What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-09-22 compared with 2026-03-17 · 284 added, 245 removed, 118 unchanged (82% of the section changed)

11 unchanged sentences

figures and rounded to the nearest whole number .

operate principally through Yuanyu Enterprise Management Co., Limited (“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.

We 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.

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

royalties of $7.25 million in the nine months ended January 31, 2026.

January and February 2025, as part of our efforts to diversify our revenue streams, we announced the development

of a social networking vertical, in which we would provide content to TikTok and similar social media ventures.

Our revenue relating

to social networking will depend on performance-based conversion metrics.

In the nine months ended January 31, 2026, our social media advertising business generated revenue of $5.7 million.

August 2025, we signed a $500 million joint venture agreement to form AiRWA Exchange, a digital asset exchange focused on the tokenization

of real-world assets (RWA), specifically U.S.

AiRWA Exchange is not yet operational and generating revenue, but we have successfully

completed test runs for settling trades of tokenized U.S.

equities, positioning AiRWA Exchange to offer users the ability to trade digital

representations of U.S.

stocks with the same simplicity and speed as cryptocurrencies — with transactions settled within seconds

and recorded on the blockchain’s immutable ledger, which is accessible 24 hours per day.

We believe AiRWA Exchange will mark a

significant step toward bridging the gap between conventional financial systems and the emerging decentralized economy.

support the development of our AiRWA Exchange, we intend to leverage our commercial relationships, launching our Exchange services to

our JV partner’s millions of users in order to help scale the Exchange’s operations more quickly, and partnering with a leading

provider of digital asset intelligence and security solutions, to add advanced monitoring, threat detection, and compliance capabilities

for the long-term integrity of the AiRWA Exchange ecosystem.

change of name to AiRWA, Inc.

reflects our intention to make AiRWA Exchange core to our business and to focus on our goal of enhancing

global access to tokenized financial products.

and Corporate Developments

August 19, 2025, we completed a private placement, issuing 20,000,000 units (each unit comprising one share of common stock and two five-year

warrants with an exercise price of $0.89 and cashless exercise if no effective registration is in place), which raised gross proceeds

of $4,600,000, without taking into account any exercise of the warrants.

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.

a prospectus supplement dated August 22, 2025 that amends the prospectus supplement dated June 11, 2025 and its accompanying prospectus

dated June 11, 2025, filed with the Securities and Exchange Commission as part of our registration statement on Form S-3 (File No.

relating to the offer and sale of our common stock through A.G.P./Alliance Global Partners (“A.G.P.”) in “at the market

offerings” (the “ATM facility”) as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, pursuant

to the sales agreement with A.G.P.

dated as of January 8, 2025, the amount we could raise under our ATM facility was specified to be

$200 million.

As of January 31, 2026, we had sold 21,775,662 shares (adjusted for stock splits) and raised $177,099,426

after payment to the Placement Agent of 3% of the gross proceeds and certain other expenses.

January 30, 2026, we entered into a share purchase agreement with various sellers to acquire all the share capital of Aberfeldy Holdings Limited,

a Seychelles holding company owning 100% of 26 Rafael Sdn.

Bhd., a Malaysian operating company (the “Target Subsidiary”),

for $140,000,000, payable in cash.

Target Subsidiary is an AI-specialist company providing end-to-end full-cycle services designed to empower enterprises to transition

seamlessly from raw data to intelligent applications.

Its 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.

on October 22, 2025, as previously reported on Form 8-K and on our Form 10-Q for the quarter ended October 31, 2025, we filed a

Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a

reverse stock split of the Common Stock at a ratio of 1-for-50, which became effective on

October 27, 2025.

(the “Registration Statement”) relating to the offer and sale of our common stock through A.G.P./Alliance Global Partners

(“A.G.P.”) in “at the market offerings” (the “ATM facility”) as defined in Rule 415 promulgated under

the Securities Act of 1933, as amended, pursuant to the sales agreement with AGP dated as of January 8, 2025 (the “Sales Agreement”),

the amount we could raise under our ATM facility was specified to be $200 million.

During the three months ended July 31, 2026,

the Company sold 4,526,380 shares of common stock pursuant to the Sales Agreement, generating aggregate gross proceeds of approximately $16.3

As of the date of this 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

The Company does not expect to be eligible to resume sales under the Sales Agreement until at least October 1, 2027.

Life Acquisition

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.

On September 10, 2026, we paid half of the balance of the Base Consideration, with the other half due by October 28.

the Target achieves gross revenue of $10 million for the 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 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 under the Sales Agreement, raising

approximately $16.3 million in gross proceeds.

Reverse Stock Splits

On May 18, 2026, and August 17, 2026, the Company effected reverse stock splits of its common stock at ratios of

1-for-40 and 1-for-20, respectively.

The reverse stock splits did not change the par value of the Company’s common stock or the

number of authorized shares.

All share and per-share amounts presented in these consolidated financial statements and accompanying notes

have been retrospectively adjusted to reflect the reverse stock splits for all periods presented, unless otherwise indicated.

August 24, 2026, the Company received a letter from the Listing Qualifications Department of Nasdaq, indicating that the

Company’s failure to file its Annual Report on Form 10-K for the period ended April 30, 2026 (the “Filing”)

violated Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the “Rule”).

resulted from the fact that, following a significant acquisition, it had proven more time-consuming than anticipated to consolidate

the financial results of the acquired business with the Company’s own.

The Company had 60 calendar days to submit a plan to

regain compliance and if the plan was accepted, Nasdaq could grant an exception of up to 180 calendar days from the Filing’s

due date, or until January 25, 2027, to regain compliance.

The Company made the Filing before the October 23, 2026, deadline for

submission of the plan and expects to regain compliance with Nasdaq’s listing requirements as a result.

There can be no assurance that the Company will be able to satisfy Nasdaq’s continued listing

requirements, regain compliance with the Rule, and maintain compliance with other Nasdaq listing requirements.

of Results of Operations

revenue is generated principally from license fees paid by customers for the use of our technology The Company also provides digital

marketing solution services related to performance advertising across diversified advertising channels.

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

attributable to revenue.

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

campaign delivery costs.

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

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.

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;

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of Operations

months ended, and three months ended, January 31, 2026 compared to the nine months ended, and three months ended, January 31, 2025

following are the results of our operations for the nine-month period ended, and the three-month period ended, January 31, 2026, as compared

to the corresponding periods a year earlier:

Nine Months Ended January

months ended July 31, 2026, compared to the three months ended July 31, 2025

following are the results of our operations for the three-month period ended July 31, 2026, as compared to the three-month period ended

July 31, 2025:

Three Months Ended

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Total Operating Expenses

Operating (Loss)/Income

revenue increased by $3.2 million, or 32%, $13.0 million for the nine-month period ended January 31, 2026, from $ 9.8

million for the corresponding period a year earlier.

Our revenue increased by $3.7 million, or 113%, to $7.0 million for the

three-month period ended January 31, 2026, from $3.2

million for the corresponding period a year earlier.

In both these cases, the increases were attributable to the new source

of revenue from our advertising business .

this new business line totaled $5.0 million or 44% of total revenue for the three-month period ended January 31, 2026.

was primarily derived from the provision of performance advertising services across diversified advertising channels, such as Google

and Meta, and included services such as marketing strategy and planning, media placement, creative production, and campaign

monitoring, analytics, optimization, and reporting.

The addition of this new revenue stream was a major driver of the

Company’s increase in revenue over the nine-month and three-month periods and reduces comparability to prior

cost of revenue increased by $5.8 million, or 261%, to $8.1 million for the nine-month period ended January 31, 2026, from $2.2

million for the corresponding period a year earlier.

Our cost of revenue also increased by $5.8 million, or 784%, to $6.6 million

for three-month period ended January 31, 2026 from $0.7 million for the corresponding period a year earlier.

These increases were

driven by the Company’s new business line.

Operating Income

revenue increased by $18.2 million, or 608%, from $3.0 million for the three-month period ended July 31, 2025 to $21.2 million for the

three-month period ended July 31, 2026, driven by the recognition of approximately $15.2 million of AI services income following the

acquisition of Rafael AI and the recognition of approximately $6.0 million of advertising income following the launch of our advertising

business, partially offset by an approximately $3.0 million decrease in license revenue following the termination of the related license

cost of revenue increased by $14.9 million, or 1,997%, from $0.7 million to $15.6 million, primarily due to increased costs as we grew

with the addition of our advertising and new AI-related businesses during the three-month period ended July 31, 2026.

In particular,

Rafael AI increased its 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 increased by

$3.5 million, or 150%, from $2.3 million to $5.6 million.

and Marketing Expenses

selling and marketing expenses were $0.5 million and nil in the nine-month and three-month periods ended January 31, 2026 respectively

as we began amortizing agent fees in relation to the Company’s social media advertising business.

and marketing expenses, which primarily consist of salaries, office expenses, rent, utilities, and marketing fees, increased by $0.5

million, from nil for the three-month period ended July 31, 2025, as we promoted our new advertising services and our newly acquired

AI services business.

and Administrative Expenses

and administrative expenses, which mainly consist of salaries, professional fees, and other general office and administrative

expenses, increased by $2.1 million, or 96.0%, to $4.5 million, for the nine-month period ended January 31, 2026 compared with

$ 2.3 million for the corresponding period a year

This increase was primarily driven by higher professional and management costs relating to the build-out of our new social

media advertising business and the acquisition of the AI data business.

General and administrative expenses did not change

significantly for the three-month period ended January 31, 2026 compared with the corresponding period a year earlier.

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

increased by $4.7 million, or 618%, from $0.8 million for the three-month period ended July 31, 2025 to $5.5 million for the three-month

period ended July 31, 2026, primarily driven by the growth of our business through the acquisition of Rafael AI.

The increase was mainly

due to the amortization of the intangible assets incurred from the acquisition of Rafael AI, including the acquired development costs and customer relationships.

and Capital Resources

principal sources of liquidity during the nine-month period ended January 31, 2026, were cash generated from financing activities and

cash provided by operating activities.

Our primary liquidity requirements were funding working capital, making investments in subsidiaries,

paying vendors and service providers, and supporting our ongoing business expansion.

of January 31, 2026, we had working capital, defined as current assets less current liabilities, of $49.7 million, compared to $15.9

million as of April 30, 2025, representing an increase of approximately $33.8 million, or 212%.

This increase in working capital was

primarily attributable to an increase in cash and cash equivalents and prepayments and deposits, partially offset by increases in accounts

receivable and other working capital balances.

receivable increased by approximately $0.9 million as of January 31, 2026, compared to April 30, 2025, primarily due to the expansion

of our advertising business, which generated higher revenue during the period.

Prepayments and deposits increased by approximately $4.2

million as of January 31, 2026, from nil as of April 30, 2025, primarily due to advance payments made to vendors and service providers

in connection with our operating activities and business expansion.

Cash and cash equivalents increased by approximately $36.0 million,

from $0.05 million as of April 30, 2025, to $36.0 million as of January 31, 2026, primarily due to proceeds raised under our at-the-market,

or ATM, facility and other equity financing transactions, as well as cash collections from customers.

following is a summary of our cash flows from operating, investing, and financing activities for the nine-month periods ended January

31, 2026 and 2025:

Nine Months Ended January 31,

Cash Flow Provided by Operating Activity

Cash Flow Used in Investing Activity

(165,797,198 )

Cash Flow Provided

by Financing Activities

following table sets forth a summary of our cash flow for the three-month periods ended July 31, 2026 and 2025, as indicated.

Three Months Ended July 31,

Net cash provided by/(used in) operating activities

$ (1,083,809 )

Net cash used in investing activities

(29,367,266 )

cash provided by operating activities was $3.8 million for the nine-month period ended January 31, 2026.

Operating cash flow was

primarily affected by changes in working capital accounts, primarily the increase in accounts payable of $4.0 million, the increase

in income taxes payable of $0.6 million, and the increase in accrued expenses of $0.4 million, which were partially offset by an

increase in prepayments and deposits of $4.4 million and increases in accounts receivable and other receivables.

The increase in

prepayments and deposits was primarily the result of refundable advance payments made to vendors and service providers in connection

with the Company’s advertising business and expansion activities.

The increase in accounts receivable was mainly attributable

to higher revenue generated from the launch of the advertising business, while the increase in other receivables primarily

related to amounts paid on behalf of another company.

The increase in accounts payable and accrued expenses was

mainly due to the timing of payments to vendors and service providers as the Company expanded its operations.

cash used in investing activities was $165.8 million during the nine-month period ended January 31, 2026, consisting primarily of

payments of $36.0 million and $129.8 million for investments in subsidiaries.

The significant use of cash in investing activities

reflected the Company’s strategic expansion and acquisition-related activities during the period.

Accordingly, the fluctuation

in investing cash flows was primarily driven by these investments, which were not part of the Company’s ordinary operating

cash provided by financing activities was $197.6 million during the nine months ended January 31, 2026.

Financing cash inflows consisted

primarily of $172.6 million of proceeds from the Company’s ATM offering, $14.8 million from a direct offering, $4.6 million

from a private placement, and $5.8 million from an issuance of shares to our Chairman.

The increase in financing cash flows was primarily

attributable to the Company’s capital-raising activities undertaken to fund its investments in subsidiaries, support working

capital needs, and provide liquidity for business expansion.

As a result, financing activities were the principal source of cash

during the period.

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Net cash provided by operating activities for the three-month period ended

July 31, 2026, was $27.7 million, compared with $1.1 million for the three-month period ended July 31, 2025.

Cash provided by operating

activities for the three-month period ended July 31, 2026 primarily reflected a decrease of $19.0 million in digital assets and a decrease

of $11.2 million in accounts receivable.

These cash inflows were partially offset by a decrease of $5.0 million in contract liabilities.

used in operating activities for the three-month period ended July 31, 2025 primarily reflected in increase of $3.0 million in accounts

receivable, partially offset by net income of $1.3 million.

cash used in investing activities for the three-month period ended July 31, 2026, was $29.4 million, compared with nil for the three-month

period ended July 31, 2025.

The net cash used in investing activities for the three-month period ended July 31, 2026 consisted of the Company’s cash payment of $29.4 million for the acquisition of Best Life.

cash provided by financing activities for the three-month period ended July 31, 2026 was nil, compared with $1.1 million for the three-month

period ended July 31, 2025.

The net cash provided by financing activities was primarily

attributable to an increase of approximately $1.1 million in amounts due from a related party.

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, the development of our plans in respect of our AiRWA

Exchange, and decisions regarding acquisitions.

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

do not have any off balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our

financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditure, or capital

resources that are material to investors.

financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditure, or

capital resources that are material to investors.

Accounting Policies

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accounting policies that involve significant estimates and judgment of management.

preparation of these financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the

financial statements and the reported amounts of revenue and expenses during the reporting period.

The Company regularly evaluates

estimates and assumptions related to long-lived assets and deferred income tax asset valuation allowances.

The Company bases its

estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under

the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and

the accrual of costs and expenses that are not readily apparent from other sources.

The actual results experienced by the Company

may differ materially from the Company’s estimates.

To the extent there are material differences between the estimates and the

actual results, future results of operations will be affected.

preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the

reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements

and the reported amounts of revenue and expenses during the reporting period.

The Company regularly evaluates estimates and assumptions

related to long-lived assets and deferred income tax asset valuation allowances.

The Company bases its estimates and assumptions on current

facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which

form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are

not readily apparent from other sources.

The actual results experienced by the Company may differ materially from the Company’s

To the extent there are material differences between the estimates and the actual results, future results of operations will

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.

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

Company considers various factors, including historical collection experience, the 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 January 31, 2026 and April 30, 2025, 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 July 31 and April 30, 2026, the Company recorded an allowance for credit losses of nil and

$300,000, respectively, against other receivables.

of long-lived assets

assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions

that will impact the future use of the assets) indicate that the carrying value may not be fully recoverable or that the useful life

is shorter than the Company had originally estimated.

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

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 nine months ended January 31, 2026 and 2024 was nil.

assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market

conditions that will impact the future use of the assets) indicate that the carrying value may not be fully recoverable or that the

useful life is shorter than the Company had originally estimated.

When these events occur, the Company evaluates the impairment by

comparing the carrying 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 disposition.

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 three months ended July 31, 2026 and 2025 was nil.

value of financial instruments

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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

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of the Company’s activities and is recorded net of VAT.

The Company follows five steps for the revenue recognition:

the contracts with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv)

allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies

The Company’s revenue recognition process involves five steps:

(i) identifying

the contracts with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv)

allocating the transaction price to the performance obligations in the contract, and (v) recognizing revenue when (or as) the entity satisfies

a performance obligation.

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(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).

Company’s terms and conditions vary by customer and typically provide net 90-day terms.

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.

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 relevant 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.

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 contracts are

fixed, without variable consideration, a significant financing component, non-cash consideration, or consideration payable to

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

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.

The transfer of

control is considered complete when products have been delivered to, and accepted 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.

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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.

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 2024, the Financial Accounting Standards Board (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, general

and administrative expenses, and research and development).

ASU 2024-03 is effective for annual reporting periods beginning after December

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

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, or 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

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.

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 and

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 statements.

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

to Interim Disclosure Requirements .

The standard clarifies disclosure requirements for interim financial statements and is effective

for interim periods 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 currently evaluating the impact of

this guidance on its condensed consolidated financial statements.

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-Q

Item 2. Management’s Discussion and Analysis