as Chief Executive Officer, effective October 1, 2026. Jonathan Reich will continue serving as Zedge’s CEO through September 30, 2026, and will transition to President and Chief Operating Officer upon Mr. Berger’s appointment.

On September 25, 2026, the Company completed the private placement contemplated by the direct investment mentioned above. At the closings thereunder, the Company issued an aggregate of 2,616,447 shares (or $2.93 average price per share) of Class B Common Stock and warrants to purchase an aggregate of 2,354,803 shares of Class B Common Stock (the “Warrants”) for aggregate gross proceeds of $7.68 million.

The warrants have an average exercise price of $3.22 and become exercisable only on the later of: (i) the date of receipt of the requisite stockholder approval under NYSE American rules; and (ii) the applicable six-month period following issuance.

Plan Amendment

On September 8, 2026, the Company’s Board of Directors amended, subject to approval of the amendment by the Company’s stockholders, the Company’s 2026 Stock Option and Incentive Plan to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional 1,100,000 shares to an aggregate of 1,538,695 shares.

DSU Vesting

On September 7, 2026,26,142 DSUs granted under the incentive program discussed in Note 12 above vested (the second tranche of the 89,683 DSUs granted in November 2024). In connection with the vesting of the DSUs, the Company issued 26,142 shares of Class B common stock (based on a 100% conversion ratio determined due to the market price of $2.98 per share relative to the grant price approved by the Compensation Committee of the Company’s Board of Directors of $2.76 per share).