LOTT 10-K & 10-Q changes, risk factors and insider trading

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.

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.

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.

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.

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.

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.

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.

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.

(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:

(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.

(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.

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%).

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.

The prior-period research and development expenses were primarily attributed to write-offs of certain investments in intellectual property and development of our products.

Amortization expenses for the three and six months ended June 30, 2026 were approximately $534,000 and $1,067,000, respectively, compared to nil for the three and six months ended June 30, 2025.