Business Context and Reporting Period
KIDZ AI Inc. (formerly Classover Holdings, Inc.) is an online enrichment platform offering courses for children aged 4 to 17. The company operates as a single segment and is classified as a smaller reporting company and an emerging growth company. This Form 10-Q covers the quarterly period ended June 30, 2026.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Total Revenue | $481,831 | $1,001,029 |
| Gross Profit | $211,722 | $472,620 |
| Gross Margin | 44% | 47% |
| Net Loss | $(2,496,074) | $(6,683,608) |
| Operating Cash Flow | N/A | $(1,451,648) |
| Cash & Cash Equivalents | $5,878,823 | $5,878,823 |
| Restricted Cash (USDC) | $3,003,537 | $3,003,537 |
| Total Liabilities | $4,053,203 | $4,053,203 |
| Convertible Notes Payable | $667,413 | $667,413 |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 34% year-over-year for the quarter and 35% for the six-month period, attributed to reduced customer traffic and lower user engagement as management focused on public company compliance and AI strategic transformation.
- Net Loss Fluctuation: While the quarterly net loss improved (decreased) by 35% compared to the prior year, the six-month net loss increased by 61% to $6.7 million. This increase was driven primarily by a $3.4 million unrealized loss on crypto assets and a $1.3 million loss on the fair value of convertible debt.
- Expense Reduction: Operating expenses decreased 33% for the quarter and 8% for the six months, largely due to reduced professional fees post-SPAC merger and lower educator compensation aligned with revenue declines.
- Balance Sheet Shift: Convertible notes payable decreased significantly from $8.2 million at year-end 2025 to $667,413 at June 30, 2026, due to substantial conversions into equity. Conversely, stockholders' equity increased to $9.9 million.
Outlook, Risks, and Unusual Items
- Going Concern: The company reports substantial doubt about its ability to continue as a going concern due to recurring losses. However, management asserts that current working capital ($6.6 million surplus) and financing options (ATM agreement, ChEF Purchase Agreement) are sufficient for the next 12 months.
- Crypto Volatility: The company holds crypto assets (Solana, Worldcoin, Hyperliquid) measured at fair value. A significant portion of the net loss is driven by unrealized losses on these assets ($3.4 million for the six months).
- Financing Activities: The company has active financing facilities, including an At-the-Market (ATM) agreement and a $100 million Equity Purchase Facility (ChEF). In the quarter, $3.0 million was raised via private placement and ATM sales.
- Subsequent Events: In July 2026, the company entered a $44.6 million GPU Compute Services Agreement and sold an additional 8.2 million shares under the ATM agreement for $7.1 million in gross proceeds.
Investor Verification Checklist
- Crypto Asset Exposure: Verify the current fair value and liquidity of the remaining crypto assets and the impact of market volatility on future earnings.
- Revenue Sustainability: Assess the effectiveness of the strategic pivot to AI-driven education in reversing the 35% revenue decline.
- Debt Conversion Terms: Review the terms of the remaining convertible notes and the dilution impact of future conversions or equity issuances under the ChEF and ATM agreements.
- Going Concern Mitigation: Confirm the execution of the $44.6 million GPU contract and the ability to monetize the new AI compute infrastructure to support operations.