AIRWA INC. 10-K

ITEM 1. Business The Acquisition On March 18, 2024, the Company entered into a share purchase agreement (the “Purchase Agreement”) and a share exchange agreement (the “Exchange Agreement”) to acquire 70% of Yuanyu Enterprise Management Co., Limited (“YYEM”) from Mr. Hongyu Zhou, the sole shareholder of YYEM (“YYEM Seller”) for a combined $56 million (the “Acquisition”). $16.5 million of this amount was paid in cash on March 20, 2024, pursuant to the Purchase Agreement to acquire 20% of YYEM. On November 21, 2024, following The Nasdaq Stock Market LLC’s (“Nasdaq”) approval of the new listing application submitted to it in connection with the Acquisition, the Company completed the purchase of 5,000 ordinary shares of YYEM, representing 50% of the issued and outstanding ordinary shares of YYEM, for 8,127,572 newly issued shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) to the YYEM Seller, representing 55.8% of the issued and outstanding shares of Common Stock as of the date of the closing (the “Share Exchange Transaction”). As an inducement to the Company to complete the Acquisition, YYEM agreed, pursuant to the Exchange Agreement, to make several installment payments to the Company totaling $5,000,000 in aggregate. As part of the transaction, the Company agreed to sell its wholly owned subsidiary, Slinger Bag Americas Inc., to a newly established Florida limited liability company called J&M Sports LLC (“J&M”), which is owned by Yonah Kalfa, former Chief Innovation Officer and director of the Company; Mike Ballardie, former President, Chief Executive Officer, Treasurer and director of the Company; Juda Honickman, former Chief Marketing Officer of the Company; and Mark Radom, former general counsel and Secretary of the Company. On November 21, 2024, the Company entered into a separation and assignment agreement (the “Separation Agreement”) with J&M to sell, transfer, and assign all or substantially all of its legacy business, assets, and liabilities related to or necessary for the operations of its “Slinger Bag” business or products (the “Legacy Business”) to J&M, in consideration for $1.00. Pursuant to the Separation Agreement, J&M obtained the sole right to and assumed all the obligations of the Legacy Business and is liable to the Company for any losses from third-party claims against the Company that arise from liabilities related to the Legacy Business (the “Separation”). As a result of the completion of the Acquisition, on November 21, 2024, the Company’s directors and officers resigned from their positions on November 21, 2024. On November 19, 2024, prior to the resignation of all of the directors of the Company, the Company’s Board of Directors (the “Board”) appointed five new directors, with such appointment taking effect on November 21, 2024 upon the closing of the Acquisition. YYEM became the Company’s sole operating subsidiary. 1 Technology Licensing Established in November 2021, YYEM is based in Hong Kong and operates in the emerging love and marriage market sector. YYEM’s mission is to empower global connections through innovative matchmaking technology. Through YYEM, 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. Our YYEM company was founded on the principle that love is universal but dating and marriage customs vary widely across cultures. By providing highly relevant patents, and a flexible, customizable matchmaking app framework, we aim to enable our partners to develop matchmaking services that resonate with local users while benefiting from our advanced matching algorithms, safety features, and engagement tools. We possess six technologies related to the metaverse and five AI matchmaking patents, which together enable access to both Augmented Reality (AR) and eXtended Reality (XR), enhancing our future revenue growth potential in the online matchmaking segment. Our AI technology is also designed to integrate with existing Big Data models and other larger AI models, such as Huawei Pangu, Baidu 6 Wenxinyiyan, Alibaba Tongyi, and Tencent Hunyuan. Through interrogating and analyzing available Big Data, our intellectual property aims to support the identification of our licensees’ target subscriber base, while providing subscriber profile analysis and connecting to our AI matchmaker platform, all with the goal of helping our licensees deliver effective matchmaking services both online and in person and helping their clients find successful life partnerships. Our revenue model is based on licensing fees with our partners, which we intend to bolster through the development or acquisition of additional patents. We aim to pioneer a new approach to matchmaking. Our strategy is built on three core pillars: 1. Technological Innovation: We will invest in R&D, predominantly through our relationships with our trusted outsourcing companies, to become a leading supplier of matchmaking technology. Our AI-powered matching algorithms, advanced safety features, and engagement tools will be designed to create meaningful connections while prioritizing user safety and authenticity. 2. Cultural Adaptability: Our platform is being built with flexibility in mind, allowing partners to easily customize the user experience and features to align with local cultural norms and preferences. This approach will better ensure that each app feels native to its market while benefiting from our global expertise. 3. Partner Empowerment: We plan to offer our partners support, including technical integration, marketing strategies, and ongoing optimization. Our success will be tied to the success of our partners, creating a symbiotic relationship that will help to drive innovation and growth. 2 We believe that by enabling our partners to customize our AI-powered platform for local preferences and practices, each app can present a unique value proposition to its respective target user base. Key features of our technology, offered now or in development, include: ● AI-driven matching algorithms that learn and improve based on user behavior and feedback; ● Metaverse capabilities for more natural meetings in cyberspace; ● Customizable safety features, including photo verification, message filtering, and real-time moderation; ● Engagement tools such as virtual events and video chat integration; ● Flexible monetization options to suit different market needs; and ● Robust analytics and reporting to help partners optimize their apps. Our team has a strong track record in both matchmaking technology and international business. We intend to leverage this expertise not only to improve our core technology but also to offer our partners help in navigating the complexities of launching and growing matchmaking apps in diverse markets. Looking ahead, we see promising opportunities for growth as more people around the world embrace technological assistance with matchmaking, particularly AI-driven assistance. By empowering local entrepreneurs and established companies to create culturally relevant matchmaking apps, we believe we will expand our reach and impact far beyond what we could achieve with a single, global app. We generated royalties of $12.8 million in our financial year ended April 30, 2025. Social Networking Our operating subsidiary, YYEM, is also developing a social networking vertical to create and sell content to TikTok for its users in the Middle East and North Africa (the “MENA region”), which we anticipate will provide an independent revenue stream capitalizing on TikTok’s strength in the MENA region relative to the uncertainty the app faces in the United States. Under a Multi-Channel Network (MCN) agency services agreement signed with TikTok in February 2025, YYEM will procure the production of content to be live-streamed or served as videos to TikTok’s multitude of users in the MENA region. This is expected to include engaging broadcasts across various categories, such as sports, gaming, and lifestyle topics, produced by popular Twitch hosts and other influencers within the network that YYEM is developing. We anticipate that YYEM’s new vertical will also include live-streaming, voice chat rooms, gaming, and influencer-driven user-generated content. The fees generated by this arrangement with TikTok will depend on the rate of conversion by TikTok end-users. Market Overview Technology Licensing The global online dating market is worth multiple billions of dollars annually, with most estimates of dating app revenue being between $6 billion and $9 billion in each of 2023 and 2024. Global growth is forecast to be between 6% and 9% per year through the rest of the decade. A disproportionate amount of this revenue is generated by a few public companies in the United States (most notably Match Group), where the market is mature, technology is well integrated in people’s lives, and penetration rates are high. Connexa, through YYEM, has focused its efforts on building relationships with clients focused on markets outside North America, where the competition is more dispersed, penetration rates are lower, and the room for growth is greater. We are not aware of any competitor technology companies that specialize in providing technology to online dating companies as we do. Across the Asia Pacific region (in this case, Japan, Hong Kong, and Southeast Asia), there is a wide diversity of opportunity. Highly urbanized hubs in Japan and Singapore, as well as parts of Thailand and the Philippines, have relatively high app adoption among young adults. Japan’s cultural dynamics, with ritualized dating norms, relatively late marriages, and heavy smartphone use, help to create a sizable paying user base. Hong Kong is a high-connectivity market, as well, with near-universal internet and mobile usage, which supports app adoption, although the absolute market is small due to the population size of the territory. At the same time, Southeast Asia also has many less-urbanized areas with lower smartphone usage and fewer opportunities for monetization per user. These areas, however, have strong growth potential because the population will generally connect to the internet almost exclusively through their phones rather than through computers, fostering mobile-first social behavior and increasing comfort with apps of all kinds, and because the proportion of youth in its population is typically higher. Europe (including the UK) is a mature market with broad app awareness. Culturally, Europe is generally more similar to the United States than Asia is, enabling the major U.S.-based players to gain market share more easily. The penetration rate among urban 18- to 34-year-olds is high, comfortably exceeding 10% in numerous jurisdictions, which provides a solid base for monetization but translates into lower projected growth rates. Online dating companies must contend with strict data privacy regulation in Europe, which requires greater expenditure but arguably bolsters the long-term prospects of the market, given the trust it engenders. 3 Sub-Saharan Africa is far smaller in scale than either Asia Pacific or Europe, but its growth prospects are promising. South Africa’s online dating app market generated just over $200 million in revenue in 2023, but generally monetization is harder elsewhere in the region, with low average revenue per user. Mobile internet access and smartphone ownership are rising fast but still are substantially lower than global averages, which constrains absolute penetration of dating apps despite strong potential interest in urban youth segments of the societies. Given the low established base, growth prospects are significant, with important factors being localization (with cultural and religious conservatism impacting product design) and low cost (given the economic challenges associated with operating in developing economies). The cultural and religious conservatism prevalent in parts of Sub-Sharan Africa stands in contrast with the more secular traditions of much of Europe. Europe’s culture of individualism stands in contrast with Asia Pacific’s emphasis on societal values. The need for advanced features to gain traction in a mature market such as Europe stands in contrast with the need for the more basic, low-cost model needed for Sub-Saharan Africa. Strengths and Strategies Competitive Strengths Our Directors believe that our success is attributable to, among other things, the following competitive strengths: ● Patented proprietary technology : Underpinning our business is a portfolio of patented proprietary technology that incorporates artificial intelligence and metaverse technology. Our AI technology helps our licensees to identify potential customers, match customers with potential partners, and screen out malicious actors, while our metaverse technology brings our licensees closer to the next stage of connectivity: dating in cyberspace. ● Cultural adaptability : Our business is focused on enabling our partners to easily customize the user experience and features of their customer-facing products to align with local cultural norms and preferences, which we believe provides our partners, and by extension us, a competitive advantage over large international players, who may have greater resources and larger scale but often deploy a one-size-fits-all approach that fails to respect local sensitivities and resonate with different populations. ● Local partnerships : Our business is built to serve local partners who understand local markets. While we strive to ensure the long-term success of these partners, our license agreements provide for fixed payments, which provides greater predictability of financial results by insulating us from the vagaries of the consumer-facing market. Strategies Our goal is to become a leading provider of technology to online dating companies around the world. To this end, we plan to carry out, or are in the process of carrying out, the following strategies: ● Development of core technologies : Continue iterative development of the Company’s core technology offering, refining existing technology, extending the capabilities of the technology, and acquiring or developing new patents and other IP to add to the Company’s technology offering. ● Geographic expansion : Consider expansion to Mainland China, where the penetration rate of online dating apps is reported to be roughly a third of that in the United States, presenting a strong growth opportunity in a familiar market. ● Web3 expansion : Capitalize on the next version of the worldwide web, known as Web3. The Company believes its technology, with its AI component and its focus on the metaverse, is particularly well suited to the coming Web3 era, which will also involve blockchain technology and so-called tokenomics, areas that the Company intends to leverage either itself or through tools provided to customers. ● Diversification of revenue streams : The Company has recently launched a new vertical centered on social networking applications to diversify its revenue streams. We intend to build out this vertical while considering additional sources of revenue to further diversify our revenue streams. Customers and Marketing YYEM is a business-to-business, or B-to-B, player, licensing its technology to companies who understand the retail market in their respective regions. Currently, our Company, through YYEM, has three main licensees covering distinct geographic regions: one based in Hong Kong for rights to use the IP in Japan and South Korea among other locations; one in the UK for rights to use the IP in the UK and Europe; and one in the USA for rights to use the IP in Sub-Saharan Africa. Each of these licenses is incorporating or has incorporated the Company’s technology into its own product offerings. We rely principally on YYEM’s reputation in business circles, particularly in the online dating ecosystem, and do not actively market YYEM’s brand or technology to retail customers. The YYEM Approach At this stage of our development, we are primarily a technology company that facilitates matchmaking, while our licensees are generally matchmaking companies that leverage technology. We believe this combination enables each company to focus on the aspect of the business in which it is strongest. At the same time, we consider ourselves more than a technology company — through our licensees, we are facilitating connections, sparking romances, and bringing people together across the globe. In the process, we aim to redefine the future of matchmaking. We are sensitive to cultural norms and recognize that, as we expand to new jurisdictions, our approach needs to be adjusted to suit prevailing local preferences. For this reason, we prefer to partner with local players as we enter new markets, and we build our products and services with a view to customization based on local culture and practices. By respecting cultural nuances, licensees can create services that resonate deeply with their clientele. At YYEM, we are dedicated to supporting our licensees in delivering exceptional online matchmaking services. Through our advanced patent portfolio, pioneering AI-powered technology platform, and cultural adaptation of our offerings, we believe we can empower our partners to create meaningful and lasting connections for their clients. Our commitment to innovation and excellence will help ensure that we are a trusted name in the matchmaking industry, providing considerable value to our global network and, ultimately, to individuals looking for love and marriage. Permission or Approvals Required from the PRC Authorities with respect to the Operations of YYEM Business operations YYEM conducts business in Hong Kong and is required to obtain, and has obtained, a business license issued by the Hong Kong Companies Registry. As a special administrative region of the PRC, Hong Kong enjoys separate governing and economic systems from that of mainland China under the principle of “one country, two systems.” YYEM, as a Hong Kong-based company without operations in mainland China, is not directly subject to PRC laws and regulations regarding the general conduct of its business or regarding overseas listings. As of the date of this Annual Report, YYEM has not been denied any requisite permissions by any PRC authority, nor has YYEM received any notice of, or been subject to, any penalty or other disciplinary action from any PRC authority for the failure to obtain or the insufficiency of any approval or permit in connection with the conduct or service of its business operations. However, YYEM may be subject to additional licensing requirements, and our conclusion on the status of YYEM’s licensing compliance may prove to be mistaken, due to uncertainties around the interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant governmental authorities, the PRC government’s ability to intervene in or influence YYEM’s operations, and the rapid evolvement of PRC laws, regulations, and rules, sometimes with little or no advance notice. We cannot assure you that YYEM is or will be in compliance with all licensing requirements applicable to it or will not be subject to any penalty in the future due to the lack or insufficiency of approvals or permits. The failure of YYEM to obtain or to thereafter maintain any permit or license required for its operations may result in the suspension or termination of, or otherwise give rise to a material adverse change to, its businesses, which would materially and adversely affect our financial condition and results of operations and cause our Common Stock to significantly decline in value. For more detailed information, see “ Risk Factors — Risks Related to Doing Business in Hong Kong .” 4 Securities offering We believe that, as of the date of this Annual Report, YYEM is not required to obtain any permission from the China Securities Regulatory Commission (the “CSRC”), the Cyberspace Administration of China (the “CAC”), or any other PRC authority in connection with an offering of securities. As a result, it has never submitted an application to any such authority for the approval of any offering. As of the date of this Annual Report, it has not received any inquiry, notice, warning, or official objection in relation to any offering from the CSRC, the CAC, or any other PRC authority. However, there remains uncertainty as to the enactment, interpretation, and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. We believe that YYEM has received all requisite permissions and approvals to issue securities. If YYEM does not receive or maintain such permissions or approvals or has inadvertently concluded that the approvals of the CSRC, the CAC, or any other regulatory authority are not required for an offering, or if applicable laws, regulations, or interpretations change and YYEM is required to obtain approvals in the future, seeking such approvals could cause the value of our securities, including the Common Stock, to significantly decline or be worthless. Any uncertainties or negative publicity regarding such an approval requirement could have a material adverse effect on the trading price of our securities. In addition, these regulatory agencies may impose fines and penalties on YYEM, limit its ability to pay dividends outside of China, limit its operations in China, delay or restrict the repatriation of the proceeds from an offering into China, or take other actions that could have a material adverse effect on its business, financial condition, results of operations, and prospects, as well as the trading price of our securities. The CSRC or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt a securities offering before settlement and delivery of our Common Stock. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery of securities, you do so at the risk that settlement and delivery may not occur. See “ Risk Factors — Risks Related to Doing Business in Hong Kong — Changes in the PRC’s economic, political, or social conditions or governmental policies could have a material adverse effect on our business and results of operations .” Audit inspections On December 16, 2021, the PCAOB reported that it was unable to completely inspect or investigate registered public accounting firms headquartered in mainland China or Hong Kong because of a position taken by one or more authorities in each of those jurisdictions. However, following the signing of a Statement of Protocol with the CSRC and the Ministry of Finance of the PRC in August 2022, the PCAOB on December 15, 2022 vacated its previous determination and confirmed that it was now able to secure complete access to inspect and investigate registered public accounting firms headquartered in those jurisdictions. Nevertheless, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB may issue a new determination. Our former auditor, Olayinka Oyebola & Co. (“OOC”), an independent public accounting firm registered with the PCAOB, and an auditor of publicly traded companies in the United States, is subject to U.S. laws pursuant to which the PCAOB conducts regular inspections to assess its compliance with applicable professional standards. Our former auditor has been inspected by the PCAOB on a regular basis, with the last inspection in November 2023. Our former auditor is not headquartered in mainland China or Hong Kong and was not identified as an accounting firm subject to the determinations announced by the PCAOB on December 16, 2021. Nevertheless, should our former auditor in the future have any work papers in China or Hong Kong that the PCAOB is unable to fully inspect, it would be difficult to evaluate the effectiveness of our former auditor’s audit procedures or equity control procedures. Investors could consequently lose confidence in our reported financial information and procedures or the quality of our financial statements, which would adversely affect us and our securities. Our current auditor, Enrome LLP (“Enrome”), an independent public accounting firm registered with the PCAOB, and an auditor of publicly traded companies in the United States, is subject to U.S. laws pursuant to which the PCAOB conducts regular inspections to assess its compliance with current professional standards, with the last inspection in April 2025. Our current auditor is not headquartered in mainland China or Hong Kong and was not identified as an accounting firm subject to the determinations announced by the PCAOB on December 16, 2021. Nevertheless, should our current auditor in the future have any work papers in China or Hong Kong that the PCAOB is unable to fully inspect, it would be difficult to evaluate the effectiveness of our auditor’s audit procedures or equity control procedures. Investors could consequently lose confidence in our reported financial information and procedures or the quality of our financial statements, which would adversely affect us and our securities. Moreover, if trading in our securities is prohibited under the HFCAA in the future because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future time, an exchange would in all likelihood delist our securities. On June 22, 2021, the U.S. Senate passed the AHFCAA, and on December 29, 2022, the Consolidated Appropriations Act was signed into law by President Biden, which contained, among other things, an identical provision to the AHFCAA and amended the HFCAA by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering a delisting of our Company and the prohibition of trading in our securities if the PCAOB is unable to inspect our accounting firm at such future time. 5 Capital controls Following the Acquisition, our corporate organization consists of the Company and YYEM. Revenue primarily is received by YYEM, where it is used to pay operating expenses and is expected to be reinvested in outsourced research and development, the purchase of additional patents and other intellectual property, and branding and other promotional activities, among other things. If needed, management may decide to transfer cash between YYEM and the Company, or between one of these two entities and any subsidiaries that we may establish or acquire in other jurisdictions. This could take the form of intercompany fund advances or capital contributions. Under our cash management policy, the amount of intercompany transfers will be determined by our management based on the working capital needs of the entities within our group, and intercompany transactions will be subject to our internal approval process and funding arrangements. We have not declared or paid dividends or made any distribution of earnings as of the date of this Annual Report. We do not intend to declare dividends or distribute earnings (if any) in the near future. Any determination to declare dividends or distribute earnings (if any) in the future will be at the discretion of our board of directors. The Company and YYEM are not subject to any significant restrictions on buying or selling foreign exchange or on transferring cash between entities within our group, across borders, or to U.S. investors. There are no significant restrictions or limitations on our ability to distribute earnings (if any) from YYEM to the Company and U.S. investors or our ability to settle amounts owed. However, there can be no assurance that the PRC government will not intervene or impose restrictions on the ability of YYEM to buy or sell foreign exchange or transfer or distribute cash within our organization, which could result in an inability to make, or a prohibition on making, transfers or distributions to entities outside of Hong Kong and adversely affect our business. YYEM may decide to work with a licensee based in Mainland China, which imposes various limitations, procedures, and formalities on payments out of China. Capital account transactions, which relate to the purchase and sale of foreign assets and liabilities and include such transactions as investments and loans, are subject to review by the State Administration of Foreign Exchange (“SAFE”). Current account payments, including royalty payments, should generally not be restricted, but SAFE has a significant degree of administrative discretion in implementing laws and regulations and has on occasion used this discretion to limit the convertibility of current account payments out of China. YYEM understands from a potential Mainland China licensee that because the royalties that would be due to YYEM under a licensing agreement would constitute current account payments, the payment of such royalties would be permitted under PRC regulations, provided the sending and receiving banks can show that the transactions are legitimate. However, there can be no assurance that the distinction between restrictions on capital account transactions and restrictions on current account transactions will be consistently interpreted by SAFE and China’s other regulatory agencies, nor can there be any assurance that the legal analysis of the licensee is correct or that the PRC government will not intervene or impose other restrictions on the ability of the licensee to make the required payments to YYEM outside of Mainland China. The immediate financial impact of any such development in the coming months, while potentially affecting our business prospects adversely, would be limited by the fact that, to date, YYEM has not received any revenue from, and is therefore not financially dependent on, any licensee in Mainland China. 6 Recent Developments ATM Offering On January 8, 2025, the Company entered into a sales agreement with A.G.P./Alliance Global Partners (the “Agent”), pursuant to which the Company may 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. The issuance and sale, if any, of shares of the Company’s common stock under the Sales Agreement will be pursuant to the Company’s registration statement on Form S-3 (File No. 333- 279880) (the “Registration Statement”), filed with the Securities and Exchange Commission (the “SEC”) on January 8, 2025 and are described in detail in the related base prospectus and prospectus supplement included as part of the Registration Statement. In accordance with the terms of the Sales Agreement, under the prospectus supplement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $2,213,152 from time to time through or to the Agent. The sale, if any, of shares of the Company’s common stock under the Sales Agreement will be made by any method permitted that is deemed to be an “at-the-market” equity offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on the Nasdaq Capital Market or any other trading market for the Company’s common stock. Subject to the terms and conditions of the Sales Agreement, the Agent will use commercially reasonable efforts to sell the shares of the Company’s common stock from time to time, based on the Company’s instructions. The compensation payable to the Agent as sales agent shall be 3.0% of the gross proceeds from each sale of the shares through or to the Agent pursuant to the Sales Agreement. In addition, the Company will reimburse the Agent for certain out-of-pocket costs and expenses incurred in connection with the Sales Agreement in an amount not to exceed $50,000 and up to an additional $20,000 per fiscal year for maintenance, and the Company has agreed in the Sales Agreement to provide indemnification and contribution to the Agent against certain liabilities, including liabilities under the Securities Act. Private Placement On June 30, 2025, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain investors (the “Investors”), providing for the private placement (the “Private Placement”) of 20,000,000 units (each, an “Unit”), each unit consisting of one (1) share of Common Stock and two warrants (“Warrants,” and the shares of Common Stock underlying the Warrants, the “Warrant Shares”), both of such Warrants with identical terms. Each Unit was offered at a price of $0.23, and each Warrant has a five-year exercise period, with an exercise price of $0.89 (“Exercise Price”). The total gross proceeds from the Private Placement without taking into account any exercise of the Warrants will be $4,600,000. The Exercise Price is subject to adjustment pursuant to the terms of the Warrants, the form of which is appended to the Securities Purchase Agreement, upon the occurrence of: the Company’s Common Stock reverse and forward splits, payment of dividends in Common Stock, and reclassification of Common Stock into any shares of the Company’s capital stock. If at the time of exercise of the Warrants there is no effective registration statement registering the Warrants or the Warrant Shares, or the prospectus for the registration statement is not available for the resale of the Warrant Shares by the investor holding the Warrants, then each Warrant may be exercised, in whole or in part, at such time by means of a “cashless exercise.” Closing of the Private Placement and issuance of the Common Stock and Warrants will be conditional upon satisfaction of all Nasdaq listing rules, including the obtaining of shareholder approval and the filing of a Schedule 14C information statement and all required time periods being complied with. The Securities Purchase Agreement may be terminated by the Company with written notice if the closing of the Private Placement has not been consummated on or before December 31, 2025. Nasdaq Compliance On July 9, 2025, the Company received a letter (the “Notice”) from the Listing Qualifications Department of Nasdaq indicating that, as a result of Warren Andrew Thomson’s resignation from the Board and the audit committee of the Board, effective June 12, 2025, the Company is not currently in compliance with Nasdaq Listing Rule 5605. The Notice has no immediate effect on the listing or trading of the Company’s common stock. Nasdaq Listing Rule 5605 requires that (i) a majority of the Board be comprised of independent directors and (ii) the Audit Committee be comprised of at least three independent directors. The Company currently has four directors, only two of whom qualify as independent directors. In addition, the Audit Committee currently comprises only two independent directors. The Notice states that, consistent with Nasdaq Listing Rules 5605(b)(1)(A) and 5605(c)(4), Nasdaq will provide the Company a cure period in order to regain compliance as follows: (i) until the earlier to occur of the Company’s next annual stockholders’ meeting or June 12, 2026; or (ii) if the next annual stockholders’ meeting is held before December 9, 2025, then the Company must evidence compliance no later than December 9, 2025. The Company intends to appoint an additional independent director to serve as a member of the Board and the Audit Committee prior to the end of the cure period described above. Implications of Being a Smaller Reporting Company We are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our shares held by non-affiliates equals or exceeds $250 million as of the prior June 30 th , or (2) our annual revenue equaled or exceeded $100 million during such completed fiscal year and the market value of our shares held by non-affiliates equals or exceeds $700 million as of the prior June 30 th . Such reduced disclosure and corporate governance obligations may make it more challenging for investors to analyze our results of operations and financial prospects. Employees As at the date of this report, we have 14 full-time employees. Management believes its relations with employees are good. 7