KIDZ AI Inc.

Previous wording

References to the “Company,” “our,” “us” or “we” refer to Classover Holdings, Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes related thereto. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors .

Current wording

References to the “Company,” “our,” “us” or “we” refer to KIDZ AI Inc*. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes related thereto. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors .*

Previous wording

CLASSOVER’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Current wording

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Previous wording

We are an online enrichment class platform that offers over 40 courses taught by experienced, independent educators. Our program caters to children aged 4 to 17, providing personalized attention and a supportive learning environment. Unlike traditional classes, we give students the unique opportunity to explore their interest in-depth via interactive, live streaming courses with flexible time slots. Our total revenue decreased by $296,818, or 36%, from $816,016 for the three months ended March 31, 2025, to $519,198 for the three months ended March 31, 2026. Our gross profit decreased by $144,468, from $405,366 for the three months ended March 31, 2025, to $260,898 for the three months ended March 31, 2026. Our gross profit margin remained unchanged at 50% for the three months ended March 31, 2026 as compared to same period in 2025.

Current wording

We are an online enrichment class platform that offers over 20 courses taught by experienced, independent educators. Our program caters to children aged 4 to 17, providing personalized attention and a supportive learning environment. Unlike traditional classes, we give students the unique opportunity to explore their interest in-depth via interactive, live streaming courses with flexible time slots. Our total revenue decreased by $243,817, or 34%, from $725,648 for the three months ended June 30, 2025, to $481,831 for the three months ended June 30, 2026. Our gross profit decreased by $110,996, from $322,718 for the three months ended June 30, 2025, to $211,722 for the three months ended June 30, 2026. Our gross profit margin remained unchanged at 44% for the three months ended June 30, 2026 as compared to same period in 2025. Our total revenue decreased by $540,635, or 35% from $1,541,664 for the six months ended June 30, 2025, to $1,001,029 for the six months ended June 30, 2026. Our gross profit decreased by $255,464, from $728,084 for the six months ended June 30, 2025, to $472,620 for the six months ended June 30, 2026. And our gross profit margin remained unchanged at 47% for the six months ended June 30, 2026 as compared to same period in 2025.

Previous wording

Our business model is dependent upon our ability to grow and maintain a large user base, and it also requires that we grow and keep registered users and paid subscribers. As of March 31, 2026 and 2025, we have 73,881 and 65,614 registered users, respectively.

Current wording

Our business model is dependent upon our ability to grow and maintain a large user base, and it also requires that we grow and keep registered users and paid subscribers. As of June 30, 2026 and 2025, we have 74,997 and 68,374 registered users, respectively.

Previous wording

We believe that students are attracted to us largely because of the high quality and wide selection of enrichment and academic lessons offered by our high quality independent teacher contractors, and that continuing to attract and retain many high quality educator partners will be an important factor in attracting registered users and paid subscribers and increasing our revenue over time. We believe that our reach, reputation, and compensation packages provide an attractive value proposition for educators to partner with us to develop and distribute enrichment content. To be the platform of choice for educator partners, we continue to invest in increasing the size and engagement of our user base, improving recommendation and personalization features, and developing marketing capabilities that drive higher conversions. As of March 31, 2026 and 2025, we have 1,229 and 977 educator partners working with us, respectively.

Current wording

We believe that students are attracted to us largely because of the high quality and wide selection of enrichment and academic lessons offered by our high quality independent teacher contractors, and that continuing to attract and retain many high quality educator partners will be an important factor in attracting registered users and paid subscribers and increasing our revenue over time. We believe that our reach, reputation, and compensation packages provide an attractive value proposition for educators to partner with us to develop and distribute enrichment content. To be the platform of choice for educator partners, we continue to invest in increasing the size and engagement of our user base, improving recommendation and personalization features, and developing marketing capabilities that drive higher conversions. As of June 30, 2026 and 2025, we have 1,266 and 1,051 educator partners working with us, respectively.

Previous wording

We have three predominant sources of revenue: (i) time-based subscriptions, (ii) credit-based subscriptions to our online courses, and (iii) marketing consulting services. Customers are required to pay in advance to enroll for courses.

Current wording

We have three predominant sources of revenue: (i) time-based subscriptions, (ii) credit-based subscriptions to our online courses. Customers are required to pay in advance to enroll for courses.

Previous wording

Our total revenue decreased by $296,818, or 36% from $816,016 for the three months ended March 31, 2025, to $519,198 for the three months ended March 31, 2026. The decrease was primarily attributable to reduced customer traffic and lower user engagement on the Company’s platform during the quarter, which resulted in decreased demand for both credit-based course purchases and pass subscription products. During this period, management devoted greater operational focus and resources to public company compliance, treasury management, and strategic initiatives, including AI-related projects and the Company's broader AI-driven strategic transformation. Management believes these efforts may support the Company's long-term growth and the continued development of its AI-powered education initiatives.

Current wording

Our total revenue decreased by $243,817, or 34% from $725,648 for the three months ended June 30, 2025, to $481,831 for the three months ended June 30, 2026. The decrease was primarily attributable to reduced customer traffic and lower user engagement on the Company’s platform during the quarter, which resulted in decreased demand for both credit-based course purchases and pass subscription products. During this period, management devoted greater operational focus and resources to public company compliance, treasury management, and strategic initiatives, including AI-related projects and the Company's broader AI-driven strategic transformation. Management believes these efforts may support the Company's long-term growth and the continued development of its AI-powered education initiatives.

Previous wording

Cost of revenues decreased by $152,350, or 37%, from $410,650 for the three months ended March 31, 2025, to $258,300 for the three months ended March 31, 2026.

Current wording

Cost of revenues decreased by $132,821, or 33%, from $402,930 for the three months ended June 30, 2025, to $270,109 for the three months ended June 30, 2026.

Previous wording

The decrease in cost of revenues was primarily attributable to lower customer activity and reduced sales volume during the quarter, and was generally consistent with the decrease in revenues. Compensation expenses for independent educators and employees directly involved in providing services decreased by $131,088, or 35%, from $371,390 for the three months ended March 31, 2025, to $240,302 for the three months ended March 31, 2026.

Current wording

The decrease in cost of revenues was primarily attributable to lower customer activity and reduced sales volume during the quarter and was generally consistent with the decrease in revenues. Compensation expenses for independent educators and employees directly involved in providing services decreased by $124,559, or 33%, from $371,866 for the three months ended June 30, 2025, to $247,307 for the three months ended June 30, 2026.

Previous wording

The total gross profit margin increased remains at 50% for the three months ended March 31, 2026 and 2025.

Current wording

The total gross profit margin remains at 44% for the three months ended June 30, 2026 and 2025.

Previous wording

Other expense for the three months ended March 31, 2026, was $3,292,719 as compared to $1,300 for the three months ended March 31, 2025. The spike on other expense was primarily attributable to a decrease of $2,444,670 in fair value of crypto assets and an increase of $860,631 in fair value of convertible debt.

Current wording

Other expense for the three months ended June 30, 2026, was $1,347,768 as compared to $2,128,776 for the three months ended June 30, 2025. The decrease on other expense was primarily attributable to an increase of $1,607,699 in fair value of warrants and decrease of $473,500 on financing cost, in addition, the decrease was partially offset by a decrease of $1,127,371 and $203,841 in fair value of crypto assets and convertible debt respectively.

Previous wording

We had no income tax provision for the three months ended March 31, 2026 and 2025 as we made fully allowance on the deferred tax assets as we have determined that it is not more likely than not that the assets will be realized.

Current wording

We had no income tax provision for the three months ended June 30, 2026 as we made fully allowance on the deferred tax assets as we have determined that it is not more likely than not that the assets will be realized. Provision for income taxes for the three months ended June 30, 2025 was $38,360.

Previous wording

As a result of the combination of factors discussed above, our net loss increased to$4,187,534 for the three months ended March 31, 2026 from net loss of $297,207 for the three months ended March 31, 2025.

Current wording

As a result of the combination of factors discussed above, our net loss decreased to $2,496,074 for the three months ended June 30, 2026 from net loss of $3,866,169 for the three months ended June 30, 2025.

Previous wording

During the three months ended March 31, 2026, we incurred total operating expenses of $1,155,713, an increase of $454,440, or 65%, as compared to total operating expenses of $701,273 during the three months ended March 31, 2025.

Current wording

During the six months ended June 30, 2026, we incurred total operating expenses of $2,515,741, a decrease of $207,283, or 8%, as compared to total operating expenses of $2,723,024 during the six months ended June 30, 2025.

Previous wording

General and administrative expenses increased significantly by $522,617, or 91%, from $573,539 for the three months ended March 31, 2025, to $1,096,156 for the three months ended March 31, 2026. Our general and administrative expenses include compensation related to the administrative personnel, amortization and depreciation expenses, rent, and other general expenses. The increase in general and administrative expenses in the three months ended March 31, 2026 as compared to same period last year was primarily attributable to an increase of $188,960 stock compensation to management, an increase of $146,441 on employee compensation, an increase of $103,510 on amortization expenses in relation to our IP assets, and an increase of $81,976 professional expenses in relation to our merger. Specifically,

Current wording

General and administrative expenses decreased significantly by $98,611, or 4%, from $2,462,714 for the six months ended June 30, 2025, to $2,364,103 for the six months ended June 30, 2026. Our general and administrative expenses include compensation related to the administrative personnel, amortization and depreciation expenses, rent, and other general expenses. The decrease in general and administrative expenses in the six months ended June 30, 2026 as compared to same period last year was primarily attributable to an decrease of $586,344 other general expenses, and the decrease was partially offset by an increase of $230,187 stock compensation to management, an increase of $62,356 on employee compensation, an increase of $207,074 on amortization expenses in relation to our IP assets, specifically.

Previous wording

Our other general expenses increased by $81,976 from $171,328 for the three months ended March 31, 2025, to $253,305 for the three months ended March 31, 2026. The increase was primarily attributable to higher regulatory registration expenses and professional accounting fees as we completed a merger with Battery Future Acquisition Corp. (“BFAC”) and became a public listed company.

Current wording

Our other general expenses decreased by $586,344 from $1,329,956 for the six months ended June 30, 2025, to $743,612 for the six months ended June 30, 2026. The decrease was primarily attributable to higher regulatory registration expenses and professional accounting fees as we completed a merger with Battery Future Acquisition Corp. (“BFAC”) and became a public listed company.

Previous wording

In addition, employee stock compensation was $188,960 for the three months ended March 31, 2026. There was no employee stock compensation for the three months ended March 31, 2025.

Current wording

In addition, employee stock compensation increased by $230,187 from $137,277 for the six months ended June 30, 2025 to $367,464 for the six months ended June 30, 2026.

Previous wording

Amortization and depreciation expenses increased by $104,474 from $16,221 for the three months ended March 31, 2025, to $120,695 for the three months ended March 31, 2026. The increase was primarily attributable to the amortization of the intangible assets.

Current wording

Amortization and depreciation expenses increased by $207,074 from $32,442 for the six months ended June 30, 2025, to $239,516 for the six months ended June 30, 2026. The increase was primarily attributable to the amortization of the intangible assets.

Previous wording

As of March 31, 2026, we had cash and cash equivalents of $2,116,631. Cash consists primarily of cash on hand and bank deposits. The Company maintains cash deposits with financial institutions that may exceed federally insured limits at times. The following table shows the breakout between cash on hand and bank deposits:

Current wording

As of June 30, 2026, we had cash and cash equivalents of $5,878,823. Cash consists primarily of cash on hand and bank deposits. The Company also maintains U.S. dollar-denominated stablecoins ("USDC") that are classified as restricted cash in the accompanying consolidated balance sheets pursuant to the terms of the Company's financing arrangements. The Company maintains cash deposits with financial institutions that may exceed federally insured limits at times. The following table shows the breakout between cash on hand and bank deposits:

Previous wording

The accompanying consolidated financial statements have been prepared applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of March 31, 2026, the Company had cash of $2,116,631, a working capital deficit of $125,316 and a stockholders’ equity of $3,678,295. In addition, for the three months ended March 31, 2026, the Company had net loss of $4,187,534, and net cash used in operating activities of $602,380. These factors among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.

Current wording

The accompanying consolidated financial statements have been prepared applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of June 30, 2026, the Company had cash of $5,878,823, a working capital surplus of $6,624,850 and a stockholders’ equity of $9,949,689. The Company’s liquidity improved significantly as compared to 1 st quarter of 2026. However, for the three months ended June 30, 2026 and 2025, the Company had losses of $2,496,074 and $3,866,169, respectively, and for the six months ended June 30, 2026 and 2025, the Company had losses of $6,683,608 and $4,163,376, respectively. These factors among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.

Previous wording

The Company completed business combination with Battery Future Acquisition Corp (the “BFAC”) on April 3, 2025 and received $1,075,936 from BFAC’s trust account. Additionally, on May 30, 2025, the Company entered into a Securities Purchase Agreement with an investor and the Company may sell to the investor up to an aggregate of $500 million in newly issued senior secured convertible notes (the “Notes”), of which 80% could be used for treasury purposes and 20% could be general working capital purposes . On June 6, 2025, the Company consummated the initial closing of $11 million of Notes. As of the date of this financial statement, the Company has up to $489 million in convertible notes available to issue. Management of the Company has evaluated the mitigation plans and determined that the current working capital, cash position, and Notes available for future issuance are sufficient to support its continuous operations and to meet its payment obligations when liabilities fall due within the next twelve months from the date of issuance of these combined and consolidated financial statements. Accordingly, the Company’s combined and consolidated financial statements are prepared on going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.

Current wording

The Company completed business combination with Battery Future Acquisition Corp (the “BFAC”) on April 4, 2025 and received $1,075,936 from BFAC’s trust account. Additionally, on May 30, 2025, the Company entered into a Securities Purchase Agreement with an investor and the Company may sell to the investor up to an aggregate of $500 million in newly issued senior secured convertible notes (the “Notes”), of which 80% could be used for treasury purposes and 20% could be general working capital purposes. On June 6, 2025, the Company consummated the initial closing of $11 million of Notes. On May 28, 2026 the Company issued an additional Senior Secured Convertible Note with an aggregate principal amount of $600,000. On May 12, 2026, the Company received approval from the SEC on S-3, which allows the Company to sell up to $200,000,000 securities. The securities may be offered separately, together, or in series, and in amounts, at prices and on other terms to be determined at the time of each offering. On May 14, 2026, the Company entered into an At-the-Market Sales Agreement (the “ATM Agreement”) with Chardan Capital Markets LLC, as sales agent, pursuant to which the Company may offer and sell, from time to time through or to the Agent, up to an aggregate of $9,115,000 (amended and increased to $12,455,000 on June 5, 2026) of shares of its Class B common stock. On May 21, 2026, the Company entered into a ChEF Purchase Agreement (the “ChEF Agreement”) with Chardan Capital Markets LLC. Pursuant to the ChEF Agreement, subject to certain conditions precedent contained therein, the Company has the right, but not the obligation, to issue and sell to Chardan, and Chardan shall purchase from the Company, up to an aggregate of $100 million in newly issued shares of the Company’s Class B common stock. Subject to certain conditions and limitations, the Company will control the timing and amount of any sales of Shares to Chardan pursuant to the ChEF Agreement. Management of the Company has evaluated the mitigation plans and determined that the current working capital, cash position, and financing options available for future issuance are sufficient to support its continuous operations and to meet its payment obligations when liabilities fall due within the next twelve months from the date of issuance of these combined and consolidated financial statements. Accordingly, the Company’s combined and consolidated financial statements are prepared on going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2026, was primarily attributable to net loss of $4,187,534, decrease in deferred revenues of $115,361, and change in crypto staking rewards of $84,680. Cash outflow was partially offset by and change in fair value of warrants of $77,625, change in fair value of convertible debt of $860,631, change in fair value of crypto assets of $2,444,670, non-cash amortization of operating lease right-of-use assets $ 78,061, employee stock compensation of $188,960, and depreciation and amortization of $120,695.

Current wording

Net cash used in operating activities for the six months ended June 30, 2026, was primarily attributable to net loss of $6,683,608, decrease in deferred revenues of $170,791, and change in crypto staking rewards of $91,998. Cash outflow was primarily offset by change in fair value of convertible debt of $1,325,102, change in fair value of crypto assets of $3,389,376, non-cash amortization of operating lease right-of-use assets $156,128, employee stock compensation of $367,463, and depreciation and amortization of $242,451.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2025, was primarily attributable to net loss of $297,207 and decrease in operating lease liabilities of $77,063 as we made payment under the lease contract and decrease in deferred revenues of $104,044. Cash outflow was partially offset by the non-cash amortization of operating lease right-of-use assets $75,221, depreciation and amortization expenses of $16,221, increase in due to related parties of $48,365, and increase in accrued liabilities and other payables of $37,171.

Current wording

Net cash used in operating activities for the six months ended June 30, 2025, was primarily attributable to net loss of $4,163,376, decrease in operating lease liabilities of $154,885 as we made payment under the lease contract, decrease in deferred revenues of $240,112, and change in fair value of crypto assets of $182,665. Cash outflow was partially offset by the change in fair value of warrants of $1,540,424, increase in accounts payable of $1,513,002, change in fair value of convertible debt of $260,630, non-cash amortization of operating lease right-of-use assets $151,201, employee stock compensation of $118,444, and increase in accrued liabilities and other payables of $374,008.

Previous wording

Net cash used in investing activities was $32,583 for the three months ended March 31, 2026. The increase was primarily due to our purchases of property and equipment.

Current wording

Net cash used in investing activities was $2,300,000 for the six months ended June 30, 2025. The decrease was primarily due to our purchases of crypto assets and intangible assets.

Previous wording

Net cash provided by financing activities was $0 for the three months ended March 31, 2026.

Current wording

Net cash provided by financing activities was $3,629,387 for the six months ended June 30, 2026, was primarily attributable to the issuance of promissory notes of $600,000, capital contribution from private placement of $3,032,905,