YYAI 10-Q
Airwa Inc. (YYAI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from ________ to ________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices, including Zip Code)
(Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934: None
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934 Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
The number of shares outstanding of the registrant’s Common Stock, $ par value per share, as of September 18, 2026, was .
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue,” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenue, profitability, cash flows, and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by any forward-looking statements.
Important factors that may cause the actual results to differ from the forward-looking statements, projections or other expectations include, but are not limited to, the following:
| ● | volatility related to the Company’s relatively low public float; | |
| ● | the effects of prior acquisitions and divestitures on current and future business operations; | |
| ● | strategic and operational uncertainties; | |
| ● | risks associated with potential litigation, financing transactions, or acquisitions; | |
| ● | macroeconomic, competitive, legal, regulatory, tax, and geopolitical factors; and | |
| ● | other risks and uncertainties related to our prospects, properties, and business strategy. |
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events, or otherwise.
As used in this report, the terms “AiRWA”, the “Company,” “we,” “us,” and “our” refer to AiRWA Inc., unless otherwise indicated.
| i |
TABLE OF CONTENTS
| ii |
PART I
ITEM 1. FINANCIAL STATEMENTS
AiRWA INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in U.S. dollars, except for numbers of shares or as otherwise noted)
| As of | As of | |||||||
| July 31, 2026 | April 30, 2026 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Contract costs | ||||||||
| Inventories | ||||||||
| Right-of-use asset | ||||||||
| Digital assets | ||||||||
| Deposits | ||||||||
| Prepayments | ||||||||
| Other receivables | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets: | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Total Non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| LIABILITIES | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Contract liabilities | ||||||||
| Amount due to related party | ||||||||
| Deferred consideration payable | ||||||||
| Contingent consideration payable | ||||||||
| Total Current Liabilities | ||||||||
| Non-current Liability: | ||||||||
| Deferred tax liabilities | ||||||||
| Total Non-Current Liability | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Common stock, $ par value; shares authorized; approximately and shares issued and outstanding as of July 31 and April 30, 2026, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total AiRWA Inc. shareholders’ equity | ||||||||
| Non-controlling interest | ||||||||
| Total Shareholders’ Equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-1 |
AiRWA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME
FOR THE THREE-MONTH PERIODS ENDED JULY 31, 2026 AND 2025
(Amounts in U.S. dollars, except for numbers of shares or as otherwise noted)
| For the Three-Month Periods Ended July 31, | ||||||||
| 2026 | 2025 | |||||||
| REVENUE | $ | $ | ||||||
| COST OF REVENUE | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Selling and marketing expenses | ||||||||
| General and administrative expenses | ||||||||
| Total Operating Expenses | ||||||||
| OPERATING (LOSS)/INCOME | ( | ) | ||||||
| NON-OPERATING INCOME | ||||||||
| Gain on financial assets at fair value through profit or loss | ||||||||
| Interest income | ||||||||
| Total Non-Operating Income | ||||||||
| NON-OPERATING EXPENSE | ||||||||
| Share guarantee expense | ( | ) | ||||||
| Interest expense | ( | ) | ||||||
| Total Non-Operating Expense | ( | ) | ( | ) | ||||
| NET (LOSS)/INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE | ( | ) | ||||||
| Income tax expense | ( | ) | ( | ) | ||||
| NET (LOSS)/INCOME | ( | ) | ||||||
| LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST | ||||||||
| NET (LOSS)/INCOME ATTRIBUTABLE TO CONTROLLING INTEREST | $ | ( | ) | $ | ||||
| Net (loss)/income per share - basic | $ | ( | ) | |||||
| Net (loss)/income per share - diluted | $ | ( | ) | |||||
| Weighted average common shares outstanding - basic | ||||||||
| Weighted average common shares outstanding - diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
AiRWA INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE THREE-MONTH PERIODS ENDED JULY 31, 2026 AND 2025
(Amounts in U.S. dollars, except for numbers of shares or as otherwise noted)
| Common Stock | Total | |||||||||||||||||||||||||||
| Shares | Amount | Additional Capital | Retained Earnings (Accumulated Deficit) | AiRWA Inc. shareholders’ equity | Non- Interest | Total Shareholders’ Equity | ||||||||||||||||||||||
| Balance as of - May 1, 2025 | $ | $ | | $ | $ | $ | $ | |||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Balance as of – July 31, 2025 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Balance as of - May 1, 2026 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Acquisition of non-controlling interest | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance as of - July 31, 2026 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
AiRWA INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE-MONTH PERIODS ENDED JULY 31, 2026 AND 2025
(Amounts in U.S. dollars, except for numbers of shares or as otherwise noted)
| For the Three-Month Periods Ended July 31, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
| Net (loss)/income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income to net cash used in operating activities | ||||||||
| Amortization expense on intangible assets | ||||||||
| Depreciation of property and equipment | ||||||||
| Amortization of operating lease right-of-use asset | ||||||||
| Gain on Financial Assets at FVTPL | ( | ) | ||||||
| Interest expense on deferred consideration payable and contingent consideration payable | ||||||||
| Deferred tax benefit | ( | ) | ||||||
| Changes in assets and liabilities, net of acquired amounts | ||||||||
| Accounts receivables | ( | ) | ||||||
| Digital assets | ||||||||
| Other receivables | ||||||||
| Prepayments and deposits | ( | ) | ||||||
| Contract costs | ||||||||
| Account payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Contract liabilities | ( | ) | ||||||
| Income taxes payable | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOW FROM INVESTING ACTIVITIES | ||||||||
| Payment of acquisition of investment in subsidiaries | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
| Amount due from related party | ||||||||
| Net cash provided by financing activities | ||||||||
| NET DECREASE IN CASH | ( | ) | ( | ) | ||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION | ||||||||
| Amount due from related party | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
AiRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. ORGANIZATION AND NATURE OF BUSINESS
| Entity | Date
of incorporation |
Place
of incorporation |
Percentage
of direct or indirect ownership |
Principal activities | ||||
| Subsidiaries: | ||||||||
| Yuanyu Enterprise Management Co., Limited | ||||||||
| Aberfeldy Holdings Limited (“Aberfeldy”) | ||||||||
| Rafael AI Sdn. Bhd. (“Rafael”) | ||||||||
| Oceancrest Investment Holdings Limited (“Oceancrest”) | ||||||||
| Hongkong Best Life Trade Co., Limited (“Best Life”) | ||||||||
| New Zealand Best Life Limited | ||||||||
| Madrone Commerce Inc. | ||||||||
| Toymaison Ltd | ||||||||
| Québec Inc. |
Lazex Inc. (“Lazex”) was incorporated under the laws of the State of Nevada on October 12, 2015. From 2019 through 2021, Lazex acquired various entities related to the manufacture and distribution of the Slinger Bag Launcher, a portable tennis ball, padel ball, and pickleball launcher. In 2019, Lazex changed its name to Slinger Bag Inc.; in 2022 Slinger Bag Inc. changed its name to Connexa Sports Technologies Inc.; and on September 30, 2025, Connexa Sports Technologies Inc. changed its name to AiRWA, Inc.
On
November 21, 2024, the Company acquired % of Yuanyu Enterprise Management Co., Limited (“YYEM”) from Mr. Hongyu Zhou, the
sole shareholder of YYEM for a combined $
This transaction was accounted for as a “reverse acquisition”, so for accounting purposes, YYEM was deemed to be the accounting acquirer in the transaction, and the Company, the legal acquirer, was deemed to be the accounting acquiree. The consolidated financial statements represent a continuation of the consolidated financial statements of YYEM.
Following
the closing of the Acquisition and the disposal of the Slinger Bag business, YYEM was the sole operating subsidiary of the Company. On
October 22, 2025, the Company entered into a share purchase agreement with Mr. Zhou, the then Chairman of the Company, to acquire from
him the
Established in November 2021, YYEM is based in Hong Kong and operates primarily in the emerging love and marriage market sector. YYEM’s mission is to empower global connections through innovative matchmaking technology. YYEM owns advanced patents and other proprietary technology which it has licensed out, enabling licensees to create localized matchmaking experiences tailored to their specific markets and cultures. On account of economic challenges faced by the Company’s licensees, the agreements generating royalty income were terminated in the course of fiscal year 2026, but the Company continues to believe in the merits of this business model and is seeking replacement customers.
On August 25, 2025, the Company announced a joint venture for the establishment of an RWA-focused exchange, which would initially focus on tokenized U.S. equities. Following that announcement, development proceeded with partial funding and with successful test runs settling trades of tokenized U.S. equities. However, after the end of the Company’s fiscal year, to protect the Company in the wake of media reports that the Company’s joint venture partner was experiencing significant financial and legal problems, management terminated the joint venture agreement, delivering formal notice on September 18, 2026.
On January 30, 2026, the Company entered into and closed on a share purchase agreement with various sellers to acquire all the share capital of Aberfeldy, a Seychelles holding company owning % of Rafael AI (formerly known as 26 Rafael Sdn. Bhd.), a Malaysian operating company, for $, paid in USDT.
Rafael AI provides “data-to-AI” end-to-end solutions, which are full-cycle services designed to empower enterprises to transition seamlessly from raw data to intelligent applications. Its business is structured around five interconnected AI-related modules, together forming a closed-loop system in which data generation, model refinement, and operational feedback continuously reinforce one another. Its services are tailored to specialist industries such as healthcare, industrial manufacturing and autonomous driving.
| F-5 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. ORGANIZATION AND NATURE OF BUSINESS (cont.)
On
July 30, 2026, the Company completed the acquisition of Best Life, an international trading company,
by paying $
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). Significant accounting policies followed by the Company in the preparation of the accompanying consolidated financial statements are summarized below.
Principles of consolidation
The accompanying consolidated financial statements include the consolidated financial statements of the Company and its wholly owned subsidiaries. A subsidiary is an entity over which the Company has control. Control is achieved when the Company (i) has power over the investee (including when the Company directly or indirectly controls more than 50% of the voting power or when the Company has the power to appoint or remove the majority of the members of the board of directors, to cast a majority of votes at board meetings, or to govern the financial and operating policies of the investee pursuant to a statute or under an agreement among the shareholders or equity holders); (ii) is exposed to, or has rights to, variable returns from its involvement with the investee; and (iii) has the ability to use its power to affect those returns.
A subsidiary is consolidated from the date on which the Company obtains control. The Company reassesses whether it controls an investee if facts and circumstances indicate changes to one or more of the three elements of control listed above.
All inter-company balances and transactions are eliminated upon consolidation. The results of subsidiary acquired are recorded in the consolidated statements of operations from the effective date of acquisition, as appropriate. All significant transactions and balances between the Company and its subsidiaries have been eliminated.
Use of estimates
The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Foreign currency
The Company’s reporting currency is the U.S. dollar (USD). The functional currencies of its subsidiaries is also the U.S. dollar. The determination of the respective functional currency is based on the criteria set out by ASC 830, Foreign Currency Matters.
Transactions denominated in currencies other than in the functional currency are translated into the functional currency using the exchange rates prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into functional currency using the applicable exchange rates at the balance sheet date. Non-monetary items that are measured in terms of historical cost in foreign currency are re-measured using the exchange rates at the dates of the initial transactions. Exchange gains or losses arising from foreign currency transactions are included in the consolidated statements of operations and comprehensive (loss)/income.
| F-6 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Cash and cash equivalents
For accounting purposes, cash and cash equivalents are all considered to be highly liquid investments with a maturity of three months or less at the time of purchase.
Accounts receivable
Accounts receivable are recorded at the gross billing amount less an allowance for any uncollectible accounts due from customers. Accounts receivable do not bear interest.
Since July 1, 2022, the Company early adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using the modified retrospective transition method. ASU 2016-13 replaced the existing incurred loss impairment model with an expected loss methodology, resulting in more timely recognition of credit losses. Upon adoption, the Company changed its impairment model to utilize a forward-looking current expected credit loss (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost and receivables resulting from the application of ASC 606, including contract assets. The adoption of this guidance had no impact on the allowance for credit losses for accounts receivable as of April 30, 2026.
The Company maintains an allowance for credit losses, recorded as an offset to accounts receivable. Estimated credit losses charged to the allowance are classified as “General and administrative expenses” in the consolidated statements of operations and comprehensive (loss)/income. The Company assesses collectability by reviewing accounts receivable aging schedules. In determining the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the balances, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the ability to collect from customers. Delinquent account balances are written off against the allowance after management determines that collection is not probable.
For
the three months ended July 31, 2026 and 2025, the Company did
Inventories
Inventories, primarily consisting of finished goods, are stated at the lower of cost or net realizable value, with net realizable value being the estimated selling prices in the ordinary course of business, less reasonably predictable costs of disposal and transportation. Cost of inventory is determined using the weighted average cost method. The Company reviews inventory to determine whether the carrying value exceeds the estimated net realizable value and, if so, records an inventory provision by reducing the cost of inventory to the estimated net realizable value for slow-moving merchandise and damaged products. Once an inventory provision is recorded, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. The inventory provision balance as of July 31 and April 30, 2026 was .
Deposits, Prepayments and Other Receivables
Deposits, prepayments and other receivables primarily consist of prepayments to vendors and service providers, advances to employees, refundable deposits, and other receivables. Prepayments are recognized as assets when payments are made in advance of the receipt of goods or services and are expensed when the related goods or services are received.
The Company evaluates deposits and other receivables that represent financial assets measured at amortized cost for expected credit losses in accordance with ASC Topic 326, Financial Instruments—Credit Losses. The allowance for credit losses reflects management’s estimate of expected credit losses over the contractual life of the financial assets and is based on relevant available information, including historical collection experience, current conditions, and reasonable and supportable forecasts, as applicable. Changes in the allowance are recognized as credit loss expense in the consolidated statements of operations. Balances are written off against the allowance when they are deemed uncollectible.
As
of July 31 and April 30, 2026, the Company recorded an allowance for credit losses of and $
Operating leases
The Company accounts for operating leases following ASC 842, Leases (“Topic 842”). The Company, through its subsidiary, leases its offices, which are classified as operating leases in accordance with Topic 842. Operating leases are required to record in the balance sheet as right-of-use assets and lease liabilities, initially measured at the present value of the lease payments. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date, and (3) initial direct costs for any expired or existing leases as of the adoption date. The Company has elected the short-term lease exemption for the lease terms that are 12 months or less.
| F-7 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract is or contains a lease, the Company assesses whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all the economic benefits from the use of the asset, and whether it has the right to control the use of the asset. The right-of-use assets and related lease liabilities are recognized at the lease commencement date. The Company recognizes operating lease expenses on a straight-line basis over the lease term and had no finance leases for any of the periods stated herein.
The
right-of-use of asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any
lease payments made at or before the commencement date, plus any initial direct costs incurred and less any lease incentive
received. All right-of-use assets are reviewed for impairment annually. There was
Investments
The Company accounts for equity securities in accordance with ASC Topic 321, Investments—Equity Securities.
Equity securities with readily determinable fair values are measured at fair value at each reporting date, with realized and unrealized gains and losses resulting from changes in fair value recognized in earnings.
For equity securities without readily determinable fair values that do not qualify for the equity method of accounting, the Company may elect the measurement alternative permitted under ASC Topic 321. Under the measurement alternative, such investments are measured at cost, less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. The Company evaluates such investments at each reporting period for impairment and for observable transactions that may require an adjustment to the carrying amount.
Upon the sale, disposal, or other derecognition of an investment, the related carrying amount is removed from the consolidated balance sheet, and any resulting gain or loss is recognized in earnings.
Investment gains and losses are presented within other income/(expense) in the consolidated statements of operations and comprehensive (loss)/income.
Development Costs
The Company applies the principles of FASB ASC Topic 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product. At Rafael AI, the Company has invested significant capital into the research and development of new products and features.
The Company has adopted the “tested working model” approach to establish technological feasibility for its products. Under this approach, the Company does not consider a product in development to have passed the technological feasibility milestone until the Company has completed a model of the product that contains essentially all the functionality and features of the final product and has tested the model to ensure that it works as expected. The Company capitalizes costs related to the development of software to be sold, leased, or otherwise marketed as and when it believes such software has met the “tested working model” threshold. Development costs continue to be capitalized until the related software is released. The Company considers the following factors in determining whether costs can be capitalized: the nature of the relevant market; the uncertainty regarding a product’s revenue-generating potential; its lack of control over distribution channels, where applicable; and its historical practice of canceling products at that stage of the development process. After products and features are released, all product maintenance costs are expensed.
| F-8 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The Company also applies the principles of FASB ASC Topic 350-40, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“ASC 350-40”). ASC 350-40 requires that software development costs incurred before the preliminary project stage be expensed as incurred. The Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the functions intended.
Capitalized software development costs, whether for software developed to be sold, leased, or otherwise marketed or for internal use, are generally amortized over five-year useful life.
As of July 31 and April 30, 2026, the Company capitalized software development costs as more fully described in Note 11, Intangible Assets, net.
Property and Equipment, Net
Property and equipment are tangible assets which the Company holds for its own use and which are expected to be used for more than one year. An item of property and equipment is recognized as an asset when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Property and equipment are initially measured at cost. Cost includes all the expenditure which is directly attributable to the acquisition or construction of the asset, including the capitalization of borrowing costs on qualifying assets and adjustments in respect of hedge accounting, where appropriate.
Expenditure incurred subsequently for major services, or for additions to or replacements of parts of property and equipment, are capitalized if it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost can be measured reliably. Day-to-day servicing costs are expensed as incurred. Subsequent to initial recognition, property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation of an asset commences when the asset is available for use as intended by management. Depreciation is charged to write off the asset’s carrying amount over its estimated useful life to its estimated residual value, using a method that best reflects the pattern in which the asset’s economic benefits are consumed by the Group. Depreciation is not charged to an asset if its estimated residual value exceeds or is equal to its carrying amount. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or derecognized.
The estimated useful lives of property and equipment have been assessed as follows:
| Category | Depreciation Method | Useful Life | ||
| Furniture and fixtures | Straight line | |||
| Machinery and equipment | Straight line |
Acquisition
These consolidated financial statements include the operations of acquired businesses from the date of the acquisitions.
Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, estimated replacement costs and future expected cash flow from acquired advertiser or publisher relationships, acquired technology and acquired patents. Management’s estimates of fair value are based on assumptions believed to be reasonable but which are inherently uncertain and unpredictable, and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects the Company’s amortization expense, as acquired finite-lived intangible assets are amortized over their useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
| F-9 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Goodwill
Goodwill represents the excess of purchase consideration over the acquisition date amounts of the identifiable tangible and intangible assets acquired and liabilities assumed from the acquired entity as a result of the Company’s acquisitions of interests in its subsidiaries. Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. In accordance with ASC 350, the Company may first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. In the qualitative assessment, the Company considers factors such as macroeconomic conditions, industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations, business plans and strategies of the reporting unit. Based on the qualitative assessment, if it is more likely than not that the fair value of a reporting unit is less than the carrying amount, the quantitative impairment test is performed. The Company may also bypass the qualitative assessment and proceed directly to perform the quantitative impairment test.
The Company adopted ASU 2017-04, Intangibles—Goodwill and Other (Topic 350: Simplifying the Test for Goodwill Impairment). After adopting this guidance, the Company performs the quantitative impairment test by comparing the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized as impairment. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, allocation of assets, liabilities, and goodwill to reporting units, and determination of the fair value of each reporting unit.
For
the three months ended July 31, 2026 and 2025,
Intangible assets, net
Intangible assets are stated at cost, less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are initially recognized at their estimated fair values as of the acquisition date in accordance with ASC Topic 805, Business Combinations.
The Company’s finite-lived intangible assets are amortized over their estimated useful lives. The method of amortization reflects the pattern in which the economic benefits of the intangible assets are expected to be consumed. If such pattern cannot be reliably determined, the Company uses the straight-line method. The estimated useful lives and amortization methods are reviewed at each reporting period, and changes in estimated useful lives or amortization methods are accounted for prospectively as changes in accounting estimates.
The estimated useful lives of the Company’s intangible assets are as follows:
| Category | Useful Life | |
| Acquired development costs | ||
| Customer relationships of Rafael AI | ||
| Noncompete agreement | ||
| Patent | ||
| Customer relationships of Best Life |
The Company reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability is assessed by comparing the carrying amount of the asset or asset group with the undiscounted future cash flow expected to result from its use and eventual disposition. If the carrying amount is not recoverable, an impairment loss is measured as the amount by which the carrying amount exceeds its fair value. Internally developed software costs are recognized as an intangible asset when:
| ● | it is technologically feasible to complete the asset so that it will be available for use or sale; | |
| ● | there is an intention to complete and use or sell it; | |
| ● | there is an ability to use or sell it; | |
| ● | it will generate probable future economic benefits; | |
| ● | there are available technical, financial, and other resources to complete the development and to use or sell the asset; and | |
| ● | the expenditure attributable to the asset during its development can be measured reliably. |
| F-10 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Amortization
begins when development is complete and the asset is available for use. Development costs are amortized based on a useful life of
Acquisition-related costs
Acquisition-related costs, such as legal, accounting, valuation, and other professional fees, are expensed as incurred and are not included in consideration transferred.
Digital Assets
The Company’s digital assets consist primarily of U.S. dollar-denominated stablecoins, mainly USDT, which is designed to maintain a value of approximately one U.S. dollar per token and is generally redeemable on a one-to-one basis for U.S. dollars. The Company holds these digital assets primarily for treasury management and settlement purposes. USDT is accounted for as a financial instrument on the consolidated balance sheets.
The Company evaluates the contractual terms and rights associated with each digital asset, including whether the Company has an enforceable right to redeem the digital asset directly with the issuer for U.S. dollars. Based on the Company’s evaluation, the Company does not maintain a direct account with the applicable issuers and does not have an unconditional contractual right to redeem the digital assets directly with the issuers. The Company generally realizes the value of its digital assets through transactions conducted on third-party digital asset platforms.
Accordingly, the Company accounts for its digital assets under ASC Subtopic 350-60, Intangibles—Goodwill and Other—Crypto Assets. Digital assets are measured at fair value as of each reporting date, with changes in fair value recognized in net income. Digital assets are presented separately as “digital assets” in the consolidated balance sheets. Realized and unrealized gains and losses are included in “other income/(expense), net” in the consolidated statements of operations and comprehensive (loss)/income.
The Company’s digital assets were maintained in a corporate account with Ju.com, a third-party digital asset trading platform, until we withdrew our remaining deposits to terminate the relationship on August 10, 2026. The Company did not directly control the private keys associated with the digital assets held through the platform. Accordingly, the Company was exposed to third-party custodial and counterparty risks, including cybersecurity incidents, unauthorized access, suspension of withdrawals, platform insolvency, and regulatory actions.
Contract Liabilities
A contract liability is recognized when the Company receives consideration from a customer, or the consideration is unconditionally due, before the Company transfers goods or services to the customer. Contract liabilities are recognized as revenue when the Company satisfies the related performance obligation. The recorded contract liabilities include advance payments and billings in excess of revenue recognized. Contract liabilities are reported on a contract-by-contract basis at the end of each reporting period.
| F-11 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Contract Costs
The Company capitalizes costs incurred to fulfill a contract when such costs (i) relate directly to a contract or anticipated contract, (ii) generate or enhance resources that will be used in satisfying future performance obligations, and (iii) are expected to be recovered. These costs primarily consist of direct labor, direct materials, and allocations of directly attributable overhead.
Capitalized contract fulfillment costs are amortized on a straight-line basis over the expected period of benefit, which is consistent with the pattern of transfer of goods or services to which the asset relates. Amortization expense is recorded in cost of revenue in the accompanying consolidated statements of operations and comprehensive (loss)/income.
The Company assesses the carrying amount of capitalized contract costs for impairment at each reporting period. An impairment loss is recognized in the period in which it is identified, to the extent that the carrying amount of the asset exceeds the expected remaining consideration for the related contract, less any costs expected to be incurred in fulfilling the contract.
Impairment of long-lived assets
Long-lived assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change in market conditions that will impact the future use of the assets) indicate that the carrying value may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flow expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flow is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets.
Related party and related-party transactions
Related parties, which can be a corporation or individual, are considered to be related if the one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence, such as a family member or relative, shareholder, or a related corporation.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due to or from related parties due to their related-party nature.
Accounts payable
Accounts payable consist of amounts owed to suppliers, vendors, and service providers for goods and services received in the ordinary course of business. Such amounts are recorded at invoice value, or at management’s estimate of amounts due when invoices have not yet been received, and are classified as current liabilities. Due to the short-term nature of these obligations, the carrying value of accounts payable approximates their fair value.
Accrued expenses
Accrued expenses consist of liabilities for goods and services that have been received or provided but not yet paid as of the balance sheet date, including payroll and related expenses, interest, professional fees, and other operating costs. Accruals are based on management’s best estimates and are adjusted to actual amounts when the obligations are invoiced or settled.
| F-12 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Fair value of financial instruments
The Company measures fair value in accordance with ASC 820, Fair Value Measurement. ASC 820 establishes a three-level fair value hierarchy based on the inputs used to measure fair value:
| Level 1 | — | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| Level 2 | — | Other inputs that are directly or indirectly observable in the marketplace. | |
| Level 3 | — | Unobservable inputs which are supported by little or no market activity. |
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities:
| Market Approach | — | Uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. | |
| Income Approach | — | Uses valuation techniques to convert future amounts to a single present value, based on current market expectations about those future amounts. | |
| Cost Approach | — | Based on the amount that would currently be required to replace an asset. |
The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, deposits, other receivables, accounts payable, and certain accrued liabilities. The carrying amounts of these financial instruments approximate their fair values due to their short-term maturities.
The Company’s digital assets are measured at fair value on a recurring basis. Certain identifiable assets acquired and liabilities assumed in a business combination are measured at fair value on a non-recurring basis as of the acquisition date in accordance with the acquisition method described in Note 14, Business Combinations. Transfers between levels of the fair value hierarchy, if any, are recognized as of the date of the event or change in circumstances giving rise to the transfer.
The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, other receivables, amounts due from and due to related parties, accounts payable, and accrued expenses approximate their respective fair values due to the short-term nature of these financial instruments.
There were no transfers between Level 1, Level 2, and Level 3 of the fair value hierarchy during the three months ended July 31, 2026 and 2025.
In connection with the acquisition of Aberfeldy and Best Life, certain identifiable intangible assets acquired, including customer relationships and intellectual property, were measured at fair value on a non-recurring basis as of the acquisition date. Such fair value measurements were based on valuation techniques that utilized significant unobservable inputs and were classified within Level 3 of the fair value hierarchy. See Note 14, Business Combinations.
The following table presents the Company’s assets measured at fair value on a recurring basis:
| Fair Value Measurements as of July 31, 2026 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Digital assets, at fair value | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Fair Value Measurements as of April 30, 2026 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Digital assets, at fair value | $ | $ | $ | $ | ||||||||||||
| Total | ||||||||||||||||
| F-13 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Revenue recognition
Revenue represents the amount of consideration the Company is entitled to upon the transfer of promised goods or services in the ordinary course of the Company’s activities and is recorded net of VAT. The Company adopts the five steps for the revenue recognition: (i) identify the contracts with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
Consistent with the criteria of ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when performance obligations are satisfied by transferring control of a promised good or service to a customer. For performance obligations that are satisfied at a point in time, the Company also considers the following indicators to assess whether control of a promised good or service is transferred to the customer: (i) right to payment; (ii) legal title; (iii) physical possession; (iv) significant risks and rewards of ownership; and (v) acceptance of the good or service.
Royalty income
In the case of royalty income, the Company recognizes revenue in an amount that reflects the consideration to which it expects to be entitled for its products and services. Accounts receivables are recorded when the right to consideration becomes unconditional. The Company’s terms and conditions vary by customer and typically provide net 90-day terms.
The Company receives royalty income in the form of license fees from customers for the use of the Company’s technology rights by the customers. Royalty income is recognized over time when the Company’s technology rights are used by the customers in accordance with the terms and conditions of the relevant license agreement. Revenue is recognized by the Company not only when invoices have been signed and confirmed by customers but also at the end of each year over the term of the relevant license agreements as the service is provided to the customers.
Advertising revenue
The Company generates revenue from sales of various forms of advertising on streaming content by way of advertisement displays or the integration of promotion activities in content to be streamed. Advertising contracts are signed to establish the different contract prices for different advertising scenarios, consistent with the advertising period. The Company enters into advertising contracts directly with the advertisers or the third-party advertising agencies that represent advertisers.
For the contracts that involve third-party advertising agencies, the Company acts as principal as the Company is responsible for fulfilling the promise of providing advertising services and has the discretion in establishing the price for the specified advertisement. Under a framework contract, the Company receives separate purchase orders from advertising agencies before the broadcast. Accordingly, each purchase order is identified as a separate performance obligation, containing a bundle of advertisements that are substantially the same and that have the same pattern of transfer to the customer. Where collectability is reasonably assured, revenue is recognized monthly over the service period of the purchase order.
For contracts signed directly with the advertisers, the Company commits to display a series of advertisements which are substantially the same or similar in content and transfer pattern, and the display of the whole series of advertisements is identified as the single performance obligation under the contract. The Company satisfies its performance obligations over time by measuring the progress toward the display of the whole series of advertisements in a contract, and advertising revenue is recognized over time based on the number of advertisements displayed.
Payment terms and conditions vary by contract types, and terms typically include a requirement for payment within a period from six to nine months. Both direct advertisers and third-party advertising agencies are generally billed at the end of the display period and require the Company to issue invoices in order to make their payments.
| F-14 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
AI revenue
The Company acquired Rafael AI on January 30, 2026. Rafael AI generates revenue from the sale of customized “data-to-AI” end-to-end solutions directly to customers, which qualifies as software. Rafael AI is the sole legal and beneficial owner of the software, and enters into contracts with its customers as a principal in the transactions. The sale of customized “data-to-AI” end-to-end solutions is considered a distinct product as the product is highly integrated, interdependent, and interrelated. The customers cannot use any component on a standalone basis to obtain economic benefits. The contracts contain a single performance obligation, which is to deliver a complete integrated software solution to its customers in exchange for consideration, and the performance obligation is satisfied when the customers obtain control upon completion and delivery of all software deliverables. The customers do not simultaneously receive and consume benefits as the Company performs the contracts, and do not control the software during development. The software has no alternative use, and Rafael AI does not have an enforceable right to payment for partial performance. The terms of pricing and payment stipulated in the contract are fixed, without variable consideration, significant financing component, non-cash consideration, and consideration payable to customers. Upon delivery of products, Rafael AI does not accept product returns or refunds except for quality issues, but it has obligations to issue refunds when the product has not been delivered. Rafael AI typically provides a one-year warranty for products delivered. Revenue is recognized when the control of the products has been transferred to customers. The transfer of control is considered complete when products have been accepted and received by customers. Amounts received in advance are recorded as contract liabilities, which are recognized as revenue when the relevant products are delivered and accepted by the customer. This activity falls within the scope of ASC 606.
Principal vs agent consideration
To determine whether revenue should be reported based on the gross or net transaction price to customers, the Company must determine whether it is acting as principal in its sales to customers. An entity acts as principal if it controls a good or service before it is transferred to the customer. Key indicators that the Company uses in evaluating its role in these sales transactions include, but are not limited to, the following:
| ● | the underlying contract terms and conditions between the various parties to the transaction; | |
| ● | which party is primarily responsible for fulfilling the promise to provide the specified good or service; and | |
| ● | which party has discretion in establishing the price for the specified good or service. |
The Company has discretion in establishing the price for the specified good or service, and, based on an evaluation of the above indicators, the Company has determined that it acts as the principal to its customers and thus reports its revenue on a gross basis.
| F-15 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Cost of revenue
For royalty income, the Company’s cost of revenue consists primarily of amortization charges of intangible assets, in particular, technology rights, which are directly attributable to the revenue.
For advertising revenue, cost of revenue consists primarily of (i) media placement and platform consumption costs incurred to obtain advertising inventory and related platform services from third-party digital advertising platforms and (ii) fees paid to third-party cooperating platforms and service providers used to deliver, operate, measure, and optimize customer advertising campaigns (for example, ad networks, demand-side platforms, data or measurement providers, tracking and verification services, and other campaign execution tools).
For AI services, cost of revenue consists primarily of salaries, amortization charges of intangible assets, and depreciation of property and equipment, which are directly attributable to the revenue. The Company generally invoices customers for media and service fees in connection with performance advertising arrangements.
Selling and marketing expenses
Selling and marketing expenses primarily consist of personnel-related costs, office expenses, travel expenses, rent, utilities, and other marketing-related expenses.
General and administrative expenses
General and administrative expenses primarily consist of salaries and benefits for employees involved in general corporate functions, professional fees for external legal, accounting, and other consulting services, travel expenses, and other general office and administrative expenses.
Income taxes
The Company has adopted ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Prior to its acquisition by the Company, YYEM and Best Life were limited liability companies incorporated in Hong Kong. YYEM and Best Life are subject to Hong Kong profits tax on its assessable profits arising in or derived from Hong Kong. Provision for Hong Kong profits tax is made based on the estimated assessable profit in accordance with applicable tax laws and regulations in Hong Kong. The tax positions taken may be subject to examination by the Hong Kong Inland Revenue Department, and any adjustments resulting from such examination could affect the amount of tax expense and liabilities recognized in the financial statements.
Rafael AI is subject to income taxes in Malaysia under applicable Malaysian tax laws. Following its acquisition by the Company, Rafael AI’s results are included in the Company’s consolidated income tax provision from the acquisition date. Provisional income tax payments made by Rafael AI are recorded as prepaid income taxes until applied against its final income tax liabilities and do not, by themselves, represent income tax expense.
Commitments and contingency
From time to time, the Company may be a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amounts can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. For the three months ended July 31, 2026 and 2025, the Company did not have any material legal claims or litigation that, individually or in the aggregate, could have a material adverse impact on the Company’s financial position, results of operations, or cash flow.
| F-16 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Basic earnings per share are calculated by dividing income available to shareholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period.
All common stock equivalents such as shares to be issued for the conversion of warrants were excluded from the calculation of diluted earnings per share as the effect is anti-dilutive.
Basic net income per share is computed by dividing net income attributable to ordinary shareholders, after considering accretions to redemption value and deemed dividends on preferred shares, by the weighted average number of ordinary shares outstanding during the year using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating securities based on their respective participating rights. The Company’s preferred shares are considered participating securities because they participate in undistributed earnings on an as-if-converted basis. The preferred shares have no contractual obligation to fund or otherwise absorb the Company’s losses. Accordingly, any undistributed net income is allocated on a pro rata basis to ordinary and preferred shares, whereas any undistributed net loss is allocated to ordinary shares only.
Diluted net income per share is calculated by dividing net income attributable to ordinary shareholders, as adjusted for the accretion and allocation of net income related to preferred shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of shares issuable upon the conversion of preferred shares and convertible loans using the if-converted method, and ordinary shares issuable upon the vesting of restricted shares or exercise of outstanding share options, using the treasury stock method based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. Ordinary equivalent shares are excluded from the denominator of the diluted earnings per share calculation when their inclusion would be anti-dilutive.
Comprehensive (loss)/income
The Company applies ASC 220, Comprehensive Income, with respect to reporting and presentation of comprehensive (loss)/income and its components in a full set of financial statements. Comprehensive (loss)/income is defined to include all changes in equity of the Company during a period arising from transactions and other events and circumstances except those resulting from investments by shareholders and distributions to shareholders.
Segment reporting
An operating segment is a component of the Company that engages in business activities from which it may earn revenue and incur expenses and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker in order to allocate resources and assess performance of the segment.
In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “CODM”) in deciding how to allocate resources and in assessing performance. The Company’s revenue segments have similar economic characteristics, and they are managed as a single business unit. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s CODM for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s CODM reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. The Company has determined that there is only one reportable operating segment.
Recent accounting pronouncements
The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flow, or disclosure.
In November 2024, the FASB issued ASU 2024-03, Reporting Comprehensive Income—Expense Disaggregation Disclosures, which focuses on improving disclosure about a public business entity’s expenses and addresses requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, G&A, and research and development). ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of adopting the standard and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
| F-17 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20: Induced Conversions of Convertible Debt Instruments). The amendments provide guidance on accounting for induced conversions of convertible debt instruments. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for entities that have adopted the amendments in ASU 2020-06. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In January 2025, the FASB issued ASU 2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures.” ASU 2025-01 amends the effective date of ASC 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In March 2025, the FASB issued ASU 2025-02, Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122. The amendments are effective immediately and must be applied on a fully retrospective basis to annual periods beginning after December 15, 2024. The Company does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. The amendments provide guidance on identifying the accounting acquirer in transactions involving a variable interest entity. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual periods. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In May 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer. The amendments clarify the accounting for share-based consideration payable to a customer under Topic 718 and Topic 606. The amendments are effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of these amendments and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. These amendments provide a practical expedient and, if applicable, an accounting policy election to simplify the measurement of credit losses for certain receivables and contract assets. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in any interim or annual period in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other (Topic 350: Internal-Use Software). The standard simplifies the accounting for internal-use software costs and is effective for fiscal years beginning after December 15, 2026. The Company does not expect adoption of this standard to have a material impact on its financial position, results of operations, or cash flow.
In December 2025, FASB issued ASU 2025-11, Interim Reporting (Topic 270: Improvements to Interim Disclosure Requirements). This standard clarifies disclosure requirements for interim financial statements and is effective for interim periods beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this guidance and does not believe that it will have a material effect on the Company’s financial position, results of operations, or cash flow.
In April 2026, the FASB issued ASU 2026-01, which provides guidance on the initial measurement of paid-in-kind dividends on equity-classified preferred stock. The amendments require such dividends to be initially measured based on the paid-in-kind dividend rate stated in the preferred stock agreement. The amendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual reporting periods. Early adoption is permitted. The Company does not currently have equity-classified preferred stock with paid-in-kind dividend provisions and therefore does not expect the adoption of this guidance to have a material effect on its financial position, results of operations, or cash flow.
In May 2026, the FASB issued ASU 2026-02, which establishes accounting and disclosure guidance for environmental credits and environmental credit obligations. For public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual reporting periods. Early adoption is permitted. The Company does not currently have material environmental credits or environmental credit obligations and does not expect the adoption of this guidance to have a material effect on its financial position, results of operations, or cash flow.
The Company has reviewed other recently issued accounting pronouncements and does not believe that the adoption of such pronouncements is expected to have a material effect on its consolidated financial statements or related disclosure.
| F-18 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 3: CONCENTRATIONS OF RISK
Concentration of customer risk
The
Company’s three largest customers (together with their respective affiliates) accounted for approximately
The following table sets forth a summary of single customers who represent 10% or more of the Company’s total accounts receivable:
| As of July 31, 2026 | As of April 30, 2026 | |||||||
| Customer A | % | % | ||||||
| Customer B | % | % | ||||||
| Customer C | % | % | ||||||
| Customer D | % | % | ||||||
| Customer E | % | % | ||||||
Concentration of credit risk
The
Company is exposed to credit risk primarily through its cash and cash equivalents, accounts receivable, and revenue concentration. As
of July 31 and April 30, 2026, the Company held cash and cash equivalents of $
Accounts
receivable totaled $
The Company monitors the creditworthiness of these customers on an ongoing basis and establishes allowances for expected credit losses when necessary.
Note 4: ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
| As of | As of | |||||||
| July 31, 2026 | April 30, 2026 | |||||||
| Accounts receivable | $ | $ | ||||||
As of July 31 and April 30, 2026, all accounts receivable were due from third-party customers. The provisions for credit losses were as of July 31 and April 30, 2026.
| F-19 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 5: DEPOSITS
As
of each of July 31 and April 30, 2026, the Company had deposits totaling $
Note 6: PREPAYMENTS
As
of July 31 and April 30, 2026, the Company had prepayments totaling $
| As of | As of | |||||||
| July 31, 2026 | April 30, 2026 | |||||||
| Advance to suppliers | $ | $ | ||||||
| Advance tax payment in Malaysia | ||||||||
| Prepaid rental | ||||||||
| Total Prepayments | $ | $ | ||||||
Note 7: OTHER RECEIVABLES
As
of each of July 31 and April 30, 2026, the Company had $
As of July 31, 2026, | As of April 30, 2026 | |||||||
| Amount due from third party | $ | $ | ||||||
| Loan interest receivable | ||||||||
| Total | $ | $ | ||||||
| F-20 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 8: CONTRACT COSTS AND LIABILITIES
Contract costs
Contract costs consist of costs to obtain and fulfill a contract. Costs to fulfill a contract primarily consist of salaries and related costs, amortization of intangible assets, and depreciation of property and equipment in developing customized “data-to-AI” solutions for customers where such costs are expected to be recovered under existing contracts. Contract costs are recognized as a cost of revenue upon transfer of the customized data-to-AI solutions to customers.
The movement of contract costs was as follows:
| For the Three Months Ended July 31, | ||||||||
| 2026 | 2025 | |||||||
| Beginning | $ | $ | ||||||
| Cost of revenue | ( | ) | ||||||
| Costs accumulation | ||||||||
| Ending | $ | $ | ||||||
Contract liabilities
The Company acquired Aberfeldy on January 30, 2026. In accordance with ASC 805 and ASU 2021-08, the Company recognized and measured the contract liabilities assumed from Aberfeldy in accordance with ASC 606, Revenue from Contracts with Customers, as if the Company had originated the contracts at the acquisition date. The contract liabilities assumed represent amounts received up front from customers for customized data-to-AI solutions for which the underlying services had not yet been delivered at the acquisition date. The Company had no contract liabilities from its own operations prior to the acquisition of Aberfeldy.
The following table provides information about the Company’s contract liabilities arising from contracts with customers.
| For the Three Months Ended July 31, | ||||||||
| 2026 | 2025 | |||||||
| Beginning | $ | $ | ||||||
| Revenue | ( | ) | ||||||
| Collections from customers | ||||||||
| Ending | $ | $ | ||||||
The
Company’s remaining performance obligations represent the amount of the transaction price for which service has not been
performed. As of July 31, 2026, the aggregate amount of the transaction price allocated for the remaining performance obligations
amounted to $
| F-21 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 9: INVENTORIES
Inventories consisted of the following:
| As of | As of | |||||||
| July 31, 2026 | April 30, 2026 | |||||||
| Finished goods | $ | $ | ||||||
Note 10: DIGITAL ASSETS
The
Company’s digital assets consisted primarily of USDT, stablecoins designed to maintain a value of approximately one U.S. dollar
per token. As of July 31 and April 30, 2026, the fair value of the Company’s digital assets was $
The Company determined the fair value of its digital assets based on quoted prices in the principal market accessible to the Company as of the applicable reporting date. Changes in the fair value of the Company’s digital assets were not material during the three months ended July 31, 2026 and 2025. Accordingly, the Company recognized no material gains or losses related to its digital assets during the periods presented.
Note 11: INTANGIBLE ASSETS, NET
The Company’s intangible assets consisted of the following:
| As of July 31, 2026 | As of April 30, 2026 | |||||||
| Technology rights | $ | $ | ||||||
| Acquired development costs, gross | ||||||||
| Customer relationships, gross | ||||||||
| Noncompete agreement, gross | ||||||||
| Patents, gross | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Less: accumulated impairment | ( |
) | ( |
) | ||||
| Intangible assets, net | $ | $ | ||||||
| F-22 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 11: INTANGIBLE ASSETS, NET (cont.)
Intangible Assets
The
Company’s finite-lived intangible assets consist of development costs and customer relationships. These intangible assets are amortized
on a straight-line basis over their estimated useful lives of
During
the year ended April 30, 2026, the Company recognized an impairment loss of approximately $
Acquired Intangible Assets
On
January 30, 2026, in connection with the acquisition of Aberfeldy, the Company recognized acquired intangible assets consisting of a
$
On
July 30, 2026, in connection with the acquisition of Best Life, the Company recognized acquired intangible assets consisting of a
$
These
acquired intangible assets are finite-lived and are amortized on a straight-line basis over an estimated useful life of
As
of July 31, 2026, the net carrying amount of these acquired intangible assets was $
See Note 14, Business Combinations, for additional information regarding the acquisition and the allocation of the purchase consideration.
| For the year ending April 30, | Estimated amortization | |||
| 2027 | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 | ||||
| Thereafter | ||||
| Total | $ | |||
Note 12: PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consists of the following:
| As of July 31, 2026 | As of April 30, 2026 | |||||||
| Office equipment | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, net | $ | $ | ||||||
Depreciation
expense for the three months ended July 31, 2026 and 2025 was $
| F-23 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 13: REVENUE
The following represents the Company’s revenue segmented by geographic region for the three months ended July 31, 2026 and 2025.
| Location | For the three months ended July 31, 2026 | For the three months ended July 31, 2025 | ||||||
| Hong Kong | $ | $ | ||||||
| United States of America | ||||||||
| United Kingdom | ||||||||
| Singapore | ||||||||
| Malaysia | ||||||||
| Indonesia | ||||||||
| Taiwan | ||||||||
| Philippines | ||||||||
| Thailand | ||||||||
| Vietnam | ||||||||
| Brazil | ||||||||
| Total | $ | $ | ||||||
The following represents the Company’s revenue segmented by revenue stream for the three months ended July 31, 2026 and 2025.
| Revenue Stream | For the three months ended July 31, 2026 | For the three months ended July 31, 2025 | ||||||
| Royalty income | $ | $ | ||||||
| Advertising | ||||||||
| AI services | ||||||||
| Total | $ | $ | ||||||
Note 14: BUSINESS COMBINATIONS
Acquisition of Aberfeldy Holdings Limited
On
January 30, 2026, the Company completed the acquisition of
The following table summarizes the provisional purchase price allocation and fair value of the assets and liabilities acquired in this business acquisition:
| PPA | Amount | |||
| Book net assets / pre-acquisition equity | $ | |||
| Development costs | ||||
| Customer relationships | ||||
| Less: Deferred tax liabilities | ( | ) | ||
| Net identifiable assets | ||||
| Goodwill | ||||
| Purchase consideration | $ | |||
Included within the intangible assets was
a provisional amount of $
| F-24 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 14: BUSINESS COMBINATIONS (cont.)
The
provisional fair value of development costs identified amounted to $
The
fair value of customer relationships identified was a provisional amount of $
As of the date these consolidated financial statements are issued, the purchase accounting related to the acquisition is incomplete because the evaluation necessary to assess the fair values of certain intangible assets acquired is still in process. As such, the above balances may be adjusted in the future period as the valuation is finalized and these adjustments may be material to the consolidated financial statements. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.
The goodwill recognized is primarily attributable to expected synergies from combining the operations of the Company and the Acquired Business, anticipated future growth opportunities, the assembled workforce, and other benefits that do not qualify for separate recognition as identifiable assets.
Goodwill is not amortized and is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of the applicable reporting unit is less than its carrying amount.
Acquisition of Best Life
On
July 27, 2026, the Company (the “Buyer”), entered into a Sale Purchase Agreement (the “SPA”) with Nova
Innovation Tech Ltd (the “Seller”) and Hongkong Best Life Trade Co., Limited (the “Target Company” or
“Best Life”), to acquire
The
SPA contains certain provisions regarding an earn-out arrangement. Pursuant to the SPA, additional sums are payable to Seller only if
the financial results of Best Life meet certain defined thresholds. Specifically, if the gross revenue of Best Life exceeds $
Pursuant
to the SPA, the total fixed consideration for the acquisition is $
Under ASC 805-30-30-7, the consideration transferred is measured at fair value, which includes the fair value of the cash transferred at the acquisition date and the fair value of the deferred cash consideration to be paid in the future. The Company discounted the deferred payments to their present values as of the Acquisition Date. The fair value of the total consideration transferred is calculated as follows:
| F-25 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 14: BUSINESS COMBINATIONS (cont.)
The fair value of the total consideration transferred is calculated as follows:
| Consideration | Amount | |||
| Present value of Partial Payment ($ | $ | |||
| Present value of Balance Payment ($ | ||||
| Fair value of First earn-out contingent consideration ($ | ||||
| Fair value of Second earn-out contingent consideration ($ | ||||
| Fair value of total consideration | $ | |||
The acquisition of Best Life was accounted for as a business combination in accordance with ASC 805. The Company allocated the purchase price based upon the fair value of the identifiable assets acquired and liabilities assumed on the Acquisition Date. The Company, through a third-party valuer, estimated the fair values of the assets acquired and liabilities assumed.
The allocation of consideration of the assets acquired and liabilities assumed based on their fair value was as follows:
| Best life | ||||
| Fair value of consideration transferred ( | $ | |||
| Fair value of non-controlling interests ( | ||||
| Total fair value | ||||
| Fair value of the assets acquired and the liabilities assumed ( | ||||
| Identifiable assets acquired: | ||||
| Cash | ||||
| Accounts receivable | ||||
| Prepayment | ||||
| Inventory | ||||
| Intangible assets, net | ||||
| Total assets acquired | ||||
| Liabilities assumed: | ||||
| Due to related parties | ||||
| Payroll Payable | ||||
| Deferred tax liabilities | ||||
| Total liabilities assumed | ||||
| Fair value of net identifiable assets acquired | ||||
| Goodwill | $ | |||
As of the date of acquisition, the intangible assets acquired and estimated useful lives were as follows:
| Estimated useful life | Fair values at Closing | |||||||
| Noncompete Agreement | $ | |||||||
| Patent | ||||||||
| Customer Relationship | ||||||||
| Total | $ | |||||||
| F-26 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 14: BUSINESS COMBINATIONS (cont.)
Included
within the intangible assets was a provisional amount of $
As of the date these consolidated financial statements are issued, the purchase accounting related to the acquisition is incomplete because the evaluation necessary to assess the fair values of certain intangible assets acquired is still in process. As such, the above balances may be adjusted in a future period as the valuation is finalized, and these adjustments may be material to the consolidated financial statements. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.
The goodwill recognized is primarily attributable to expected synergies from combining the operations of the Company and the acquired business, anticipated future growth opportunities, the assembled workforce, and other benefits that do not qualify for separate recognition as identifiable assets.
Goodwill is not amortized and is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of the applicable reporting unit is less than its carrying amount.
Note 15: ACCRUED EXPENSES
The following is a summary of accrued expenses as of July 31 and April 30, 2026, respectively.
As of July 31, 2026 | As of April 30, 2026 | |||||||
| Accrued salaries and benefits – management | $ | $ | ||||||
| Accrued signing bonus | ||||||||
| Accrued success fee | ||||||||
| Accrued directors’ fees | ||||||||
| Accrued professional fees | ||||||||
| Accrued salaries and benefits – employees | ||||||||
| Accrued utilities expenses | ||||||||
| Total | $ | $ | ||||||
Note 16: AMOUNT DUE FROM RELATED PARTY
Nature of relationships with related party
| Name | Relationship with the Company | |
| Yanmei Mo |
Transaction with related party
| Name | As of July 31, 2026 | As of April 30, 2026 | ||||||||
| Amount due to related party | Yanmei Mo | $ | $ | |||||||
The amount due to related party as of July 31, 2026, represented the advances from Ms. Yanmei Mo and was used for working capital in the normal course of business. Such advances were non-interest bearing and due on demand.
Note 17: TAXATION
A reconciliation between the Company’s actual provision for income taxes and the provision calculated under the Hong Kong and Malaysia statutory rates are as follows:
Income Before Income Taxes
Income before income taxes was as follows:
| For the Three-Month Period Ended | ||||||||
| Description | July 31, 2026 | July 31, 2025 | ||||||
| U.S. federal and state | $ | ( | ) | $ | ||||
| Foreign | ||||||||
| (Loss)/income before income taxes | $ | ( | ) | $ | ||||
| F-27 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 17: TAXATION (cont.)
Provision for Income Taxes
The components of the provision for income taxes were as follows:
| For the Three-Month Period Ended | ||||||||
| July 31, 2026 | July 31, 2025 | |||||||
| Current: | ||||||||
| U.S. federal and state | $ | $ | ||||||
| Foreign | ||||||||
| Total current income tax expense | ||||||||
| Deferred: | ||||||||
| U.S. federal and state | ||||||||
| Foreign | ( | ) | ||||||
| Total deferred income tax benefit | ( | ) | ||||||
| Income tax expense | $ | $ | ||||||
For the three months ended July 31, 2026, current foreign income tax expense was attributable to the Company’s operations in Malaysia. The Company did not incur current income tax expense in the United States or Hong Kong during the period.
Effective Income Tax Rate Reconciliation
A
reconciliation of the income tax benefit computed at the U.S. federal statutory income tax rate of
| For the Three-Month Period Ended | ||||||||||||||||
| July 31, 2026 | July 31, 2025 | |||||||||||||||
| Description | Amount | Rate | Amount | Rate | ||||||||||||
| Income tax benefit at U.S. federal statutory rate | $ | ( | ) | % | $ | % | ||||||||||
| Foreign tax effects | ( | )% | ( | ) | ( | )% | ||||||||||
| Tax effect of preferential tax rate | ( | )% | % | |||||||||||||
| Tax effect of losses for which no tax benefit was recognized | ( | )% | % | |||||||||||||
| Income tax expense | $ | ( | )% | $ | % | |||||||||||
The
Company’s effective income tax rate differed from the U.S. federal statutory income tax rate primarily because no tax benefit was
recognized for losses incurred in certain jurisdictions and the Company’s Malaysian operations are subject to a statutory corporate
income tax rate of
Uncertain Tax Positions
As of July 31 and April 30, 2026, the Company had no material unrecognized tax benefits. The Company recognizes interest and penalties related to uncertain tax positions, if any, as a component of income tax expense.
Note 18: SHAREHOLDERS’ EQUITY
Common Stock Issuance
The Company is authorized to issue shares of common stock, par value $ per share.
On
May 18 and August 17, 2026, the Company effected reverse stock splits of its common stock at ratios of
| F-28 |
AIRWA INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 18: SHAREHOLDERS’ EQUITY (cont.)
After giving retrospective effect to the reverse stock splits, the Company had approximately shares of common stock issued and outstanding as of July 31 and April 30, 2026.
| Transaction | Split-Adjusted Shares Issued | Proceeds | ||||||
| Private placement | $ | |||||||
| At-the-market offerings | ||||||||
| Exercise of warrants / other common stock issuance | ||||||||
| Registered direct offering | ||||||||
| Share allotment | ||||||||
| Total | $ | |||||||
The Company’s common stock outstanding reconciles as follows:
| Shares | ||||
| Shares outstanding as of April 30, 2025, as retrospectively adjusted | ||||
| Shares issued during the year ended April 30, 2026, as retrospectively adjusted | ||||
| Shares outstanding as of July 31 and April 30, 2026 | ||||
At the time of the respective transactions and prior to giving effect to the subsequent reverse stock splits:
| ● | the
private placement consisted of units at $ per unit and generated gross proceeds of $ | |
| ● | the
Company sold common stock pursuant to its at-the-market offering program and generated aggregate net proceeds of approximately $ | |
| ● | the
registered direct offering consisted of shares at $ per share and generated net proceeds of $ | |
| ● | the
Company issued shares of common stock at $ per share for proceeds of $ |
The historical share and per-share amounts in the preceding paragraph are presented on the basis applicable at the time of the respective transactions and have not been adjusted for subsequent reverse stock splits.
Reverse Stock Split during the Year
On
October 27, 2025, the Company effected a
All share and per-share amounts in these notes and the accompanying consolidated financial statements, unless otherwise indicated, have been retrospectively adjusted for this reverse stock split and for the reverse stock splits that occurred subsequent to the financial year end. (See Note 20, Subsequent Events.)
Note 19: CONTINGENCIES AND COMMITMENTS
The Company is subject to legal proceedings and regulatory actions in the ordinary course of business. The outcomes of such proceedings cannot be predicted with certainty; however, the Company does not anticipate that the final outcome of any such matter will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flow, taken as a whole. As of July 31, 2026, the Company is not a party to any material legal or administrative proceedings.
Note 20: SUBSEQUENT EVENTS
On
August 15, 2026, the Company filed a Certificate of Amendment to the Certificate of Incorporation of the Company with the Secretary of
State of the State of Delaware to effect a reverse stock split of the Common Stock at a ratio of
Every twenty shares of the Company’s issued and outstanding Common Stock were automatically combined into one issued and outstanding share of Common Stock, without any change in par value per share. No fractional shares were issued in connection with the August Reverse Split. Stockholders at the participant level of the Depository Trust Company who would have otherwise been entitled to a fraction of one share as a result of the August Reverse Split instead received one whole share of Common Stock in lieu of such fractional share. The August Reverse Split did not otherwise modify any rights or preferences of the Company’s Common Stock. The Common Stock began trading on a split-adjusted basis on the Nasdaq Capital Market at market open on August 17, 2026.
| F-29 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited financial statements and the related notes appearing in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks, uncertainties, and assumptions. You should read the “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” sections of our Form 10-K for the period ended April 30, 2025 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. All dollar figures expressed in terms of millions are rounded to one decimal place. All percentages are calculated using the unrounded underlying figures and rounded to the nearest whole number.
Overview
AI Services
Through Rafael AI, the Company provides end-to-end full-cycle services designed to empower enterprises to transition seamlessly from raw data to intelligent applications. This business is structured around five interconnected AI-related modules, together forming a closed-loop system in which data generation, model refinement, and operational feedback continuously reinforce one another. Its services are tailored to specialist industries such as healthcare, industrial manufacturing, and autonomous driving. We recorded $6.6 million of revenue from our AI services business in the final quarter of our financial year ended April 30, 2026, which was the period during which Rafael AI was our subsidiary.
Technology Licensing
Through YYEM, the Company owns patents and other proprietary technology for licensing out to partners worldwide, enabling them to create localized matchmaking experiences tailored to their specific markets and cultures. By providing such patents, we aim to enable our partners to develop matchmaking services that resonate with local users while benefiting from advanced matching algorithms, safety features, and engagement tools. Our technology licensing business generated royalties of $7.3 million in our financial year ended April 30, 2026.
Advertising
Our subsidiary YYEM also provides digital marketing solution services related to performance advertising across diversified advertising channels such as Google, TikTok, and Meta. Services typically include marketing strategy and planning; platform account setup and media placement; production of advertising creative (video and other content); and ongoing campaign monitoring, analytics, optimization, and reporting. We have developed key relationships integral to this business, both with companies seeking to promote their products and services and with companies that have direct buying relationships with the platforms, which we are leveraging as we build market share. This business generated approximately $12.0 million of revenue in our financial year ended April 30, 2026.
Fundraising
ATM Facility
Under a prospectus supplement dated August 22, 2025 that amends the prospectus supplement dated June 11, 2025 and its accompanying prospectus dated June 11, 2025, filed with the Securities and Exchange Commission as part of our registration statement on Form S-3 (File No. 333-284188) (the “Registration Statement”) relating to the offer and sale of our common stock through A.G.P./Alliance Global Partners (“A.G.P.”) in “at the market offerings” (the “ATM facility”) as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, pursuant to the sales agreement with AGP dated as of January 8, 2025 (the “Sales Agreement”), the amount we could raise under our ATM facility was specified to be $200 million. During the three months ended July 31, 2026, the Company sold 4,526,380 shares of common stock pursuant to the Sales Agreement, generating aggregate gross proceeds of approximately $16.3 million. As of the date of this Report, the Company is unable to sell shares under the Sales Agreement as the Registration Statement is not available for use as a result of the Company not being current in its reporting obligations under the Securities Exchange Act of 1934. The Company does not expect to be eligible to resume sales under the Sales Agreement until at least October 1, 2027.
| 1 |
Recent Developments
Best Life Acquisition
On July 27, 2026, we entered into a share purchase agreement with Nova Innovation Tech Ltd, a BVI company, to acquire all the share capital of Oceancrest Investment Holdings Limited, a BVI holding company, which owned 97% of Best Life, for $50 million (the “Base Consideration”), payable in USDT (Tether) or cash, with additional earn-out amounts payable if Best Life achieves specified revenue targets.
Best Life is a cross-border consumer-goods distribution and e-commerce business, leveraging direct brand sourcing, import expertise, bonded warehousing, platform operations, offline retail access, and selected private-label development to sell Japanese and other international consumer products across China and other overseas markets. It has in place business relationships with brand owners and manufacturers upstream and with e-commerce platforms, supermarkets, specialty retailers, and online resellers downstream. While Best Life historically has focused on Asia, it has recently launched an international expansion program to the UK, the U.S., Canada, and New Zealand.
On July 30, 2026, we closed on the transaction, paying $30 million toward the purchase price and receiving all of the shares of the holding company, giving us a 97% equity interest in Best Life. On September 10, 2026, we paid half of the balance of the Base Consideration, with the other half due by October 28. If the Target achieves gross revenue of $10 million for the year ending December 31, 2026, the Company will make an earn-out payment of $30 million, and if it achieves gross revenue of $25 million for the year ending December 31, 2027, the Company will make an earn-out payment of $50 million.
To fund the purchase of Best Life, we sold 4,526,380 shares of Common Stock on a split-adjusted basis under the Sales Agreement, raising approximately $16.3 million in gross proceeds.
Reverse Stock Splits
On May 18, 2026, and August 17, 2026, the Company effected reverse stock splits of its common stock at ratios of 1-for-40 and 1-for-20, respectively. The reverse stock splits did not change the par value of the Company’s common stock or the number of authorized shares. All share and per-share amounts presented in these consolidated financial statements and accompanying notes have been retrospectively adjusted to reflect the reverse stock splits for all periods presented, unless otherwise indicated.
Nasdaq Deficiency
On August 24, 2026, the Company received a letter from the Listing Qualifications Department of Nasdaq, indicating that the Company’s failure to file its Annual Report on Form 10-K for the period ended April 30, 2026 (the “Filing”) violated Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the “Rule”). The delay resulted from the fact that, following a significant acquisition, it had proven more time-consuming than anticipated to consolidate the financial results of the acquired business with the Company’s own. The Company had 60 calendar days to submit a plan to regain compliance and if the plan was accepted, Nasdaq could grant an exception of up to 180 calendar days from the Filing’s due date, or until January 25, 2027, to regain compliance. The Company made the Filing before the October 23, 2026, deadline for submission of the plan and expects to regain compliance with Nasdaq’s listing requirements as a result. There can be no assurance that the Company will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with the Rule, and maintain compliance with other Nasdaq listing requirements.
Components of Results of Operations
Revenue
Our revenue is generated from the sale of customized “data-to-AI” end-to-end solutions, from license fees paid by customers for the use of our technology, and from digital marketing solution services.
AI services revenue is generated from the sale of customized data-to-AI end-to-end solutions directly to customers. These solutions consist of highly integrated software deliverables that are designed and customized based on customers’ specific requirements. Revenue from the sale of such solutions is recognized when control of the completed software solution is transferred to and accepted by the customer.
License revenue is generated from license fees paid by customers for the use of our technology.
Advertising revenue is generated from the provision of digital marketing solution services related to performance advertising across diversified advertising channels.
Cost of revenue
Cost of revenue consists of costs directly attributable to the generation of revenue.
For our AI services business, cost of revenue consists primarily of salaries, amortization charges related to intangible assets, and depreciation of property and equipment that are directly attributable to the development and delivery of our customized data-to-AI end-to-end solutions.
For our technology licensing business, cost of revenue consists primarily of amortization charges related to intangible assets, specifically technology rights.
For our advertising business, cost of revenue consists primarily of media and platform costs and third-party cooperating-platform and campaign delivery costs.
General and Administrative Expenses
General and administrative expenses primarily consist of salaries and benefits for employees involved in general corporate functions; professional fees for external legal, accounting, and other consulting services; travel expenses; and other general office and administrative expenses.
Gross Profit
Gross profit is calculated as revenue less cost of revenue.
Results of Operations
Three months ended July 31, 2026, compared to the three months ended July 31, 2025
The following are the results of our operations for the three-month period ended July 31, 2026, as compared to the three-month period ended July 31, 2025:
Three Months Ended July 31, | Change | |||||||||||||||
| 2026 | 2025 | Amount | % | |||||||||||||
| Revenue | $ | 21,243,892 | $ | 3,000,000 | 18,243,892 | 608 | % | |||||||||
| Cost of Revenue | 15,604,610 | 744,231 | 14,860,379 | 1,997 | % | |||||||||||
| Gross Profit | 5,639,282 | 2,255,769 | 3,483,513 | 150 | % | |||||||||||
| Operating Expenses: | ||||||||||||||||
| Selling and Marketing Expenses | 450,995 | - | 450,995 | N/A | ||||||||||||
| General and Administrative Expenses | 5,485,053 | 764,386 | 4,720,667 | 618 | % | |||||||||||
| Total Operating Expenses | 5,936,048 | 764,386 | 5,717,662 | 677 | % | |||||||||||
| Operating Income | $ | (296,766 | ) | $ | 1,491,383 | (1,778,149 | ) | (120 | )% | |||||||
| 2 |
Revenue
Our revenue increased by $18.2 million, or 608%, from $3.0 million for the three-month period ended July 31, 2025 to $21.2 million for the three-month period ended July 31, 2026, driven by the recognition of approximately $15.2 million of AI services income following the acquisition of Rafael AI and the recognition of approximately $6.0 million of advertising income following the launch of our advertising business, partially offset by an approximately $3.0 million decrease in license revenue following the termination of the related license agreements.
Cost of Revenue
Our cost of revenue increased by $14.9 million, or 1,997%, from $0.7 million to $15.6 million, primarily due to increased costs as we grew with the addition of our advertising and new AI-related businesses during the three-month period ended July 31, 2026. In particular, Rafael AI increased its expenditure on medical-related research and development from February through April 2026 as it sought to establish itself as a leader in Southeast Asia in developing AI models for traditional Chinese medicine. As a result, gross profit increased by $3.5 million, or 150%, from $2.3 million to $5.6 million.
Selling and Marketing Expenses
Selling and marketing expenses, which primarily consist of salaries, office expenses, rent, utilities, and marketing fees, increased by $0.5 million, from nil for the three-month period ended July 31, 2025, as we promoted our new advertising services and our newly acquired AI services business.
General and Administrative Expenses
General and administrative expenses, which mainly relate to salaries, professional fees, and other general office and administrative expenses, increased by $4.7 million, or 618%, from $0.8 million for the three-month period ended July 31, 2025 to $5.5 million for the three-month period ended July 31, 2026, primarily driven by the growth of our business through the acquisition of Rafael AI. The increase was mainly due to the amortization of the intangible assets incurred from the acquisition of Rafael AI, including the acquired development costs and customer relationships.
Liquidity and Capital Resources
The following table sets forth a summary of our cash flow for the three-month periods ended July 31, 2026 and 2025, as indicated.
| Three Months Ended July 31, | ||||||||
| 2026 | 2025 | |||||||
| Net cash provided by/(used in) operating activities | $ | 27,672,258 | $ | (1,083,809 | ) | |||
| Net cash used in investing activities | (29,367,266 | ) | - | |||||
| Net cash provided by financing activities | - | 1,081,758 | ||||||
| Net decrease in cash and cash equivalents | (1,695,008 | ) | (2,051 | ) | ||||
| Cash and cash equivalents, beginning of period | 12,780,208 | 54,744 | ||||||
| Cash and cash equivalents, end of period | $ | 11,085,200 | $ | 52,693 | ||||
Operating activities
Net cash provided by operating activities for the three-month period ended July 31, 2026, was $27.7 million, compared with $1.1 million for the three-month period ended July 31, 2025. Cash provided by operating activities for the three-month period ended July 31, 2026 primarily reflected a decrease of $19.0 million in digital assets and a decrease of $11.2 million in accounts receivable. These cash inflows were partially offset by a decrease of $5.0 million in contract liabilities. Cash used in operating activities for the three-month period ended July 31, 2025 primarily reflected in increase of $3.0 million in accounts receivable, partially offset by net income of $1.3 million.
Investing Activities
Net cash used in investing activities for the three-month period ended July 31, 2026, was $29.4 million, compared with nil for the three-month period ended July 31, 2025. The net cash used in investing activities for the three-month period ended July 31, 2026 consisted of the Company’s cash payment of $29.4 million for the acquisition of Best Life.
Financing Activities
Net cash provided by financing activities for the three-month period ended July 31, 2026 was nil, compared with $1.1 million for the three-month period ended July 31, 2025. The net cash provided by financing activities was primarily attributable to an increase of approximately $1.1 million in amounts due from a related party.
Based on our current operating plans, we believe that our existing cash at the time of this filing will be sufficient to meet our anticipated operating needs for at least the next 12 months and that we will have sufficient financial resources available through capital markets fundraising if we should decide to incur additional capital expenditure or make other investments and to pay amounts potentially owing under an earn-out in respect of Best Life. Our future capital requirements will depend upon many factors, including competing technological and market developments, our R&D efforts, and decisions regarding acquisitions of further companies or other assets, and there can be no guarantee that we will be able to raise sufficient funds on acceptable terms or at all.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditure, or capital resources that are material to investors.
Significant Accounting Policies
Our significant accounting policies are disclosed in Note 2 to the accompanying financial statements. The following is a summary of those accounting policies that involve significant estimates and judgment of management.
| 3 |
Use of Estimates
The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Allowance for Credit Losses
Accounts receivable are stated at their historical carrying amount net of an allowance for credit losses.
Allowance for credit loss represents management’s best estimate of probable losses inherent in the portfolio. On June 30, 2022, the Company adopted ASC 326, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance replaced the “incurred loss” impairment methodology with an approach based on “expected losses” to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset.
The Company considers various factors, including the nature of the receivable, historical collection experience, and age of the accounts receivable balances; the credit quality and specific risk characteristics of its customers; and current economic conditions, to develop an estimate of credit losses. Additionally, the Company makes specific allowance for credit losses based on any specific knowledge the Company has acquired that might indicate that an account is uncollectible. The facts and circumstances of each account may require the Company to use substantial judgment in assessing its collectability. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. As of July 31 and April 30, 2026, the Company recorded an allowance for credit losses of nil and $300,000, respectively, against other receivables.
Impairment of long-lived assets
Long-lived assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing the carrying value of the assets to an estimate of future undiscounted cash flow expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flow is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. Impairment charge recognized for the three months ended July 31, 2026 and 2025 was nil.
Fair value of financial instruments
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements of assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Company considers the principal or most advantageous market in which it would transact, and it also considers assumptions that market participants would use when pricing the asset or liability.
Revenue Recognition
Revenue represents the amount of consideration the Company is entitled to upon the transfer of promised goods or services in the ordinary course of the Company’s activities and is recorded net of VAT. The Company’s revenue recognition process involves five steps: (i) identifying the contracts with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations in the contract, and (v) recognizing revenue when (or as) the entity satisfies a performance obligation.
| 4 |
Consistent with the criteria of ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when performance obligations are satisfied by transferring control of a promised good or service to a customer. For performance obligations that are satisfied at a point in time, the Company also considers the following indicators to assess whether control of a promised good or service is transferred to the customer: (i) right to payment, (ii) legal title, (iii) physical possession, (iv) significant risks and rewards of ownership, and (v) acceptance of the good or service.
Royalty income
In the case of royalty income, the Company recognizes revenue in an amount that reflects the consideration to which it expects to be entitled for its products and services. Accounts receivables are recorded when the right to consideration becomes unconditional. The Company’s terms and conditions vary by customer but typically provide net 90-day terms.
The Company receives royalty income in the form of license fees from customers for the use of the Company’s technology rights by the customers. Royalty income is recognized over time when the Company’s technology rights are used by customers in accordance with the terms and conditions of the relevant license agreement. Revenue is recognized by the Company not only when invoices have been signed and confirmed by customers but also at the end of each year over the term of the relevant license agreements as the service is provided to the customers.
Advertising revenue
The Company also provides digital marketing solution services related to performance advertising across diversified advertising channels (e.g., Google, Meta, etc.). Services typically include: (i) marketing strategy and planning; (ii) platform account setup and media placement; (iii) production of advertising creative (including video and other content); and (iv) ongoing campaign monitoring, analytics, optimization, and reporting.
Revenue from the Company’s performance advertising services is recognized over time because customers simultaneously receive and consume the benefits of the Company’s performance as the Company performs the services.
AI revenue
Rafael AI generates revenue from the sale of customized data-to-AI end-to-end software solutions directly to customers. Rafael AI is the sole legal and beneficial owner of the relevant software and enters into contracts with its customers as a principal in the related transactions. The sale of customized data-to-AI end-to-end solutions is considered a distinct product as it is highly integrated, interdependent, and interrelated. The customers cannot use any component on a standalone basis to obtain economic benefits. The contracts contain a single performance obligation, which is to deliver a complete integrated software solution to the customers in exchange for the agreed consideration. The performance obligation is satisfied when the customers obtain control upon completion and delivery of all software deliverables. The customers do not simultaneously receive and consume benefits as the Company performs the contracts and do not control the software during development. Furthermore, the software has no alternative use, and Rafael AI does not have an enforceable right to payment for partial performance. The terms of pricing and payment stipulated in the contracts are fixed, without variable consideration, a significant financing component, non-cash consideration, or consideration payable to customers. Upon delivery of products, Rafael AI does not accept product returns or refunds except for quality issues. Rafael AI has obligations to make refunds when the product has not been delivered. Rafael AI usually provides a one-year product warranty for delivered products. Rafael AI recognizes revenue when control of the products has been transferred to customers. The transfer of control is considered complete when products have been delivered to, and accepted by, customers. Amounts received in advance are recorded as contract liabilities. Contract liabilities are recognized as revenue when the products are delivered to, and accepted by, the customers. This activity falls within the scope of ASC 606.
Income Taxes
The Company has adopted ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Recent Accounting Pronouncements
The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flow, or disclosure.
| 5 |
In November 2024, the FASB issued ASU 2024-03, Reporting Comprehensive Income—Expense Disaggregation Disclosures, which focuses on improving disclosure about a public business entity’s expenses and addresses requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, G&A, and research and development). ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. These amendments provide guidance on accounting for induced conversions of convertible debt instruments. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for entities that have adopted the amendments in ASU 2020-06. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures. ASU 2025-01 amends the effective date of ASC 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In March 2025, the FASB issued ASU 2025-02, Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122. These amendments are effective immediately and must be applied on a fully retrospective basis to annual periods beginning after December 15, 2024. The Company does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. These amendments provide guidance on identifying the accounting acquirer in transactions involving a variable interest entity. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual periods. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In May 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer. These amendments clarify the accounting for share-based consideration payable to a customer under Topic 718 and Topic 606. The amendments are effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. These amendments provide a practical expedient and, if applicable, an accounting policy election to simplify the measurement of credit losses for certain receivables and contract assets. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in any interim or annual period in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flow.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other (Topic 350): Internal-Use Software. This standard simplifies the accounting for internal-use software costs and is effective for fiscal years beginning after December 15, 2026. The Company does not expect adoption of this standard to have a material impact on its financial position, results of operations, or cash flow.
In December 2025, FASB issued Accounting Standards Update ASU 2025-11, Interim Reporting (Topic 270): Improvements to Interim Disclosure Requirements. This standard clarifies disclosure requirements for interim financial statements and is effective for interim periods beginning after December 15, 2026. Early adoption is permitted. The Company is assessing the potential impact of this guidance on its consolidated financial statements.
In April 2026, the FASB issued ASU 2026-01, Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. This standard amends ASC Topic 505 (Equity) to standardize the initial measurement of paid-in-kind dividends on equity-classified preferred stock, requiring such dividends to be initially measured based on the paid-in-kind dividend rate stated in the preferred stock agreement. These amendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual reporting periods. Early adoption is permitted. The Company does not currently have equity-classified preferred stock with paid-in-kind dividend provisions and therefore does not expect the adoption of this guidance to have a material effect on its consolidated financial statements.
In May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations. For public business entities, these amendments are effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual reporting periods. Early adoption is permitted. The Company does not currently have material environmental credits or environmental credit obligations and does not expect the adoption of this guidance to have a material effect on its consolidated financial statements.
The Company has reviewed other recently issued accounting pronouncements and does not believe that the adoption of such pronouncements is expected to have a material effect on its consolidated financial statements or related disclosure.
| 6 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the Security and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate, to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of July 31, 2026.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the quarter ended July 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of the date of issuance, there were no pending or threatened legal proceedings that could reasonably be expected to have a material effect on the results of the Company’s operations. There are also no proceedings in which any of the Company’s directors, officers, or affiliates is an adverse party to the Company or has a material interest adverse to the Company’s interest.
None of our executive officers or directors has (i) been involved in any bankruptcy proceedings within the last five years, (ii) been convicted in or has pending any criminal proceedings (other than traffic violations and other minor offenses), (iii) been subject to any order, judgment, or decree enjoining, barring, suspending, or otherwise limiting involvement in any type of business, securities, or banking activity, or (iv) been found to have violated any Federal, state, or provincial securities or commodities law where such finding has not been reversed, suspended, or vacated.
ITEM 1A: RISK FACTORS
For information regarding the risk factors that could affect the Company’s business, results of operations, financial condition, and liquidity, see the information under Part I, Item 1A. “Risk Factors” in the Form 10-K which is accessible on the SEC’s website at www.sec.gov. Except as set forth below, there have been no material changes to the risk factors previously disclosed in the Form 10-K.
We have received a deficiency notice from Nasdaq relating to our failure to timely file periodic reports, and our failure to maintain compliance with Nasdaq listing requirements could result in delisting of our common stock.
On August 24, 2026, the Company received a letter from the Listing Qualifications Department of Nasdaq, indicating that the Company’s failure to file its Annual Report on Form 10-K for the period ended April 30, 2026 (the “Filing”), violated Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the “Rule”). The delay resulted from the fact that, following a significant acquisition, it had proven more time-consuming than anticipated to consolidate the financial results of the acquired business with the Company’s own. The Company had 60 calendar days to submit a plan to regain compliance and if the plan was accepted, Nasdaq could grant an exception of up to 180 calendar days from the Filing’s due date, or until January 25, 2027, to regain compliance. The Company made the Filing before the October 23, 2026, deadline for submission of the plan and expects to regain compliance with Nasdaq’s listing requirements as a result. There can be no assurance that the Company will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with the Rule, and maintain compliance with other Nasdaq listing requirements. If we fail to meet any of the continued listing requirements, Nasdaq could initiate delisting procedures, which could result in our common stock being delisted from the Nasdaq Capital Market. Delisting could adversely affect the liquidity and market price of our common stock, our ability to raise capital, and investor confidence in the Company.
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5: OTHER INFORMATION.
Insider trading arrangements and policies.
During
the quarter ended July 31, 2026, no director or officer of the Company
Item 6. Exhibits
| 8 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AIRWA INC. | ||
| Dated: September 22, 2026 | By: | /s/ Thomas Tarala |
| Thomas Tarala | ||
| Chief Executive Officer | ||
| Dated: September 22, 2026 | By: | /s/ Guibao Ji |
| Guibao Ji | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
| 9 |
Exhibit 31.1
CERTIFICATION
Pursuant to Rule 13a-14(a) and 15d-14(a)
Under the Securities Exchange Act of 1934, as Amended
I, Thomas Tarala, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of AiRWA Inc.;
2. To my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. To my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: September 22, 2026 | |
| /s/ Thomas Tarala | |
| Thomas Tarala | |
| President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
Pursuant to Rule 13a-14(a) and 15d-14(a)
Under the Securities Exchange Act of 1934, as Amended
I, Guibao Ji, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of AiRWA Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: September 22, 2026 | |
| /s/ Guibao Ji | |
| Guibao Ji | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report (the “Report”) of AiRWA Inc. (the “Company”) on Form 10-Q for the quarter ended July 31, 2026 as filed with the Securities and Exchange Commission on the date hereof, I, Thomas Tarala, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods referred to in the Report. |
Date: September 22, 2026
| By: | /s/ Thomas Tarala | |
| Thomas Tarala | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report (the “Report”) of AiRWA Inc. (the “Company”) on Form 10-Q for the quarter ended July 31, 2026 as filed with the Securities and Exchange Commission on the date hereof, I, Guibao Ji, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods referred to in the Report. |
Date: September 22, 2026
| By: | /s/ Guibao Ji | |
| Guibao Ji | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) |