What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-09-21 compared with 2025-08-13 · 325 added, 169 removed, 112 unchanged (82% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

figures expressed in terms of millions are rounded to one decimal place;

all dollar figures expressed in terms of thousands are rounded

to the nearest thousand.

All percentages are calculated using the unrounded underlying figures and rounded to the nearest whole number.

The Company operates through YYEM, a Hong Kong-based subsidiary established

in November 2021 that is engaged in the emerging love and marriage market sector.

mission is to empower global connections through innovative matchmaking technology.

own advanced patents and other proprietary technology which we license out, and we are using this intellectual property to develop an

AI-powered matchmaking platform to license to partners worldwide, enabling them to create localized matchmaking experiences tailored

to their specific markets and cultures.

We believe our pioneering technology has the power to transform the matchmaking industry, leading

to greater success for our licensees and their clients, and ultimately leading to more people finding successful life partnerships.

We have licensing agreements in place with various entities to use the IP in numerous countries across Asia, Europe, and Africa, generating

royalties of $12.8 million in our financial year ended April 30, 2025.

February 2025, YYEM entered into an agency agreement to develop content for TikTok across the MENA region, leveraging Twitch-hosted live-streaming

in sports, gaming, and lifestyle categories.

While no upfront payments were received, the agreement positions us to monetize end-user

engagement once our influencer network is developed.

Revenue under this agreement will depend on performance-based conversion metrics,

and as of April 30, 2025, influencer network capabilities were still nascent.

We consider this development a positive step toward the diversification of our revenue streams.

January 8, 2025, we entered into a sales agreement with A.G.P./Alliance Global Partners (“A.G.P.”) under a registered

Form S-3 shelf registration, enabling us to raise up to $2,213,152 through periodic sales of common stock.

We may sell shares via

as agent, or to A.G.P.

as principal, and will pay a 3% commission on gross proceeds, plus limited out-of-pocket expense

reimbursements.

No shares had been sold through this facility as of April 30, 2025, but the agreement provides strategic

flexibility for future capital raising.

June 30, 2025, we executed a securities purchase agreement to issue 20 million units (each unit comprising one share of common stock

and two five-year warrants with an exercise price of $0.89), targeting gross proceeds of $4.6 million.

Closing is contingent on

Nasdaq listing compliance and shareholder approval.

The warrants allow for cashless exercise if no effective registration is in

This financing, if consummated, will significantly improve liquidity and capital resources through 2025 and

dollar figures expressed in terms of millions are rounded to one decimal place;

all dollar figures expressed in terms of thousands are

rounded to the nearest thousand.

All percentages are calculated using the unrounded underlying figures and rounded to the nearest whole

Rafael AI, the Company provides end-to-end full-cycle services designed to empower enterprises to transition seamlessly from raw data

to intelligent applications.

This business is structured around five interconnected AI-related modules, together forming a closed-loop

system in which data generation, model refinement, and operational feedback continuously reinforce one another.

Its services are tailored

to specialist industries such as healthcare, industrial manufacturing, and autonomous driving.

We recorded $6.6 million of revenue

from our AI services business in the final quarter of our financial year ended April 30, 2026, which was the period during which Rafael

AI was our subsidiary.

YYEM, the Company owns patents and other proprietary technology for licensing out to partners worldwide, enabling them to create localized

matchmaking experiences tailored to their specific markets and cultures.

By providing such patents, we aim to enable our partners to

develop matchmaking services that resonate with local users while benefiting from advanced matching algorithms, safety features, and

engagement tools.

Our technology licensing business generated royalties of $7.3 million in our financial year ended April 30, 2026.

subsidiary YYEM also provides digital marketing solution services related to performance advertising across diversified advertising channels

such as Google, TikTok, and Meta.

Services typically include marketing strategy and planning;

platform account setup and media placement;

production of advertising creative (video and other content);

and ongoing campaign monitoring, analytics, optimization, and reporting.

We have developed key relationships integral to this business, both with companies seeking to promote their products and services and

with companies that have direct buying relationships with the platforms, which we are leveraging as we build market share.

This business

generated approximately $12.0 million of revenue in our financial year ended April 30, 2026.

July 27, 2026, we entered into a share purchase agreement with Nova Innovation Tech Ltd, a BVI company, to acquire all the share capital

of Oceancrest Investment Holdings Limited, a BVI holding company, which owned 97% of Best Life for $50 million (the “Base Consideration”),

payable in USDT (Tether) or cash, with additional earn-out amounts payable if Best Life achieves specified revenue targets.

Life is a cross-border consumer-goods distribution and e-commerce business, leveraging direct brand sourcing, import expertise, bonded

warehousing, platform operations, offline retail access, and selected private-label development to sell Japanese and other international

consumer products across China and other overseas markets.

It has in place business relationships with brand owners and manufacturers

upstream and with e-commerce platforms, supermarkets, specialty retailers, and online resellers downstream.

While Best Life historically

has focused on Asia, it has recently launched an international expansion program to the UK, the U.S., Canada, and New Zealand.

July 30, 2026, we closed on the transaction, paying $30 million toward the purchase price and receiving all of the shares of the holding

company, giving us a 97% equity interest in Best Life.

By October 28, we are required to pay the balance of the Base Consideration.

the Target achieves gross revenue of $10 million for the fiscal year ending December 31, 2026, the Company will make an earn-out payment

of $30 million, and if it achieves gross revenue of $25 million for the fiscal year ending December 31, 2027, the Company will make an

earn-out payment of $50 million.

fund the purchase of Best Life, we sold 4,526,380 shares of Common Stock on a split-adjusted basis, following the financial year end

on April 30, 2026, under the Sales Agreement described below under Results of Operations — Liquidity and Capital Resources —

Financing Activities, raising approximately $16.3 million in gross proceeds.

the acquisition of Best Life occurred after April 30, 2026, it does not form part of management’s analysis of our financial condition

and results of operations as of, and for the financial year ended on, that date.

of Results of Operations

revenue is generated from the sale of customized “data-to-AI” end-to-end solutions, from license fees paid by customers for

the use of our technology, and from digital marketing solution services.

services revenue is generated from the sale of customized “data-to-AI” end-to-end solutions directly to customers.

solutions consist of highly integrated software deliverables that are designed and customized based on customers’ specific requirements.

Revenue from the sale of such solutions is recognized when control of the completed software solution is transferred to and accepted

by the customer.

revenue is generated from license fees paid by customers for the use of our technology.

of revenue consists primarily of amortization charges against intangible assets (specifically, technology rights), which are directly attributable

and administrative expense primarily consists of salaries and benefits for employees involved in general corporate functions;

professional fees for external legal,

accounting, and other consulting services;

traveling expenses;

revenue is generated from the provision of digital marketing solution services related to performance advertising across diversified

advertising channels.

of revenue consists of costs directly attributable to the generation of revenue.

our AI services business, cost of revenue consists primarily of salaries, amortization charges related to intangible assets, and depreciation

of property and equipment that are directly attributable to the development and delivery of our customized “data-to-AI” end-to-end

our technology licensing business, cost of revenue consists primarily of amortization charges related to intangible assets, specifically

technology rights.

our advertising business, cost of revenue consists primarily of media and platform costs and third-party cooperating-platform and campaign

delivery costs.

and Administrative Expenses

and administrative expenses primarily consist of salaries and benefits for employees involved in general corporate functions;

fees for external legal, accounting, and other consulting services;

travel expenses;

and other general office and administrative expenses.

6 unchanged sentences

Operating Expenses:

Selling and Marketing Expenses

General and Administrative Expenses

Total Operating Expenses

Operating Income

Our revenue increased by $7.6 million, or 147.0%, from $5.2 million for

the year ended April 30, 2024 to $12.8 million for the year ended April 30, 2025, driven by royalty income from new licensees following

the entry into agreements, initially in the form of binding term sheets, with three licensees in January 2024.

Our cost of revenue increased by $1.8 million, or 153%, from $1.2 million

to $3.0 million, primarily driven by higher amortization costs related to our greater level of intangible assets, many of which were acquired

near the end of the financial year ended April 30, 2024.

Gross profit increased by $5.8 million, or 145%, from $4.0 million to $9.8 million,

driven by our higher royalty income described immediately above.

Operating (Loss)/Income

(12,702,662 )

revenue increased by $12.9 million, or 101%, from $12.8 million for the year ended April 30, 2025 to $25.8 million for the year

ended April 30, 2026, driven by the recognition of approximately $6.6 million of AI services income following the acquisition of

Rafael AI and the recognition of approximately $12.0 million of advertising income following the launch of our advertising business,

partially offset by an approximately $5.7 million decrease in license revenue following the termination of the related license

cost of revenue increased by $19.5 million, or 655%, from $3.0 million to $22.5 million, primarily due to increased costs as we grew

with the addition of our advertising and new AI-related businesses during the year ended April 30, 2026.

In particular, Rafael AI had an

uptick in expenditure on medical-related research and development from February through April 2026 as it sought to establish itself as

a leader in Southeast Asia in developing AI models for traditional Chinese medicine.

As a result, gross profit decreased by $6.5 million,

or 66%, from $9.8 million to $3.3 million.

and Marketing Expenses

and marketing expenses, which primarily consist of salaries, office expenses, rent, utilities, and marketing fees, increased by $0.7

million, from nil for the year ended April 30, 2025, as we promoted our new advertising services and our newly acquired AI services business.

and Administrative Expenses

General and administrative expenses, which mainly related to salaries,

professional fees, and other general office and administrative expenses, increased by $3.1 million, from $164,000 to $3.3 million, primarily

driven by the growth of our business as we increased royalty revenue and by the fact that in the year ended April 30, 2025, we began incurring

costs relating to YYEM becoming an operating subsidiary of a Nasdaq-listed company.

This included audit fees, legal fees, insurance premiums,

and directors’ and officers’ compensation.

and administrative expenses, which mainly relate to salaries, professional fees, and other general office and administrative

expenses, increased by $5.5 million, or 167%, from $3.3 million for the year ended April 30, 2025 to $8.7 million for the year ended

April 30, 2026, primarily driven by the growth of our business through the acquisition of Rafael AI and related fees and expenses.

Bad debt increased by approximately $1.0 million;

approximately $1.3 million was paid as commission in relation to the acquisition

of Rafael AI;

and approximately $2.4 million of professional expenses were paid in relation to the acquisition, such as legal fees,

accounting fees, and audit fees.

and Capital Resources

We finance our operations primarily through cash generated from operations.

We had working capital, or net current assets, of $16.0 million as of April 30, 2025, compared to $8.2 million as of April 30, 2024, an

increase of approximately $7.6 million, or 93%.

In comparison with a year prior, our accounts receivable as of April 30, 2025 increased

by $10.0 million as we recognized royalty revenue over the course of the financial year in accordance with our recognition policy while

the credit terms of our licensees permitted payment up to 90 days after the end of our financial year in order to afford them time to

monetize the licensed technology.

As of April 30, 2025, we had retained earnings of $6.1 million.

following is a summary of our cash flows from operating, investing, and financing activities for the years ended April 30, 2025 and 2024:

Year Ended April 30,

Cash Flow (Used in)/Provided by Operating

following table sets forth a summary of our cash flow for the years ended April 30, 2026 and 2025, as indicated.

For the Years Ended April 30

Net cash used in operating activities

$ (20,855,471 )

Cash Flow (Used in)/Provided by Financing Activities

Net cash used in investing activities

(164,122,025 )

of April 30, 2025, we had cash and cash equivalents of $54,000, compared to $39,000 as of April 30, 2024.

cash used in operating activities was $379,000 for the year ended April 30, 2025, compared with a net inflow of $2.5 million of cash from

operating activities for the prior year, a decrease of $2.9 million in operating cash flow.

A $2.0 million rise in our net income was partially offset by the

combined effect of our non-cash adjustments, including a $10.0 million increase in our accounts receivable as described above, as

well as sizable increases in amortization expense and income taxes payable as our business grew.

Since our cash level was low in the period before payment from our licensees was due, we had no cash allocated to investing activities,

neither putting cash into investments nor receiving cash from investments.

only cash flow we recorded as financing activities were two non-cash items:

$330,000 increase in the value of a guarantee given to the Company by our Chairman in respect of the value of listed shares we own;

and $725,000 owed to our Chairman for amounts he paid on behalf of the Company during the year ended April 30, 2025.

Based on our current operating plans, we believe that our existing cash

at the time of this filing will be sufficient to meet our anticipated operating needs for at least the next 12 months and that we will

have sufficient financial resources available through capital markets fundraising if we should decide to incur additional capital expenditure

or make other investments.

Our future capital requirements will depend upon many factors, including competing technological and market

developments, our R&D efforts, and decisions regarding acquisitions of further patents or companies or other assets.

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

cash used in operating activities for the year ended April 30, 2026, was $20.9 million, compared with $0.4 million for the year

ended April 30, 2025.

The $20.5 million increase in net cash used in operating activities was primarily attributable to the change

from net income of $4.6 million in fiscal year 2025 to a net loss of approximately $15.4 million in fiscal year 2026, together with

increased cash deployed into digital assets and contract costs.

As detailed below, these increases in cash usage were partially

offset by a significantly lower increase in accounts receivable in fiscal year 2026, as well as increases in contract liabilities

and accounts payable.

the year ended April 30, 2026, net cash used in operating activities was $20.9 million, which was primarily attributable to (i) net

non-cash and other reconciling items of $20.2 million, primarily consisting of depreciation and amortization expense, impairment

losses on intangible assets, an investment in Brightstar, amounts due from a director, other receivables, and a loss on financial

assets at fair value through profit or loss;

(ii) an increase of approximately $19.2 million in digital assets, primarily reflecting

cash used to acquire digital assets during the year;

(iii) an increase of $3.8 million in contract costs, reflecting costs incurred

and deferred in connection with customer contracts in our AI services business;

(iv) an increase of $1.6 million in accounts

receivable, primarily attributable to the timing of customer billings and collections;

(v) an increase of $0.7 million in

prepayments and deposits, primarily reflecting advance payments made in the ordinary course of business;

and (vi) a decrease of $4.9

million in income taxes payable, primarily reflecting the settlement of tax liabilities during the year.

These cash outflows were

partially offset by (i) an increase of approximately $4.4 million in contract liabilities, primarily attributable to consideration

received from AI services customers in advance of the satisfaction of the related performance obligations;

(ii) an increase of $5.0

million in accounts payable, primarily attributable to the timing of payments to vendors and suppliers in our AI services business;

(iii) a decrease of $0.6 million in other receivables, primarily attributable to the collection or settlement of previously

outstanding balances;

and (iv) an increase of $0.8 million in accrued expenses, primarily attributable to expenses incurred but not

yet paid as of year-end.

the year ended April 30, 2025, net cash used in operating activities was approximately $0.4 million, which was primarily

attributable to $8.4 million of net cash used as a result of changes in operating assets and liabilities, partially offset by $3.4

million of non-cash items, primarily consisting of $3.0 million of depreciation and amortization expense on our patents, a $0.3

million loss on financial assets at fair value through profit or loss, and shares issued to prior management upon the exercise of

warrants issued in earlier periods for services rendered.

Changes in operating assets and liabilities included (i) an increase of

$12.1 million in accounts receivable, primarily attributable to revenue growth and the timing of customer collections;

increase of $0.6 million in prepayments and deposits, primarily attributable to advance payments made by the Company in the

ordinary course of business.

These cash outflows were partially offset by (i) an increase of $2.3 million in accrued expenses,

mainly attributable to the timing of payments for professional fees, compensation, and other operating expenses;

increase of $2.0 million in income taxes payable, as income tax liabilities recognized during the year exceeded cash tax

cash flow impact from accounts receivable improved significantly in fiscal year 2026.

Accounts receivable increased by $1.6 million,

compared with an increase of $12.1 million during fiscal year 2025, resulting in a significantly lower amount of operating cash being

held as accounts receivable in fiscal year 2026.

cash used in investing activities for the year ended April 30, 2026, was $164.1 million, compared with nil for the year ended April

The net cash used in investing activities in fiscal year 2026 was attributable to the Company’s cash payment of

$36.0 million for 30% of YYEM and its purchase of $140.0 million of USDT which was later used as consideration for the purchase of

Rafael AI but which was offset in part by the acquisition of Rafael AI’s approximately of $11.8 million of cash and cash equivalents.

cash provided by financing activities for the year ended April 30, 2026 was $197.7 million, compared with $0.4 million for the year ended

April 30, 2025.

This increase in financing cash inflows was primarily attributable to the Company’s use of external equity financing

in fiscal year 2026.

Financing cash inflows during this year primarily consisted of (i) $172.6 million of proceeds from at-the-market

offerings of shares;

(ii) $14.8 million of proceeds from a registered direct offering of shares;

(iii) $5.8 million of proceeds from

a private placement of shares to our Chairman at the time;

and (iv) $4.6 million of proceeds from another private placement.

also received an immaterial amount of proceeds from the exercise of warrants for cash during the year.

comparison, net cash provided by financing activities for the year ended April 30, 2025, was approximately $0.4 million, primarily attributable

to an increase of approximately $0.7 million in amounts due to a related party, partially offset by an increase of approximately $0.3

million in amounts due from a related party.

Accordingly, the year-over-year increase in financing cash flow primarily reflects a shift

from limited related-party financing activities in fiscal year 2025 to substantial equity capital raising activities in fiscal year 2026.

January 8, 2025, the Company entered into a sales agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners

(the “Agent”), pursuant to which the Company could sell from time to time, at its option, shares of the Company’s common

stock through or to the Agent, as sales agent or principal.

Sales under the Sales Agreement would be made pursuant to the Company’s

registration statement on Form S-3 (File No.

333- 279880) (the “Registration Statement”), filed with the SEC on January 8,

2025, and were described in detail in the related base prospectus and prospectus supplement, as amended, included as part of the Registration

The compensation payable to the Agent as sales agent would be 3.0% of the gross proceeds from each sale of shares through

or to the Agent pursuant to the Sales Agreement.

During the year ended April 30, 2026, the Company sold 1,147,525 shares of common

stock pursuant to the Sales Agreement for aggregate gross proceeds of approximately $172.6 million.

As of the date of this Annual Report,

the Company is unable to sell shares under the Sales Agreement as the Registration Statement is not available for use as a result of

the Company not being current in its reporting obligations under the Securities Exchange Act of 1934.

The Company does not expect to

be eligible to resume sales under the Sales Agreement until at least August 1, 2027.

on our current operating plans, we believe that our existing cash at the time of this filing will be sufficient to meet our anticipated

operating needs for at least the next 12 months and that we will have sufficient financial resources available through capital markets

fundraising if we should decide to incur additional capital expenditure or make other investments and to pay amounts potentially owing

under an earn-out in respect of Best Life.

Our future capital requirements will depend upon many factors, including competing technological

and market developments, our R&D efforts, and decisions regarding acquisitions of further companies or other assets, and there can

be no guarantee that we will be able to raise sufficient funds on acceptable terms or at all.

Balance Sheet Arrangements

18 unchanged sentences

for Credit Losses

receivable are stated at their historical carrying amount net of allowance for credit losses.

receivable are stated at their historical carrying amount net of an allowance for credit losses.

for credit loss represents management’s best estimate of probable losses inherent in the portfolio.

7 unchanged sentences

the financial asset to present the net carrying value at the amount expected to be collected on the financial asset.

Company considered various factors, including nature, historical collection experience, the age of the accounts receivable balances,

credit quality and specific risk characteristics of its customers, and current economic conditions to develop an estimate of credit losses.

Additionally, the Company makes specific allowance for credit losses based on any specific knowledge the Company has acquired that might

indicate that an account is uncollectible.

The facts and circumstances of each account may require the Company to use substantial judgment

in assessing its collectability.

After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

As of April 30, 2025 and 2024, the Company had made no reserves.

Company considers various factors, including the nature of the receivable, historical collection experience, and age of the accounts

receivable balances;

the credit quality and specific risk characteristics of its customers;

and current economic conditions, to develop

an estimate of credit losses.

Additionally, the Company makes specific allowance for credit losses based on any specific knowledge the

Company has acquired that might indicate that an account is uncollectible.

The facts and circumstances of each account may require the

Company to use substantial judgment in assessing its collectability.

After all attempts to collect a receivable have failed, the receivable

is written off against the allowance.

As of April 30, 2026 and 2025, the Company recorded an allowance for credit losses of $300,000

and nil, respectively, against other receivables.

of long-lived assets

3 unchanged sentences

When these events occur, the Company evaluates the impairment by comparing carrying

value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual

If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes

value of the assets to an estimate of future undiscounted cash flow expected to be generated from the use of the assets and their eventual

If the sum of the expected future undiscounted cash flow is less than the carrying value of the assets, the Company recognizes

an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets.

Impairment charge recognized

for the years ended April 30, 2025 and 2024 was nil.

The Company recognized

an impairment charge of approximately $7.5 million for the year ended April 30, 2026.

No impairment charge was recognized for the prior

value of financial instruments

1 unchanged sentence

between market participants at the measurement date.

When determining the fair value measurements for assets and liabilities required

When determining the fair value measurements of assets and liabilities required

or permitted to be either recorded or disclosed at fair value, the Company considers the principal or most advantageous market in which

6 unchanged sentences

a performance obligation.

with the criteria of ASC 606, “Revenue from Contracts with Customers,” the Company recognizes revenue when performance

obligations are satisfied by transferring control of a promised good or service to a customer.

For performance obligations that are

satisfied at a point in time, the Company also considers the following indicators to assess whether control of a promised good or

service is transferred to the customer:

(i) right to payment, (ii) legal title, (iii) physical possession, (iv) significant risks

and rewards of ownership and (v) acceptance of the good or service.

Company recognizes revenue in an amount that reflects the consideration to which it expects to be entitled for its products and services.

Accounts receivable are recorded when obligations have been performed and

billed to the customer.

During the period after the right to payment has become unconditional but before a bill has been issued, the amount

owed is recorded as accrued revenue (receivables).

The Company’s terms and conditions vary

by customer and typically provide net 90-day terms.

with the criteria of ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when performance obligations

are satisfied by transferring control of a promised good or service to a customer.

For performance obligations that are satisfied at

a point in time, the Company also considers the following indicators to assess whether control of a promised good or service is transferred

to the customer:

(i) right to payment, (ii) legal title, (iii) physical possession, (iv) significant risks and rewards of ownership and

(v) acceptance of the good or service.

the case of royalty income, the Company recognizes revenue in an amount that reflects the consideration to which it expects to be entitled

for its products and services.

Accounts receivables are recorded when the right to consideration becomes unconditional.

The Company’s

terms and conditions vary by customer but typically provide net 90-day terms.

Company receives royalty income in the form of license fees from customers for the use of the Company’s technology rights by the

Royalty income is recognized over time when the Company’s technology rights are used by the customers in accordance

with the terms and conditions of the relevant license agreement.

Revenue is recognized by the Company not only when invoices have been

signed and confirmed by customers but also at the end of each year over the term of the relevant license agreements as the service is

provided to the customers.

Royalty income is recognized over time when the Company’s technology rights are used by customers in accordance with

the terms and conditions of the relevant license agreement.

Revenue is recognized by the Company not only when invoices have been signed

and confirmed by customers but also at the end of each year over the term of the relevant license agreements as the service is provided

to the customers.

Company also provides digital marketing solution services related to performance advertising across diversified advertising channels

(e.g., Google, Meta, etc.).

Services typically include:

(i) marketing strategy and planning;

(ii) platform account setup and media placement;

(iii) production of advertising creative (including video and other content);

and (iv) ongoing campaign monitoring, analytics, optimization,

and reporting.

from the Company’s performance advertising services is recognized over time because customers simultaneously receive and consume

the benefits of the Company’s performance as the Company performs the services.

Company acquired Rafael AI on January 30, 2026.

Rafael AI generates revenue from the sale of customized “data-to-AI” end-to-end

software solutions directly to customers.

Rafael AI is the sole legal and beneficial owner of the software and enters into contracts

with its customers as a principal in the related transactions.

The sale of customized “data-to-AI” end-to-end solutions is

considered a distinct product as it is highly integrated, interdependent, and interrelated.

The customers cannot use any component on

a standalone basis to obtain economic benefits.

The contracts contain a single performance obligation, which is to deliver a complete

integrated software solution to the customers in exchange for the agreed consideration.

The performance obligation is satisfied when

the customers obtain control upon completion and delivery of all software deliverables.

The customers do not simultaneously receive and

consume benefits as the Company performs the contracts and do not control the software during development.

Furthermore, the software

has no alternative use, and Rafael AI does not have an enforceable right to payment for partial performance.

The terms of pricing and

payment stipulated in the contract are fixed, without variable consideration, a significant financing component, non-cash consideration,

and consideration payable to customers.

Upon delivery of products, Rafael AI does not accept product returns or refunds except for quality

Rafael AI has obligations to make refunds when the product has not been delivered.

Rafael AI usually provides a one-year product

warranty for delivered products.

Rafael AI recognizes revenue when control of the products has been transferred to customers.

of control is considered complete when products have been accepted and received by customers.

Amounts received in advance are recorded

as contract liabilities.

Contract liabilities are recognized as revenue when the products are delivered to, and accepted by, the customers.

This activity falls within the scope of ASC 606.

Company has adopted ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting for income taxes.

3 unchanged sentences

those temporary differences are expected to be recovered or settled.

to the acquisition by YYAI, YYEM was a limited liability company.

As a limited liability company, the Company’s taxable income

or loss is allocated to members in accordance with their respective percentage ownership.

Therefore, no provision or liability for federal

income taxes has been included in the financial statements.

In the event of an examination of the Company’s tax return, the tax

liability of the members could be changed if an adjustment in the Company’s income is ultimately sustained by the taxing authorities.

Company accounts for share-based compensation in accordance with ASC 718, “Compensation—Stock Compensation.” Under the fair

value recognition provisions of this topic, stock-based compensation cost is measured at the grant date based on the fair value of the

award and is recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period.

Accounting Pronouncements

Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition,

results of operations, cash flows, or disclosures.

November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07 (“ASU 2023-07”).

requires more detailed information about reportable segments and expenses, including the requirement to disclose qualitative information

about factors used to identify reportable segments and quantitative information about profit and loss measures and significant expense

ASU 2023-07 became effective for public companies in fiscal years beginning after December 15, 2023.

The Company operates

as a single reportable segment.

The chief operating decision maker is the Company’s chief executive officer, who assesses performance

based on total revenue, expenses, cash flows, and progress made in the Company’s ongoing development efforts.

All of the Company’s

long-lived assets are located in Hong Kong.

The Company reports revenue by geographical location as required under the standard.

Company has analyzed ASU 2023-07 and determined that the required information is presented within the consolidated financial statements

and note disclosures herein.

The Company does not believe that ASU 2023-07 will have a material impact on the consolidated financial

November 2024, the FASB issued ASU 2024-03, “Reporting Comprehensive Income — Expense Disaggregation Disclosures”,

which focuses on improving the disclosures about a public business entity’s expenses and address requests from investors for more

detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization,

and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development).

ASU 2024-03 is

effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15,

results of operations, cash flow, or disclosure.

November 2024, the FASB issued ASU 2024-03, Reporting Comprehensive Income—Expense Disaggregation Disclosures, which focuses

on improving disclosure about a public business entity’s expenses and addresses requests from investors for more detailed information

about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly

presented expense captions (such as cost of sales, G&A, and research and development).

ASU 2024-03 is effective for annual reporting

periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting the standard and does not expect that the

adoption of this guidance will have a material impact on its financial position, results of operations and cash flows.

The Company is currently evaluating the impact of adopting this standard and does not expect that the adoption of this guidance will

have a material impact on its financial position, results of operations, or cash flow.

November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20):

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of Convertible Debt Instruments .

The amendments provide guidance on accounting for induced conversions of convertible debt instruments.

These amendments provide guidance on accounting for induced conversions of convertible debt instruments.

The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those

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evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial

position, results of operations, or cash flows.

January 2025, the FASB issued ASU 2025-01, “Income Statement — Reporting Comprehensive Income — Expense Disaggregation

Disclosures”.

The amendment in ASU 2025-01 amends the effective date of ASC 2024-03 to clarify that all public business entities

are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting

periods beginning after December 15, 2027.

Early adoption of is permitted.

The Company is currently evaluating the impact of this amendment

and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations and

position, results of operations, or cash flow.

January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures .

ASU 2025-01 amends the effective date of ASC 2024-03 to clarify that all public business entities are required to adopt the guidance

in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December

Early adoption is permitted.

The Company is currently evaluating the impact of this amendment and does not expect that the

adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.

March 2025, the FASB issued ASU 2025-02, Liabilities (Topic 405):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin

The amendments are effective immediately and must be applied on a fully retrospective basis to annual periods beginning

These amendments are effective immediately and must be applied on a fully retrospective basis to annual periods beginning

after December 15, 2024.

The Company does not expect that the adoption of this guidance will have a material impact on its financial

position, results of operations, or cash flows.

position, results of operations, or cash flow.

May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810):

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Acquirer in the Acquisition of a Variable Interest Entity .

The amendments provide guidance on identifying the accounting acquirer

These amendments provide guidance on identifying the accounting acquirer

in transactions involving a variable interest entity.

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The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this

guidance will have a material impact on its financial position, results of operations, or cash flows.

guidance will have a material impact on its financial position, results of operations, or cash flow.

May 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers

Clarifications to Share-Based Consideration Payable to a Customer .

The amendments clarify the accounting for share-based

These amendments clarify the accounting for share-based

consideration payable to a customer under Topic 718 and Topic 606.

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evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial

position, results of operations, or cash flows.

position, results of operations, or cash flow.

July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326):

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Receivable and Contract Assets .

The amendments provide a practical expedient and, if applicable, an accounting policy election to

simplify the measurement of credit losses for certain receivables and contract assets.

These amendments provide a practical expedient and, if applicable, an accounting policy election

to simplify the measurement of credit losses for certain receivables and contract assets.

The amendments are effective for annual reporting

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currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact

on its financial position, results of operations, or cash flows.

on its financial position, results of operations, or cash flow.

September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other (Topic 350):

Internal-Use Software .

This standard

simplifies the accounting for internal-use software costs and is effective for fiscal years beginning after December 15, 2026.

does not expect adoption of this standard to have a material impact on its financial position, results of operations, or cash flow.

December 2025, FASB issued Accounting Standards Update ASU 2025-11, Interim Reporting (Topic 270):

Improvements to Interim Disclosure

Requirements .

This standard clarifies disclosure requirements for interim financial statements and is effective for interim periods

beginning after December 15, 2026.

Early adoption is permitted.

The Company is assessing the potential impact of this guidance on its

consolidated financial statements.

April 2026, the FASB issued ASU 2026-01, Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock.

standard amends ASC Topic 505 (Equity) to standardize the initial measurement of paid-in-kind dividends on equity-classified preferred

stock, requiring such dividends to be initially measured based on the paid-in-kind dividend rate stated in the preferred stock agreement.

These amendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those

annual reporting periods.

Early adoption is permitted.

The Company does not currently have equity-classified preferred stock with paid-in-kind

dividend provisions and therefore does not expect the adoption of this guidance to have a material effect on its consolidated financial

May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations .

For public business entities,

these amendments are effective for annual reporting periods beginning after December 15, 2027, including interim periods within those

annual reporting periods.

Early adoption is permitted.

The Company does not currently have material environmental credits or environmental

credit obligations and does not expect the adoption of this guidance to have a material effect on its consolidated financial statements.

Company has reviewed other recently issued accounting pronouncements and does not believe that the adoption of such pronouncements is

expected to have a material effect on its consolidated financial statements or related disclosure.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-K

Item 7. Management’s Discussion and Analysis