Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe-harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements regarding our strategy, market opportunity, planned geographic and vertical expansion, future commercial deployments, capital requirements, regulatory matters, and prospective listing. Words such as "may," "will," "expect," "intend," "plan," "believe," "anticipate," "estimate," "potential," and similar expressions identify forward-looking statements.

Forward-looking statements rest on management's current expectations and are subject to substantial risks, uncertainties, and changes in circumstances that are outside the Company's control. Actual results may differ materially. Important factors are described under the heading "Risk Factors" in our 2025 10-K, as updated by our subsequent filings with the SEC. Except as required by law, we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date of this report. The terms "we," "us," "our," "Techlott," and the "Company" refer to Techlott, Inc. and its consolidated subsidiaries unless context otherwise requires.

Overview

We are a Nevada corporation whose common stock is quoted on the OTC Markets, OTCQB tier, under the symbol "LOTT." We currently operate in two areas: (i) the development and commercial deployment of a blockchain-based technology platform supporting licensed lottery, draw-based gaming, and casino-style gaming operators, which is our principal area of focus following our acquisition of the Techlott IP on December 31, 2025; and (ii) legacy digital health products developed by our wholly-owned subsidiary SleepX for sleep apnea and snoring monitoring, with respect to which we continue to evaluate strategic options.

Our blockchain-based technology is designed to support core lottery operational processes - including ticket registration, draw execution, and prize distribution - through smart-contract logic, verifiable randomness, and audit-trail capabilities intended to support regulatory and operator-side compliance. As of the date of this report, our commercial operations consist of one active customer deployment, located in The Gambia. While our existing commercial deployment is in the lottery vertical, the Platform's underlying components, including smart-contract execution, verifiable randomness, and modular backend services, are configurable to support a broader range of regulated gaming applications, including casino-style table games and instant-win products, when offered by licensed gaming operators in jurisdictions where such activities are permitted. Casino and other gaming operations are typically subject to distinct licensing regimes and regulatory requirements that differ materially from those applicable to lottery operations, and operators offering such products would generally be required to hold the relevant gaming licenses and to comply with the regulatory requirements applicable in their respective jurisdictions.

While we intend to focus on the development and expansion of our lottery and gaming business, we continue to explore options with respect to our legacy digital health business.

Industry Background

The global lottery industry is large and well-established.

We believe the following industry trends are favorable to our business, although there can be no assurance that any of these trends will continue or that, if they do continue, we will be positioned to benefit from them:

	-	Digital channel growth. A growing share of lottery purchases is conducted through digital channels rather than traditional retail terminals, particularly in jurisdictions with established mobile payment infrastructure.
	-	Mobile payment adoption in emerging markets. The expansion of mobile-money and digital payment infrastructure in certain emerging markets, including parts of Africa and Asia, has reduced traditional barriers to participation in regulated lottery games.
	-	Regulatory focus on verifiable fairness. Lottery and gaming regulators in a number of jurisdictions have signaled increasing interest in technical mechanisms by which the fairness, integrity and auditability of lottery operations can be independently verified, rather than relying solely on regulator inspection of operator-controlled systems.

We believe these trends create demand for technology platforms that can support digital and mobile lottery and gaming participation while providing operators and regulators with mechanisms to independently verify fairness and integrity. The Platform is designed to address this demand. The extent to which we are able to capitalize on these trends, however, is subject to a range of factors outside our control, including regulatory developments, the pace of technology adoption among lottery and gaming operators, and competition from established and emerging providers.

Our Platform

We have developed and commercially deployed a technology platform designed to support lottery and gaming operations through a combination of smart contract infrastructure, verifiable randomness, and modular backend systems. The Platform is intended to support transparency, operational efficiency, and auditability for lottery and gaming operators and regulators. The Platform is designed to be deployed alongside, or as a replacement for, an operator's existing legacy systems, depending on operator requirements; we do not represent that the Platform alone ensures operational efficiency or regulatory compliance, both of which depend on the operator's broader system architecture, business processes, and regulatory environment.

As of the date of this report, our commercial operations are in an early stage, with one active customer deployment in The Gambia, Africa. We intend to generate our first revenue from this client during the third quarter of 2026. Our future growth depends on, among other things, securing additional customers, expanding into new markets, and continuing to develop the Platform.

Platform Architecture

The Platform combines on-chain components (smart contracts deployed on a public blockchain) with off-chain components (backend services, operator-facing administrative tools, and integration interfaces). The Platform is designed to support high-throughput environments and may be deployed across multiple jurisdictions, subject in each case to applicable regulatory requirements and operator-specific configuration.

At its core, the system utilizes blockchain-based smart contracts to automate certain operational processes, including ticket registration, draw execution, and prize distribution. These processes are designed to reduce reliance on manual intervention and improve consistency and traceability across lottery and gaming operations, although they remain subject to the limitations of the underlying blockchain network and the integrity of the smart-contract code, including the risk of undiscovered vulnerabilities.

The Platform integrates frontend interfaces, backend services, and blockchain components to deliver a unified system that can be adapted to various operator requirements and regulatory environments.

A central component of the Platform is its use of third-party verifiable randomness services for draw execution. The system integrates the Chainlink Verifiable Random Function ("Chainlink VRF") service to generate cryptographically verifiable random outcomes. We consume Chainlink VRF on a per-request basis using the LINK token; we do not have a written commercial agreement with Chainlink Labs governing access to the service. This approach is intended to:

	-	Reduce the risk of manipulation in the draw process.
	-	Provide a cryptographic record that outcomes are generated in accordance with predefined rules.
	-	Support regulatory and audit requirements related to fairness and integrity.

We are also developing additional mechanisms to further bind draw outcomes to predefined rule sets and improve traceability and auditability of each draw event. We rely on the continued availability of Chainlink VRF on terms acceptable to us; the unavailability or material modification of the Chainlink VRF service could require us to migrate to an alternative randomness service, which could be costly and disruptive.

Platform Capabilities

The Platform is designed as a modular system that supports a range of operational capabilities for lottery and gaming operators, including:

Lottery Management. End-to-end management of lottery lifecycle processes, including ticket sales, draw execution, and prize distribution, with system events recorded and traceable.

Operator Tools and Back Office. Administrative interfaces that provide near-real-time visibility into system activity, including transaction tracking, reporting, and operational controls. These tools are intended to support compliance, auditing, and operational oversight.

Affiliate and Promotional Systems. Integrated tools for campaign management, affiliate tracking, and promotional logic, enabling operators to manage user acquisition and engagement strategies, subject in each case to applicable regulatory restrictions on lottery and gaming marketing in the operator's jurisdiction.

Player Engagement Features. Optional engagement features, such as promotional campaigns and reward-based mechanisms, designed to support user retention and activity. Where required, these features are configurable to incorporate operator-specific responsible-gaming and self-exclusion controls; however, ultimate responsibility for compliance with responsible-gaming requirements rests with the operator.

Technology Roadmap

Our technology development roadmap includes:

	-	Expansion to additional blockchain networks to support scalability and flexibility.
	-	Enhancement of API-based services for third-party operators.
	-	Continued development of operator tools and user interfaces.
	-	Integration of additional payment methods and regional capabilities.
	-	Ongoing improvements to security, monitoring, and system performance.

These initiatives are intended to support our long-term strategy of providing a scalable and compliant technology platform for the global lottery and gaming industry. There can be no assurance that we will be able to execute on this roadmap on the timeline anticipated, or at all, particularly in light of our current capital position.

Our Products and Services

We provide technology products and services designed to support licensed lottery and gaming operators. We do not, and do not intend to, hold lottery, gaming or wagering licenses in our own name; we operate as a business-to-business technology supplier to licensed operators.

Platform Access and Deployment. We provide operators with access to the Platform, including system setup, configuration, and deployment tailored to the operator's requirements and regulatory environment.

Customization and Development. We offer development services to adapt the Platform to specific customer needs, including custom game configurations, integration with local payment systems, adaptation to regulatory requirements, and development of additional features unique to each operator.

Ongoing Support and Maintenance. We provide continuous technical support and system maintenance services, including Platform monitoring, issue resolution, system updates and improvements, and operational support for live environments.

Additional Platform Capabilities. The Platform includes modules for lottery lifecycle management, administrative and reporting tools, affiliate and promotional systems, and user engagement features. These capabilities may be configured differently depending on the customer's requirements.

Key Financial Terms and Metrics

The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.

Revenues

We have generated insignificant revenues to date.

Research and Development Expenses

Developing and enhancing our technology platform is an ongoing process that is subject to technical and commercial uncertainty. We expect to continue incurring substantial expenses as we develop the platform. We are unable, with any certainty, to estimate either the costs or the timelines in which those expenses will be incurred. Continued development of the platform will consume a large proportion of our current, as well as projected, resources.

Our research and development costs are comprised of:

● internal recurring costs, such as personnel-related costs (salaries, employee benefits, equity compensation and other costs), materials and supplies, facilities and maintenance costs attributable to research and development functions; and

● fees paid to external parties who provide us with contract services, such as software development, blockchain integration, smart contract auditing, security testing, and other technology-related services.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, employee benefits, equity compensation, and other personnel-related costs associated with executive, administrative and other support staff. Other significant general and administrative expenses include the costs associated with professional fees for accounting, auditing, insurance costs, consulting and legal services, along with facility and maintenance costs attributable to general and administrative functions.

Financial Expenses

Financial expenses consist primarily of the impact of exchange rate derived from re-measurement of monetary balance sheet items denominated in non-dollar currencies. Other financial expenses include bank fees and interest on long term loans. Financial income derives mainly from change in derivative value of convertible loans.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2026 to the Three and Six Months Ended June 30, 2025

The six months ended June 30, 2026 represent the first six months following the Company's strategic pivot to blockchain-based lottery technology and the consummation of the Techlott IP acquisition on December 31, 2025. The six months ended June 30, 2025 reflect the Company's operations as a digital health company.

(U.S. dollars in thousands)		For the three- months period ended June 30								For the Six- months period ended June 30
		2026				2025				2026			2025
		U.S. dollars
Revenues			-				1			-				4
Cost of sales			-				4			-				8
Gross profit (loss)			-				(3	)		-				(4	)
Research and development expenses			225				221			434				215
Sales and marketing			52				32			75				49
Amortization of intangible assets			534				-			1,067				-
General and administrative expenses			496				97			915				208
Operating loss			(1,307	)			(353	)		(2,491	)			(476	)
Financial income (expenses), net			(562	)			347			(946	)			304
Net profit (loss)			(1,869	)			(6	)		(3,437	)			(172	)

Revenue.

The Company did not generate any revenue for the three and six month periods ended June 30, 2026, compared to $1,000 and $4,000 for the three and six months ended June 30, 2025. Prior-period revenue was attributable to legacy sales of the SleepX AppySleep biofeedback wristband and related products.

Cost of Sales.

The Company did not incur cost of sales for the three and six months ended June 30, 2026, compared to $4,000 and $8,000 for the three and six months ended June 30, 2025. The change reflects the shift in revenue mix from physical product sales (SleepX) to platform-based services (Techlott IP).

Research and Development Expenses.

Research and development expenses for the three and six months ended June 30, 2026 were approximately $225,000 and $434,000, respectively, compared to $221,000 and $215,000 for the three and six months ended June 30, 2025, respectively. Research and Development expenses for the three and six months ended June 30, 2026 primarily consisted of approximately $90,000 and $164,000, respectively, in respect of development costs associated with the continued enhancement and deployment of the acquired lottery platform, as well as $135,000 and $270,000, respectively, of allocated compensation expenses relating to the Company's CTO (Ben Harris) and certain members of management that were previously attributed to research and development activities. Mr. Harris was appointed on December 31, 2025 and is entitled to monthly compensation of $30,000.

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

Amortization of Acquired Intangible Assets.

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

For the three and six months ended June 30, 2026, approximately $528,000 and $1,056,000 of the amortization expenses, respectively, related to the intellectual property acquired from Techlott on December 31, 2025, with the remaining amount attributable to the amortization of legacy SleepX patent assets.

Sales and Marketing Expenses.

Sales and marketing expenses for the three and six months ended June 30, 2026, respectively, were approximately $52,000 and $75,000, compared to $32,000 and $49,000 for the three and six months ended June 30, 2025, respectively.

General and Administrative Expenses.

General and administrative expenses for the three and six months ended June 30, 2026 were approximately $496,000 and $915,000, respectively, compared to $97,000 and $208,000 for the three and six months ended June 30, 2025, respectively. The increase reflects, among other items, the following developments that occurred after June 30, 2025 and are present for the first full quarterly period in the six months ended June 30, 2026: (i) monthly consulting fees payable to the senior management team appointed in August 2025 (Mr. Abadi, Mr. Grady, and Mr. Mekler) and December 2025 (Mr. Katzenelson and Mr. Ben Harris), aggregating approximately $140,000 per month in base fees (calculated as base monthly fees of $30,000 per month for each of Mr. Abadi, Mr. Grady, Mr. Katzenelson, Mr. Harris, and $10,000 per month for both Mr. Mekler and Mr. Boris Molchadsky) of which due to cashflow constrains only $7,000 per month are in fact paid out; (ii) share-based non-cash compensation expense relating to options granted to officers and consultants (including $78,000 and $81,000 of expense related to the vesting of 15,000,000 options held by Mr. Mekler on March 31 and June 30, 2026, respectively); and (iii) professional fees relating to the Company's public reporting program, the Techlott IP acquisition, and ongoing legal matters. None of the professional fees to our management team have in fact been paid due to cash flow constraints but such amounts are being accrued, except for a monthly fee of $7,000 (of the $10,000) being paid to the Company's CFO.

Change in Fair Value of Convertible Loans and Derivative Liabilities.

The change in fair value of convertible loans and derivative liabilities recorded for the three and six months ended June 30, 2026 were approximately $556,000 and $942,000, respectively, compared to income of $358,000 and $314,000 for the three and six months ended June 30, 2025. The current-period amount reflects the remeasurement of (i) the Plutus Note carried at fair value pursuant to the fair value option under ASC 815 and (ii) the anti-dilution derivative liabilities recognized in December 2025 in connection with the Techlott IP acquisition and the contractual anti-dilution rights of senior management. The prior-period amount reflected the remeasurement of convertible loan instruments outstanding during that period, none of which remain outstanding as of June 30, 2026 (other than the Plutus Note).

Financial Income (Expenses), Net.

Financial income (expenses), net for the three and six months ended June 30, 2026 were expenses of approximately $6,000 and $4,000, respectively, compared to expense of $11,000 and $10,000 for the three and six months ended June 30, 2025, respectively. Financial income was primarily attributable to interest earned on U.S. dollar-denominated deposits. Financial expenses primarily reflect interest accrual on outstanding debt obligations and the effect of remeasurement of monetary balances denominated in non-U.S. dollar currencies (principally the New Israeli Shekel).

Net Loss.

Net loss for the three and six months ended June 30, 2026 were approximately $(1,869,000) and $(3,437,000), compared to net loss of $(6,000) and $(172,000) for the three and six months ended June 30, 2025, respectively. The increase in net loss primarily reflects the items described above, in particular the post-acquisition amortization of the Techlott IP and the consulting fees payable to the senior management team appointed during the second half of 2025.

Liquidity and Capital Resources

We have funded our operations to date through a combination of equity issuances and convertible debt financings. As of June 30, 2026, we had cash and cash equivalents of approximately $495,000 and total liabilities of approximately $10,663,000, of which approximately $9,715,000 were current. As of December 31, 2025, we had cash and cash equivalents of $408,000.

Cash Flows.

The following table summarizes our cash flows for the periods presented:

(U.S. dollars in thousands)		Six Months Ended June 30,
		2026				2025
Net cash used in operating activities			(613	)			(213	)
Net cash used in investing activities			-				(1	)
Net cash provided by financing activities			698				124
Effect of exchange rate changes on cash			2				19
Net change in cash and cash equivalents			87				(71	)
Cash and cash equivalents, beginning of period			408				79
Cash and cash equivalents, end of period			495				8

We expect to continue to incur substantial expenses in connection with the development of our blockchain-based technology platform, the addition of new customers, geographic expansion, and our public-reporting compliance program. Based on management's current projections, we believe that our existing cash resources, taken together with the proceeds from the January 27, 2026 capital raise, will be sufficient to fund our operations through December 2026. We will require additional capital to fund our operations beyond such date and to execute our long-term strategic objectives. There is no assurance that we will be able to obtain additional capital on commercially reasonable terms, or at all. If we are unable to raise additional capital, we may be required to delay, scale back, or eliminate planned activities, which would have a material adverse effect on the Company.

Going Concern

For the six months ended June 30, 2026, and as of the date of this report, we assessed our financial condition and concluded that based on our current and projected cash resources and commitments, as well as other factors mentioned above, there is a substantial doubt about our ability to continue as a going concern. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We have an accumulated deficit of $28,892,000 and a working capital deficit of $9,119,000 on June 30, 2026, as well as negative operating cash flows. Included in this amount is a non-monetary liability of approximately $8,320,000 related to anti-dilution obligations reflecting the future potential issuance of shares to investors and controlling shareholders in connection with future equity issuances. Excluding this non-monetary component, the Company's working capital deficit would have been approximately $799,000.

The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2025 contained an explanatory paragraph stating that the Company's recurring losses and limited operations raise substantial doubt about its ability to continue as a going concern; the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have not been audited or reviewed by our independent registered public accounting firm. If the Company is unable to obtain adequate capital, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. No adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty.

We cannot be sure that future funding will be available to us on acceptable terms, or at all. Due to the often volatile nature of the financial markets, equity and debt financing may be difficult to obtain.

We may seek to raise any necessary additional capital through a combination of private or public equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights, future revenue streams, or technologies or to grant licenses on terms that may not be favorable to us. If we raise additional capital through private or public equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Anti-Dilution Rights.

As described in Note 4 to the unaudited condensed consolidated financial statements and in the 2025 10-K, certain of the Company's officers and Techlott hold contractual anti-dilution rights covering specified ownership percentages and aggregate values. Future issuances of common stock or convertible securities may trigger the issuance of additional shares to these holders, resulting in further dilution to the holders of common stock. The fair value of the related derivative liabilities, and changes in fair value, are reflected in our condensed consolidated balance sheet and condensed consolidated statement of operations, respectively.

Critical Accounting Estimates

Our critical accounting estimates are described in the 2025 10-K. Critical estimates affecting the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2026 include, in particular, (i) the fair value of the Plutus Note (Level 3 inputs); (ii) the fair value of derivative liabilities relating to anti-dilution rights (Level 3 inputs); (iii) the recoverability and useful life of the Techlott IP intangible asset; and (iv) the going-concern assessment. Changes in the assumptions or unobservable inputs underlying these estimates could have a material effect on our reported results.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined under Item 303(a)(4) of Regulation S-K.