[10-K] APPYEA, INC Files Annual Report
UNITED STATES
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| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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APPYEA, INC.
2025 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
| Page | |
| PART I | |
| ITEM 1. BUSINESS | 4 |
| ITEM 1A. RISK FACTORS | 12 |
| ITEM 1B. UNRESOLVED STAFF COMMENTS | 24 |
| ITEM 1C. CYBERSECURITY | 24 |
| ITEM 2. PROPERTIES | 25 |
| ITEM 3. LEGAL PROCEEDINGS | 25 |
| ITEM 4. MINE SAFETY DISCLOSURES | 25 |
| PART II | |
| ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 26 |
| ITEM 6. RESERVED | 27 |
| ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 27 |
| ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 36 |
| ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 37 |
| ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 37 |
| ITEM 9A. CONTROLS AND PROCEDURES | 37 |
| ITEM 9B. OTHER INFORMATION | 38 |
| ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 38 |
| PART III | |
| ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | 38 |
| ITEM 11. EXECUTIVE COMPENSATION | 42 |
| ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 46 |
| ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 47 |
| ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES | 50 |
| PART IV | |
| ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 51 |
| ITEM 16. FORM 10-K SUMMARY | 51 |
| SIGNATURES | 52 |
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve a number of risks and uncertainties. Although our forward-looking statements reflect the good faith judgment of our management, these statements can be based only on facts and factors of which we are currently aware. Consequently, forward-looking statements are inherently subject to risks and uncertainties. Actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.
Forward-looking statements can be identified by the use of forward-looking words such as “may,” “will,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. These statements include, but are not limited to, statements under the captions “Risk Factors,” “Management’s Discussion and Analysis or Plan of Operation” and “Description of Business,” as well as other sections in this report. Such forward-looking statements are based on our management’s current plans and expectations and are subject to risks, uncertainties and changes in plans that may cause actual results to differ materially from those anticipated in the forward-looking statements. You should be aware that, as a result of any of these factors materializing, the trading price of our common stock may decline. These factors include, but are not limited to, the following:
| ● | the availability and adequacy of capital to support and grow our business; | |
| ● | economic, competitive, business and other conditions in our local and regional markets; | |
| ● | actions taken or not taken by others, including competitors, as well as legislative, regulatory, judicial and other governmental authorities; | |
| ● | competition in our industry; | |
| ● | changes in our business and growth strategy, capital improvements or development plans; | |
| ● | the availability of additional capital to support development; and | |
| ● | other factors discussed elsewhere in this annual report. |
The cautionary statements made in this annual report are intended to be applicable to all related forward-looking statements wherever they may appear in this report.
As used in this Annual Report on Form 10-K, unless the context indicates or otherwise requires, “our Company”, “the Company”, “AppYea”, “we”, “us” and “our” refer to AppYea, Inc., a Nevada corporation, and its consolidated subsidiary, SleepX Ltd., a company organized under the laws of Israel.
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PART I
ITEM 1. BUSINESS
Corporate History
AppYea, Inc. (“AppYea”, “the Company”, “we” or “us”) was incorporated in the State of South Dakota on November 26, 2012 to engage in the acquisition, purchase, maintenance and creation of mobile software applications. The Company is in the development stage with no significant revenues and no operating history. On November 1, 2021 the Company was redomiciled in the State of Nevada.
On August 2, 2021, AppYea entered into a stock exchange agreement with SleepX Ltd., a company formed under the laws of the State of Israel (“SleepX”) and controlled by the principal shareholder of AppYea, Barry Molchadsky, one of our directors and our then Chief executive Officer. Pursuant to the agreement, the outstanding equity capital consisting of 1,724 common shares of SleepX was exchanged for 174,595,634 shares of common stock of the Company, based on the agreement that determined that to SleepX shareholders will be issued common shares in the amount that will result in them holding 80% of the common shares issued of AppYea. The agreement was subject to certain terms before the agreement could be closed. On December 31, 2021, the agreement was consummated as the terms of the agreement were fulfilled; As a result, SleepX became a wholly owned subsidiary of the Company. The issuance of the shares to SleepX shareholders, due to administrative matters, was completed in March 2022 after the Company completed a reverse stock split. In anticipation of the reverse merger described below, on July 2, 2021, Mr. Molchadsky acquired in a private transaction from the former majority shareholder two hundred and twenty-five thousand (225,000) Shares of Series A Preferred Stock of the Company. The Series A Preferred Shares have the right to vote 1,000 to 1 as shares of common stock and are convertible into 1,500 to 1 of the shares of common stock of the Company. The acquisition of the Preferred Shares then provided Mr. Molchadsky control of a majority of the Company’s voting equity capital.
Historically, through SleepX the Company operated in the digital health company, focused on the development of accurate wearable monitoring solutions to treat sleep apnea and snoring and fundamentally improve quality of life. Our solutions in the digital health area are based on our proprietary intellectual property portfolio comprised of Artificial Intelligence (AI) and sensing technologies for the tracking, analysis, and diagnosis of vital signs and other physical parameters during sleep time, offering extreme accuracy at an affordable cost.
As disclosed in our public filings, as of August 21, 2025 we have entered into a transaction with Techlott Enterprises Ltd. (“Techlott”), a Cypriot company, for the acquisition of proprietary blockchain-based lottery and gaming platform and the underlying intellectual property. The transaction with Techlott represents a strategic business pivot for us by focusing on what we believe is the rapidly growing institutional lottery market, providing a complete, production-ready technology package engineered for enterprise deployments. We are building an infrastructure layer that makes fairness and transparency the default in games—spanning lottery and keno, virtual racing, and large multiplayer titles. This is a “digital receipt printer” for every draw or in-game event, the system generates verifiable randomness (VRF), records a public, tamper-evident receipt, and creates an audit trail ready for regulators and operators. Operators, regulators, and even players can verify rather than just “trust.” The infrastructure layer plugs into an operator’s stack via SDK/API. The architecture is multi-chain (including support for leading L2s such as Base), engineered for thousands of requests per second, and comes with an audit trail and internal reporting to simplify regulatory compliance.
While we continue to explore options with respect to our legacy digital health business, we currently intend to focus on the development and expansion of our Blockchain based lottery and gaming field.
Overview of the Blockchain Based Lottery and Gaming Field
The lottery industry, long entrenched in traditional practices, is ripe for transformation. While it’s often lumped into the gaming sector, the lottery market is more than just entertainment—it’s a high-volume commodity with its own set of challenges. Chief among these are issues of transparency, fairness, and efficiency. However, the emergence of blockchain technology presents a compelling opportunity to revolutionize the lottery industry.
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Blockchain technology, with its decentralized and immutable ledger system, offers a promising solution to many of the longstanding problems plaguing traditional lotteries. By leveraging blockchain, a lottery platform can fundamentally alter the way lottery games are conducted, enhancing fairness and reducing fraud in the process.
Transparency is a key issue in traditional lotteries, with participants often left in the dark about the inner workings of the system. Blockchain technology addresses this by providing a transparent and auditable record of all transactions. Every ticket purchase, draw, and payout is recorded on the blockchain, accessible to anyone with an internet connection. This transparency instills trust in the system, ensuring that participants can verify the fairness of the lottery process.
Moreover, blockchain technology enables the implementation of smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. Smart contracts can automate various aspects of the lottery process, from ticket sales to prize distribution, eliminating the need for intermediaries and reducing the risk of human error or manipulation.
Additionally, the immutable nature of blockchain ensures that once data is recorded, it cannot be altered or tampered with. This feature significantly reduces the risk of fraud and manipulation, providing participants with peace of mind knowing that the integrity of the lottery is upheld.
The lottery industry, despite its widespread popularity, grapples with a myriad of challenges that threaten its integrity and legitimacy. One of the most pressing issues facing traditional lotteries is the pervasive lack of fairness, which casts a shadow of doubt over the entire system. Players often question the authenticity of deals and tickets, wondering if they are legitimate or if they have been tampered with in any way.
Central to concerns about fairness is the method used for random number generation (RNG). In traditional lotteries, the RNG process is shrouded in secrecy, leaving players skeptical about its security and randomness. Without transparent and verifiable RNG methods, players cannot be certain that the outcome of the lottery draws is truly random, raising doubts about the fairness of the entire process.
Moreover, delays in prize payouts further erode trust in traditional lotteries. Players rightfully expect prompt and timely payouts upon winning, but all too often, they are left waiting for their prizes for extended periods. This lack of promptness not only frustrates players but also fuels suspicions about the legitimacy of the lottery operators.
Embracing innovative technologies, such as blockchain, can provide a viable solution to many of the industry’s longstanding problems. Blockchain’s decentralized and transparent ledger system ensures that every transaction and draw is recorded in a tamper-proof manner, enhancing trust and integrity. By implementing blockchain technology, lottery operators can establish a new standard of fairness and transparency in the industry. Transparent RNG algorithms can be built into smart contracts, guaranteeing truly random outcomes for each draw. Furthermore, blockchain’s immutable nature ensures that prize payouts are executed promptly and without the risk of manipulation.
In conclusion, the challenges facing the lottery industry, particularly the lack of fairness and transparency, demand urgent attention and innovative solutions. Through the adoption of blockchain technology and other cutting-edge advancements, the industry can rebuild trust with players and pave the way for a more transparent and equitable future.
How Blockchain Can Transform the Lottery Industry
Blockchain technology has the potential to revolutionize the lottery industry by addressing some of its most persistent challenges. One of the most significant benefits of blockchain technology in the lottery industry is its infallibility. Traditional lotteries are often susceptible to human error and manipulation. However, blockchain eliminates the need for human intervention by automating key processes through smart contracts. These self-executing contracts are programmed to execute predefined actions when certain conditions are met, ensuring that prize delivery is guaranteed and tamper-proof. With smart contracts developed through blockchain app development services, players can have confidence that the lottery’s operations are conducted fairly and without the risk of interference.
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Moreover, blockchain-based lottery platforms are highly reliable. The security and reliability of prize delivery methods are guaranteed by smart contracts, which are executed automatically and cannot be altered once deployed. This eliminates the potential for delays or disputes in prize payouts, ensuring that winners receive their rewards promptly and without hassle. By leveraging blockchain app development services to create a reliable system, lottery operators can instill trust in their players and uphold the integrity of their games.
Transparency is another key advantage of utilizing blockchain app development services in the lottery industry. The immutable nature of the blockchain ledger ensures that all data related to lottery transactions, including ticket purchases, draw results, and prize distributions, is recorded transparently and cannot be altered or tampered with. This transparency provided by blockchain app development services allows players visibility into the entire lottery process, enabling them to verify the fairness and integrity of the games. By leveraging blockchain’s transparency through these services, lottery platforms can enhance trust and credibility among their players, fostering a more positive gaming experience.
Furthermore, blockchain-based lottery platforms built with blockchain app development services offer a democratic alternative to traditional lotteries that are often subject to governmental control and regulation. By operating on a decentralized network, blockchain lotteries are beyond the control of any single authority, making them resistant to censorship and manipulation. This decentralization facilitated by blockchain app development services enables compliance with regulations while also ensuring that lottery games remain accessible and open to players from around the world. By embracing blockchain’s democratic principles through these services, lottery platforms can promote inclusivity and fairness in the industry.
In short, blockchain technology holds immense potential to transform the lottery industry by offering infallible, reliable, transparent, and democratic solutions. By leveraging blockchain’s core features through blockchain app development services, lottery platforms can overcome the challenges of traditional lotteries and establish a new standard of trust and integrity in the industry. As blockchain continues to evolve, it is poised to revolutionize the way lottery games are conducted, providing players with a more secure and transparent gaming experience through the power of blockchain app development services.
Our Lottery Platform
We are developing a blockchain-based technology platform designed to support lottery and gaming operations through a combination of smart contract infrastructure, verifiable randomness, and modular backend systems. Our platform is intended to enhance transparency, operational efficiency, and auditability for lottery operators and regulators. Our solutions replace legacy, opaque systems with transparent, blockchain-native architectures that ensure operational efficiency and regulatory compliance.
As of the date of this report, our commercial operations are in an early stage, with one active customer deployment. Our future growth will depend on our ability to secure additional customers, expand into new markets, and continue developing our platform.
Platform Architecture
Our technology is built on a multi-layered architecture that integrates blockchain infrastructure with traditional backend systems and user-facing applications. The platform is designed to support high-throughput environments and can be deployed across multiple jurisdictions.
At its core, the system utilizes blockchain-based smart contracts to automate key operational processes, including ticket registration, draw execution, and prize distribution. These processes are designed to reduce reliance on manual intervention and improve consistency and traceability across lottery operations.
The platform integrates frontend interfaces, backend services, and blockchain components to deliver a unified system that can be adapted to different operator requirements and regulatory environments.
Blockchain Infrastructure and Smart Contracts
The platform currently utilizes blockchain infrastructure, including networks such as Binance Smart Chain (BSC), selected for their performance characteristics and cost efficiency. Smart contracts are used to manage core lottery functions, including:
| ● | Recording ticket purchases and participation data | |
| ● | Executing draw logic | |
| ● | Managing prize allocation and distribution |
These smart contracts are designed to provide transparent and verifiable records of lottery activity, enabling operators, regulators, and, where applicable, end users to independently validate system outcomes.
Verifiable Randomness
A central component of the platform is its use of verifiable randomness mechanisms for draw execution.
The system integrates external randomness providers, such as Chainlink Verifiable Random Function (VRF), to generate cryptographically verifiable random outcomes. This approach is intended to:
| ● | Reduce the risk of manipulation in the draw process | |
| ● | Provide verifiable proof that outcomes are generated in accordance with predefined rules | |
| ● | Support regulatory and audit requirements related to fairness and integrity |
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We are also developing additional mechanisms to further bind draw outcomes to predefined rule sets and improve traceability and auditability of each draw event.
Platform Capabilities
The platform is designed as a modular system that supports a wide range of operational capabilities for lottery operators, including:
Lottery Management
End-to-end management of lottery lifecycle processes, including ticket sales, draw execution, and prize distribution, with system events recorded and traceable.
Operator Tools and Back Office
Administrative interfaces that provide real-time visibility into system activity, including transaction tracking, reporting, and operational controls. These tools are intended to support compliance, auditing, and operational oversight.
Affiliate and Promotional Systems
Integrated tools for campaign management, affiliate tracking, and promotional logic, enabling operators to manage user acquisition and engagement strategies.
Player Engagement Features
Optional engagement features, such as promotional campaigns and reward-based mechanisms, designed to support user retention and activity.
Operational Flow
The platform supports a full operational lifecycle, which typically includes:
| 1. | User onboarding and account or wallet connection |
| 2. | Participation in lottery draws through ticket purchase |
| 3. | Execution of draws using verifiable randomness |
| 4. | Automated or system-assisted prize distribution |
| 5. | Ongoing user engagement through additional platform features |
Each stage is recorded and managed through a combination of backend systems and blockchain-based components, enabling traceability across the lifecycle.
Security and System Integrity
We implement multiple layers of security designed to protect system integrity and user data. These include:
| ● | Use of audited smart contract frameworks and third-party review processes, where applicable |
| ● | Adherence to industry-standard security practices, including OWASP guidelines |
| ● | Continuous system monitoring using infrastructure observability tools |
| ● | Internal controls designed to mitigate fraud and unauthorized activity |
While these measures are designed to enhance security and reliability, no system can be guaranteed to be completely free from vulnerabilities or risks.
Technology Stack and Infrastructure
Our platform is supported by a modern technology stack, including:
| ● | Frontend frameworks for web-based user interfaces |
| ● | Backend systems built on scalable server architectures |
| ● | Database systems for operational and analytical data |
| ● | Containerized infrastructure and orchestration tools (e.g., Docker, Kubernetes) |
| ● | Blockchain indexing and storage solutions |
| ● | Monitoring and analytics tools for system performance and reliability |
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This architecture enables us to scale the platform, support multiple operators, and adapt to evolving technical and regulatory requirements.
Product Layers and Services
Our technology strategy includes the development of multiple product layers:
Protocol Layer
Blockchain-based infrastructure that manages core lottery logic and data recording.
Platform Layer
A modular, full-stack system that enables operators to manage lottery operations, including game configuration, reporting, and user management.
API and Services Layer
We are developing API-based services that allow third-party operators to access specific platform capabilities, including randomness services and operational tools, without requiring direct blockchain integration.
Ecosystem Development
Over time, we intend to expand the platform into a broader ecosystem that can support multiple operators, game formats, and distribution channels within a shared infrastructure framework.
Technology Roadmap
Our development roadmap includes:
| ● | Expansion to additional blockchain networks to support scalability and flexibility |
| ● | Enhancement of API-based services for third-party operators |
| ● | Continued development of operator tools and user interfaces |
| ● | Integration of additional payment methods and regional capabilities |
| ● | Ongoing improvements to security, monitoring, and system performance |
These initiatives are intended to support our long-term strategy of providing a scalable and compliant technology platform for the global lottery and gaming industry.
Our Products and Services
We provide a range of technology products and services designed to support licensed lottery operators:
Platform Access and Deployment
We provide operators with access to our technology platform, including system setup, configuration, and deployment tailored to the operator’s requirements and regulatory environment.
Customization and Development
We offer development services to adapt the platform to specific customer needs, including:
| ● | Custom game configurations |
| ● | Integration with local payment systems |
| ● | Adaptation to regulatory requirements |
| ● | Development of additional features unique to each operator |
Ongoing Support and Maintenance
We provide continuous technical support and system maintenance services, including:
| ● | Platform monitoring |
| ● | Issue resolution |
| ● | System updates and improvements |
| ● | Operational support for live environments |
Additional Platform Capabilities
Our platform includes modules for:
| ● | Lottery lifecycle management |
| ● | Administrative and reporting tools |
| ● | Affiliate and promotional systems |
| ● | User engagement features |
These capabilities may be configured differently depending on the customer’s requirements.
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Revenue Model
Our revenue model is based on a combination of upfront fees, recurring service payments, and performance-based components. Specifically, we generate revenue from:
Setup and Implementation Fees
One-time fees charged for the initial deployment, configuration, and onboarding of new customers onto our platform.
Service and Support Fees
Recurring fees for ongoing technical support, maintenance, and operation of the platform.
Custom Development Fees
Fees charged for the development of customer-specific features, integrations, and enhancements.
Revenue-Based Fees
In certain cases, we receive a percentage-based fee linked to the operational activity of the platform, such as a share of turnover or transaction volume generated through the system.
The exact fee structure may vary between customers based on commercial agreements.
Our Growth Strategy
We focus on providing technology solutions to licensed operators in regulated or emerging markets. Our go-to-market strategy includes:
| ● | Partnering with existing licensed operators – We focus on working with operators that hold the necessary licenses in their respective jurisdictions, allowing us to provide technology solutions without acting as a licensed operator ourselves. |
| ● | Supporting digital transformation of traditional lottery systems |
| ● | Enabling operators to integrate modern infrastructure into their existing operations — We adapt our platform to meet local requirements, including regulatory constraints, payment systems, and user preferences |
| ● | Expansion of Existing Platforms. We continue to develop additional platform features and services to support operator needs, including enhancements to system performance, reporting, and operational tools |
We currently have one active customer operating on our platform and are in the process of expanding our commercial activity.
Market Opportunity and Growth Strategy
Market Opportunity
The global lottery industry represents a large and established market, with significant participation across both developed and emerging economies. Historically, the industry has been dominated by traditional, retail-based distribution models, with a growing but still limited share of digital adoption.
Many operators, particularly in emerging markets, continue to rely on legacy systems that may lack transparency, operational efficiency, and real-time reporting capabilities. At the same time, regulators and consumers are increasingly focused on system integrity, auditability, and digital accessibility.
We believe these trends create an opportunity for technology providers to support the modernization of lottery infrastructure through scalable, digital platforms.
Geographic Focus
Our current commercial activity is focused in Africa, where we have an active customer operating on our platform in The Gambia.
We believe that certain emerging markets present favorable conditions for technology adoption due to:
| ● | Increasing mobile and digital payment usage |
| ● | Demand for more efficient and transparent systems |
| ● | Opportunities for modernization of existing lottery operations |
Expansion Strategy
We intend to expand our operations into additional regions over time, with a focus on:
Asia
We plan to explore opportunities in select Asian markets, where large populations and growing digital adoption may support demand for modern lottery infrastructure.
Europe
We also intend to evaluate opportunities in European markets, particularly where operators may seek to upgrade or complement existing systems with more advanced technology solutions.
Our expansion into new markets will depend on a range of factors, including regulatory requirements, availability of local partners, and commercial viability.
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Competition
We compete with a range of companies across its product lines. Competition varies by product:
| 1. | Camelot UK (national Lottery) |
As the operator of the UK National Lottery, Camelot boasts significant market share and a large player base with over £8.1 billion in sales (2020-21. Our competitive advantage lies in that blockchain ensures unparalleled transparency and significantly lower operational costs compared to their traditional, centralized infrastructure.
| 2. | Intralot |
A global leader in lottery and gaming solutions, Intralot has a wide international presence, serving 40+ countries with €398 million in revenue (2022). Our competitive advantage is that our modular architecture enables rapid, flexible deployment and superior hybrid fiat-crypto functionality, outperforming Intralot’s often legacy integrations.
| 3. | IGT (International Game Technology) |
IGT is a dominant global gaming company, offering lottery, gaming machines, and sports betting solutions with billions in annual revenue ($4.2B in 2022). However, we offer auditable, decentralized transactions and fully automated operations, providing a level of trust and efficiency that, in our opinion, traditional giants like IGT cannot match
Regulation and Compliance
We are subject to a variety of laws in the U.S. and abroad that affect our business, including state, territorial, and federal laws regarding lotteries, gaming, sweepstakes, consumer protection, electronic marketing, data protection and privacy, competition, taxation, intellectual property, export, and national security, all of which are continuously evolving. The scope and interpretation of the laws that are or may be applicable to us are often evolving or new and uncertain and may conflict with each other, particularly those governing our international operations.
Lottery and gaming laws are generally based upon declarations of public policy designed to protect consumers from fraud and other misdeeds and the viability and integrity of the games, while raising revenues for the particular country, state, or other authorizing jurisdiction. To accomplish these goals, stringent laws and regulations may be established to ensure that participants in the industry meet certain standards of character and responsibility, which may require participants to:
| ● | ensure that games are conducted fairly and honestly; | |
| ● | establish procedures designed to prevent cheating and fraudulent practices; | |
| ● | establish and maintain anti-money laundering practices and procedures; | |
| ● | establish and maintain responsible accounting practices and procedures; | |
| ● | ensure that lottery games are sold only at the price established by the applicable lottery regulator; | |
| ● | report prizes awarded and withhold certain amounts for taxes and other specified liabilities; | |
| ● | file periodic reports with regulators; | |
| ● | establish programs to promote responsible gaming and comply with other social responsibility practices; and | |
| ● | enforce minimum age requirements. |
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State and federal laws in the U.S. govern and, in some cases, limit our business practices. For example, the Interstate Wagering Amendment to 18 U.S.C. § 1301 limits our ability to purchase lottery games for a user located in one state from a lottery authority located in another state, except under certain limited circumstances, such as where the lottery authorities in the respective states allow the sales. Therefore, for our users located within the U.S., we only purchase lottery games for users geolocated to be physically situated within the U.S. state or jurisdiction where the lottery game they are purchasing is being conducted, unless an exception were to be authorized by the applicable lottery authorities.
In addition, the Wire Act provides that anyone engaged in the business of betting or wagering that knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication that entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, may be fined or imprisoned, or both. The Wire Act provides, however, that it shall not be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a state or foreign country where betting on that sporting event or contest is legal into a state or foreign country in which such betting is legal. In late 2011, the Office of Legal Counsel (“OLC”) in the United States Department of Justice (“DOJ”) issued an opinion that concluded the conduct prohibited by the Wire Act was limited to sports gambling; however, in January 2019, the OLC issued a new opinion that concluded that the restrictions in the Wire Act on the transmission in interstate or foreign commerce of bets and wagers was not limited to sports gambling but applied to all bets and wagers, including those involving state lotteries. Reinterpretation of the federal Wire Act by the OLC threatened certain online lottery sales, leading to litigation in which the First Circuit Court of Appeals determined that the Wire Act applies only to interstate wire communications related to sporting events or contests and not lottery games. In addition to the First Circuit’s decision, the U.S. Circuit Court of Appeals for the Fifth Circuit has previously held the Wire Act prohibitions apply only to sports gambling. The Company is still analyzing the impact of these decisions on its business.
Our compliance with local, territorial and federal laws is based on our interpretation of existing state and federal laws regarding lottery services such as ours. We have obtained legal advice and notified certain lottery authorities in U.S. jurisdictions where we do business of the services that we offer, but in most cases, we have not received definitive determinations of the laws applicable to our services. There is a risk that existing or future laws in the states and jurisdictions in which we operate may be interpreted in a manner that is not consistent with our business model. Future laws that permit certain lottery services may be accompanied by restrictions or taxes that make it impractical or less feasible to operate in certain jurisdictions.
Other laws and regulations may be adopted or construed to apply to us that could restrict our business model, including privacy, taxation, marketing, anti-money laundering, anti-corruption, copyright, currency exchange, export, and antitrust laws, as well as those governing public companies.
The growth of electronic commerce may prompt calls for stronger consumer protection laws that may impose additional burdens on companies such as ours conducting business through the Internet and mobile devices. It is likely that scrutiny and regulation of our industry may increase, and we will be required to devote additional resources to compliance with applicable regulations. While we believe that we are currently in compliance in all material respects with all applicable laws and regulatory requirements, we cannot assure that our activities or our users’ activities will not become the subject of any regulatory or law enforcement investigation, proceeding, or other governmental action or that any such investigation, proceeding, or action, as the case may be, would not have a materially adverse impact on us or our business, financial condition or results of operations.
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Corporate Office
Our principal executive office is 16 Balfour Street Jerusalem Israel. T Our main telephone number is (800) 674-3561. We maintain a website at www,Techlott.com through which we make available free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission (the “SEC”). Alternatively, you may also access our reports at the SEC’s website at www.sec.gov. Information contained on or accessible through our website is not, and should not be considered, part of, or incorporated by reference into, this annual report.
Employees
We and our subsidiaries retain the services of fourteen personnel, of which five are in administration, ten 10 in research and development and two in marketing.
Corporate and Available Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports are available free of charge though our website as soon as practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”). Except as otherwise stated in these documents, the information contained on our website or available by hyperlink from our website is not incorporated by reference into this report or any other documents we file, with or furnish to, the SEC.
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, before making any decision to invest in shares of our common stock. This Annual Report on Form 10-K contains forward-looking statements. If any of the events discussed in the risk factors below occurs, our business, prospects, results of operations, financial condition and cash flows could be materially harmed. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks not currently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations.
Risk Related to our Lottery and Gaming business, Financial Position and Need for Capital
The audited consolidated financial statements included in this Annual Report have been prepared assuming the Company will continue as a going concern.
The Company recorded negative working capital of approximately $0.22 million and stockholders’ surplus of $12.9 million as of December 31, 2025; a net operating loss of $15.1 million and net cash used in operations of $0.6 million for the year ended December 31, 2025. Absent any other action, the Company will require additional liquidity to continue its operations for the next 12 months.
Our unprecedented transformation from sleep apnea technology to lottery and gaming technology lacks any operational track record and may completely fail.
The lottery and gaming industry operates under fundamentally different business models, regulations, and customer requirements than financial services. There is no assurance that we will successfully execute this transformation or generate any returns from the substantial capital being deployed. Our complete lack of defense industry track record means investors are funding an entirely unproven strategy that may result in total loss of invested capital.
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If we fail to obtain the capital necessary to fund our operations, we will be unable to continue or complete our product development and you will likely lose your entire investment.
We will need to continue to seek capital from time to time to continue development of our products and we cannot provide any assurances that any revenues they may generate in the future will be sufficient to fund our ongoing operations. We believe that we will need to raise substantial additional capital to fund our continuing operations and the development and commercialization of our products. We anticipate that we will need an additional $500,000 to (i) complete product design and testing for our products; and (ii) build the infrastructure for our sustained growth.
Our business or operations may change in a manner that would consume available funds more rapidly than anticipated and substantial additional funding may be required to maintain operations, fund expansion, develop new or enhanced products, acquire complementary products, business or technologies or otherwise respond to competitive pressures and opportunities, such as a change in the regulatory environment. In addition, we may need to accelerate the growth of our sales capabilities and distribution beyond what is currently envisioned, and this would require additional capital. However, we may not be able to secure funding when we need it or on favorable terms. We may not be able to raise sufficient funds to commercialize the products we intend to develop.
If we cannot raise adequate funds to satisfy our capital requirements, we will have to delay, scale back or eliminate our research and development activities or future operations. We may also be required to obtain funds through arrangements with collaborators, which arrangements may require us to relinquish rights to certain technologies or products that we otherwise would not consider relinquishing, including rights to certain major geographic markets. This could result in sharing revenues which we might otherwise retain for ourselves. Any of these actions may harm our business, financial condition and results of operations.
The amount of capital we may need depends on many factors, including the progress, timing and scope of our product development programs; our ability to enter into and maintain collaborative, licensing and other commercial relationships; and our partners’ commitment of time and resources to the development and commercialization of our products.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our products on unfavorable terms to us.
We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms of such financings may include liquidation or other preferences, anti-dilution rights, conversion and exercise price adjustments and other provisions that adversely affect the rights of our stockholders, including rights, preferences and privileges that are senior to those of our holders of common stock in the event of a liquidation. In addition, debt financing, if available, could include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures, or declaring dividends and may require us to grant security interests in our assets. If we raise additional funds through collaborations, strategic alliances, or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, or products or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may need to curtail or cease our operations.
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Our Senior Management has certain contractual anti-dilution protection which are intended to protect their aggregate holdings of 70% of our company.
Our Senior Management has certain contractual anti-dilution protection that provide them broad anti-dilution protection for up to $10 million of value recorded in the Company. These persons hold, in the aggregate approximately 70% of our company. Their anti-dilution protection is not limited to solely additional capital raises but covers all issuances to third parties for any value recorded in the Company’s books such mergers and acquisitions, licensing, etc.
Unless waived by the holders, these anti-dilution provisions may inhibit or impair our ability to raise capital as needed. Failure to raise capital when needed can result in significant harm to our business.
Our Chief Executive Officer’s commitments to other companies may limit his ability to devote full-time attention to our business and could result in competition or conflicts of interest, which could adversely affect our operations and financial performance.
Yakir Abadi our Chief Executive Officer, also maintains and oversees other business ventures. These roles require Mr. Abadi to devote significant time and resources to the management and strategic direction of these other companies, which may reduce the time and attention he can dedicate to our company. This divided focus could impair our ability to execute our business strategy, particularly as we transition to a lottery and gaming company. The competing demands on Mr. Abadi’s time may delay critical decision-making, hinder our ability to respond to market opportunities, or weaken our operational oversight, all of which could materially adversely affect our business, financial condition, and results of operations.
Furthermore, certain of the businesses interest of Mr. Abadi may operate in sectors or pursue opportunities that compete with our current or future operations. Mr. Abadi’s involvement in these companies could lead to conflicts of interest, including the allocation of business opportunities, resources, or strategic priorities that may favor these other entities over our company. Any such competition or conflicts could harm our competitive position, limit our growth prospects, and negatively impact the value of our securities.
The loss of the services of our key management and personnel or the failure to attract additional key personnel could adversely affect our ability to operate our business.
We are particularly reliant on the services of our Chief Executive Officer, President and Chief Technology Officer. A loss of any one of them or one or more of our current officers or key employees or consultants could severely and negatively impact our operations. We have no present intention of obtaining key-man life insurance on any of our executive officers or management. Additionally, competition for highly skilled technical, managerial and other personnel is intense. As our business develops, we might not be able to attract, hire, train, retain and motivate the highly skilled managers and employees we need to be successful. If we fail to attract and retain the necessary technical and managerial personnel, our business will suffer and might fail.
If we do not effectively manage our growth and the associated demands on our operational, risk management, sales and marketing, technology, compliance and finance and accounting resources, our business may be adversely impacted.
To effectively manage and capitalize on our growth, we must continue to expand our information technology and financial, operating, and administrative systems and controls, and continue to manage headcount, capital, and processes efficiently. Our continued growth could strain our existing resources, and we could experience ongoing operating difficulties in managing our business as it expands, including difficulties in hiring, training, and managing an employee base. Failure to scale could harm our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives. If we do not adapt to meet these evolving challenges, or if our management team does not effectively scale with our growth, we may experience erosion to our reputation and the integration of our products and services. Moreover, the failure of our systems and processes could undermine our ability to provide accurate, timely, and reliable reports on our financial and operating results, including the financial statements provided herein, and could impact the effectiveness of our internal controls over financial reporting. In addition, our systems and processes may not prevent or detect all errors, omissions, or fraud, though we have experienced no such material errors, omissions or fraud in the past. Any of the foregoing operational failures could lead to noncompliance with laws, loss of revenues, licenses or other government authorizations, or loss of relationships that could substantially impair or even suspend company operations.
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The future growth of our business depends on its ability to retain existing customers, attract new customers as well as getting existing customers and new customers to increase the volumes processed through our payments platform and therefore grow revenue. Our customers are not subject to any minimum volume commitments and they have no obligation to continue to use our services, and we cannot be sure that customers will continue to use our services or that we will be able to continue to attract new volumes at the same rate as we have in the past.
A customer’s use of our services may decrease for a variety of reasons, including the customer’s level of satisfaction with our products and services, the expansion of business to offer new products and services, the effectiveness of our support services, the pricing of our products and services, the pricing, range and quality of competing products or services, the effects of global economic conditions, regulatory or financial institution limitations, trust, perception and interest in foreign exchange and payment processing services and in our products and services, or reductions in the customer’s payment and transfer activity. Furthermore, the complexity and costs associated with switching to a competitor may not be significant enough to prevent a customer from switching service providers, especially for larger customers who commonly engage more than one payment service provider at any one time.
Any failure by us to retain existing customers, attract new customers, and increase revenue from both new and existing customers could materially and adversely affect our business, financial condition, results of operations and prospects. These efforts may require substantial financial expenditures, commitments of resources, developments of our processes, and other investments and innovations.
We are subject to heightened operational and cybersecurity risks.
We are subject to heightened operational and cybersecurity risks. Many of our employees work from their homes or other non-company dwellings. Technologies in our employees’ and service providers’ homes and shared office spaces may not be as robust and could cause the networks, information systems, applications, and other tools available to employees and service providers to be more limited or less reliable. Further, the security systems in place at our employees’ and service providers’ homes and shared office spaces may be less secure than those used in corporate offices, and while we have implemented technical and administrative safeguards to help protect our systems when our employees and service providers work from home, we may be subject to increased cybersecurity risk which could expose us to risks of data or financial loss, and could disrupt our business operations. There is no guarantee that the data security and privacy safeguards we have put in place will be completely effective or that we will not encounter risks associated with employees and service providers accessing company data and systems remotely.
We rely on third parties in critical aspects of our business, which creates additional risk. Our ability to offer our services depends on relationships with other financial services institutions and entities, and our inability to maintain existing relationships or to enter into new such relationships could impact our ability to offer services to customers.
As we build our lottery and gaming business, we will depend on relationships with specialized subcontractors, and government-approved suppliers. We will depend on various third-party partners including prime contractors.
Also, critical aspects of our technology will rely on third-party technologies. Our lack of established relationships in the industry and foreign ownership structure may be an impediment to our ability to establish partnerships with major defense contractors. Should potential partners refuse to work with us, we would be at risk of being unable to participate in major defense programs.
Third parties upon which we rely on may refuse to partner with us, may breach their agreements with us, refuse to enter into agreements on commercially reasonable terms, take actions that degrade the functionality of our services, impose additional costs or requirements on us, or give preferential treatment to established defense contractors, any of which could prevent us from competing effectively and materially and adversely affect our business, financial condition, results of operations and prospects.
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Some third parties that provide services to our industry may have significant market power and be able to impose unfavorable terms on new entrants like us. In addition, there can be no assurance that third parties will be willing to work with us on acceptable terms, or at all. If we cannot establish necessary partnerships, we may be unable to compete for defense contracts, which may materially and adversely affect our business, financial condition, results of operations and prospects.
Competition within the global sports, entertainment and gaming industries is intense and if we fail to compete effectively, our users may be attracted to our competitors or to competing forms of entertainment including those on mobile devices and web applications, such as streaming, online gaming, esports, and online sports betting. If our offerings are not popular, we could experience price reductions, reduced margins, loss of market share, and our business, financial condition, and results of operations could be harmed.
Our users have a vast array of entertainment choices, including television, movies, sporting events, in-person lottery gaming, real money gaming, and sports betting, all of which are more established and may be perceived by our users to offer greater variety, affordability, interactivity, and enjoyment than our offerings. We compete with these and other forms of entertainment for our users’ discretionary time and income. If we are unable to sustain sufficient interest in our product offerings in comparison to other forms of entertainment, including new and emerging forms of entertainment available on mobile devices and web applications, such as streaming, online gaming, esports, and online sports betting, our business model may not continue to be viable.
In addition, the specific industries in which we have historically operated are characterized by dynamic consumer demand and technological advances, and there is intense competition amongst providers to the lottery, online gaming, sports betting, and promotions industries. Specifically, a number of established, well-financed third-party lottery application companies, online gaming providers, sports betting, and interactive entertainment companies have competed with our offerings, and other well-capitalized companies may introduce competitive services that achieve greater market acceptance. Such competitors may spend more money and time on developing and testing products, services, and systems, undertake more extensive marketing campaigns, adopt more aggressive pricing or promotional policies, or otherwise develop more commercially successful products, services, or systems than we are able, which could negatively impact our business. Furthermore, new competitors may enter the mobile lottery industry, and government lottery operators may introduce forms of online lottery gaming that compete with our services. There has also been, and continues to be, considerable consolidation among competitors in the entertainment, gaming, and lottery industries, and such consolidation, and future consolidation, could result in the formation of larger competitors with increased financial resources and altered cost structures, which may enable them to offer more competitive products, gain a larger market share, expand offerings, and broaden their geographic scope of operations. If we are not able to achieve some market share, if our offerings are not popular, or if we are not able to provide competitive products, our business, financial condition, and results of operations could be harmed.
Economic downturns, inflation, and political and market conditions beyond our control could adversely affect our business, financial condition, and results of operations.
Our financial performance is subject to global economic conditions and their impact on levels of spending by potential users and customers of our Platform a. Economic recessions, or other economic conditions such as rising inflation and interest rates, have had, and may continue to have, far reaching adverse consequences across many industries, including the global entertainment, lottery, sweepstakes and promotions, and gaming industries, which may adversely affect our business, financial condition, and results of operations. Tepid growth was experienced in the U.S. and globally following the financial crisis in 2008 through 2009, and there may be an increasing risk of a recession or inflationary economic impacts due to international trade and monetary policy, rising interest rates and inflation, and acts or threats of acts of war (including the ongoing war in the Ukraine and Middle East), along with other economic challenges. If the national and international economic recovery slows or stalls, these economies experience another recession, or any of the relevant regional or local economies suffers a downturn, or if inflationary effects accelerate, we may experience a material adverse effect on our business, financial condition, or results of operations.
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In addition, changes in general market, economic, and political conditions in domestic and foreign economies or financial markets, including those resulting from, for example: the ongoing effects of the COVID-19 pandemic; rising interest rates and inflation; geopolitical challenges, including global security concerns in response to Russia’s continued war in Ukraine and regional wars in the Middle East; financial and credit market instability or the unavailability of credit; and fluctuation in stock markets, may reduce users’, customers’, or subscribers’ disposable income and corporate budgets. Any one of these changes could have a material adverse effect on our business, financial condition, or results of operations and could cause the value of our securities to decline or become worthless.
Negative events or negative media coverage relating to, or a declining popularity of, the lottery or lottery games in general, or other negative coverage relating to lottery, forms of online gaming or betting, or the gaming industry, may adversely impact our ability to retain or attract users, which could have an adverse impact on our business, financial condition, and results of operations.
Public opinion can significantly influence our business. Unfavorable publicity regarding, for example, our company, members of our management and Board, our technology, our implementation of upgrades and changes to our technology, the quality of our Platform and its interfaces, our product offerings, our other services and systems, actual or threatened litigation or regulatory activity, the actions of third parties with whom we have relationships, our ability to recommence our business operations, or the conduct of the lottery authorities and the products they offer, including declining popularity of a particular lottery game or lottery games in general, could seriously harm our reputation. In addition, a negative shift in the perception of lottery games by the public or by politicians, lobbyists, or others could affect future legislation regarding the mobile purchase of lottery games from third-party providers, including with respect to the regulation or licensure of couriers, or with respect to the legalization of online lottery game sales (“Online Lottery”), either of which may impact our operations. Negative public perception could also lead to new restrictions on or to the prohibition of mobile lottery play in jurisdictions in which we currently operate. Such negative publicity could also adversely affect the size, demographics, engagement, and loyalty of our new players and established user base, and it could result in decreased revenue or slower user growth rates, which could seriously harm our business, financial condition, and results of operations and could cause the value of our securities to decline or become worthless.
We are subject to risks related to corporate social responsibility, responsible gaming, reputation, and ethical conduct.
Many factors influence our reputation and the value of our brands, including the perception held by our users, customers, business partners, investors, regulatory authorities, key stakeholders, and the communities in which we operate, such as our social responsibility, corporate governance, and responsible gaming practices. We have faced, and will likely continue to face, increased scrutiny related to social, governance and responsible gaming activities, and our reputation and the value of our brands can be materially adversely harmed if we fail to act responsibly in a number of areas, such as diversity and inclusion, workplace conduct, responsible gaming, human rights, philanthropy, and support for local communities. Any harm to our reputation could impact employee engagement and retention, and the willingness of users, customers and partners to do business with us, which could have a materially adverse effect on our business, financial condition, and results of operations and could cause the value of our securities to decline or become worthless.
Illegal, unethical or fraudulent activities perpetrated by any of our members of management or Board, users, customers, or partners for personal gain could expose us to potential reputational damage and financial loss, which would negatively impact our business, financial condition, and results of operations and could cause the value of our securities to decline or become worthless.
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We may encounter numerous difficulties frequently encountered by companies in the early stage of operations.
We have a limited operating history upon which an investor can evaluate our current business and future prospects. Any potential investor must consider the risks and difficulties frequently encountered by early-stage companies. Historically, there has been a high failure rate among early-stage companies. Our future performance will depend upon a number of factors, including our ability to:
| ● | generate revenues and implement our business plan and growth strategy; | |
| ● | attract and retain marketing and commercial sponsors; | |
| ● | aggressively counter and respond to actions by our competitors; | |
| ● | maintain adequate control of our expenses; | |
| ● | attract, retain and motivate qualified personnel; | |
| ● | react to member preferences and demands; | |
| ● | maintain regulatory compliance; and | |
| ● | generate sufficient working capital through our operations or through issuance of additional debt or equity financing, and to continue as a going concern. |
We cannot assure investors that we will successfully address any of these factors, and our failure to do so could have a material adverse effect on our business, financial condition, results of operations and future prospects.
Changes in the configuration of the technology underlying our devices and application under development may result in additional costs or delay.
It is common that various aspects of the development program, such as manufacturing methods and configuration, are altered along the way in an effort to optimize processes and results. Any changes we make carry the risk that they will not achieve the intended objectives. Any of these changes could cause our products under development to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered device. Such changes may also require additional testing, regulatory notification or regulatory approval. This could delay completion of clinical trials, increase costs, delay approval of our future products and jeopardize our ability to commence sales and generate revenue.
The nature of the technology platforms utilized by us are complex and highly integrated, and if we fail to successfully manage releases or integrate new updates, it could harm our revenues, operating income, and reputation.
The technology platforms developed by us accommodate integrated applications that include our own developed technology and third-party technology, thereby substantially increasing their functionality. By enabling such system interoperability, our communications platform both reduces implementation and ongoing costs, and improves overall management efficiencies.
Due to this complexity and the condensed development cycles under which we operate, we may experience errors in our software, corruption or loss of our data, or unexpected performance issues from time to time. For example, our solutions may face interoperability difficulties with software operating systems or programs being used by our customers, or new releases, upgrades, fixes or the integration of acquired technologies may have unanticipated consequences on the operation and performance of our other solutions. If we encounter integration challenges or discover errors in our solutions late in our development cycle, it may cause us to delay our launch dates. Any major integration or interoperability issues or launch delays could have a material adverse effect on our revenues, operating income and reputation.
Security breaches, cyberattacks or other cyber-risks of our IT and production systems could expose us to significant liability and cause our business and reputation to suffer and harm our competitive position.
Our corporate infrastructure stores and processes our sensitive, proprietary and other confidential information (including as related to financial, technology, employees, marketing, sales, etc.) which is used on a daily basis in our operations. In addition to that, our software involves transmission and processing of our customers’ confidential, proprietary and sensitive information. We have legal and contractual obligations to protect the confidentiality and appropriate use of customer data.
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High-profile cyberattacks and security breaches have increased in recent years, with the potential for such acts heightened as a result of the number of employees working remotely. Security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting IT products and enterprise infrastructure. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and often are not recognized until launched against a specific target, we may be unable to anticipate these techniques or to implement adequate preventative measures. As we continue to increase our client base and expand our brand, we may become more of a target for third parties seeking to compromise our security systems and we anticipate that hacking attempts and cyberattacks will increase in the future. We cannot give assurance that we will always be successful in preventing or repelling unauthorized access to our systems. We also may face delays in our ability to identify or otherwise respond to any cybersecurity incident or any other breach. Additionally, we use third-party service providers to provide some services to us that involve the storage or transmission of data, such as SaaS, cloud computing, and internet infrastructure and bandwidth, and they face various cybersecurity threats and also may suffer cybersecurity incidents or other security breaches. Despite our security measures, our IT and infrastructure may be vulnerable to attacks. Threats to IT security can take a variety of forms. Individual and groups of hackers and sophisticated organizations, including state-sponsored organizations or nation-states, continuously undertake attacks that pose threats to our customers and our IT. These actors may use a wide variety of methods, which may include developing and deploying malicious software or exploiting vulnerabilities in hardware, software, or other infrastructure in order to attack our products and services or gain access to our networks, using social engineering techniques to induce our employees, users, partners, or customers to disclose passwords or other sensitive information or take other actions to gain access to our data or our users’ or customers’ data, or acting in a coordinated manner to launch distributed denial of service or other coordinated attacks. Inadequate account security practices may also result in unauthorized access to confidential and/or sensitive data.
Security risks, including, but not limited to, unauthorized use or disclosure of customer data, theft of proprietary information, theft of intellectual property, theft of internal employee’s PII/PHI information, theft of financial data and financial reports, loss or corruption of customer data and computer hacking attacks or other cyberattacks, could require us to expend significant capital and other resources to alleviate the problem and to improve technologies, may impair our ability to provide services to our customers and protect the privacy of their data, may result in product development delays, may compromise confidential or technical business information, may harm our competitive position, may result in theft or misuse of our intellectual property or other assets and could expose us to substantial litigation expenses and damages, indemnity and other contractual obligations, government fines and penalties, If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures and our products could be harmed, we could lose potential sales and existing customers, our ability to operate our business could be impaired, and we may incur significant liabilities, and we could suffer harm to our reputation and competitive position, and our operating results could be negatively impact our business.
We may not be able to retain our key personnel or attract additional personnel, which could affect our ability to complete necessary clinical trials, application & product development, and obtain approvals so that we can generate revenue sufficient to continue as a going concern diminishing your return on investment.
Our performance is substantially dependent on the services and on the performance of our Management. We are, and will be, heavily dependent on the skill, acumen and services of our key executives. Our performance also depends on our ability to attract, hire, retain and motivate our officers and key employees. The loss of the services of our executives could result in lost revenue depending on the length of time and effort required to find qualified replacements. We have not entered into long-term employment agreements with all of our key personnel and currently have no “Key Employee” life insurance policies.
Our future success may also depend on our ability to identify, attract, hire, train, retain and motivate other highly skilled technical, managerial, marketing and customer service personnel.
Competition for such personnel is intense, and there can be no assurance that we will be able to successfully attract, assimilate or retain sufficiently qualified personnel. If we are unable to attract, retain, and train the necessary technical, managerial, marketing and customer service personnel, our expectations of increasing our clientele could be hindered, and our profitability reduced.
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As the Company intends to be conducting international business transactions, it will be exposed to local business risks in different countries, which could have a material adverse effect on its financial condition or results of operations.
The Company intends to promote and sell its product candidates internationally by virtue of the global access to its products line and it expects to have customers located in several countries. The Company’s international operations will be subject to risks inherent in doing business in foreign countries, including, but not necessarily limited to:
| ● | New and different legal and regulatory requirements in local jurisdictions; | |
| ● | Potentially adverse tax consequences, including imposition or increase of taxes on transactions or withholding and other taxes on remittances and other payments by subsidiaries; | |
| ● | Risk of nationalization of private enterprises by foreign governments; | |
| ● | Legal restrictions on doing business in or with certain nations, certain parties and/or certain products; and | |
| ● | Local economic, political and social conditions, including the possibility of hyperinflationary conditions and political instability. |
The Company may not be successful in developing and implementing policies and strategies to address the foregoing factors in a timely and effective manner in the locations where it will do business. Consequently, the occurrence of one or more of the foregoing factors could have a material adverse effect on its base operations and upon its financial condition and results of operations.
We may be subject to litigation that will be costly to defend or pursue and uncertain in its outcome.
Our business relies in large part on granted and pending patents which we own. However, the grant of a patent does not ensure that litigation will not arise where the validity of the patent is challenged or that the patent will not be found by a court to infringe upon patents held by others. Furthermore, any litigation relating to our patent rights is likely to be expensive and may require a significant amount of management’s time and attention, at the expense of other aspects of our business. The outcome of litigation is always uncertain, and in some cases could include judgments against us that require us to pay damages, enjoin us from certain activities, or otherwise affect our legal or contractual rights, which could have a significant adverse effect on our business and financial condition.
We may not be able to obtain third-party reimbursement or favorable product pricing, which would reduce our ability to operate profitably.
Our ability to successfully commercialize certain of our proposed products may depend to a significant degree on reimbursement of the costs of such products and related services at acceptable levels from government authorities and other organizations. We cannot assure you that reimbursement in the United States or foreign countries will be available for any products we may develop or, if available, will not be decreased in the future, or that reimbursement amounts will not reduce the demand for, or the price of, our products with a consequent harm to our business. We cannot predict what additional regulation or legislation may be enacted in the future or what effect such regulation or legislation may have on our business. If additional regulations are overly onerous or expensive makes our business more expensive or burdensome than originally anticipated, we may be forced to significantly downsize our business plans or completely abandon our business model.
It may be difficult to enforce a U.S. judgment against us, our officers and some of our directors and the foreign persons named in this registration statement in the United States or in foreign countries, or to assert U.S. securities laws claims in foreign countries or serve process on our officers and directors and these experts.
While we are incorporated in the State of Nevada, currently three of our directors and executive officers are not residents of the United States, and the foreign persons named in this Annual report on Form 10-K are located outside of the United States. The majority of our assets are located outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or foreign court, or to effect service of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in original actions instituted in foreign countries. Foreign courts may refuse to hear a claim based on a violation of U.S. securities laws on the grounds that foreign countries are not necessary the most appropriate forum in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that foreign law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by foreign countries law. There is little binding case law in foreign countries addressing the matters described above.
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We have not adopted various corporate governance measures, and as a result, stockholders may have limited protections against interested director transactions, conflicts of interest and similar matters.
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Because our securities are not yet listed on a national securities exchange, we are not required to adopt these corporate governance measures and have not done so voluntarily in order to avoid incurring the additional costs associated with such measures. Furthermore, the absence of the governance measures referred to above with respect to our Company may leave our stockholders with more limited protection in connection with interested director transactions, conflicts of interest and similar matters.
Risks Related to Our Digital Health Business
Our subsidiary, SleepX Ltd. and B.G. Negev Technologies and Applications Ltd., and Mor Research Application Ltd., have entered into a Licensing agreement which if terminated could have adverse effects on our digital health business.
BGN is a company wholly owned by Ben Gurion University of the Negev in Israel and Mor, is the technology transfer arm of the Clalit Health Services, an Israeli non-profit healthcare insurance and service provider. Under the License Agreement, SleepX was granted a worldwide royalty bearing and exclusive license exclusive worldwide license with the right to grant sub-licenses and with a term of 15 years, to certain intellectual property to research, develop, manufacture use, market, distribute, offer for sale and sell sensor and software solutions for monitoring snoring and sleep apnea. In addition to the agreed upon royalty fees to be paid by SleepX to BGN, there is a milestone payment of $60,000 upon the attainment of regulatory approval from applicable authority in the USA or Europe to market and sell the licensed products. As of the date of this prospectus, we have not achieved any of these milestones.
Under the License Agreement, the Licensors are entitled to terminate the License Agreement under certain conditions relating to a material change in the business of our Israeli subsidiary or a breach of any material obligation thereunder or to a bankruptcy event of our Israeli subsidiary. Under certain conditions, our Israeli subsidiary may terminate the License Agreement and return the licensed information to the Licensors.
In the event of an acquisition of all of the issued and outstanding share capital of the Israeli Subsidiary or of the Company and/or consolidation of the Israeli Subsidiary or the Company into or with another corporation (“Non IPO Exit”) or a listing of our common stock on a national exchange such as Nasdaq (the IPO Exit”), then the Licensors shall be entitled to an exit fee equal to 5% of the valuation of our company at the time of such exit and with respect to an IPO Exit, shares of common stock which will reflect in the aggregate 5% of the outstanding common stock of the Company.
Our business derives from such license and in the event of a termination this could have adverse effects on the Company and cause issues in the distribution and marketing of our products.
The Protection from our Future Patents is Uncertain.
We will rely on patents and trade secrets for the protection of our intellectual property. The issuance of a patent by the Patent Office does not ensure that the patent will be upheld if it is challenged in litigation or that the patent will not be found to infringe upon patents validly issued to others. We could be exposed to substantial litigation expense defending their intellectual property as well as liability to others.
Our Products may Become Technologically Obsolete.
The anti-snoring and anti-sleep apnea products market is characterized by extensive research and development activities. New developments are expected to continue at a rapid pace and there can be no assurance that new discoveries will not render our products, processes and devices uneconomical or obsolete. The likelihood of success for our products must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the development of new medical processes, devices and products and their level of acceptance by the medical community.
We may Encounter Liabilities Involving Customers and Third Parties.
The sale of medical devices can result in claims for injury if a product causes harm or fails to perform as promised. Although we have not been subject to any such claim, no assurance can be given that such claims will not be made in the future or that we can obtain any insurance coverage. If we were subject to an uncovered claim, our assets could be greatly reduced. Though we intend to obtain product liability insurance prior to the commercialization of our product, we currently don’t have a policy in place.
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Risks Related to Geopolitical and Macroeconomic Conditions
Escalating global conflicts, particularly the ongoing wars in the Middle East and Ukraine, create both heightened demand and severe operational risks for our business.
The global security environment has deteriorated significantly, with active military conflicts in the Middle East (including the ongoing conflict in Israel and the broader regional tensions involving Iran, Hezbollah, and other actors) and the continuing war in Ukraine now entering its fourth year. While these conflicts may drive increased defense spending globally, they create severe and direct operational risks for our company. We operate in an active conflict zone where missile attacks, drone incursions, and ground operations pose immediate threats to our facilities, personnel, and supply chains. Mandatory military reserve duty requirements have at times removed significant portions of the Israeli workforce from civilian employment, directly affecting our subsidiaries’ ability to maintain production schedules and fulfill contractual obligations. Flight suspensions and port disruptions in Israel can impede logistics and delay delivery of critical defense products. The continuation or escalation of these conflicts could result in physical damage to our facilities, loss of key personnel, disruption of production, inability to fulfill contractual obligations, and substantial uninsured losses.
Risks Related to Ownership of Our Common Stock
Our senior management may exert significant influence over its affairs, including the outcome of matters requiring stockholder approval.
Our Chief Executive Officer, Chairman, President and Chief Technology Officer control the voting of approximately 70% of our outstanding common stock as of the date of this filing. As a result, they will have the ability, acting together, to control the election of the Company’s directors and the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or a sale of the Company, (ii) a sale of all or substantially all of its assets, and (iii) amendments to its certificate of incorporation. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to the Company’s other stockholders and be disadvantageous to the Company’s stockholders with interests different from those individuals. Certain of these individuals also have significant control over the Company’s business, policies and affairs as officers or directors of the Company. Therefore, you should not invest in reliance on your ability to have any control over the Company.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business, which research and reports are not and would not be subject to our control. We currently do not have and may never obtain research coverage by securities analysts, and industry analysts that currently cover us may cease to do so. If no securities analysts commence coverage of our company, or if industry analysts cease coverage of our company, the trading price for our stock could be materially and adversely impacted. In the event we obtain securities analyst coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price may be materially and adversely impacted. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
A decline in the price of our common stock could affect our ability to raise any required working capital and adversely impact our operations.
A decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise any required capital for our operations. Because we intend to fund the Company in the future primarily through the sale of equity securities, a decline in the price of our common stock could have an adverse effect upon our liquidity and our continued operations. A reduction in our ability to raise equity capital in the future may have a material adverse effect upon our business plan and operations. If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.
The large number of shares eligible for immediate and future sales may depress the price of our stock.
As of the date of this filing we have shares of common stock outstanding which are “free trading” and may serve to overhang the market and depress the price of our common stock.
“Penny Stock” rules may make buying or selling our common stock difficult. Limitations upon Broker-Dealers Effecting Transactions in “Penny Stocks”
Trading in our common stock is subject to material limitations as a consequence of regulations which limit the activities of broker-dealers effecting transactions in “penny stocks.” Pursuant to Rule 3a51-1 under the Exchange Act, our common stock is a “penny stock” because it (i) is not listed on any national securities exchange or The NASDAQ Stock Market™, (ii) has a market price of less than $5.00 per share, and (iii) its issuer (the Company) has net tangible assets less than $2,000,000 (if the issuer has been in business for at least three (3) years) or $5,000,000 (if the issuer has been in business for less than three (3) years).
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Rule 15g-9 promulgated under the Exchange Act imposes limitations upon trading activities on “penny stocks”, which makes selling our common stock more difficult compared to selling securities which are not “penny stocks.” Rule 15a-9 restricts the solicitation of sales of “penny stocks” by broker-dealers unless the broker first (i) obtains from the purchaser information concerning his financial situation, investment experience and investment objectives, (ii) reasonably determines that the purchaser has sufficient knowledge and experience in financial matters that the person is capable of evaluating the risks of investing in “penny stocks”, and (iii) delivers and receives back from the purchaser a manually signed written statement acknowledging the purchaser’s investment experience and financial sophistication.
Rules 15g-2 through 15g-6 promulgated under the Exchange Act require broker-dealers who engage in transactions in “penny stocks” first to provide their customers with a series of disclosures and documents, including (i) a standardized risk disclosure document identifying the risks inherent in investing in “penny stocks”, (ii) all compensation received by the broker-dealer in connection with the transaction, (iii) current quotation prices and other relevant market data, and (iv) monthly account statements reflecting the fair market value of the securities.
There can be no assurance that any broker-dealer which initiates quotations for the Common Stock will continue to do so, and the loss of any such broker-dealer likely would have a material adverse effect on the market price of our common stock.
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described below, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Because our common stock is deemed a low-priced “penny stock,” it will be cumbersome for brokers and dealers to trade in our common stock, making the market for our common stock less liquid and negatively affect the price of our stock.
We will be subject to certain provisions of the Securities Exchange Act of 1934 (the “Exchange Act”), commonly referred to as the “penny stock” rules as defined in Rule 3a51-1. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Since our stock is deemed to be a penny stock, trading is subject to additional sales practice requirements of broker-dealers. These require a broker-dealer to:
| ● | Deliver to the customer, and obtain a written receipts for, a disclosure document; | |
| ● | Disclose certain price information about the stock; | |
| ● | Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer; | |
| ● | Send monthly statements to customers with market and price information about the penny stock; and | |
| ● | In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules. |
Consequently, penny stock rules and FINRA rules may restrict the ability or willingness of broker-dealers to trade and/or maintain a market in our common stock. Also, prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares.
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We Have Paid No Dividends
We have never paid any dividends on our common stock, and we do not intend to pay any dividends in the foreseeable future.
We have the right to issue shares of preferred stock. If we were to issue preferred stock, it is likely to have rights, preferences and privileges that may adversely affect the common stock. Our CEO has, by virtue of his preferred stock ownership, voting control over all matters.
We are authorized to issue 500,000 shares of “blank check” preferred stock, with such rights, preferences and privileges as may be determined from time-to-time by our board of directors. As of the date of this report, we currently have 230,598 shares of Convertible Preferred Stock outstanding, of which 222,664 shares are held by our chairman. Our board of directors is empowered, without shareholder approval, to issue preferred stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights, and other rights, preferences and privileges for the preferred stock. The issuance of shares of preferred stock, depending on the rights, preferences and privileges attributable to the preferred stock, could adversely reduce the voting rights and powers of the common stock and the portion of the Company’s assets allocated for distribution to common stockholders in a liquidation event, and could also result in dilution in the book value per share of the common stock we are offering. The preferred stock could also be utilized, under certain circumstances, as a method for raising additional capital or discouraging, delaying or preventing a change in control of the Company, to the detriment of the investors in the common stock offered hereby. We cannot assure you that the Company will not, under certain circumstances, issue shares of its preferred stock.
The elimination of personal liability of our directors and officers under Nevada law and the existence of indemnification rights held by our directors, officers and employees may result in substantial expenses.
Our Second Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws eliminate to the furthest extent permitted under Nevada law the personal liability of our directors and officers to us, our stockholders and creditors for damages as a result of any act or failure to act in his or her capacity as a director or officer. Furthermore, our Amended and Restated Articles of Incorporation, our Amended and Restated Bylaws and individual indemnification agreements that we have entered with each of our directors and officers provide that we are obligated to indemnify, subject to certain exceptions, each of our directors or officers to the fullest extent authorized by Nevada law and, subject to certain conditions, to advance the expenses incurred by any director or officer in defending any action, suit or proceeding prior to its final disposition. Those indemnification obligations could expose us to substantial expenditures to cover the cost of settlement or damage awards against our directors or officers, which we may be unable to afford. Further, those provisions and resulting costs may discourage us or our stockholders from bringing a lawsuit against any of our current or former directors or officers for such damages, even if such actions might otherwise benefit our stockholders.
We do not intend to pay cash dividends on our capital stock in the foreseeable future.
We have never declared or paid any cash dividends on our common stock and do not anticipate paying any dividends in the foreseeable future. We currently intend to retain all future earnings to fund the development of our products.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
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ITEM 2. PROPERTIES
We do not own any real property.
We lease office premises in part of the personal residence of our Chairman. We believe that our facilities are generally in good condition and suitable to carry on our business. We also believe that, if required, suitable alternative or additional space will be available to us on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
On August 11, 2022, a lawsuit was filed in the Tel Aviv Magistrate’s Court against our Chairman and majority shareholder, Boris Molchadsky, G.P.I.S Ltd., an entity controlled by Mr. Molchadsky, Nexsense, Inc. (the former shareholder of SleepX Ltd.) and SleepX, Ltd., our subsidiary (collectively, the “Defendants”) [Civil lawsuit number 25441-08-22]. The suit was filed by a fund operating out of Israel. A copy of the claim was served to the defendants only six months after it was submitted to court, on February 21, 2023.
The lawsuit is based on the alleged breach of partnership and loan agreements as well as other related allegations, including violation of agreements reached in a mediation proceeding that took place in 2015.
The suit alleges that the Defendants, amongst other things, did not disclose to the plaintiff certain transactions to which the Plaintiff was presumably entitled to compensation and hence the plaintiff demanded an accounting of the transactions and refund of amounts invested. With respect to SleepX. the plaintiff alleged that it made a deal with Nexsense, Inc. which wasn’t disclosed to the plaintiff, while allegedly the technology and patents of Nexsense, Inc. were transferred to SleepX (which was established shortly before the reverse merger between AppYea and SleepX), thus allegedly aimed to the concealment of assets from the plaintiff.
On July 24, 2023, the Defendants (except for Nexsense, Inc.) filed a statement of defense, denying the allegations and argued that the claim should be dismissed, due to the statute of limitations, lack of cause of action, lack of jurisdiction, delay in filing the claim, and respecting SleepX, also due to the lack of legal rivalry between SleepX and the plaintiff.
In addition, the Defendants submitted several preliminary requests to dismiss the claim outright, including a plea to dismiss the claim on the grounds it was submitted to the magistrate court, which is not the competent court according to law, due to the economic nature of the claim. Nexsense, Inc. submitted a request to dismiss the claim against it because it was not properly served under the law (given the different service rules for defendants whose domicile is outside of Israel).
Recently, the Magistrate’s Court in Tel Aviv accepted the request regarding lack of material jurisdiction, and the claim was then transferred to the economic department of the District Court in Tel Aviv.
A preliminary hearing was held on February 14, 2024. The presiding judge did not rule on the preliminary pleadings and urged the parties to attempt mediation before the ruling. The parties are considering different mediators (which must be mutually agree to) and following the selection of a mediator, the parties will schedule a date for the mediation.
We cannot, at this stage, know the effects, if any, of these actions on our subsidiary SleepX and / or the Company. However, SleepX together with the other Defendants, intend to vigorously defend against the lawsuit.
Aside from the disclosure above, from time to time we may become involved in various legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings or claims that we believe, either individually or in the aggregate, will have a material adverse effect on our business, financial condition, or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is currently quoted on the OTCQB-tier of OTC Markets under the symbol “APYP.” We started being quoted on the OTCQB-tier of OTC Markets on October 17, 2022. As of April 15, 2026 we had 890,742,444 shares of our common stock outstanding. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions
As of April 15, 2026, there were 103 holders of record of our common stock, and the last reported sale price of our common stock on the OTCQB-tier of OTC Markets on April 14, 2026 was $0.0135.
Dividend Policy
To date, we have paid no dividends on our common stock and do not expect to pay cash dividends in the foreseeable future. We plan to retain all earnings to provide funds for the operations of our company. In the future, our Board of Directors will decide whether to declare and pay dividends based upon our earnings, financial condition, capital requirements, and other factors that our Board of Directors may consider relevant. We are not under any contractual restriction as to present or future ability to pay dividends.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information regarding our equity compensation plans as of December 31, 2025.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | Weighted- average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in first column) (2) | |||||||||
| Equity compensation plans approved by security holders | - | $ | - | - | ||||||||
| Equity compensation plans not approved by security holders | 110,483,851 | 0.00101 | 0 | |||||||||
| Total | 110,483,851 | $ | 0.00101 | 0 | ||||||||
| (1) | Represents shares of common stock issuable to service providers including officers and directors. |
| (2) | Represents shares of common stock available for future issuance under equity compensation plans. |
Unregistered Sales of Equity Securities
There were no sales of equity securities during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed by the Company.
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ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for the fiscal years ended December 31, 2024 and December 31, 2025 and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations. In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the year ended December 31, 2025, as compared to the fiscal year ended December 31, 2024. This discussion should be read in conjunction with our consolidated financial statements for the fiscal years ended December 31, 2025 and December 31, 2024 and related notes included elsewhere in this Annual Report on Form 10-K. These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly in “Item 1A. Risk Factors.”
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss further below.
Use of estimates
The accompanying Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions. These estimates and assumptions 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 expense. Significant estimates include our ability to continue as going concern, the recoverability of long-lived assets, the recoverability of amounts due from related parties, the valuation of stock-based compensation and certain debt and derivative liabilities, recognition of loss contingencies and deferred tax valuation allowances. Actual results could differ from those estimates. Changes in facts and circumstances may result in revised estimates, which would be recorded in the period in which they become known.
Financial statements in United States dollars
The functional currency of the Company is the U.S. dollar, as the U.S. dollar is the currency of the primary economic environment in which the Company operates. The Company’s transactions and balances denominated in U.S. dollars are presented at their original amounts. Non-dollar denominated transactions and balances have been re-measured to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters” In accordance with ASC 830, monetary balances denominated in or linked to foreign currency are stated on the basis of the exchange rates prevailing at the applicable balance sheet date. For foreign currency transactions included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used.. All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statements of operations and are included in the Financial Expenses – net line. The exchange rate of the US Dollar to the Israeli Shekel was 3.647 and 3.014 as of December 31, 2024 and 2025, respectively.
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Cash and Cash equivalents
Cash equivalents are short-term highly liquid investments that are readily convertible to cash when originally purchased with maturities of three months or less.
Property, plant and equipment, net
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets at a 33% annual rates.
Other Intangible Assets
Identifiable intangible assets are stated at cost, net of accumulated amortization. Patents are amortized using the straight-line method over 7 years. Intellectual Properties are amortized using the straight-line method over its estimated useful economic life, as determined by the Company.
Capitalized internal-use software costs are included in intangibles assets, net in the consolidated statement of financial position. As of December 31, 2024, the Company didn’t amortize the internal-use software costs because it didn’t reach the necessary stage. During 2025, the Company reassessed the qualifying criteria for capitalizing development costs and, as a result, determined to amortize all costs that had previously been capitalized under this framework.
Derivative Financial Instruments
Management evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option based simple derivative financial instruments, the Company uses an option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
Fair value of financial instruments
As defined in ASC 820 “Fair Value Measurements” (“ASC 820”), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
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Concentrations of credit risk
The financial instruments include cash, accounts receivable, accounts payable, accrued expenses, loans payable, due to officers and derivative financial instruments. Balances in various cash accounts may at times exceed insured limits. We have not experienced any losses in such accounts. Cash and cash equivalents are invested in major banks in Israel and United States. Generally, these deposits may be redeemed upon demand and therefore, management believes there is minimal risk. Other than certain warrant and convertible instruments (derivative financial instruments). we believe the carrying values of our financial instruments approximate their fair values because they are short term in nature or payable on demand. Our derivative financial instruments are carried at a measured fair value. The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
Convertible Debt
For convertible debt that does not contain an embedded derivative that requires bifurcation, the conversion feature is evaluated to determine if the rate of conversion is below market value and should be categorized as a beneficial conversion feature (“BCF”). A BCF related to debt is recorded by the Company as a debt discount and with the offset recorded to equity. The related convertible debt is recorded net of the discount for the BCF. The discount is amortized as additional interest expense over the term of the debt with the resulting debt discount being accreted over the term of the note.
The Fair Value Measurement Option
We have elected the fair value measurement option for convertible debt with embedded derivatives that require bifurcation, and record the entire hybrid financing instrument at fair value under the guidance of ASC 815, Derivatives and Hedging (“ASC 815”). The Company reports interest expense, including accrued interest, related to this convertible debt under the fair value option, within the change in fair value of convertible notes and derivatives in the accompanying consolidated statement of operations.
Research and development costs
Research and development consist of costs incurred in the process of developing product improvements or new products and are expensed to the statement of operations as incurred.
General and administrative expenses
General and administrative expenses consists of all corporate overhead costs incurred by the Company.
Stock-Based Compensation
We account for stock-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”). ASC 718, which requires that the cost resulting from all share-based transactions be recorded in the financial statements over the respective service periods. It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions. The Company utilizes the straight-line method allocating the cost over the service period.
Income taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, “Accounting for Income Taxes” (“ASC 740”), using the liability method whereby deferred tax assets and liability account balances are determined based on the differences between financial reporting and the tax basis for assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company accounts for uncertain tax provisions in accordance with ASC 740. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
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Basic and Diluted Net Income (Loss) per Share:
The Company computes net income (loss) per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and Convertible preferred stock, using the if-converted method: In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. For the years ending December 31, 2024 and 2023, there were 230,598 and 258,745 shares, respectively, of convertible preferred stock outstanding and conversion privileges attached to convertible promissory notes payable.
Recently Issued Accounting Pronouncements
On January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU 2019-12 did not have a material effect on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”), which is intended to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance on the basis of feedback from financial statement users. ASU 2020-06 is effective for fiscal years, and interim periods in those fiscal years, beginning after December 15, 2023 (effective January 1, 2024) for smaller reporting companies. The Company is determining the adoption of this new accounting guidance and the effect on its consolidated financial statements throughout the period until implementation.
Significant Events that Occurred During 2025
(i) On each of July 24 and July 30, 2025, entities controlled by Mr. Yakir Abadi and Mr. Eldar Grady, the new CEO and Chairman of the Board, who were appointed to these positions as of August 12, 2025, invested 234,000 NIS in the Company by the purchase of units comprised if i) shares of the Company’s common stock, and: 2) warrants to purchase two (2) additional shares of common stocks exercisable through the second anniversary of the issuance of such options, at a per share exercise price of $0.01. The per unit purchase price was $0.005, for a total purchase price of 234,000 NIS (approximately $69,200 as of the date of this report).
(ii) On August 1, 2025, Mr. Asaf Porat and the Company reached an understanding that Mr. Porat’s position as the Chief Financial Officer has terminated. Mr. Porat continued to provide services to the Company through August 31, 2025. Effective August 12, 2025, Mr. Ron Mekler, who has served as a director of the Company through August 12, 205, was been appointed as Chief Financial Officer. Mr. Mekler resigned from his position as a director on the board on such date.
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(iii) On August 12, 2025, the Company and the holders of outstanding convertible promissory notes in an aggregate amount of approximately $1.8 million have agreed to extend to February 15, 2026 the maturity date of the Convertible Notes (the “New Maturity Date”), freeze the continuing accrual of interest and to not exercise their right to convert the Convertible Notes through the New Maturity Date, in consideration of the repayment in cash by the New Maturity Date of the outstanding principal and accrued interest on the Notes together with a premium not exceeding 10%. The Company’s obligation to repay these amounts is subject to the Company raising additional operating capital. Thereafter, on December 31, 2025, the holders of outstanding convertible promissory notes of the Company in an aggregate amount of approximately $0.8 million have agreed to convert the outstanding balance of these notes into 263,411,477 shares of the Company’s Common stock (the “Conversion Shares”). In addition, the holder of convertible promissory notes of the Company in an aggregate amount $863,840 has agreed to (i) extend the maturity date of such notes by an additional two years to February 15, 2028 and (ii) to refrain from exercising the conversion of terms of such notes until the new extended maturity date. The interest on the balance of such note shall continue to accrue at per annum rate of eight percent (8%).
(iv) In consideration for its efforts in facilitating the extension of the maturity date of the Convertible Notes and the associated waivers discussed above, the Company agreed to issue to an unrelated third party consultant options for 45 million shares of Company common stock, which are vested upon grant and exercisable at a per share price of $0.0001, subject to a 12 month lockup.
(v) Subject to the increase in authorized share capital of the Company, the Company and each of Mr. Abadi and Mr. Grady (the “Share Capital Increase”) agreed that each of these individuals will be issued each options to purchase 638,961,306 shares of Company common stock, exercisable for a five year period and at the per share price, in each case as set forth below:
| (i) | options for 212,965,804 shares of common stock shall vest and become exercisable upon the aggregate trading volume of the Company’s publicly traded share of common stock being at a value of least $500,000 over any consecutive 30-day period; | |
| (ii) | options for 212,965,804 shares of common stock shall vest and become exercisable upon the aggregate trading volume of the Company’s publicly traded share of common stock trading at a average daily trading price of at least $0.03 for 15 consecutive trading days; and | |
| (iii) | options for 213,029,698 shares of common stock shall vest and become exercisable upon the Company’s completion of a capital raise of at least $1 million. |
(vi) On September 30, 2025, the Board e agreed to change the aforementioned resolution regarding the issuance of such options to Mr. Abadi and Mr. Grady, and instead, to enter into a subscription agreement for an identical number of shares of the company’s common stocks at a per share purchase price of $0.0001. see Item (xi) below. The Subscription Agreement goes into effect upon the increase in the Company’s authorized share capital. The Subscription Agreement provides that if certain specified milestones are not achieved with five (5) years then all or part of the Subscription Shares are to be returned to Company’s treasury. In addition, under the Subscription Agreement, each of YA and EG are entitled to anti-dilution protection, such that in the event of any issuance by the Company of shares of Common Stock or securities convertible into shares of Common Stock, whether for cash, in exchange for assets, services, or pursuant to debt conversion or otherwise, the Company shall issue additional shares to YA and EG so that their respective percentage ownership shall be maintained following such issuance, provided that such anti-dilution protection shall be afforded for up to $7 million of value received by the Company, whether measured in gross proceeds, value of assets recorded on the Company’s financial statements or otherwise. Any adjustment shall be made at the end of each quarter following the release of the financial statements for the quarter in which the value was received.
Each of YA and EG received anti dilution protection. Such anti-dilution protection is intended to ensure that each of YA and EG maintains ownership of 17.5% of the Company’s fully diluted share capital, provided that such anti-dilution protection shall be afforded for up to $7 million of value received by the Company, whether measured in gross proceeds, value of assets recorded on the Company’s financial statements or otherwise.
(vii) On September 4, 2025, the Company accepted subscriptions for $550,000 from five qualified investors in consideration of the issuance, in the aggregate, of 45,333,333 shares of the Company’s common stock and warrants to purchase an additional 12,750,000 shares of common stock, exercisable for a period not exceeding 12 months and at per share exercise prices between $0.015 and $0.02.
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(viii) On October 8, 2025, the Company accepted subscriptions for $50,000 from a qualified investor in consideration of the issuance, in the aggregate, of 2,000,000 shares of the Company’s common stock at per share prices between $0.019.
(ix) On November 26, 2025, the Company filed a certificate of designation (the “B Certificate of Designation”) with the Secretary of State of Nevada, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the shares of the Series B Preferred Stock. The total number of authorized shares of the Series B Preferred Stock is 100,000 shares.
On December 31 2025, an amendment was filed with the State of Nevada to the B Certificate of Designation providing that that each Series B Preferred Shares will automatically convert into 25,000 shares of Common Stock (the “Series B Mandatory Conversion”) upon the effectiveness of the Authorized Increase in Shares of Common Stock. On April 13, 2026, a further amendment was filed to correct a clerical error and providing that at the Series B Mandatory Conversion each Series B Preferred Share will convert into 50,000 shares of Common Stock.
(x) On December 29, 2025, the Company and its CFO, Ron Mekler, entered into a subscription agreement for the purchase by Mr. Mekler of 12,500,000 shares at a per unit purchase price of $0.018. RM also received warrant to purchase 12,500,000 shares of common stocks at an exercise price of $0.022. under the Subscription Agreement, RM is entitled to anti-dilution protection, such that in the event of any issuance by the Company of shares of Common Stock or securities convertible into shares of Common Stock, whether for cash, in exchange for assets, services, or pursuant to debt conversion or otherwise, the Company shall issue additional shares to RM so that his respective percentage ownership shall be maintained following such issuance, provided that such anti-dilution protection shall be afforded for up to $7 million of value received by the Company, whether measured in gross proceeds, value of assets recorded on the Company’s financial statements or otherwise. Any adjustment shall be made at the end of each quarter following the release of the financial statements for the quarter in which the value was received.
Mr. Mekler received anti dilution protection. Such anti-dilution protection is intended to ensure that RM maintains ownership of 2% of the Company’s fully diluted share capital, provided that such anti-dilution protection shall be afforded for up to $7 million of value received by the Company, whether measured in gross proceeds, value of assets recorded on the Company’s financial statements or otherwise. Any adjustment shall be made at the end of each quarter following the release of the financial statements for the quarter in which the value was received.
(xi) On December 31, 2025, AppYea completed its acquisition of its previously announced agreement with Techlott to purchase the Techlott Technology. Pursuant to the terms of the Purchase Agreement, the aggregate consideration to be paid by the Company (the “Consideration Shares”) of the Company’s Common Stock, representing 35% of the Company’s issued and outstanding capital on a fully diluted basis. However, pending the increase in the number of the authorized shares of the Company’s Common Stock (the “Authorized Common Stock Share Increase”), the Company issued to Techlott 35,684 shares of the newly created preferred stock, par value $0.0001 per share (the “Series B Preferred”), which by their terms automatically convert into the Consideration Shares upon the effectiveness of the Authorized Common Stock Share Increase.
Techlott received anti dilution protection. Such anti-dilution protection is intended to ensure that Techlott maintains ownership of 35% of the Company’s fully diluted share capital, provided that such anti-dilution protection shall be afforded for up to $10 million of value received by the Company, whether measured in gross proceeds, value of assets recorded on the Company’s financial statements or otherwise. Any adjustment shall be made at the end of each quarter following the release of the financial statements for the quarter in which the value was received.
(xii) On January 27, 2026, we accepted subscriptions for $750,000 from four qualified investors in consideration of the issuance, in the aggregate, of 34,090,908 shares of the Company’s common stock and, with respect to one investor for $450,000, warrants to purchase an additional 20,454,545 shares of common stock, exercisable for a period three years and at per share exercise price $0.026.
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Key Financial Terms and Metrics
The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.
Revenues
We have generated insignificant revenues from product sales to date.
Research and Development Expenses
The process of researching and developing our product candidates is lengthy, unpredictable, and subject to many risks. We expect to continue incurring substantial expenses for the next several years as we continue to develop our product candidates. We are unable, with any certainty, to estimate either the costs or the timelines in which those expenses will be incurred. The design and development of our devices will consume a large proportion of our current, as well as projected, resources.
Our research and development costs include costs are comprised of:
● internal recurring costs, such as personnel-related costs (salaries, employee benefits, equity compensation and other costs), materials and supplies, facilities and maintenance costs attributable to research and development functions; and
● fees paid to external parties who provide us with contract services, such as programing, preclinical testing, manufacturing and related testing and clinical trial activities.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, employee benefits, equity compensation, and other personnel-related costs associated with executive, administrative and other support staff. Other significant general and administrative expenses include the costs associated with professional fees for accounting, auditing, insurance costs, consulting and legal services, along with facility and maintenance costs attributable to general and administrative functions.
Financial Expenses
Financial expenses consist primarily impact of exchange rate derived from re-measurement of monetary balance sheet items denominated in non-dollar currencies. Other financial expenses include bank’s fees and interest on long term loans. Financial income derives mainly from change in derivative value of convertible loans.
Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024.
Our financial results for the year ended December 31, 2024 are summarized as follows in comparison to the year ended December 31, 2023:
| Year Ended | ||||||||
December 31, 2025 | December 31, 2024 | |||||||
| Operating Expenses | ||||||||
| Research and Development | $ | 240,000 | 339,000 | |||||
| General and Administrative | $ | 16,689,000 | 1,114,000 | |||||
| Financing expenses (income) | $ | (1,963,000 | ) | 2,208,000 | ||||
| Loss for the year | $ | 15,097,000 | 4,032,000 | |||||
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Revenues. Revenues for the twelve months ended December 31, 2025 and 2024 were $7,625 and $29,000 respectively. All revenues were attributable to sales of our appnea devices.
Research and Development Expenses, Research and development expenses decreased from $339,000 for the year ended December 31, 2024 to $240,000 for the twelve months ended December 31, 2025. The decrease is primarily attributable to reduced development activities associated with certain of the Company’s products.
General and Administrative Expenses. General and administrative expenses increased from $1,114,000 for the year ended December 31, 2024 to $16,689,000 for the twelve months ended December 31, 2025. The increase in expenses is primarily attribute able to remeasurement of approximately $15.7 million in the fair value of contingent liability components and anti-dilution features related to the issuance of shares to controlling shareholders.
Loss. Loss for the twelve months ended December 31, 2025 and 2024, was $15,097,000 and $4,032,000 respectively and is primarily attributable to remeasurement of approximately $9 million in the fair value of contingent liability components and anti-dilution features related to the issuance of shares to controlling shareholders and to Change in fair value of convertible loans..
Liquidity and Capital Resources
From inception, we have funded our operations from a combination of loans and sales of equity.
As of December 31, 2025, we had a total of $408,000 in cash resources and approximately $8,799,000 of liabilities, $795,000 of which are current liabilities.
AppYea has experienced operating losses since its inception and had a total accumulated deficit of $25,455,000 as of December 31, 2025. We expect to incur additional costs and require additional capital. We have incurred losses in nearly every year since inception. These losses have resulted in significant cash used in operations. During the years ended December 31 2025 and 2024, our cash used in operations was approximately $606,000 and $785,000, respectively. We need to invest in marketing of our products, as we continue to conduct these activities, we expect the cash needed to fund operations to increase significantly over the next several years.
The following table provides a summary of operating, investing, and financing cash flows for the period ended December 31, 2024 and 2023 respectively:
| For the Years ended | ||||||||
December 31, 2025 | December 31, 2024 | |||||||
| US Dollars | ||||||||
| Net cash used in operating activities | $ | 606,000 | 785,000 | |||||
| Net cash used in investment activities | $ | - | 80,000 | |||||
| Net cash provided by Financing Activities | $ | 935,000 | 719,000 | |||||
Between December 2024 and December 2025, we raised an aggregate of $260,000 from private placement of shares of our common stock at a per share price of $0.01 and the issuance of warrants, exercisable for a two year period from the date of issuance for an identical number of shares at a per share exercise price of $0.04, and additional $124,000 from exercise of outstanding warrants at an exercise price of $0.0066 per share, which was reduced from $0.04 if exercised within a specified shorter duration. In respect of the raise the investors are entitled to an aggregate 26,000,000 shares of our common stock and identical number of warrants, of which 13,500,000 have already been issued. The subscription proceeds are being used to complete the IOS design and development of our biofeedback snoring treatment wristband (AppySleep product) as well as general corporate matters. More recently, we raised in July 2025 through entities controlled by Mr. Yakir Abadi and Mr. Eldad Grady, the new CEO and Chairman of the Board, respectively, appointed as of August 12, 2025, invested 234,000 NIS in the Company by the purchase of units comprised of; 1) Shares of the Company’s common stock at a par value of $0.0001 per share, and: 2) Warrants to purchase two (2) additional shares of common stocks exercisable through the second anniversary of the issuance of such options, at a per share exercise price of $0.01, at a per unit purchase price of $0.005 for a total purchase price of 234,000 NIS (approximately $69,200 as of the date of this report). Each of them received 7,000,000 of Company’s shares of common stock.
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On September 4, 2025, the Company accepted subscriptions for $550,000 from five qualified investors in consideration of the issuance, in the aggregate, of 45,333,333 shares of the Company’s common stock and warrants to purchase an additional 12,750,000 shares of common stock, exercisable for a period not exceeding 12 months and at per share exercise prices between $0.015 and $0.02.
On October 8, 2025, the Company accepted subscriptions for $50,000 from a qualified investor in consideration of the issuance, in the aggregate, of 2,000,000 shares of the Company’s common stock prices between $0.019.
As of January 27, 2026, we accepted subscriptions for $750,000 from four qualified investors in consideration of the issuance, in the aggregate, of 34,090,908 shares of the Company’s common stock and, with respect to one investor for $450,000, warrants to purchase an additional 20,454,545 shares of common stock, exercisable for a period three years and at per share exercise price $0.026.
On December 31, 2025, the holders of outstanding convertible promissory notes of the Company in an aggregate amount of approximately $0.8 million have agreed to convert the outstanding balance of these notes into 263,411,477 shares of the Company’s Common stock (the “Conversion Shares”). In addition, the holder of convertible promissory notes of the Company in an aggregate amount $863,840 has agreed to (i) extend the maturity date of such notes by an additional two years to February 15, 2028 and (ii) to refrain from exercising the conversion of terms of such notes until the new extended maturity date. The interest on the balance of such note shall continue to accrue at per annum rate of eight percent (8%).
Management believes that funds on hand, will enable us to fund our operations and capital expenditure requirements through December 2026. We need to raise additional operating capital in order to maintain operations as presently conducted and to realize our business plan beyond such date.
Our accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these consolidated financial statements. However, the Company has incurred substantial losses. Our current liabilities exceed our current assets and available cash is not sufficient to fund the expected future operations. The Company is raising additional capital through debt and equity securities in order to continue the funding of its operations. However, there is no assurance that the Company can raise enough funds or generate sufficient revenues to pay its obligations as they become due, which raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty.
We cannot be sure that future funding will be available to us on acceptable terms, or at all. Due to often volatile nature of the financial markets, equity and debt financing may be difficult to obtain.
We may seek to raise any necessary additional capital through a combination of private or public equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights, future revenue streams, or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through private or public equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
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Going Concern
For the year ended December 31, 2025, and as of the date of this report, we assessed our financial condition and concluded that based on our current and projected cash resources and commitments, as well as other factors mentioned above, there is a substantial doubt about our ability to continue as a going concern. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We have accumulated deficit of $25,455,000 and a working capital deficit of $224,000 on December 31 2025, as well as negative operating cash flows. Our report from our independent registered public accounting firm for the year ended December 31, 2025, includes an explanatory paragraph stating the Company has recurring losses and limited operations which raise substantial doubt about its ability to continue as a going concern. If the Company is unable to obtain adequate capital, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Smaller Reporting Company Status
Currently, we qualify as a smaller reporting company.
As a smaller reporting company, we are eligible and have taken advantage of certain exemptions from various reporting requirements that are not available to public reporting companies that do not qualify for this classification, including, but not limited to:
● An opportunity for reduced disclosure obligations regarding executive compensation in our periodic and annual reports, including without limitation exemption from the requirement to provide a compensation discussion and analysis describing compensation practices and procedures,
● An opportunity for reduced financial statement disclosure in registration statements and in annual reports on Form 10-K, which only requires two years of audited financial statements rather than the three years of audited financial statements that are required for other public companies,
● An opportunity for reduced audit and other compliance expenses as we are not subject to the requirement to obtain an auditor’s report on internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002, and
● An opportunity to utilize the non-accelerated filer time-line requirements beginning with our annual report for the year ending December 31, 2024 and quarterly filings thereafter.
For as long as we continue to be a smaller reporting company, we expect that we will take advantage of both the reduced internal control audit requirements and the disclosure obligations available to us as a result of this classification.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company’s consolidated financial statements, together with the report of the independent registered public accounting firm thereon and the notes thereto, are presented beginning at page F-1. The Company’s consolidated balance sheet as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the years then ended have been audited by Barzily & Co. These financial statements have been prepared in accordance with accounting principles generally accepted in the United State of America and pursuant to Regulations S-K as promulgated by the Securities and Exchange Commission and are included herein pursuant to Part II, Item 8 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act and regulations promulgated thereunder) as of December 31, 2025, or the Evaluation Date. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective as of December 31, 2025.
Management’s Report on Internal Control over Financial Reporting
Our management, under the supervision of the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company’s assets that could have a material effect on the financial statements.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this evaluation, our management used the criteria set forth in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, management concluded that our internal control over financial reporting was not effective on December 31, 2024. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
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As a result of our evaluation, we identified a material weakness in our controls related to segregation of duties and other immaterial weaknesses in several areas of data management and documentation. Our management is composed of a small number of professionals resulting in a situation where limitations on segregation of duties exist. Accordingly, and as a result of the material weakness identified above, we have concluded that the control deficiencies result in a reasonable possibility that a material misstatement of the annual or interim financial statements may not be prevented on a timely basis by the Company’s internal controls. We continue to employ and refine a structure in which critical accounting policies, issues and estimates are identified, and together with other complex areas, are subject to multiple reviews by executives. We expect to be materially dependent upon third parties to provide us with accounting consulting services for the foreseeable future which we believe will mitigate the impact of the material weaknesses discussed above.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the fourth quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
During
the three months ended December 31, 2025, no director or officer of the Company
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE
The Company’s directors hold office until the next annual general meeting of the stockholders or until their successors are elected and qualified. The Company’s officers are appointed by its board of directors and hold office until the earlier of their death, retirement, resignation, or removal.
The following table sets forth the names and ages of the members of the board of directors and the executive officers and the positions held by each as of April 15, 2026.
| Name | Age | Position | ||
| Yakir Abadi | 37 | Chief Executive Officer, Director | ||
| Eldar Grady | 36 | Executive Chairman, Director | ||
| Mark Katzenelson | 49 | President, Director | ||
| Ron Mekler | 52 | Chief Financial Officer | ||
| Ben Harris | 42 | Chief Technology Officer, Director | ||
| Boris Molchadsky | 49 | Director |
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Business Experience
The following is a brief account of the education and business experience of our current directors and executive officers:
Yakir Abadi, has been our Chief Executive Officer and a Director since August 12, 2026. Mr Abadi is active in fintech, blockchain, and digital finance. He brings with him a wealth of experience in developing banking systems, digital currency solutions, and breakthrough ventures in the digital investment sector. Yakir Abadi is a serial entrepreneur and the owner of multiple leading companies in fintech, digital marketing, and content management. Since 2018, he has led Eyecu Digital, a developer of advanced banking systems integrated with blockchain technology, delivering innovative solutions to financial institutions and global organizations. In 2019, he founded A.B. Global Heights Ltd, a parent company holding a portfolio of more than 20 ventures and businesses in digital marketing, operating in both local and international markets. In 2022, he established Better Mind Ltd, a company that manages and promotes social media influencers and business mentors in Israel, focusing on building personal brands and enhancing digital presence. Over the past five years, Yakir has combined technological innovation, business vision, and brand-building expertise, establishing himself as a significant player in both the financial and digital arenas in Israel and abroadMr. Abadi holds a central position among investment communities, traders, and technology leaders. He is recognized for his practical experience in building digital banking platforms, blockchain solutions, and cryptocurrency investments, and is considered a prominent and influential figure within digital investment communities both in Israel and internationally.
Eldar Edmond Grady, has been our Chairman of the Board of Directors since August 12, 2026 Mr. Grady is the owner of an international holding company with a consulting arm for NASDAQ-listed corporations and one of the world’s top PPLI wealth management agencies. With decades of experience advising public companies, Grady has built a reputation for turning strategy into measurable, lasting success. Mr. Grady has served since 2020 as the Owner and Chief Executive Officer of Talniri Ltd., a diversified holding company with interests in NASDAQ-listed corporate advisory (PR-IR), wealth management with a focus on PPLI solutions, and strategic investments. Over the past five years, he has led Talniri’s expansion into multiple high-growth sectors, built a portfolio of companies serving global markets, and forged partnerships with leading public companies.
Mark Katzenelson has been our President and a Director since December 31, 2026. Mr. Katzenelsomn is a senior business executive and entrepreneur with more than two decades of experience spanning real estate development, international investments, and technology-driven ventures. Throughout his career, Mark has built and led diversified business operations across Europe and international markets, with a strong focus on long-term value creation, operational excellence, and scalable growth.Mark’s professional foundation lies in real estate entrepreneurship, where he has been deeply involved in residential, commercial, and office developments for over 20 years. His hands-on approach covers the full investment lifecycle—from acquisition and development to portfolio management and strategic exits—establishing him as a trusted leader in complex, cross-border real estate environments. In parallel with his real estate activities, Mark has led and owned industrial and operational businesses, gaining extensive experience in production oversight, supply-chain coordination, and operational scalability within global business ecosystems. Over the past several years, Mark has expanded his leadership into high-tech and algorithmic systems, with strategic ownership and business involvement in technology ventures such as Techlott. His work in this domain focuses on technology-enabled platforms, lottery systems, and regulatory-aware business models, bridging traditional industries with modern digital infrastructure.
Mark is also the Founder and CEO of Keemple, a smart home technology company, where he has led product vision, business strategy, and international market deployment. Mark brings a strong legal and regulatory perspective to his ventures, positioning him at the intersection of business leadership, technology innovation, and cross-border operations. He received his Bachelor of Laws (LL.B) in 2005.
Ron Mekler has been our Chief Financial Officer since August 12, 2026. Mr. Mekler served as an independent director from April, 2021 until his resignation as a director of our company on August 12, 2026 whereupon he assumed the rle of our Chief Financial Officer. Mr. Mekler has been serving in key positions during the past 20 years in both public and private institutions in Israel. Since June 2013, he has been serving as chief financial officer at Clalit Health Services - the largest Health Services organization in Israel. Prior thereto, between 2005-2013, he was Controller for Raviv Acs., a manufacturer of vehicle parts. In the years 2003-2005 he served as a Controller in Ashtrom, a Real Estate property management Company. Between 2001-2003 Mr. Mekler started his career as an intern at Price Water House Coopers specializing in industrial, real estate and high-tech Companies. Mr. Mekler is a certified accountant since 2003 (from BGU University) and has MBA in Business Management from the Ono Academic College.
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Ben Harris has been our Chief Technology Officer and a Director since December 31, 2026. Mr. Harris is a veteran technology executive with 20 years of experience driving innovation in the gaming and finance sectors. He has collaborated with industry giants such as Playtech and DraftKings, delivering data-driven solutions that redefine user engagement. As the CEO of MetaLottery and Tarcha Group, Ben combines his extensive gaming background with expertise in blockchain architecture and Web3 integration, building secure, scalable, and compliant platforms for the digital economy.
Boris Molchadsky has been serving as a director since April 2021 and as Chief Executive Officer from April, 2021 through August 12, 2026, In September 2019, Mr. Molchadsky co-founded SleepX Ltd., and continues to serve as Chairman today. In August 2015, Mr. Molchadsky co-founded Nexense Technologies USA. Inc., a corporation focused on non-intrusive treatment for snoring and sleep apnea. He additionally co-founded GPIS Ltd., in March 2007 and consults through it to companies until today. Furthermore, Mr. Molchadsky has over fifteen years of experience in the capital markets working in leading investment firms. In the recent years, he has been working in the field of sleep health in collaboration with the world’s leading research institution, such as the Ben Gurion University, Soroka Medical Center and Millenium Sleep Lab. Mr. Molchadsky holds a B.A. in Business Management and Finance from the University of Manchester and a M.B.A in Finance from the Ono Academic College, in Israel.
Code of Ethics
The Company has not as yet adopted a code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions as required by the Sarbanes-Oxley Act of 2002 due to our small size and limited resources and because management’s attention has been focused on matters pertaining to business operations.
Corporate Governance
The business and affairs of the company are managed under the direction of our board. We have a board consisting of 4 members. In addition to the contact information in this prospectus, each stockholder will be given specific information on how he/she can direct communications to the officers and our director of the corporation. All material communications from stockholders are relayed to our board.
Role in Risk Oversight
Our board is primarily responsible for overseeing our risk management processes. The board receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The board focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks undertaken by our company are consistent with the board’s appetite for risk. While the board oversees our company’s risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure supports this approach.
Family relationships
There are no family relationships among any of our officers or directors.
Committees
Our Board has established an audit committee which operates under a charter that has been approved by our board. Mr. Mekler was on the Audit Committee until his resignation from the Board on August 12, 2026 and his assumption of the position of Chief Financial Officer. We currently do not have any member on our Audit Committee as all of our Board members would not be considered independent as defined under the rules of the Nasdaq Capital Market.
We currently do not have a nominating or compensation committees or committees performing similar functions nor does our Company have a written nominating or compensation charter. Our directors believe that it is not necessary to have such committees, at this time, because the Director(s) can adequately perform the functions of such committees.
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Audit Committee
The audit committee’s main function is to oversee our accounting and financial reporting processes and the audits of our financial statements. This committee’s responsibilities include, among other things:
| ● | appointing our independent registered public accounting firm; | |
| ● | evaluating the qualifications, independence and performance of our independent registered public accounting firm; | |
| ● | approving the audit and non-audit services to be performed by our independent registered public accounting firm; | |
| ● | reviewing the design, implementation, adequacy and effectiveness of our internal accounting controls and our critical accounting policies; | |
| ● | discussing with management and the independent registered public accounting firm the results of our annual audit and the review of our quarterly unaudited financial statements; | |
| ● | reviewing, overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters; | |
| ● | reviewing on a periodic basis, or as appropriate, any investment policy and recommending to our board any changes to such investment policy; | |
| ● | preparing the report that the SEC requires in our annual proxy statement; | |
| ● | reviewing and approving any related party transactions and reviewing and monitoring compliance with our code of conduct and ethics; and | |
| ● | reviewing and evaluating, at least annually, the performance of the audit committee and its members including compliance of the audit committee with its charter. |
Involvement in legal proceedings
None of our directors or executive officers has, during the past ten years:
* had any bankruptcy petition filed by or against any business of which he was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;
* been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
* been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities;
* been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
* been subject or a party to or any other disclosable event required by Item 401(f) of Regulation S-K.
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Nominations to the Board of Directors
Director candidates are considered based upon various criteria, including without limitation their broad-based business and professional skills and experiences, expertise in or knowledge of the life sciences industry and ability to add perspectives relating to that industry, concern for the long-term interests of our stockholders, diversity, and personal integrity and judgment. Our Board of Directors has a critical role in guiding our strategic direction and overseeing the management of our business, and accordingly, we seek to attract and retain highly qualified directors who have sufficient time to engage in the activities of our Board of Directors and to understand and enhance their knowledge of our industry and business plans.
Shareholder Communications.
Although we do not have a formal policy regarding communications with our Board, shareholders may communicate with the Board by writing to us at our executive office, Attention: Boris Molchadsky, CEO. Shareholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our officers and directors and persons who beneficially own more than ten percent (10%) of the Common Stock outstanding to file initial statements of beneficial ownership of Common Stock (Form 3) and statements of changes in beneficial ownership of Common Stock (Forms 4 or 5) with the SEC. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish us with copies of all such forms they file.
Our records reflect that all reports which were required to be filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, were filed on a timely basis, except that certain reports on Form 3 and 4 have not yet been filed.
Insider Trading Policy
Given our small size, our board of directors has not yet adopted an insider trading policy that is appropriate for a company of our size. The board intends to adopt an appropriate insider trading policy during the 2025 fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes the compensation earned in each of our fiscal years ended December 31, 2025 and 2024 by the executive officers listed below, which we refer to as the Named Executive Officers.
Summary Compensation Table
| Name and Principal Position | Year | Salary | Bonus ($) | Option Awards | All other compensation | Total | ||||||||||||||||||
| Yakir Abadi, Chief Executive Officer (1) | 2025 | 131,178 | (6) | - | - | 131,178 | 131,178 | |||||||||||||||||
| 2024 | - | - | - | - | - | |||||||||||||||||||
| Eldar Grady, Executive Chairman (2) | 2025 | 131,178 | (6) | - | - | 131,178 | 131,178 | |||||||||||||||||
| 2024 | - | - | - | - | - | |||||||||||||||||||
| Mark Katnelson, President (3) | 2025 | 131,178 | (6) | - | - | 131,178 | 131,178 | |||||||||||||||||
| 2024 | - | - | - | - | - | |||||||||||||||||||
| Boris Molchadsky, Former Chief Executive & Chairman (4) | 2025 | 35,613 | (6) | - | - | 35,613 | 35,613 | |||||||||||||||||
| 2024 | 175,512 | - | - | - | 175,512 | |||||||||||||||||||
| Adi Shemer, Former Chief Executive Officer (5) | 2025 | 23,725 | - | - | 23,725 | 23,725 | ||||||||||||||||||
| 2024 | 103,631 | - | 564,398 | - | 668,029 | |||||||||||||||||||
1. Mr. Abadi was appointed Chief Executive Officer on August 12, 2025.
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2. Mr. Grady was appointed Executive Chairman on August 12, 2025.
3. Mr. Katzenelson was appointed President on December 31, 2025.
4. Mr. Molchadsky served as Chief Executive Officer from January 19, 2025 to August 12, 2025, where upon he resigned as Chief Executive Officer upon the retention of Mr. Adi Shemer to serve in such position. Mr. Molchadsky continues to serve on our Board.
5. Mr. Shemer served as Chief Executive Officer from July 1, 2023 through January 19, 2025.
6. Due to cash flow constraints, none of the specified amounts were in fact paid. However, these amounts are being accrued and recorded in the Company’s books and will begin to be paid when the Company has sufficient cash flow.
Consulting Agreements
Yakir Abadi. In connection with his appointment as Chief Executive Officer, on September 30, 2025, the Company entered into a consulting agreement with A.B Global Heights Limited, a company controlled by Mr. Abadi (the “YA Consulting Agreement”) pursuant to which YA is entitled to a monthly fee of $30,000, as of August 12, 2025 (in each case the “Base Fee”) for a three year period. In addition, in the event that the Company decides to terminate the consulting agreement for any reason other than cause (as defined in each agreement) or there is Change of Control (as defined in each agreement), then the Company is to pay to YK a severance payment equal to 36 months Base Fee.
The Consulting Agreement contains customary non-competition, non-solicitation and confidentiality provisions.
Eldar Grady. In connection with his appointment as Chairman, on September 30, 2025, the Company entered into a consulting agreement with TALNIRI LTD, a company controlled by Mr. Grady (the “EG Consulting Agreement”) pursuant to which EG is entitled to a monthly fee of $30,000, as of August 12, 2025 (in each case the “Base Fee”) for a three year period. In addition, in the event that the Company decides to terminate the consulting agreement for any reason other than cause (as defined in each agreement) or there is Change of Control (as defined in each agreement), then the Company is to pay to EG a severance payment equal to 36 months Base Fee.
The Consulting Agreement contains customary non-competition, non-solicitation and confidentiality provisions.
Mark Katzenelson. In connection with his appointment as President, on December 31, 2025, the Company entered into a consulting agreement with Mark Katzenelso (the “MK Consulting Agreement”) pursuant to which MK is entitled to a monthly fee of $30,000, as of August 12, 2025 (in each case the “Base Fee”) for a three year period. In addition, in the event that the Company decides to terminate the consulting agreement for any reason other than cause (as defined in each agreement) or there is Change of Control (as defined in each agreement), then the Company is to pay to MK a severance payment equal to 36 months Base Fee.
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The Consulting Agreement contains customary non-competition, non-solicitation and confidentiality provisions.
Boris Molchadsky. On July 1, 2021, SleepX, Ltd. and Boris Molchadsky entered into an employment agreement pursuant to which Mr. Molchadsky serves as Chairman of the Board and Chief Executive Officer of SleepX and Chairman of the Board of the Company. Under the agreement with Mr. Molchadsky, he is paid an annual salary of the current New Israeli Shekel equivalent of approximately $144,636, payable on monthly basis. SleepX Ltd is authorized to terminate the employment agreement for any reason subject to payment of five months’ salary. Under the terms of the employment agreement with him, Mr. Molchadsky also receives Manager’s Insurance under Israeli law for his to which SleepX Ltd contributes amounts equal to (a) 8-1/3 percent for severance payments, and 6.5%, or up to 7.5% (including disability insurance) designated for premium payment (and Mr. Molchadsky contributes an additional 6%) of each monthly salary and (b) 7.5 % of his salary (with Mr. Molchadsky contributing an additional 2.5%) to an education fund, a form of deferred compensation program established under Israeli law. Mr. Molchadsky is also provided with a monthly travel expense New Israeli Shekel equivalent of approximately $98.
In additionMr. Molchadsky is entitled to (i) a success bonus of 1.5% of any capital raise of up to $10,000,000 and (ii) a success bonus of 1.0% of any revenues of the Company up to accumulated revenues of $20,000,000.
Adi Shemer. On July 7, 2023, the Board of Directors of AppYea, Inc. (the “Company”) appointed Adi Shemer as Chief Executive Officer (“CEO”) of the Company, effective immediately. Mr. Shemer was associated with the Company since February 2023 as a consultant. On January 19, 2025, Mr. Shemer and the Company terminated the employment relationship.
In connection with his appointment as CEO, Mr. Shemer and the Company’s subsidiary SleepX, Ltd. entered into an Employment Agreement (the “Agreement”) setting forth the terms of his employment and compensation. Under the Agreement, Mr. Shemer was entitled to monthly salary of 40,000 NIS (equivalent to $10,800 as of the date of this report), of which the payment of 20,000 NIS is deferred until such time as the Company raises at least $1 million in aggregate proceeds from the private placement of its securities. Under the Agreement, Mr. Shemer was also entitled to the following: (i) Manager’s Insurance under Israeli law to which SleepX contributes amounts equal to (a) 8-1/3 percent for severance payments, and 6.5%, or up to 7.5% (including disability insurance) designated for premium payment (and Mr. Shemer contributes an additional 6%) of each monthly salary payment, and (b) 7.5% of his salary (with Mr. Shemer contributing an additional 2.5%) to an education fund, a form of deferred compensation program established under Israeli law. Either Mr. Shemer or SleepX is entitled to terminate the employment at any time upon 30 days prior notice.
Under the Agreement, Mr. Shemer was awarded options under the Company’s employee stock option plan for 11,500,000 shares of the Company’s common stock at a per share exercise price of $0.0001, vesting over a period of 30 months, on a quarterly basis, beginning with the quarter ending September 30, 2023, provided that Mr. Shemer continues in the employ of SleepX and continues to provide CEO services to the Company. At the end of the 30 month period, he is entitled to options for an additional 11,500,000 shares at the same exercise price provided he has been in the continuous employ of SleepX. The options are exercisable through July 2033. In connection with his consulting services, he was awarded options for 1,000,000 shares of the Company’s common stock, exercisable through July 2033 at a per share exercise price of $0.0001 per share, all of which have vested. Following the termination of the employment relationship, Mr. Shemer holds options for 27,773,926 shares at a per share exercise price of $0.0001 per share.
Mr. Shemer and the Company agreed as of January 19, 2025 to terminate Mr. Shemer’s position as CEO. In January 2026, the Company and Mr.Shemer entered into a settlement and release agreement pursuant to which, Mr. Shamer agreed to fully release and discharge the Company from any and all claims. In connection with the settlement, Mr. Shamer returned to the Company 28,864,132 vested but unexercised stock options previously granted to him. In consideration for the foregoing, the Company paid Mr. Shamer NIS 150,000 (approximately $47,318). Following the execution of agreement, Mr. Shamer holds 3,008,288 shares of the Company’s common stock
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Outstanding Equity Awards
There were no outstanding equity awards to any Named Executive Officer that were outstanding as of December 31, 2025.
Compensation of Directors
The following table sets forth for each non-employee director that served as a director during the year ended December 31, 2025:
Year Ended December 31, 2025
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($)(1)(2) | Non Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Benefits ($) | All Other compensation ($) | Total ($) | |||||||||||||||||||||
| Ron Mekler, former director (3) | 21,795 | (2) | 21,795 | |||||||||||||||||||||||||
| 1. | In accordance with SEC rules, the amounts in this column reflect the fair value on the grant date of the option awards granted to the named executive, calculated in accordance with ASC Topic 718. Stock options were valued using the Black-Scholes model. The grant-date fair value does not necessarily reflect the value of shares which may be received in the future with respect to these awards. The grant-date fair value of the stock options in this column is a non-cash expense for us that reflects the fair value of the stock options on the grant date and therefore does not affect our cash balance. The fair value of the stock options will likely vary from the actual value the holder receives because the actual value depends on the number of options exercised and the market price of our common stock on the date of exercise. |
| 2. | In respect of options for 1,000,000 shares of Common Stock. |
3. |
Mr. Mekler resigned as a director as of August 12, 2025 whereupon he was appointed as the Company Chief Financial Officer. |
As of January 1, 2023 the company engaged with Ron Mekler as a board member. For his services he was granted stock option under ESOP to purchase 500,000 of the Company’s common stock, par value $0.0001 per share of the Company (the “Common Stock”), on a post-split basis. Upon grant, the Options vest as follows: (i) 50% following 12 months on the first anniversary of the appointment and (ii) the balance of shares of Common Stock, in four (4) consecutive fiscal quarters, beginning with the quarter ending March 31, 2024. The Option shall be exercisable at a per share exercise price of $0.0001 and shall otherwise be subject to the other terms and conditions specified in an Option Grant Agreement to be entered into between Mr. Mekler and the Company. Mr. Mekler exercised the 500,000 vested options during September 2024.
On August 31, 2023, Mr. Mekler was granted additional stock option under ESOP to purchase 500,000 of the Company’s common stock, par value $0.0001 per share of the Company (the “Common Stock”), vesting in equal quarterly instalments over a period of 12 months, ending 08.31.2024. Mr. Mekler exercised the 500,000 vested options during September 2024.
In addition, on August 7, 2024, the Board approved the issuance of a stock option to purchase 1,000,000 shares of the Company’s common stock, at a per share exercise price of $0.0001, to Mr. Ron Mekler, the company independent board member.
The Company reimburses its directors for any out-of-pocket cost reasonably incurred to attend a Board meeting.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 15, 2026 for (a) the executive officers named in the Summary Compensation Table of this proxy statement, (b) each of our directors and director nominees, (c) all of our current directors and executive officers as a group and (d) each stockholder known by us to own beneficially more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Under the rules of the SEC, a stockholder is deemed to be a beneficial owner of any security of which that stockholder has the right to acquire beneficial ownership in 60 days of April 15, 2026. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by these stockholders. Percentage of ownership is based on 890,742,444 shares of common stock outstanding on April 15, 2026.
| % of class | SERIES A | % of class | % of class | |||||||||||||||||||||
| COMMON | (Common | PREFERRED | (Series A | Series B | (Series B | |||||||||||||||||||
| Name of Beneficial Owner | STOCK | Stock) | STOCK (1) | Preferred) | Preferred(2) | Preferred) | ||||||||||||||||||
| Officers and Directors | ||||||||||||||||||||||||
| Yakir Abadi, CEO & Director | 7,000,000 | 0.82 | % | - | 17,842 | 25 | % | |||||||||||||||||
| Eldar Grady, Chairman | 7,000,000 | 0.82 | % | - | 17,842 | 25 | % | |||||||||||||||||
| Mark Katzenelsonm President & Director | - | |||||||||||||||||||||||
| Ben Harris, CTO, Director | - | |||||||||||||||||||||||
| Boris Molchadsky, Former CEO and Director(3) | 163,553,935 | 19.09 | % | 222,664 | 96.56 | % | ||||||||||||||||||
| Adi Shemer, Former CEO | 3,008,288 | 0.35 | % | - | ||||||||||||||||||||
| 5% shareholders | ||||||||||||||||||||||||
| Plutus Investments LP(5) | 99,420,718 | 11.61 | % | |||||||||||||||||||||
Techlott Ltd.(4) | 35,684 | 50 | % | |||||||||||||||||||||
| Officers and Directors as a Group (6 persons) | 177,553,935 | 19.93 | % | 222,664 | 96.56 | 71,368 | 100 | % | ||||||||||||||||
| (1) | The Series A Preferred Stock were issued in June 2020. The Series A Preferred Stock is authorized to vote with the Common Stock in all stockholder meetings that the Common Stock may vote and each share has voting power equal to 3,000 votes per share and are convertible at a rate of 1,500 shares of common stock to each preferred share. | |
| (2) | On November 26, 2025, the Company filed a certificate of designation (the “B Certificate of Designation”) with the Secretary of State of Nevada, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the shares of the Series B Preferred Stock. The material terms of the Series B- Preferred Stock are described below. The total number of authorized shares of the Series B Preferred Stock is 100,000 shares. The Series B Preferred Stock is authorized to vote with the Common Stock in all stockholder meetings that the Common Stock may vote and each share has voting power equal to 15,000 votes per share and automatically convert into Common Stock upon an increase in t the Company’s authorized Common Stock at a rate of 50,000 shares of common stock to each Series B Preferred Stock. | |
| (3) | Comprised of 96,004,464 shares held directly by Mr. Molchadsky and 67,549,471 held through Nexense Technologies Inc. | |
| (4) | The Principals of Techlott Ltd. are Mark Katzenelos, our President and Ben Harris, our Chief Technology Officer | |
| (5) | Comprised of (i) 14,989,494 shares and (ii) 84,431,224 shares issuable upon conversion of convertible notes based on the publicly traded stock as of April 15, 2026. The notes are not convertible prior to February 15, 2028. |
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Except as described below, since the beginning of our last fiscal year, there have not been, nor is there currently proposed, any transaction to which we are or were a party in which the amount involved exceeds the lesser of $120,000 and 1% of the average of our total assets at year-end for the last two completed fiscal years, and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any of their respective affiliates or immediate family members, had, or will have, a direct or indirect material interest.המשפט לא
(i) During 2021, our subsidiary SleepX borrowed from Nexense Technologies USA Inc. an aggregate amount of $47,623. According to the agreement, the loan is to be repaid in the event that the Company’s profits are sufficient to repay the aggregate loan amount and upon such terms and in such installments as shall be determined by the Board. The loan bears interest at an annual rate equal to the minimum rate approved by applicable law.
(ii) During 2020, the Non-controlling interest in Ta-nooma (subsidiary of SleepX), lent to Ta-nooma a long-term loan. As December 31, 2025, the outstanding loan balance amounts to $47,622.
(iii) Investments by Senior Management. On each of July 24 and July 30, 2025, entities controlled by Mr. Yakir Abadi and Mr. Elder Grady, the new CEO and Chairman of the Board, invested 234,000 NIS in the Company by the purchase of units comprised if i) shares of the Company’s common stock, and: 2) warrants to purchase two (2) additional shares of common stocks exercisable through the second anniversary of the issuance of such options, at a per share exercise price of $0.01. The per unit purchase price was $0.005, for a total purchase price of 234,000 NIS (approximately $69,200 as of the date of this report). Each of them received 7,000,000 of Company’s common shares.
(iv) On August 12, 2025 the Company and each of Mr. Abadi and Mr. Grady agreed that each of these individuals will be issued each option to purchase 638,961,306 shares of Company common stock, exercisable for a five year period and at the per share price, in each case as set forth below:
| a. | options for 212,965,804 shares of common stock shall vest and become exercisable upon the aggregate trading volume of the Company’s publicly traded share of common stock being at a value of least $500,000 over any consecutive 30-day period; | |
| b. | options for 212,965,804 shares of common stock shall vest and become exercisable upon the aggregate trading volume of the Company’s publicly traded share of common stock trading at a average daily trading price of at least $0.03 for 15 consecutive trading days; and | |
| c. | options for 213,029,698 shares of common stock shall vest and become exercisable upon the Company’s completion of a capital raise of at least $1 million. |
On September 30, 2025, the Board approved a modification of the aforementioned arrangements, replacing the prior agreement for the grant of options with the revised terms as described herein. Under the revised terms, the Company entered into subscription agreements with Mr. Abadi and Mr. Grady for an identical number of shares of the Company’s common stock at a purchase price of $0.0001 per share. The revised arrangements retain the same contingent conditions described above. The shares issued under the revised terms represent, in the aggregate, 35% of the Company’s fully diluted share capital. The Subscription Agreement provides that if the three abovementioned milestones are not achieved within five (5) years, then all or part of the Subscription Shares are to be returned to the Company’s treasury.
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In addition, under the subscription agreement, each of YA and EG are entitled to anti-dilution protection, such that in the event of any issuance by the Company of shares of Common Stock or securities convertible into shares of Common Stock, whether for cash, in exchange for assets, services, or pursuant to debt conversion or otherwise, the Company shall issue additional shares to YA and EG so that their respective percentage ownership shall be maintained following such issuance.
(v) Techlott IP Purchase Agreement. On August 20, 2025 the Company entered into an Intellectual Property Purchase Agreement with Techlott Enterprises Ltd. (“Techlott”), a Cypriot company, for the purchase (the “Techlott Purchase Agreement”) of proprietary blockchain-based decentralized lottery ecosystem leveraging smart contracts, verifiable randomness, and advanced infrastructure to deliver transparent, secure, and scalable lottery experiences (the “Technology”) and the underlying intellectual property (the “Technology”) for consideration consisting of shares of the Company’s Common Stock. Under the terms of the Techlott Purchase Agreement the Company agreed to purchase the all rights, title and interest to the Techlott Technology (the Techlott IP) in consideration of the issuance to Techlott of the Company’s Common Stock representing 35% of the issued and outstanding Company share capital on a fully diluted basis.
In connection with the above transactions, Techlott and Bary Molchadsky, a Company director and the then holder of a majority of the outstanding voting share capital of the Company, entered into a Shareholders Agreement as of such date pursuant to which Techlott is entitled to designate two (2) of the five directors of the Company’s Board of Directors at the closing of the purchase of the Technology under the IP Purchase Agreement. Techlott’s right to designate the Board directors continues so long as it holds at least 20% of the Company’s outstanding capital. Additionally, under the Shareholders Agreement the Techlott designated directors have effective veto rights over certain Company actions, including any changes to the Company’s business, issuance of new equity securities and any mergers and acquisitions. At the closing of the Technology purchase, Mr. Mark Katzenelson, the president of Techlott, will be appointed as President of the Company and Ben Harris, the CTO of Techlott, will be appointed as CTO of the Company. Techlott was also granted under the Shareholders Agreement anti-dilution protection for the Techlott Company Shares for any Company capital raise that the Company may raise up to $10 million. Techlott was granted piggy back registration rights for its Techlott Company Shares.
On December 31, 2025, we completed its acquisition of the Techlott Technology. Pursuant to the terms of the Techlott Purchase Agreement, the aggregate consideration to be paid by the Company (the “Consideration Shares”) of the Company’s Common Stock, representing 35% of the Company’s issued and outstanding capital on a fully diluted basis. However, pending the increase in the number of the authorized shares of the Company’s Common Stock (the “Authorized Common Stock Share Increase”), the Company issued to Techlott 35,684 shares of the newly created Series B preferred stock, par value $0.0001 per share (the “Series B Preferred”), which by their terms automatically convert into the Consideration Shares upon the effectiveness of the Authorized Common Stock Share Increase. Mr. Mark Katzenelson, the president of Techlott, was appointed as President of the Company and Mr. Ben Harris, the CTO of Techlott, was appointed as CTO of the Company. Each of Mr. Katzenelson and Harris were also appointed to the Company’s board of directors.
In connection with the IP acquisition from Techlott Ltd., Techlott was granted anti-dilution protection for future capital raises of up to $10 million in the aggregate.
(vi) Consulting Arrangements with Senior Management. On September 30, 2025, the Company entered into a consulting agreement with Yakir Abadi (the “YA Consulting Agreement”) and with Eeldar Grady (the “EG Consulting Agreement”). Under the terms of each of the YA Consulting Agreement and the EG Consulting Agreement, each of YA and EG is entitled to a monthly fee of $30,000, retroactive to August 12, 2025 (in each case the “Base Fee”) for a three-year period. In addition, in the event that the Company decides to terminate a consulting agreement for any reason other than cause (as defined in each agreement) or there is Change of Control (as defined in each agreement), then the Company is to pay to YA or EG, as the case may be, a severance payment equal to 36 months Base Fee. In addition, each of YA and EG is entitled to reimbursement.
| 48 |
In conjunction with their appointments as President and Chief Technology Officer, respectively, on December 31, 2025, the Company entered into a consulting agreement with each of Mr. Katzenelson and Harris. Under the terms of each of the consulting agreements, each of Mr. Katzenelson and Harris is entitled to a monthly fee of $30,000, retroactive to August 20, 2025 (in each case the “Base Fee”) for a three-year period. In addition, in the event that the Company decides to terminate a consulting agreement for any reason other than cause (as defined in each agreement) or there is Change of Control (as defined in each agreement), then the Company is to pay to each of them as the case may be, a severance payment equal to 36 months Base Fee. In addition, each of Mr. Katzenelson and Harris is entitled to reimbursement for any amounts expended in the course of their services to the Company.
On November 18, 2025, the Company and Ron Mekler, the Company’s Chief Financial Officer as of August 12, 2025 (“RM”), entered into a consulting agreement (the “RM Consulting Agreement”). Under the terms of RM Consulting Agreement, RM is entitled to a monthly fee of $10,000, retroactive to August 12, 2025 (the “Base Fee”) for a two-year period. In addition, in the event that the Company decides to terminate the RM Consulting Agreement or any reason other than cause (as defined in the agreement), then the Company is to pay to RM, a severance payment equal to the lesser of 6 months Base Fee and the duration of the Term. If the Company elects to not renew the term of the agreement upon its scheduled termination, then RM shall be entitled to three (3) months’ Base Salary. In addition under the RM Consulting agreement, RM is entitled to options for 15 million shares to vest in equal quarterly instalments of 7,500,000 option shares on each of March 31 and June 30, 2026.
(vi) Series B Preferred. On November 26, 2025, the Company filed a certificate of designation (the “Series B Certificate of Designation”) with the Secretary of State of Nevada, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the shares of the Series B Preferred Stock.. The total number of authorized shares of the Series B-8 Preferred Stock is 100,000 shares.
On December 31 2025, an amendment was filed to the B Certificate of Designation with respect to the number of shares of Common stock into which the Series B Preferred Stock are to mandatorily convert providing that each outstanding share of Series B Preferred Stock will automatically convert into 25,000 shares of Common Stock (the “B Mandatory Conversion”) upon the effectiveness of the Authorized Increase in Shares of Common Stock. On April 13, 2026, an additional amendment was filed to the B Certificate of Designation to correct the number of shares of Common Stock into which each Series B Preferred Share will convert upon the effectiveness of the Authorized Increase in Shares of Common Stock to 50,000 shares instead of 25,000 shares.
Pending the increase in Authorized Increase in Shares of Common Stock, each of Yakir Abady our Chief Executive Officer, Eldar Grady, our Executive Chairman and Techlott Ltd were issued the number of Series B Preferred Shares et forth opposite each person or entity’s name and the corresponding number of Common Stock into which the Series B will convert upon the Authorized Increase in Shares of Common Stock.
| Name | Number of Series B Preferred Shares | Number of Common Stock into which such Series Shares convert upon the Authorized Increase in Shares of Common Stock | ||||||
| Yakir Abadi | 17,842 | 892,103,602 | ||||||
| Eldar Grady | 17,842 | 892,103,602 | ||||||
| Techlott Ltd. | 35,684 | 1,784,207,205 | ||||||
(vii) Anti Dilution Protection. Each of Yakir Abadi, our Chief Executive Officer, Eldar Grady, our Executive Chairman, Ron Mekler, Our Chief Financial Officer and Techlott Ltd. have contractual anti-dilution protection that provide each with broad anti-dilution protection for up to $10 million of value recorded in the Company. With respect to each of Yakir Abadi, Eldar Grady and Techlott, the shareholdings that are subject to such anti-dilution protection are 17.5% of the Company issued capital and in the case of Ron Mekler, 2%. Their anti-dilution protection is not limited to solely additional capital raises but covers all issuances to third parties for any value recorded in the Company’s books such mergers and acquisitions, licensing, etc.
| 49 |
Director Independence
Our board of directors currently consists of five members. Our board of directors has determined that none of our directors qualify as independent directors in accordance with the Nasdaq listing requirements. Nasdaq’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three (3) years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by Nasdaq rules, our board of directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. There are no family relationships among any of our directors or executive officers.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents fees for professional audit services rendered by Barzily & co. for the audit of the Company’s audited financial statements for the years ended December 31, 2025 and December 31, 2024:
| 2025 | 2024 | |||||||
| Audit fees (1) | $ | 74,193 | $ | 68,039 | ||||
| Audit-related fees (2) | $ | 0 | $ | 0 | ||||
| Tax fees (3) | $ | 0 | $ | 0 | ||||
| All other fees | - | - | ||||||
| Total: | $ | 74,193 | $ | 68,039 | ||||
| (1) | Audit fees consist of audit and review services, consents and review of documents filed with the SEC. |
| (2) | Audit-related fees consist of assistance and discussion concerning financial accounting and reporting standards and other accounting issues. |
| (3) | Tax fees consist of preparation of federal and state tax returns, review of quarterly estimated tax payments, and consultation concerning tax compliance issues. |
Prior to engagement, the Audit Committee pre-approves each of these services by category of service. The fees are budgeted and the Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the budget at year end by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires pre-approval before engaging our independent registered public accounting firm. All of the services described above were pre-approved by our Audit Committee.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
Our Board of Directors has appointed Barzily & co, Jerusalem, Israel, company ID 540184942, as our independent registered public accounting firm for the fiscal year ended December 31, 2024.
| 50 |
PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
(a)
| c. | Financial Statements |
Our consolidated financial statements are set forth in Part II, Item 8 of this Annual Report on Form 10-K and are incorporated herein by reference.
| d. | Financial Statement Schedules |
No financial statement schedules have been filed as part of this Annual Report on Form 10-K because they are not applicable or are not required or because the information is otherwise included herein.
| e. | Exhibits required by Regulation S-K |
| Exhibit Number | Description of Exhibit | |
| 3.1 | Amended and Restated Articles of Incorporation of the Company (1) | |
| 3.2 | Bylaws of the Company (1) | |
| 4.1 | Specimen of Stock Certificate (1) | |
| 4.2 | Form of Investor Warrant issued on September 4, 2025 (Incorporated by reference from the current report on Form 8-K filed on September 5, 2025) | |
| 4.3 | Certificate of Designation of the Series B Preferred Stock (Incorporated by reference from the current report on Form 8-K filed on January 7, 2026) | |
| 4.4 | Amendment to Designation of the Series B Preferred Stock dated December 31, 2026 (Incorporated by reference from the current report on Form 8-K filed on January 7, 2026) | |
| 4.5* | Amendment to Designation of the Series B Preferred Stock dated April 13, 2026 | |
| 4.6* | Description of Securities | |
| 10.1 | Agreement dated November 23, 2021betweeh SleepX Ltd. and Pinter Software Systems Ltd. (1) | |
| 10.2 | Securities Purchase Agreement dated as of November 24, 2021 between Leonite Fund I LP and Appyea, Inc. (1) | |
| 10.3 | Pledge and Security Agreement dated as of November 24, 2021 between Leonite Fund I LP and Appyea, Inc. (1) | |
| 10.4+ | Employment Agreement dated July 1, 2021 between Boris Molchadsky and SleepX Ltd. (1) | |
| 10.5+ | Employment Agreement dated July 1, 2021 between Asaf Porat and SleepX Ltd. (1) | |
| 10.6 | License Agreement dated March 15, 2020 among SleepX Ltd. BG Negev Technologies and Applications Ltd. and Mor Research Applications Ltd. (1) | |
| 10.7 | First Amendment dated May 1, 2022 to License Agreement dated March 15, 2020 among SleepX Ltd. BG Negev Technologies and Applications Ltd. and Mor Research Applications Ltd (1) | |
| 10.8+ | Service Agreement dated June 1, 2022 between AppYea, Inc. and GPIS Ltd. (incorporated by reference to the Registration Statement on Form S-1/A file don July 12, 2022) (1) | |
| 10.9+ | Employment Agreement dated as of July 1, 2023 between SleepX Ltd. and Adi Shemer (2) | |
| 10.10+ | Debt Conversion and Settlement Agreement between Bary Molchadsky and Appyea Inc. (Incorporated by reference from the quarterly report on Form 10-Q filed on May 20, 2024) | |
| 10.11+ | Debt Conversion between Adi Shemer and Appyea Inc. (Incorporated by reference from the quarterly report on Form 10-Q filed on May 20, 2024) | |
| 10.12 | Debt Conversion and Settlement Agreement between Asaf Porat and Appyea Inc. (Incorporated by reference from the quarterly report on Form 10-Q filed on May 20, 2024) | |
| 10.13 | Intellectual Property Purchase Agreement dated as of August 20, 2025 by and between AppYea, Inc. and Techlott Ltd. (Incorporated by reference from the current report on Form 8-K filed on August 21, 2025) | |
| 10.14 | Shareholders Agreement dated as of August 20, 2025 by and between Techlott Ltd. and AppYea Controlling Shareholder (Incorporated by reference from the current report on Form 8-K filed on August 21, 2025) | |
| 10.15 | Registration Rights Agreement dated as of August 20 2025 by and between AppYea, Inc. and Techlott Ltd. (Incorporated by reference from the current report on Form 8-K filed on August 21, 2025) | |
| 10.16 | Form of Subscription Agreement dated September 4, 202 5 (Incorporated by reference from the current report t on Form 8-K filed on September 5, 2025) | |
| 10.17+ | Consulting Agreement dated as of September 30, 2025 among Appyea Inc., A B Global Heights Ltd. and Yakir Abadi (Incorporated by reference from the current report on Form 8-K filed on October 3, 2025) | |
| 10.18+ | Consulting Agreement dated as of September 30, 2025 among Appyea Inc., A B Global Heights Ltd. and Eldar Grady (Incorporated by reference from the current report on Form 8-K filed on October 3, 2025) | |
| 10.19+ | Form of Subscription Agreement dated September 30, 2025 (Incorporated by reference from the current report on Form 8-K filed on October 3, 2025) | |
| 10.20+ | Consulting Agreement dated as of December 31, 2025 between AppYea Inc. and Mark Katzenelson (Incorporated by reference from the current report on Form 8-K filed on January 7, 2026) | |
| 10.21+ | Consulting Agreement dated as of December 31, 2025 between AppYea Inc. and Ben Harris (Incorporated by reference from the current report on Form 8-K filed on January 7, 2026) | |
| 21 | List of Subsidiaries (Incorporated by reference from the annual report on Form 10-K for the year ended December 31, 2024 filed on April 15, 2025) | |
| 31.1* | Certification of Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 | |
| 31.2* | Certification of Chief Financial Officer (Principal Financial and Accounting Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 | |
| 32.1* | Certification of Chief Executive Officer (Principal Executive Officer), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2* | Certification of Chief Financial Officer (Principal Financial and Accounting Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
+ Management Agreement
(1) Incorporated by reference to the Registration Statement on Form S-1 filed on May 10, 2022
(2) Incorporated by reference to the current report on Form 8-K filed on July 7, 2023
(3) Incorporated by reference to the annual report on Form 10-K filed on March 31, 2023
* Attached herewith
ITEM 16. FORM 10-K SUMMARY
Not applicable.
| 51 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| APPYEA, INC. | ||
| Date: April 16, 2026 | By: | /s/ Yakir Abadi |
| Yakir Abadi | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: April 16, 2026 | By: | /s/ Ron Mekler |
| Ron Mekler | ||
| Chief Financial Officer, (Principal Financial and Accounting Officer) | ||
Pursuant to the requirements of the Securities Act of 1933, as amended, this report has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Yakir Abadi | Chief Executive Officer (Principal Executive Officer), Director | April 16, 2026 | ||
| Yakir Abadi | ||||
| /s/ Eldar Grady | Executive Chairman | April 16, 2026 | ||
| Eldar Grady | ( ) | |||
| /s/ Ron Mekrel | Chief Financial Officer | April 16, 2026 | ||
| Ron Mekrel | (Principal Financial and Accounting Officer) | |||
| /s/ Mark Katzenelson | President & Director | April 16, 2026 | ||
| Mark Katzenelson | ||||
| /s/ Ben Harris | Chief Technology Officer & Director | April 16, 2026 | ||
| Ben Harris | ||||
| /s/ Boris Molchadsky | Director | April 16, 2026 | ||
| Boris Molchadsky |
| 52 |
APPYEA INC. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2025
| F-1 |
APPYEA INC. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2025
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |
| Report of Independent Registered Public Accounting Firm (PCAOB ID: |
F-3 |
| Consolidated Balance Sheets | F-4 |
| Consolidated Statements of Operations | F-5 |
| Consolidated Statements of Changes in Deficiency | F-6 - F-7 |
| Consolidated Statements of Cash Flows | F-8 |
| Notes to the Consolidated Financial Statements | F-9 - F-28 |
| F-2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Appyea Inc.
Opinion on the Financial Statements
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficiency. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2021
/s/ Barzily & Co., CPAs
April 16, 2026
| F-3 |
APPYEA INC.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
| December 31, | December 31, | |||||||||
| Note | 2025 | 2024 | ||||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | ||||||||||
| Other accounts receivables | 5 | |||||||||
| Inventory | ||||||||||
| Total current assets | ||||||||||
| Non-current assets | ||||||||||
| Property and equipment, net | ||||||||||
| Intangible assets, net | 3 | |||||||||
| Total non-current assets | ||||||||||
| Total assets | ||||||||||
LIABILITIES AND EQUITY | ||||||||||
| Current liabilities | ||||||||||
| Trade payables | ||||||||||
| Other accounts payable and related party payables | 7 | |||||||||
| Short-term loans from related party | 8 | |||||||||
| Derivative liability – Anti-dilution rights | 4 | |||||||||
| Convertible loans at fair value | 9 | |||||||||
| Total Current liabilities | ||||||||||
| Non-current liabilities | ||||||||||
| Long term convertible loans at fair value | 9 | |||||||||
| Total Long-term liabilities | ||||||||||
| Total liabilities | ||||||||||
COMMITMENT AND CONTINGENCIES | 10 | |||||||||
| STOCKHOLDERS’ EQUITY | ||||||||||
| AppYea Inc. Stockholders’ Equity: | ||||||||||
| Convertible preferred A stock, $ par value | 14 | |||||||||
| Convertible preferred B stock, $ par value | 14 | |||||||||
| Common stock, $ par value | 14 | |||||||||
| Shares to be issued | ||||||||||
| Additional Paid in Capital | ||||||||||
| Treasury Stocks | ( | ) | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Total AppYea Inc. stockholders’ equity | ( | ) | ||||||||
| Non-controlling interests | ( | ) | ( | ) | ||||||
| Total Stockholders’ Equity | ( | ) | ||||||||
| Total liabilities and equity | ||||||||||
The accompanying notes are an integral part of the financial statements.
| F-4 |
APPYEA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands)
| For the year ended December 31, | ||||||||||
| Note | 2025 | 2024 | ||||||||
| Revenue | ||||||||||
| Cost of sales | ||||||||||
| Gross (loss) profit | ( | ) | ||||||||
| Research and development expenses | ||||||||||
| Sales and marketing expenses | ||||||||||
| General and administrative expenses | 15 | |||||||||
| Operating loss | ( | ) | ( | ) | ||||||
| Change in fair value of convertible loans and warrant liability | ( | ) | ||||||||
| Financial expenses, net | ( | ) | ( | ) | ||||||
| Loss before income tax benefit | ( | ) | ( | ) | ||||||
| Income tax benefit | 16 | |||||||||
| Net loss | ( | ) | ( | ) | ||||||
| Net loss attributable to AppYea Inc. | ( | ) | ( | ) | ||||||
| Net Loss Per Common Share: | ||||||||||
| Basic and diluted | ) | ) | ||||||||
| Weighted Average Number of Common Shares Basic and Diluted | ||||||||||
The accompanying notes are an integral part of the financial statements.
| F-5 |
APPYEA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIENCY
(U.S. dollars in thousands)
| Preferred Stock - Series A | Preferred Stock – Series B | Common Stock | Treasury | Shares to be | Additional Paid in | Accumulated | Non-controlling | Total | ||||||||||||||||||||||||||||||||||||
| Number* | Number* | Number* | Amount | Stocks | issued | Capital | Deficit | Total | interests | Deficiency | ||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2025 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Issuance of Shares to investors | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Share issuance to services providers | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Share based compensation | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of share based compensation to investors | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued upon conversion of options | ||||||||||||||||||||||||||||||||||||||||||||
| Convertible note conversion (note 9) | ||||||||||||||||||||||||||||||||||||||||||||
| Series B issuance for acquisition of intellectual property (note 3) |
| |||||||||||||||||||||||||||||||||||||||||||
Contingent shares issuable to controlling shareholders | ||||||||||||||||||||||||||||||||||||||||||||
| Preferred Shares – Series B (note 4) | ||||||||||||||||||||||||||||||||||||||||||||
| Treasury stocks (note 18) | ( | ) | ( |
) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | ( |
) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
| F-6 |
APPYEA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIENCY
(U.S. dollars in thousands)
Preferred Stock | Common Stock | Shares to be | Additional Paid in | Accumulated | Non-controlling | Total | ||||||||||||||||||||||||||||||||||
Number* | Amount | Number* | Amount | issued | Capital | Deficit | Total | interests | Deficiency | |||||||||||||||||||||||||||||||
| Balance as of January 1, 2024 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of Shares | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Shares to be issued to service providers | - | - | ||||||||||||||||||||||||||||||||||||||
| Shares to be issued to investors | - | - | ||||||||||||||||||||||||||||||||||||||
| Share based compensation to investors | - | - | ||||||||||||||||||||||||||||||||||||||
| Share issuance upon conversion of Preferred stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Shares to be issued put option | - | - | ||||||||||||||||||||||||||||||||||||||
| Share based compensation upon conversion of debt to related party | - | - | ||||||||||||||||||||||||||||||||||||||
| Share based compensation employees & service providers | - | |||||||||||||||||||||||||||||||||||||||
| Share issuance to services providers from stock payable and exercise of share-based compensation | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Convertible note conversion | - | |||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
| F-7 |
APPYEA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
| For the year ended December 31 | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Write-off of intangible assets | ||||||||
| Share based compensation | ||||||||
| Change in fair value of convertible loans and warrant liability and financial expenses, net | ( | ) | ||||||
| Financial expenses, net | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Other accounts receivables | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Accounts payables – related party | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Research and development expenses capitalization | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from convertible Note received less issuance expenses | ||||||||
| Proceeds on account of shares to be issued | ||||||||
| Exercise of shared based compensation | ||||||||
| Proceeds from issuance of Common Stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Foreign exchange on Cash and cash equivalents | ||||||||
| Change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of year | ||||||||
| Cash and cash equivalents at end of year | ||||||||
| Non-cash investing and financing activities | ||||||||
| Derivative liability recognized as debt discount | ||||||||
| Conversion of convertible notes into common stock | ||||||||
| Issuance of Series B preferred shares and anti-dilution rights in exchange of Techlott’s IP | ||||||||
| Related partied debt conversion to option Common stock | ||||||||
The accompanying notes are an integral part of the financial statements.
| F-8 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| NOTE 1 - | GENERAL |
| A. | AppYea, Inc. (“AppYea”, “the Company”, “we” or “us”) was incorporated in the State of South Dakota on November 26, 2012 to engage in the acquisition, purchase, maintenance and creation of mobile software applications. The Company is in the development stage with no significant revenues. On November 1, 2021 the Company was redomiciled in the State of Nevada. | |
| The Company’s common stock is traded on the OTC Markets, OTCQB tier, under the symbol “APYP”. | ||
| B. | Strategic Development | |
| On August 20, 2025 the Company entered into an agreement with Techlott Enterprises Ltd. (“Techlott”), a Cypriot company, for the purchase (the “Techlott Purchase Agreement”) of proprietary blockchain-based decentralized lottery ecosystem leveraging smart contracts, verifiable randomness, and advanced infrastructure to deliver transparent, secure, and scalable lottery experiences (the “Technology”) and the underlying intellectual property (the “Technology”) for consideration consisting of shares of the Company’s common stock par value $ per share (the “Common Stock”). For further details, see note 3 (Asset acquisition). | ||
| C. | SleepX LTD is a company formed under the laws of the State of Israel and a wholly owned subsidiary of the Company (“SleepX”). SleepX is a research and development company that has developed a proprietary product for monitoring and treating sleep apnea and snoring. The technology is protected by several international patents. | |
| SleepX
has incorporated, together with an unrelated third party, a privately held company under the laws of the State of Israel named Ta-nooma
Ltd. (“Ta-nooma”). Ta-nooma has developed sleeping monitoring technology for which patent applications were filed and
has no revenue from operations. Since its incorporation and as of the financial statements date, Sleepx holds |
| D. | Going Concern |
The
financial statements are presented on a going-concern basis. To date, the Company has not generated any significant revenues, suffered
recurring losses from operations, incurred negative cash flows from operating activities, and is dependent upon external sources for
financing its operations. As of December 31, 2025 and December 31, 2024 the Company had an accumulated deficit of $
The accumulated deficit raise substantial doubt about the Company’s ability to continue as a going concern. The Company intends to continue to finance its operating activities by raising capital. There are no assurances that the Company will be successful in obtaining an adequate level of financing needed for its long-term research and development activities on commercially reasonable terms or at all. If the Company will not have sufficient liquidity resources, the Company may not be able to continue the development of its product candidates or may be required to implement cost reduction measures and may be required to delay part of its development programs.
| F-9 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
The financial statements do not include any adjustments for the values of assets and liabilities and their classification that may be necessary in the event that the Company is no longer able to continue its operations as a “going concern”.
| NOTE 2 - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.
The significant policies in the preparation of the consolidated financial statements are:
| a. | Basis of consolidation and presentation |
These consolidated financial statements of the Company have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value through profit and loss, which are stated at their fair value. In addition, the consolidated financial statements have been prepared using the accrual basis of accounting, except for the statement of cash flows.
These consolidated financial statements incorporate the financial statements of the Company and its wholly controlled subsidiaries. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. These consolidated financial statements include the accounts of the Company and its direct wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.
| b. | Use of estimates: |
The accompanying Consolidated Financial Statements are prepared in accordance with U.S. GAAP which require management to make estimates and assumptions. These estimates and assumptions 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 revenues and expenses. Significant estimates include the ability to continue as a going concern, the recoverability of long-lived assets, the recoverability of amounts due from related parties, the valuation of stock-based compensation and certain debt and derivative liabilities, recognition of loss contingencies and deferred tax valuation allowances. Actual results could differ from those estimates. Changes in facts and circumstances may result in revised estimates, which would be recorded in the period in which they become known. See note 8 regarding the Convertible Loans and Warrants estimations.
| c. | Financial statements in United States dollars: |
The
functional currency of the Company is the U.S. dollar, as the U.S. dollar is the currency of the primary economic environment
in which the Company operates. The Company’s transactions and balances denominated in U.S. dollars are presented at their
original amounts. Non-dollar denominated transactions and balances have been re-measured to U.S. dollars in accordance with ASC 830,
“Foreign Currency Matters” In accordance with ASC 830, monetary balances denominated in or linked to foreign currency
are stated on the basis of the exchange rates prevailing at the applicable balance sheet date. For foreign currency transactions
included in the statement of operations, the exchange rates applicable on the relevant transaction dates are used. All transaction
gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the
statements of operations and are included in the Financial Expenses – net line. The exchange rate of the US Dollar to the
Israeli Shekel was
| F-10 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| d. | Cash and Cash equivalents: |
Cash equivalents are short-term highly liquid investments that are readily convertible to cash when originally purchased with maturities of three months or less.
| e. | Property and equipment, net: |
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets at the following annual rates:
| % | ||||
| Computers equipment and software | ||||
| f. | Intangible Assets, net |
Identifiable
intangible assets are stated at cost, net of accumulated amortization. Patents are amortized using the straight-line method over
Techlott’s
Intellectual Propertie is amortized using the straight-line method over its estimated useful economic life, as determined by the
Company as a
Capitalized internal-use software costs are included in intangibles assets, net in the consolidated statement of financial position. As of December 31, 2024, the Company didn’t amortize the internal-use software costs because it didn’t reach the necessary stage. During 2025, the Company reassessed the qualifying criteria for capitalizing development costs and, as a result, determined to amortize all costs that had previously been capitalized under this framework.
| g. | Derivative Financial Instruments |
Management evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses an option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The Company do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
| h. | Fair value of financial instruments: |
As defined in ASC 820, “Fair Value Measurements” (“ASC 820”), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three broad levels of the fair value hierarchy are as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly
Level 3 – Unobservable inputs for which little or no market data exists, therefore requiring a company to develop its own assumptions
| F-11 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| i. | Concentrations of credit risks: |
The financial instruments include cash, accounts receivable, accounts payable, accrued expenses, loans payable, due to officers and derivative financial instruments. Balances in various cash accounts may at times exceed insured limits. The Company have not experienced any losses in such accounts. Cash and cash equivalents are invested in major banks in Israel and United States. Generally, these deposits may be redeemed upon demand and therefore, management believes there is minimal risk. Other than certain warrant and convertible instruments (derivative financial instruments). The Company believe the carrying values of our financial instruments approximate their fair values because they are short term in nature or payable on demand. Our derivative financial instruments are carried at a measured fair value. The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
| j. | The Fair Value Measurement Option |
The Company have elected the fair value measurement option for convertible debt with embedded derivatives that require bifurcation, and record the entire hybrid financing instrument at fair value under the guidance of ASC 815, Derivatives and Hedging (“ASC 815”). The Company reports interest expense, including accrued interest, related to this convertible debt under the fair value option, within the change in fair value of convertible notes and derivatives in the accompanying consolidated statement of operations.
| k. | Revenue Recognition |
The Company recognizes revenue under ASC 606, Revenue Recognition at the amount to which it expects to be entitled when control of the products or services is transferred to its customers.
The Company determine revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, a performance obligation is satisfied.
Our contracts are typically governed by a customer purchase order. The contract generally specifies the delivery of what constitutes a single performance obligation. If an arrangement involves multiple performance obligations, the items are analyzed to determine the separate units of accounting, whether the items have value on a standalone basis and whether there is objective and reliable evidence of their standalone selling price. The total contract transaction price is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations. The standalone selling price is based on an observable price for services sold to other comparable customers.
As discussed in more detail below, revenue is recognized when a customer obtains control of promised goods or services under the terms of a contract and is measured as the amount of consideration The Company expects to receive in exchange for transferring goods or providing services. The Company do not have any material extended payment terms, as payment is due at or shortly after the time of the sale. Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded from revenue.
A contract liability is recognized as deferred revenue when we invoice customers, or receive customer cash payments, in advance of satisfying the related performance obligation(s) under the terms of a contract. Deferred revenue is recognized as revenue when we have satisfied the related performance obligation.
| F-12 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
The Company have one main revenue stream: wristband sales, with the AppySleep App. For this revenue stream, our performance obligations are satisfied at a point in time, and therefore, revenue is recognized at point in time when a customer takes control of the good or asset created by the service. Factors that may indicate transfer of control are when The Company have the right to receive payment for the good or service, when the legal title of the asset has been transferred, physical possession of the asset has been transferred, the customer obtains the significant risks and rewards of ownership of the asset, and the customer accepts the asset. For customers, control is transferred upon delivery.
The Company leverage drop-ship shipments with our partners and suppliers to deliver wristbands to our customers without having to physically hold the inventory at our warehouses, thereby increasing efficiency and reducing costs. The Company recognize revenue for drop-ship arrangements on a gross basis as the principal in the transaction when the product is received by the customer because we control the product prior to transfer to the customer. We also assume primary responsibility for the fulfillment in the arrangement, we assume inventory risk if something were to happen to the hardware during shipping, we set the price of the product charged to the customer.
The Company intends to recognize record reductions to Products net sales related to future product returns, price protection and other customer incentive programs based on the Company’s expectations and historical experience.
| l. | Research and development costs: |
Research and development consist of costs incurred in the process of developing product improvements or new products and are expensed to the statement of operations as incurred.
| m. | General and administrative expenses: |
General and administrative expenses consist of all corporate overhead costs incurred by the Company.
| n. | Stock-Based Compensation: |
The Company accounts for stock-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”). ASC 718, which requires that the cost resulting from all share-based transactions be recorded in the financial statements over the respective service periods. It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions. The Company utilizes the straight-line method allocating the cost over the service period.
The Company measures and recognizes compensation expense for all share-based payment awards made to employees, directors, and non-employees, including Restricted Stock Awards (“RSAs”), Restricted Stock Units (“RSUs”), and performance-based stock units (“PSUs”), based on their estimated grant date fair value.
Measurement and Recognition
Service-Based Awards: For awards with only service-based vesting conditions (time-based vesting), the fair value is determined based on the closing price of the Company’s common stock on the date of grant. The compensation expense is recognized on a straight-line basis over the requisite service period (the vesting period).
Performance-Based Awards: For awards that vest based on the achievement of specific performance targets (e.g., revenue goals, EBITDA, or clinical milestones), compensation expense is recognized only if it is probable that the performance condition will be achieved. The Company evaluates the probability of achievement each reporting period and adjusts the cumulative compensation expense as necessary.
Market-Based Awards: (Optional, use if applicable) For awards with market-based conditions (e.g., stock price targets), the fair value is estimated using a Monte Carlo simulation model on the grant date and is recognized regardless of whether the market condition is ultimately satisfied, provided the service period is completed.
| o. | Income taxes: |
The Company accounts for income taxes in accordance with ASC 740, “Accounting for Income Taxes” (“ASC 740”), using the liability method whereby deferred tax assets and liability are determined based on the differences between financial reporting and the tax basis for assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company accounts for uncertain tax provisions in accordance with ASC 740. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
| F-13 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| p. | Basic and Diluted Net Loss per Share: |
The Company computes net loss per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and Convertible preferred stock, using the if-converted method: In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. For the years ending December 31, 2025 and 2024, there were shares, of convertible Series A preferred stock, and shares, of convertible Series B preferred stock, outstanding and conversion privileges attached to convertible promissory notes payable.
| Q. | Business Combinations, Asset Acquisitions |
The Company accounts for acquisitions in accordance with ASC 805, “Business Combinations,” and applicable SEC reporting requirements under Regulation S-X, Rule 3-05 and Regulation S-K, Items 101 and 303. Transactions qualifying as business combinations are accounted for under the acquisition method, while those classified as asset acquisitions follow the guidance in ASC 805-50. Additionally, the Company evaluates whether a transaction qualifies as a reverse acquisition under ASC 805-40 and applies the appropriate accounting and disclosure requirements.
For transactions classified as asset acquisitions under ASC 805-50, the Company:
| ● | Applies the “screen test” to determine whether substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or group of similar assets (ASC 805-10-55-3A). | |
| ● | Applies the “screen test” to determine whether substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or group of similar assets (ASC 805-10-55-3A). | |
| ● | Allocates the purchase price using a cost accumulation model, assigning costs to acquired assets based on their relative fair values (ASC 805-50-30-3). | |
| ● | Capitalizes direct acquisition costs as part of the asset’s cost, unlike business combinations where such costs are expensed (ASC 805-50-25-1). |
| q. | Recent Accounting Pronouncements |
On January 1, 2024, the Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires all public entities to provide enhanced disclosures about significant segment expenses. The amendments in this ASU are to be applied retrospectively. The Company is in the process of determining the potential impact of adopting this guidance on its financial position, results of operations, cash flow and disclosures. The adoption of ASU 2023-07 did not have a material effect on its consolidated financial statements.
| NOTE 3 - | Asset Acquisition |
On August 20, 2025 the Company entered into an agreement with Techlott Enterprises Ltd. (“Techlott”), a Cypriot company, for the purchase (the “Techlott Purchase Agreement”) of proprietary blockchain-based decentralized lottery ecosystem leveraging smart contracts, verifiable randomness, and advanced infrastructure to deliver transparent, secure, and scalable lottery experiences (the “Technology”) and the underlying intellectual property (the “Technology”) for consideration consisting of shares of the Company’s common stock par value $ per share (the “Common Stock”).
The agreement with Techlott represents a strategic business pivot for the Company by focusing it on the rapidly growing institutional lottery market, providing a complete, production-ready technology package engineered for enterprise deployments. The Techlott platform is a decentralized randomness and verification architecture engineered for regulated, outcome-driven markets. The system enables provable fairness, real-time auditability, and independent verification—addressing long-standing transparency limitations in legacy gaming and compliance-sensitive systems.
| F-14 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
Under
the terms of the Intellectual Property Purchase Agreement dated as of August 20, 2025 entered into between the Company and Techlott (the “Purchase
Agreement”) the Company agreed to purchase all rights, title and interest in the Techlott Technology (the Techlott IP) in consideration
of the issuance to Techlott of the Company’s Common Stock representing
In connection with the above transactions, Techlott and Bary Molchadsky, a Company director and the then holder of a majority of the outstanding voting share capital of the Company, entered into a Shareholders Agreement as of such date pursuant to which Techlott is entitled to designate two (2)of the five directors of the Company’s Board of Directors at the closing of the purchase of the Technology under the IP Purchase Agreement. Techlott’s right to designate the Board directors continues so long as it holds at least 20% of the Company’s outstanding capital.
Additionally,
under the Shareholders Agreement the Techlott designated directors have effective veto rights over certain Company actions,
including any changes to the Company’s business, issuance of new equity securities and any mergers and acquisitions. At the
closing of the Technology purchase, Mr. Mark Katzenelson, the president of Techlott, will be appointed as President of the Company
and Ben Harris, the CTO of Techlott, will be appointed as CTO of the Company. Techlott was also granted under the Shareholders
Agreement anti-dilution protection for the Techlott Company Shares for any Company capital raise that the Company may raise up to
$
Mr. Mark Katzenelson, the president of Techlott, was appointed as President of the Company and Mr. Ben Harris, the CTO of Techlott, was appointed as CTO of the Company. Each of Mr. Katzenelson and Mr. Harris were also appointed to the Company’s board of directors (the “Company Board”).
The intellectual Property purchased by the Company from Techlott was measured by the fair value of the consideration of shares that was granted to Techlott upon closing date. The fair value was calculated as the quoted market price multiplied by the number of shares issued, adjusted for the DLOM to account for the extended restriction period and the absence of immediate marketability.
Shares granted to Techlott upon closing date:
| Quantity | IP Fair Value ($) | |||||||
Common Appyea Shares | (*) | |||||||
| Techlott Shares Anti Dilution | ||||||||
The fair value was classified as level 3 within the fair value hierarchy.
| (*) | ||
| On
December 31, 2025, AppYea completed its acquisition of the Techlott Technology. Pursuant to the terms of the Purchase Agreement, the
aggregate consideration to be paid by the Company (the “Consideration Shares”) of the Company’s Common Stock,
representing |
| NOTE 4 - | CHANGE IN CONTROL |
In connection with the acquisition of the intangible asset described in Note 3, On August 14, 2025, the Company appointed two additional members to its leadership team. Mr.Yakir Abadi as Chief Executive Officer (CEO), and Mr. Eldar Edmond Grady as Chairman of the Board.
Mr. Boris Molchadsky, the former Chief Executive Officer, resigned from his position and was appointed as a director of the Company.
On August 12, 2025, Mr. Asaf Porat, the former Chief Financial Officer, notified the Company of his resignation, and Mr. Ron Mekler, previously a director of the Company, was appointed as the Company Chief Financial Officer (CFO).
| (a) | Share Acquisitions by Newly Appointed Directors – Yakir Abadi and Elder Grady |
| a. | Initial Investment |
| (i) | On each of July 24 and July 30, 2025, entities controlled by Mr. Yakir Abadi and Mr. Elder Grady, the new CEO and Chairman of the Board,
invested |
| F-15 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| b. | Acquisition of Control of the Company in Collaboration with Techlott |
| (i) | Subject to the increase in authorized share capital of the Company, on August 12, 2025 the Company and each of Mr. Abadi and Mr. Grady (the “Share Capital Increase”) agreed that each of these individuals will be each options to purchase shares of Company common stock, exercisable for a period and at the per share price, in each case as set forth below: |
| a. | ; | |
| b. | ; and | |
| c. | . |
| (ii) | As of the date of these financial statements, none of the above vesting conditions have been satisfied. |
| c. | Modification of agreements related to the Acquisition of Control of the Company – Yakir Abadi and Eldar Grady |
On
September 30, 2025, the Board approved a modification of the aforementioned arrangements, replacing the prior agreement for the grant
of options with the revised terms as described herein. Under the revised terms, the Company entered into subscription agreements with
Mr. Abadi and Mr. Grady for an identical number of shares of the Company’s common stock at a purchase price of $ per share.
The revised arrangements retain the same contingent conditions described above. The shares issued under the revised terms represent,
in the aggregate,
| (i) | The Subscription Agreement provides that if the three abovementioned milestones are not achieved within five (5) years, then all or part of the Subscription Shares are to be returned to the Company’s treasury. In addition, under the Subscription Agreement, each of YA and EG are entitled to anti-dilution protection, such that in the event of any issuance by the Company of shares of Common Stock or securities convertible into shares of Common Stock, whether for cash, in exchange for assets, services, or pursuant to debt conversion or otherwise, the Company shall issue additional shares to YA and EG so that their respective percentage ownership shall be maintained following such issuance. | |
| (ii) | Such
anti-dilution protection is intended to ensure that each of YA and EG maintains ownership
of |
| F-16 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| (iii) | Any adjustment shall be made at the end of each quarter following the release of the financial statements for the quarter in which the value was received. | |
| (iv) | This modification to the agreements for the acquisition of control resulted in the recognition of contingent shares, which have been granted but are subject to the achievement of future performance conditions, as described in Note 4(a) above. |
| d. | Contingent Shares |
| e. | Recognition and presentation |
| (i) | The contingent shares are recognized at fair value as of the reporting date and presented as Preferred B stock payable. | |
| (iii) | Upon approval of the increase in the Company’s authorized share capital and the automatic conversion of the Company’s Series B preferred shares into common stock, the amounts recorded as common stock payable will be reclassified to share capital and additional paid-in capital, as applicable. |
| f. | Valuation |
| (i) | The fair value of the awards was estimated using valuation techniques appropriate for the specific vesting conditions. The resulting fair value is recognized in the statements of operations. | |
| (ii) | Awards subject to market-based conditions were valued using the Black-Scholes option pricing model, incorporating key inputs such as the Company’s share price, exercise price, expected volatility, expected term, risk-free interest rate and dividend yield. | |
| (iii) | Awards subject to market price conditions were valued using a Monte Carlo simulation model, which incorporates multiple potential future price paths to estimate the probability and timing of achieving the market conditions. |
| g. | Fair value of contingent shares |
| (i) | As of the grant date - December 31, 2025, the fair value of the contingent shares was as follows: |
| Quantity | Fair Value ($) | |||||||
| Eldar Grady | ||||||||
| Yakir Abadi | ||||||||
The fair value was classified as level 3 within the fair value hierarchy.
| F-17 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| (b) | Share acquisitions by Newly Appointed Directors – Mr. Ron Mekler |
| (i) | On
December 29, 2025, the Company and its CFO, Ron Mekler, entered into a subscription agreement for the purchase by RM of
shares at a per unit purchase price of $.
RM also received warrant to purchase | |
| (ii) | Such anti-dilution protection is intended to ensure that RM maintains ownership of |
| (c) | Derivative liability – Anti-dilution rights |
| (i) | In the above-mentioned equity-based arrangements with the Company’s CEO and Chairman, the Company’s CFO, and the acquisition of intellectual property from Techlott Ltd., the Company granted some anti-dilution protection rights. | |
| (ii) | These rights entitle the holders to receive additional shares of the Company’s common stock upon future capital raises (up to specified thresholds), in order to maintain their relative ownership. As the number of shares to be issued is variable, these rights are not considered indexed to the Company’s own stock. Accordingly, under ASC 815-40, such rights are classified as derivative liabilities. | |
| (iii) | The derivative liabilities are measured at fair value, with changes in fair value recognized in the statement of operations under “change in fair value of derivative liabilities.” The liabilities are presented within current or non-current liabilities in the balance sheet, based on the expected timing of settlement. | |
| (iv) | The
anti-dilution protection is triggered upon future equity financings up to $ | |
| (v) | The derivative liabilities were initially recognized and measured as of December 31, 2025. The fair value recognized at initial measurement was recorded partly as an asset acquisition and partly as a loss in the statement of operations for the year ended December 31, 2025. No subsequent remeasurement was recognized during the period. |
| a. | Valuation methodology |
| (i) | The fair value of the anti-dilution feature was determined using a scenario-based approach that considers potential future financing outcomes. | |
| (ii) | For each scenario, the Company estimated (i) the value of the shares assuming the anti-dilution protection is in place and (ii) the value assuming no such protection exists. The incremental value attributable to the anti-dilution feature represents the difference between these two outcomes. | |
| (iii) | The expected value across scenarios was probability-weighted and subsequently discounted to present value using an appropriate risk-free rate. | |
| (iv) | Key assumptions include expected future Company valuations, dilution rates in potential capital raises, timing of potential financing events, and the probability assigned to each scenario. |
| F-18 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| b. | Anti-dilution liability valuation |
| (i) | ||
| (ii) | The resulting fair value reflects the probability-weighted outcomes of these scenarios, consistent with the valuation methodology described above. The valuation involves significant unobservable inputs and is classified within Level 3 of the fair value hierarchy. | |
| (iii) | Changes in key assumptions, including expected Company valuation and dilution rates, could result in a material change in the fair value of the derivative liability. |
| c. | Techlott anti-dilution rights |
| (i) | In connection with the IP
acquisition from Techlott Ltd., Techlott was granted anti-dilution protection for future capital raises of up to $ |
As of December 31, 2025, the fair value of the Techlott shares amounted to:
| ● | $ |
| d. | Management -related anti-dilution rights |
| (i) | In
connection with equity arrangements with members of management (including the CEO, Chairman and CFO), the Company granted anti-dilution
protection for capital raises of up to $ |
As of December 31, 2025, the related anti-dilution derivative liabilities amounted to:
| ● | Yakir
Abadi – $ | |
| ● | Eldar
Grady – $ | |
| ● | Ron
Mekler – $ |
| (d) | New Directors Benefits |
| (i) | On
September 30, 2025, the Company entered into a consulting agreement with YA (the “YA
Consulting Agreement”) and with EG (the “EG Consulting Agreement”). Under
the terms of each of the YK Consulting Agreement and the EG Consulting Agreement, each of
YA and EG is entitled to a monthly fee of $ |
| F-19 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| (ii) | In
conjunction with their appointments, on December 31, 2025, the Company entered into a consulting
agreement with each of Mr. Katzenelson and Harris. Under the terms of each of the consulting
agreements, each of Mr. Katzenelson and Harris is entitled to a monthly fee of $ | |
| Each consulting agreement contains standard confidentiality and non-compete arrangements. |
| (iii) | On
November 18, 2025, the Company and Ron Mekler (“RM”), entered into a consulting
agreement (the “RM Consulting Agreement”). Under the terms of RM Consulting Agreement,
RM is entitled to a monthly fee of $ |
| (e) | Series B Preferred Stock |
| (i) | On November 26, 2025, the Company filed a certificate of designation (the “B Certificate of Designation”) with the Secretary of State of Nevada, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the shares of the Series B Preferred Stock. The material terms of the Series B- Preferred Stock are described below. The total number of authorized shares of the Series B Preferred Stock is shares. |
| (ii) | On December 31 2025, an amendment was filed to the B Certificate of Designation with respect to the number of shares of Common stock into which the Series B Preferred Stock are to mandatorily convert. |
| a. | Mandatory Conversion |
| (i) | Each outstanding share of Series B Preferred Stock will automatically convert into shares of Common Stock (the “B Mandatory Conversion”) upon the effectiveness of the Authorized Increase in Shares of Common Stock. shares were issued to Techlott upon closing date of the IP purchase, on 31 of December 2025, and an additional shares of Series B Preferred Stock were reserved for the benefit of Mr. Yakir Abadi and Mr. Eldar Edmond Grady, which shall likewise automatically convert into shares of Common Stock upon the effectiveness of the authorized increase in share capital. |
| b. | Liquidation Preference |
| (i) | In the event of any liquidation or dissolution of the Company, the holders of Series B Preferred Stock shall be entitled receive, pro rata with the holders of the Company’s Common Stock, and any other shares of preferred stock of the Company identified as “Designated Preferred Stock,” a per share amount equal to such amount per share as would have been payable had all shares of Series B Preferred Stock been converted to Common Stock pursuant to the B Certificate of Designation (without giving effect to any ownership limitations therein) immediately prior to such liquidation or dissolution of the Company (the “Liquidation Preference”). |
| c. | Redemption |
| (i) | The Series B Preferred Stock are not redeemable. |
| d. | Dividends |
| (i) | Dividends will be paid on the Series B Preferred Stock on an as-converted basis when, as, and if paid on the Common Stock. |
| e. | Voting Rights |
| (i) | Except
as required by law, each share of Series B Preferred Stock shall be entitle its holder to
vote fifteen thousand shares ( |
| F-20 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| NOTE 5 - | OTHER ACCOUNTS RECEIVABLES |
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| In U.S. dollars in thousands | ||||||||
| Governmental authorities | ||||||||
| Other receivables(*) | ||||||||
| (*) |
| NOTE 6 - | INTANGIBLE ASSET |
| A. | For details on the IP purchase from Techlott, see note 3. | |
| B. | On May 12, 2021, SleepX entered into a patent license agreement with Nexense Technologies USA Inc., (“Nexense” or the “Licensor”) a related party, which is controlled by Boris Molchadsky (the company chairman, board member, and control person) pursuant to which SleepX will receive from the Licensor the rights to use all of the Licensor’s owned intellectual property (the “IP”) for any commercial purposes. Management believes that the IP is not currently ready for private or commercial use and therefore, SleepX will be required to research, develop, apply for patents protection and invest in the IP in order to ready it for commercial use. Any change, improvement, inventive addition, progress, results of research or a new product with respect to the intellectual property rights, will all be owned solely by SleepX. |
The
payment terms for the license agreement are
This IP asset is valued in the financial statements at the cost that Licensor paid to acquire the IP. As of December 31, 2025, the Company has not generated significant revenues and accordingly no royalties were paid.
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| In U.S. dollars | ||||||||
| Cost | $ | |||||||
| Accumulated amortization | ( | ) | $ | ( | ) | |||
| $ | ||||||||
For
both years ended December 31, 2025 and 2024 the amortization expenses amounted to $
As
of December 31, 2024, total of $
In
2025, the Company’s management resolved to discontinue the capitalization of development expenses due to uncertainty regarding
the Company’s ability to generate sufficient future revenues. Accordingly, in 2025 the Company recorded a write-off of a development
asset in the amount of $
| NOTE 7 - | OTHER ACCOUNTS PAYABLE AND RELATED PARTY PAYABLES |
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| In U.S. dollars in thousands | ||||||||
| Accrued expenses | ||||||||
| Government institutions | ||||||||
| Credit card | ||||||||
| Consultants and payroll accruals (*)(**) | ||||||||
| (*) | ||
| (**) |
| F-21 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| NOTE 8 - | RELATED PARTY BALANCES AND TRANSACTIONS |
| A. | Short-term loans from related parties |
During
2021, SleepX borrowed from Nexense an aggregate amount of $
During
2020, the minority shareholder of Ta-nooma loaned Ta-nooma NIS
| B. | Balances with related parties |
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| In U.S. dollars in thousands | ||||||||
| Liabilities: | ||||||||
| Employees and payroll accruals | ||||||||
| Related party payables | ||||||||
| Short term loan | ||||||||
| C. | Transactions with related parties |
Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| In U.S. dollars in thousands | ||||||||
| Expenses: | ||||||||
| Consulting fees and related cost (see note 4 - Benefits to new directors) | ||||||||
| Equity-settled share-based compensation (see note 4 – Contingent shares) | ||||||||
| Share based compensation | ||||||||
| Anti-dilution rights (see note 4 - Anti-dilution rights) | ||||||||
All of the five board members in the Company do not receive cash compensation for their directorship roles. Company’s Bylaws provide that a director or officer shall be indemnified and held harmless by the Corporation, to the fullest extent permitted by the laws of the State of Nevada. See notes 9 and 10 regarding salaries agreements.
| F-22 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| NOTE 9 - | CONVERTIBLE LOANS AND WARRANTS |
A. The following table summarizes fair value measurements by level as of December 31, 2025 and, 2024 measured at fair value on a recurring basis:
| December 31, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets | In U.S. dollars in thousands | |||||||||||||||
| None | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Convertible Loans | ||||||||||||||||
| Derivative liability - Anti dilution rights | ||||||||||||||||
| December 31, 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets | In U.S. dollars in thousands | |||||||||||||||
| None | ||||||||||||||||
| Liabilities | ||||||||||||||||
| Convertible Loans (including long term) | ||||||||||||||||
| Financial liability | ||||||||||||||||
B. The Convertible Loans at fair values changes consist of the following as of and December 31, 2025 and 2024:
| Convertible Loans at Fair Value | ||||||||
| December 31, 2025 | December 31, 2024 | |||||||
| $000 | ||||||||
| Opening Balance | ||||||||
| Additional convertible loans (1) | ||||||||
| Conversion of convertible loan (2) | ( | ) | ||||||
| Decrease of Notes purchased (Note 12C) | ||||||||
| Transition from amortized cost to convertible loans measured at fair value (3) | ||||||||
| Change in fair value of convertible loans liability | ( | ) | ||||||
| Closing balance | ||||||||
| (1) | ||
| (2) | The estimated fair values of the Convertible loans were measured at $901,000 according to the Monte Carlo Model using the following assumptions: |
| As of December 31, | As of December 31, | |||||||
| 2025 | 2024 | |||||||
| Expected term (in years) | ||||||||
| Expected average (Monte Carlo) volatility | ||||||||
| Expected dividend yield | ||||||||
| Risk-free interest rate | ||||||||
| WACC | ||||||||
Convertible loans
During the years 2017-2021, the Company entered into convertible loan agreement (“CLA”) contracts with several investors as detailed below.
CLA 1 (Issued by the company During March 2019 - January 2021)
The
CLA is convertible into shares of the Company’s Common Stock at a per share price equal to the lesser of
On
December 26, 2025, the Company and the holder of the CLA 1which is due to payment in an aggregate amount of $
CLA 2 (Issued by the Company at the year of 2021)
During
the third quarter of 2023 a group of unaffiliated investors and entities (collectively, the “Purchasers’) purchased outstanding
convertible promissory notes issued by the Company, in principal value of $
| F-23 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
On
December 26, 2025 all holders of CLA 2, in an aggregate amount of approximately $
| NOTE 10 - | COMMITMENT AND CONTINGENCIES |
| A) | On
March 15, 2020, SleepX entered into license agreement with B.G Negev Technologies and
Applications Ltd. and Mor Research Application Ltd. (the “Licensors”) pursuant
to which SleepX is entitled to receive from the Licensors an exclusive worldwide license
with |
| 1. | Annual license fee – annual payments as follows: |
| Year | US$K | |
| 1-4 | ||
| 5 | ||
| 6 | ||
| 7 | ||
| 8 | ||
| 9-15 |
| 2. | Running
royalties – |
| 3. | Sublicense payments – |
| a. |
| b. |
| c. |
| 4. | Milestone
payment – payment of $ |
| 5. | Exit Fee Varies according to its kind upon consummation of the Exit event. |
In
addition to the payment terms mentioned above, SleepX will reimburse the Licensors for all incurred in the filling, prosecution and maintenance
of the licensor’s patents prior to the effective date. The amount of such expenses was $
| B) | On
April 2022, SleepX entered into an additional license agreement with B.G Negev Technologies
and Applications Ltd. and Mor Research Application Ltd. (the “Licensors”) pursuant
to which SleepX is entitled to receive from the Licensors an exclusive worldwide license
with |
| NOTE 11 - | EMPLOYEE BENEFITS |
For details on directors and related parties benefits see note 4.
| NOTE 12 - | STOCK BASED COMPENSATION |
| twelve months ended December 31, 2025 | ||||||||
| Number of options | Weighted average exercise price in USD | |||||||
| Options outstanding on January 1, 2025 | $ | |||||||
| Options granted during the period(**) | $ | |||||||
| Options cancelled during the period | - | $ | ||||||
| Options purchased from service provider | - | $ | ||||||
| Options exercised during the period | - | $ | ||||||
| Options outstanding at the end of period | $ | |||||||
| Options exercisable at the end of period (*) | ||||||||
| (*) | |||
| (**) | |||
Option Grants in 2025
During the year ended December 31, 2025, the Company granted stock options as follows:
Grant to Former Chief Executive Officer
In January 2025, the Company granted stock options to its former Chief Executive Officer, with an exercise price of $ per share and a contractual term of ten () years.
These options were repurchased by the Company on December 31, 2025 and are included in “Options purchased from service provider” in the table above.
For further details, see Note 18 – Repurchase of Shares and Options from Service Providers.
| |||
1. |
Grant to Service Provider
In August 2025, the Company granted stock options to a service provider, exercisable at an exercise price of $ per share. The options were fully vested upon grant (no vesting conditions). This grant is included in “Options granted during the period” in the table above.
For additional information, see the Company’s Current Report on Form 8-K from August 14, 2025. | ||
| F-24 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| Option Activity in 2025 | |||
| During the year ended December 31, 2025, the Company recorded the following option activity: | |||
| Options Cancelled | |||
|
During the first quarter of 2025, stock options were cancelled following the termination of employment of the Company’s former Chief Executive Officer, Mr. Adi Shemer. These cancellations are included in “Options cancelled during the period” in the table above. | |||
| 1. | Options Repurchased from Service Providers | ||
| On December 31, 2025, the Company repurchased stock options from service providers. | |||
| These transactions are included in “Options purchased from service provider” in the table above. | |||
| For further details, see Note 18 – Repurchase of Shares and Options from Service Providers. | |||
| 2. | Options Exercised | ||
During the period, stock options were exercised by a service provider. These transactions are included in “Options exercised during the period” in the table above. |
| NOTE 13 - | Segment and Geographic Information |
The Company operates as one operating segment. The Company’s chief operating decision maker (“CODM”) is its co-chief executive officers, who review financial information presented on a consolidated basis. The CODM uses consolidated operating margin and net income to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the determination of the rate at which the Company seeks to grow global operating margin and the allocation of budget between cost of revenues, sales and marketing, technology and development, and general and administrative expenses.
The following table presents selected financial information with respect to the Company’s single operating segment for the years ended December 31, 2025 and 2024:
| For the year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | ||||||||
| Cost of sales | ||||||||
| Gross profit (loss) | ( | ) | ||||||
| Research and development expenses | ||||||||
| Sales and marketing expenses | ||||||||
| General and administrative expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Change in fair value of convertible loans and warrant liability | ( | ) | ||||||
| Financial income (expenses), net | ( | ) | ( | ) | ||||
| Loss before income tax benefit | ( | ) | ( | ) | ||||
| Income tax benefit | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss attributable to AppYea Inc. | ( | ) | ( | ) | ||||
| NOTE 14 - | STOCKHOLDERS’ EQUITY |
| A. | Convertible Preferred Stock (Series A) |
Each convertible preferred A share is convertible into shares of common stock and may be voted together with the common shares at a rate of shares of common stock.
As of December 31, 2025, and 2024, shares of the Company’s convertible preferred stock were issued and outstanding. There are convertible preferred shares authorized.
On June 18 2023, the holders of the majority of the Company outstanding convertible Preferred Series A Shares par value $ per share (the “Preferred Shares”) agreed to provide that each Preferred Share shall have voting rights equal to shares of the Company’s Common Stock which may be vote at any meeting or any action of the Company shareholders at which the holders of the Common Stock are entitled to participate.
Mandatory Conversion
| F-25 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| B. | Series B Preferred Stock |
For details on series B of preferred shares, see note 4.
| C. | Common Stock |
As of December 31, 2025, and 2024, and shares of the Company’s common stock were issued and outstanding, respectively. There are authorized common shares as of December 31, 2025 and 2024.
The holder of the shares of Common Stock are entitled to the following rights:
| 1. | Right to participate and vote in the Company’s general meetings, whether regular or extraordinary. Each share will entitle its holder, when attending and participating in the voting in person or via agent or letter, to one vote; |
| 2. | Right to share in distribution of dividends, whether in cash or in the form of bonus shares; the distribution of assets or any other distribution pro rata to the par value of the shares held by them; |
| 3. | Right to a share in the distribution of the Company’s excess assets upon liquidation on a pro rata basis to the par value of the shares held by them. |
| D. | Contingent shares |
For details on Contingent shares, see note 4.
| D. | Investment and changes in Notes |
| (i) | On
September 4, 2025, the Company accepted subscriptions for $ |
| (ii) | On
October 8, 2025, the Company accepted subscriptions for $ |
| (iii) | On
December 29, 2025, the Company accepted subscriptions for $ |
| NOTE 15 - | GENERAL AND ADMINISTRATIVE EXPENSES |
Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| In U.S. dollars in thousands | ||||||||
| Consulting and share-based costs | ||||||||
| Professional services | ||||||||
| Vehicle expenses | ||||||||
| Rent and building maintenance | ||||||||
| Others | ||||||||
| NOTE 15 A- | Consulting expenses and related costs |
Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| In U.S. dollars in thousands | ||||||||
| Consulting expenses | ||||||||
| Anti-dilution related rights costs | ||||||||
| Share-based compensation expense (equity-classified), including contingent shares | ||||||||
| - | ||||||||
| F-26 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| NOTE 16 - | TAXES ON INCOME |
| A. | Taxation under Various Laws |
The
tax rate applicable to SleepX Ltd. and Ta-nooma Ltd. In Israel is
US
Federal tax rate applicable to AppYea Inc. is
| A. | Net operating losses carryforward |
As of December 31, 2025, the net operating losses (including research and development expenses incurred) for SleepX amount to $
The Company is evaluating the loss carryforward in AppYea as a result of the reverse merger, and therefore currently values them at $.
| C. | Income taxes on foreign subsidiaries |
Foreign subsidiaries are taxed according to the tax laws in their respective country of residence. Neither Israeli income taxes, foreign withholding taxes nor deferred income taxes were provided in relation to undistributed earnings of the Company’s foreign subsidiaries. This is because the Company has the intent and ability to reinvest these earnings indefinitely in the foreign subsidiaries and therefore those earnings are continually redeployed in those jurisdictions.
| D. | Tax Assessments |
The Israeli subsidiary has not received final tax assessment since its incorporation.
| E. | Deferred income taxes |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:
Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| In U.S. dollars in thousands | ||||||||
| Deferred tax assets: | ||||||||
| Net operation loss carryforward | ||||||||
| Net deferred tax asset before valuation allowance | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | ||||||||
The Company has a valuation allowance against its net deferred tax assets due to the uncertainty of realization of the deferred tax assets due to the operating loss history of the Company. The Company currently provides a valuation allowance against deferred taxes when it is more likely than not that some portion, or all of its deferred tax assets will not be realized. The valuation allowance could be reduced or eliminated based on future earnings and future estimates of taxable income.
| F-27 |
APPYEA INC.
NOTES TO THE FINANCIAL STATEMENTS
| NOTE 17 - | CONTINGENCIES |
On August 11, 2022, a lawsuit was filed in the Tel Aviv Magistrate’s Court against our former Chairman and majority shareholder, Boris Molchadsky, G.P.I.S Ltd., an entity controlled by Mr. Molchadsky, Nexsense, Inc. (the former shareholder of SleepX Ltd.) and SleepX, Ltd., our subsidiary (collectively, the “Defendants”) [Civil lawsuit number 25441-08-22]. The suit was filed by a fund operating out of Israel. A copy of the claim was served to the defendants only six months after it was submitted to court, on February 21, 2023. The lawsuit is based on the alleged breach of partnership and loan agreements as well as other related allegations, including violation of agreements reached in a mediation proceeding that took place in 2015. On July 24, 2023, the Defendants (except for Nexsense, Inc.) filed a statement of defense, denying the allegations and argued that the claim should be dismissed, due to the statute of limitations, lack of cause of action, lack of jurisdiction, delay in filing the claim, and respecting SleepX, also due to the lack of legal rivalry between SleepX and the plaintiff.
Recently, the Magistrate’s Court in Tel Aviv accepted the request regarding lack of material jurisdiction, and the claim was then transferred to the economic department of the District Court in Tel Aviv.
A preliminary hearing was held on February 14, 2024. The presiding judge did not rule on the preliminary pleadings and urged the parties to attempt mediation before the ruling. The parties are considering different mediators (which must be mutually agreed to) and following the selection of a mediator, the parties will schedule a date for the mediation.
The Company cannot, at this stage, know the effects, if any, of these actions on its subsidiary SleepX and / or the Company, and accordingly, no provision was recorded.
| NOTE 18 - | SIGNIFICANT EVENTS DURING AND AFTER THE REPORTING PERIOD |
(i) Termination and settlement with former CFO
On August 1, 2025, Mr. Asaf Porat and the Company reached an understanding that Mr. Porat’s position as Chief Financial Officer would terminate. Mr. Porat continued to provide services to the Company through August 31, 2025.
On
December 31, 2025, the Company entered into a settlement agreement with Mr. Porat regarding outstanding compensation claims. Pursuant
to the agreement, the total liability of the Company was determined to be NIS
The
Company agreed to settle the outstanding balance in monthly installments of NIS
In addition, Mr. Porat is entitled to request settlement of the outstanding balance through the issuance of shares of the Company’s common stock at a deemed price of $ per share, in accordance with a board resolution dated May 14, 2024, subject to customary adjustments in the event of a reverse split.
The issuance of such shares is subject to the filing of a resale registration statement (Form S-8) and applicable corporate approvals.
Mr. Porat has undertaken not to transfer the shares to a broker and not to sell any of his holdings prior to December 31, 2026 (lock-up).
(ii) Capital raise
On
January 27, 2026, the Company received $
One
of the abovementioned investors, has invested $
(iii) Settlement with former CEO
In January 2026, the Company entered into a settlement and release agreement with its former Chief Executive Officer, Mr. Adi Shamer.
Pursuant to the agreement, Mr. Shamer agreed to fully release and discharge the Company from any and all claims. In connection with the settlement, Mr. Shamer returned to the Company vested but unexercised stock options previously granted to him.
In
consideration for the foregoing, the Company paid Mr. Shamer NIS
Following the execution of the agreement, Mr. Shamer holds shares of the Company’s common stock.
(iv) Repurchase of options and shares from service providers
On December 31, 2025, the Company entered into agreements with several service providers who had previously been granted options and shares in respect of past services, to repurchase all such options and shares held by them.
Pursuant
to these agreements, options and shares were returned to the Company in consideration for a total payment of $
| F-28 |