AIAI Holdings Corp: Form 10-Q for the period ended Jun 30, 2026

Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide the reader of the financial statements with a narrative from the perspective of management on the financial condition, results of operations, liquidity and certain other factors that may affect the Company's operating results. MD&A should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes thereto included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” in this quarterly report. See “Forward-Looking Statements”.

The following information updates the discussion of the Company's financial condition provided in our registration statement on Form S-1 declared effective on May 6, 2026, and the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026 (“Q1 10-Q”), and analyzes the changes in the results of operations between the periods of May 7, 2026 through June 30, 2026 (the “Successor Period”), April 1, 2026 through May 6, 2026 (“Current Predecessor Quarter”), January 1, 2026 through May 6, 2026 (“Current Predecessor YTD Period”), the three months ended June 30, 2025 (“Prior Predecessor Quarter”) and the six months ended June 30, 2025 (“Prior Predecessor YTD Period”).

Overview

AIAI Holdings Corporation was formed as a Delaware corporation on July 19, 2024 for the purpose of completing a direct listing of the Company’s common equity on a U.S. stock exchange (“Direct Listing”) and creating an AI-powered ecosystem through acquiring, integrating, and scaling companies that have high potential for increased operating results through the application of AI. On May 6, 2026 (the “Closing Date”), AIAI Holdings Corporation completed the acquisitions of C.C. Carlton Industries, Ltd. (“CCCI”), Constellation Network, Inc. (“Constellation”), gTC MediGuide LP (“MediGuide”), Vanguard Health Solutions, LLC (“Vanguard”), AI Research Corporation (“AIR”), and Bond Street Limited, LLC (“Bond Street”) (each referred to individually as a “Portfolio Company” and collectively as the “Portfolio Companies”). The acquisitions of these companies are collectively referred to as “the Acquisitions” herein. AIAI Holdings Corporation, together with its consolidated subsidiaries, which initially consist solely of the Portfolio Companies and subsidiaries thereof, is referred to herein as the “Company” and “AIAI.” Prior to the Closing Date, AIAI had no substantive business operations other than incurring expenses incidental to identification and negotiation of merger agreements with the Portfolio Companies, negotiation of the AI License Agreement (as defined below), and preparation for the Direct Listing of AIAI Class A common stock on the Nasdaq Global Market which was completed on May 14, 2026. Following the Acquisitions, AIAI conducts substantially all of its operations through the following wholly owned Portfolio Companies:

• CCCI: CCCI specializes in providing full-scope civil construction, project management, and estimating services. CCCI has served Central Texas for more than 30 years and possesses extensive experience in the development of single-family subdivisions, multi-family subdivisions, apartment complexes, commercial sites, hospitals, medical office buildings, industrial sites, educational facilities, and municipal projects.
• Constellation: Constellation is a digital evidence ecosystem that provides products and services designed to create a trust-based exchange for a communications bridge. Constellation operates multiple revenue streams across hardware, software, and enterprise divisions and is advancing its mission to provide provable guarantees on the world's data through the application of its blockchain protocol to the United States military's digital infrastructure.
• MediGuide: MediGuide provides a comprehensive suite of healthcare services, including telehealth solutions, a Medical Second Opinion (“MSO”) platform that connects patients to healthcare providers and specialists, preventative health programs focused on proactive care, and Medical Treatment Abroad (“MTA”) services.
• AIR: AIR uniquely focuses on foundational and advanced mathematical and scientific research intended to overcome challenges that have historically limited artificial intelligence development activities supporting applications envisioned for U.S. defense, national security, and a multitude of commercial advanced technology applications.
• Vanguard: Vanguard and its subsidiaries collaborate with physicians and healthcare providers, offering consulting services that improve patient experiences, streamline operations, and enhance healthcare delivery. Vanguard's principal services include case management services for accident victims and advisory services to clinics.
• Bond Street: Bond Street markets scanners, software, copiers, printers, and subscription-based document solution services.

Effective as of the Closing Date the Company entered into a license agreement (the “AI License Agreement”) with Messier 42, LLC (“M42”), an affiliated entity under common control, Under the AI License Agreement, M42 granted the Company a license for the exclusive use of M42 AI Technology, consisting of data sources, object code, and APIs, along with industry specific template applications which the Company will use to implement AI-enabled solutions within the Portfolio Companies. Pursuant to the License Agreement, we obtained a right to perpetual use of the licensed technology.

AIAI operates through a unique business model that applies its licensed AI technology to strategically acquired portfolio companies. Our business generates revenue through products and services distributed by our subsidiary Portfolio Companies, which are the operating companies we have acquired and continue enhancing through AI implementation.

CCCI has been determined to be our accounting predecessor (the “Predecessor”), and accordingly, the results of operations discussed below reflect the operating results of CCCI for financial reporting periods prior to the Closing Date, with our results of operations following the Closing Date reflecting of the consolidated operations of AIAI.

Our anticipated accelerated timeline of four to six months for the implementation of our AI technology, compared to our perceived industry standard of 24-36 months, represents a significant competitive advantage and drives our financial performance. This accelerated time frame for the implementation of our AI should enable faster revenue recognition from technology services while allowing more rapid realization of operational improvements in acquired companies. There are several reasons why we believe our implementation process will occur more rapidly than traditional software implementations:

(1) Truncated Administrative Process: Traditional software companies are typically subject to lengthy sales processes involving competitive bidding and procurement, which are often weighed against criteria generated by a third-party consultant, typically beginning after a 180-day study and subsequent report on the client’s requirements.

(2) Standardizing Backend Foundational IT: Traditional software businesses must develop detailed statements of work, project plans, and system mappings, tailored to each client’s business and requirements. This process can often take several months just to begin the integration and deployment. Our approach is different because we are not selling software. We perform upfront analysis and develop standardized backend and middleware specifications that become a single technology foundation as a requirement during any subsidiary acquisition diligence process. We thereby expect to be able to generally complete this work concurrently with an approximately 12-week diligence period so we can accelerate post-acquisition integration and operational readiness. In addition to deploying our software platform, we supplement the implementation with our experienced industry-agnostic services, support, and management teams to enable consistent and uniform execution across our portfolio companies.

(3) Industry Agnostic AI Platform: A significant reason we believe we will have an accelerated platform is technical in nature. The AI technology we are licensing from M42 is supported by over one billion lines of code and configuration, industry specific and non-industry specific APIs and extremely advanced mathematics and science. As a result, our platform does not require traditional data cleansing, data extraction, data transformation, and data loading “extract transform load” (ETL) processes. We can leave the data in its data silo rather than “normalizing” disparate data types, and going through a centralized ETL process, we can “loosely associate” unstructured or structured disparate data silos and analyze them in place. This approach enables us to process very large data volumes and deliver insights significantly faster than traditional solutions, which often remain constrained by extended periods of data cleansing and normalization efforts. This capability allows us to access portfolio companies’ data and business applications and deliver AI-enabled insights within days or weeks while our competitors continue to spend extended periods manually cleansing, normalizing, integrating and extracting data.

Revenue Model

Construction Services

Construction services represent our largest revenue stream with services performed under fixed-price contracts in the civil construction sector with a focus on construction of site utilities, roads, bridges, and concrete structures in Texas. We provide full-scope civil construction, project management, and estimating services, including but not limited to wet and dry utility installation, paving and concrete structures, site clearing and grading, lift and pump stations, and treatment plants. Additionally, we offer landscaping services including irrigation, revegetation, aquatic plantings, tree replacement, and decorative wall construction. This diverse expertise is essential for executing a variety of projects, including single-family subdivisions, multi-family subdivisions, commercial sites, hospitals, medical office buildings, industrial sites, schools, and municipal projects with efficiency and scalability.

We recognize construction revenue over time as work is completed, typically using an input measure such as costs incurred to date relative to total estimated costs at completion to measure progress. Costs that do not depict progress toward satisfaction of the performance obligation are included in contract costs but may not result in revenue being recognized, such as significant re-work.

Healthcare Services

Healthcare revenue is generated from subscription services which include healthcare navigation, telemedicine, medical second-opinion services, and preventive health programs. In addition, we provide case management services for accident victims and associated healthcare advisory services to medical clinics. Healthcare customers include both private-sector and public-sector participants, including insurance companies, corporate clients, healthcare providers, patients, and government healthcare programs. Healthcare services contracts generally contain a single performance obligation recognized over time as the Company satisfies its contractual performance obligations under customer contracts.

Technology Products and Services

Technology revenue is generated from blockchain-based enterprise data and technology solutions and associated equipment sales, digital asset rewards earned by operating validator nodes and participating in blockchain staking activities, and blockchain network licensing arrangements. Additionally, technology revenues include marketing and remarketing of printer, scanner, and copier products and subscription-based document solutions. Technology customers include both public-sector and private-sector customers, including government-related applications supporting defense and national security initiatives, as well as business-to-business and business-to-consumer commercial customers. Revenue for technology services is generally recognized over time as the Company satisfies its contractual performance obligations under customer contracts. Revenue associated with sales of hardware and supplies is recognized at a point in time which control of products passes to the customer.

Trends and Key Factors Affecting Our Performance

We believe that future performance will be influenced by a number of factors, including those described in the section titled “Risk Factors” in AIAI's Registration Statement as well as the factors described below. While each of these factors presents significant opportunities for the Company, these factors also pose challenges that we must successfully address in order to sustain the growth of the Company’s business and enhance results of operations.

Implementation Efficiency

Our financial performance depends significantly on maintaining our accelerated implementation timeline for AI-enabled solutions. Any extension of this timeline could increase implementation costs, delay the realization of expected cost savings, and reduce revenue growth at our portfolio companies expected to be achieved through utilization of our licensed AI, and potentially impact customer satisfaction at our portfolio companies. Our ability to maintain AI implementation efficiency while scaling operations across multiple sectors and geographies directly impacts our profitability and growth potential.

AIAI is a diversified holding company operating through subsidiaries across the construction, healthcare and technology sectors. On May 6, 2026, concurrently with the effectiveness of AIAI's Registration Statement, we completed the Acquisitions and began operating as an integrated platform of businesses. Our strategy is to enhance the operating performance our subsidiaries through the implementation of licensed artificial intelligence technology, operational improvements, and strategic acquisitions that complement and expand its platform.

Integration of the Acquisitions

The Acquisitions resulted in a new reporting entity and a new basis of accounting. CCCI was determined to be the accounting predecessor and, accordingly, periods prior to May 7, 2026 represent the historical operations of CCCI, while periods beginning May 7, 2026 represent our consolidated operations. Because the Acquisitions resulted in a new reporting entity and the application of acquisition accounting, the Successor and Predecessor periods are not directly comparable and should be evaluated in that context.

Our results for the quarter ended June 30, 2026 were significantly influenced by the acquisition and consolidation of the Portfolio Companies beginning May 7, 2026. As a result, the Successor period includes operations of all Portfolio Companies across the construction, healthcare and technology sectors, while the Predecessor period reflects only the historical operations of CCCI. Results were also affected by transaction-related costs associated with the Acquisitions and Direct Listing, incremental public company costs, share-based compensation expense, and amortization of acquired intangible assets and other purchase accounting adjustments recorded in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. In addition, the quarter ended June 30, 2026 reflects only a partial period of consolidated operations and does not yet reflect the full impact of anticipated integration initiatives and operational synergies.

The Acquisitions also significantly changed our capital structure and liquidity profile. In connection with the acquisitions, we assumed indebtedness of the acquired businesses and issued equity interests of AIAI in exchange for all outstanding equity of the Portfolio Companies.

Weather Natural Disasters and Emergencies

Our performance in a given period can be impacted by adverse weather conditions, severe weather events, natural disasters or other emergencies, which include, among other things, heavy or prolonged snowfall, icing, or rainfall, hurricanes, tropical storms, tornadoes, floods, extreme temperatures, wildfires, and pandemics. These conditions and events can negatively impact our financial results due to, among other things, the termination, deferral or delay of projects, reduced productivity and exposure to significant liabilities. See “Risk Factors.”

Seasonality

Our construction operations are typically affected more by weather conditions during the first and fourth quarters of the fiscal year, because cold, snowy or wet conditions can create challenging working environments that are more costly for our customers or cause delays on projects. This may alter the Company’s construction schedules and can create variability in revenues, profitability and the required number of employees. Second and third quarter revenues are typically the highest of the year, as a greater number of projects are underway and operating conditions, including weather, are normally more accommodating. See “Risk Factors.”

Ability to Obtain New Construction Projects

We bid on projects that we believe offer an opportunity to meet the company’s profitability objectives or that offer the opportunity to enter promising new markets. The potential customers often conduct rigorous competitive processes for awarding contracts. We will potentially face strong competition and pricing pressures for any additional contract awards from other government agencies, and may be required to qualify or continue to qualify under various multiple award task order contract criteria. See “Risk Factors.”

Ability to Obtain Approval of Change Orders and Successfully Pursue Claims

We are subject to variation in scope and cost of construction projects from the Company’s original projections. In certain circumstances, we seek to collect or assert claims against customers, engineers, consultants, subcontractors or others involved in a project for additional compensation exceeding the contract price or for amounts not included in the original contract scope. Our experience has often been that customers have been willing to negotiate equitable adjustments to the contract compensation or completion time provisions if unexpected circumstances arise. However, this process may result in disputes over whether the work performed is beyond the scope of the work included in the original project plans and specifications or, if the customer agrees that the work performed qualifies as extra work, the price that the customer is willing to pay for the extra work. See “Risk Factors.”

Ability to Estimate and Control Construction Costs

Construction costs primarily consist of payroll, equipment, materials, subcontractors, and other project related expenses. Construction contracts are typically fixed price, and if we are unable to accurately estimate the overall risks, requirements or costs when we bid on or negotiate a contract that is ultimately awarded, the Company may achieve a lower than anticipated profit or incur a loss on the contract due to higher than estimated costs. Additionally, our costs and profitability can be adversely affected by factors such as inflation, tariffs, supply chain and other operational inefficiencies. Our future growth also depends on the Company’s ability to accurately estimate and control construction costs, a major part of which consists of implementing our licensed AI technology in contract estimating and operational processes going forward. Also, our labor and training expenses may increase as a result of a shortage in the supply of skilled personnel. We strive to minimize exposure to labor and material price increases in the company’s project bids and the manner in which we execute work. In fixed price contracts, we attempt to insulate the Company from the unfavorable effects of inflation, when possible, by incorporating escalating wage and price assumptions into construction cost estimates, by obtaining firm fixed price quotes from major subcontractors and material suppliers, by securing purchase commitments for materials early in the project schedule and by including contingency for these risks in the bid price. Construction and other materials used in construction activities are generally available locally from multiple sources. See “Risk Factors.”

An Inability to Obtain Bonding Could Have a Negative Impact on CCCI’s Operations and Results

We are often required to provide surety bonds securing the Company’s performance under construction contracts with customers. Our ability to obtain surety bonds primarily depends on company’s working capital, past performance, capitalization, credit rating, management expertise, overall capacity of the surety market and other factors. If we are unable to obtain reasonably priced surety bonds in the future, it could significantly affect our ability to be awarded new contracts and could, consequently, have a material adverse effect on our business, results of operations and financial condition. See “Risk Factors.”

Growth in New Products and Services

We believe that we have a sizable opportunity to grow our business through the introduction of new products and services utilizing the multi-tenant blockchain integration platform acquired on connection with the Acquisitions. Future growth depends on our ability to successfully implement an organic growth strategy, a major part of which consists of scaling acquired SaaS and digital evidence technology going forward and growing SaaS and data verification fee revenue. We anticipate that competition across its products and services will intensify as both existing and new competitors introduce innovative solutions or enhance their offerings for clients. As the industry matures, pricing pressures may arise over time. We are committed to continuous innovation to develop new blockchain solutions while delivering a superior user experience and strengthening the company’s reputation as a trusted partner to mitigate the impact of these competitive challenges. See “Risk Factors.”

Price and Volatility of Digital Assets

Our financial results can be impacted by the highly volatile nature of digital assets (such as Constellation “DAG” and Lattice Token “LTX”). Changing consumer confidence and resultant fluctuations in the price of various digital assets may cause uncertainty in the market and could negatively impact trading volumes of digital assets, which would negatively impact our business and operating results. See “Risk Factors.”

Liquidity Constraints and Trading Limitations

Unlike traditional financial instruments, crypto currencies are not universally accepted as legal tender and may have limited liquidity in certain markets. Our ability to convert digital asset holdings into fiat currency or other digital assets may be constrained by market conditions, exchange trading volumes, or operational restrictions. A lack of liquidity could impact our ability to monetize the acquired digital assets efficiently. See “Risk Factors.”

Regulation in U.S. and International Markets

Financial prospects and continued growth of our technology solutions depend in part on the Company’s ability to continue to operate in a manner compliant with regulations. We operate in an industry characterized by rapid technological change, evolving business models, and a complex regulatory landscape. As the AI and digital evidence industry matures, we may experience fluctuations in our operations as a result of change in laws and regulations that are applicable to the Company’s business. See “Risk Factors.”

Key Performance Indicators and Non-GAAP Measures

We regularly review the following key business metrics to evaluate the business, measure performance, identify trends affecting our business, formulate financial projections and make strategic decisions. In assessing the performance of our business, net income (loss) is the primary measure that management uses to assess performance. In addition to net income (loss), we also consider a variety of other key performance measures, including non-GAAP measures. The key performance measures used for determining how our business is performing are total revenue, income (loss) from operations, net income (loss), gross profit, and Adjusted EBITDA, which is a non-GAAP measure.

We believe that these key financial measures provide useful information to users of the financial statements in understanding and evaluating AIAI’s results of operations in the same manner as AIAI’s management team. The presentation of these key performance measures, including Adjusted EBITDA, which is a non-GAAP financial measure, is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. See “Non-GAAP Measures” below.

The following table sets forth AIAI's key performance measures for the period indicated below:

(in thousands)

50

(in thousands)

Adjusted EBITDA

Adjusted EBITDA is calculated as net income (loss) adjusted to exclude interest income (expense), net income tax benefit, and depreciation and amortization, further adjusted to exclude state franchise tax expense, share-based compensation, non-core costs related to strategic initiatives, and certain other non-recurring charges. AIAI uses Adjusted EBITDA to supplement U.S. GAAP measures of performance in the evaluation of the effectiveness of AIAI’s business strategies, to make budgeting decisions and to compare AIAI’s performance against that of other peer companies using similar measures. See “Non-GAAP Measures” below for a reconciliation of Adjusted EBITDA to net income (loss).

Components of Results of Operations

Services revenue

The substantial majority of our services revenue is generated by providing comprehensive civil construction, project management, and estimating services in Texas. Construction contracts are typically fixed-price, and we generally recognize related revenue over time as performance obligations are satisfied and control over promised goods or services are transferred to customers, in accordance with Accounting Standard Codification (“ASC”) Topic 606. This method assesses the extent of progress based on the ratio of costs incurred to date against the total estimated costs at completion of the performance obligation. Estimating total costs to complete requires us to make informed estimates regarding material costs and availability, labor costs and productivity, as well as overhead expenses. Services revenue derived from our technology offerings include blockchain-based enterprise data and technology solutions and digital asset rewards earned by operating validator nodes and participating in blockchain staking activities, and blockchain network licensing arrangements. Services revenue also includes revenue earned in connection with healthcare subscription services which include healthcare navigation, telemedicine, medical second-opinion services, and preventive health programs. In addition, we provide case management services for accident victims and associated healthcare advisory services to medical clinics.

Products revenue

Product revenues are derived from hardware sold in connection with our blockchain-based enterprise data and technology solutions, as well as marketing and remarketing of printer, scanner, and copier products.

Services costs of sales

Services costs of sales principally consists of all direct and indirect costs on construction contracts, including raw materials, labor, equipment costs, and subcontractor costs. The cost of significant uninstalled materials, re-work, or scrap is generally excluded from the cost-to-cost measure of progress on construction contracts as it is not proportionate to the entity’s progress in satisfying the performance obligation. Cost of sales additionally includes all direct and indirect costs of delivering our healthcare and technology services, principally including costs of labor and associated technology infrastructure and services. We expect services costs of sales to increase in absolute dollars in future periods as the business grows. As additional cost-optimization initiatives are executed, we expect that cost of sales as a percentage of revenue to decrease over time.

Products cost of sales

Product costs of sales includes costs of hardware sold in connection with our blockchain-based enterprise data and technology solutions, as well as costs o printer, scanner, and copier products sold.

Acquisition and related costs

Acquisition and related costs include legal and other professional fees and other transaction costs associated with completion of our initial direct listing of common stock and resale registration statement for common stock issued in connection with acquisition of our Portfolio Companies, legal and other professional fees and other transaction costs completed and contemplated business combinations and asset acquisitions, costs associated with integrating acquired businesses, including costs incurred to eliminate workforce redundancies, and other charges incurred as a direct result of acquisition efforts. These other charges include changes to the fair value of contingent purchase consideration, acquired assets, and assumed liabilities subsequent to the completion of the purchase price allocation, and purchase consideration that is deemed to be compensatory in nature.

General and administrative expenses

General and administrative expenses primarily consist of costs for estimating and bidding, business development, and costs related to operational offices such as operating leases that are not allocated to direct contract costs and expenses related to general corporate functions. General and administrative expenses are expensed as incurred. We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance with public company reporting obligations, and increased costs for investor relations and professional services. We expects general and administrative expenses to increase in future periods and to vary from period to period as a percentage of revenue.

Depreciation and amortization

Depreciation includes the depreciation of fixed assets, including construction equipment, transportation equipment, furniture and fixtures, office equipment, information technology infrastructure, and leasehold improvements. Amortization includes amortization of right of use assets under finance leases of equipment as well as amortization definite-lived intangible assets recognized in connection with the Acquisitions, as well as the license to M42 AI technology Depreciation and amortization expense is included in the statements of operations within cost of sales and general and administrative expenses.

State franchise tax expense

State franchise tax expenses primarily consist of the State of Texas franchise tax.Our predecessor’s primary operations were classified as a partnership for federal income tax purposes reportable by its members and were not subject to federal and certain state income taxes prior to the Acquisitions. Accordingly, our predecessor made no provision for federal and state income taxes in its financial statements except for certain state franchise, excise, and margin tax payable by the partnership entity. Following the completion of the Acquisitions, our predecessor and the remaining Portfolio Companies are subject to taxation as a corporation.

Interest (income) expense, net

Interest (income) expense, net primarily consists of the interest incurred on lines of credit, finance leases, notes payable, and amortization of debt issuance costs, such as debt origination and commitment fees. These interest costs are partially offset by interest income earned on cash deposits.

Results of Operations

Our results of operations as reported in our unaudited condensed consolidated financial statements for the Successor Period, the Current Predecessor Quarter and the Current Predecessor YTD Period are prepared in accordance with GAAP. Although GAAP requires that we report on these periods separately, management views our operating results for the three and six months ended June 30, 2026 by combining the Successor Period with the Current Predecessor Quarter and the Current Predecessor YTD Period, respectively, because we believe such presentation provides the most meaningful comparison of our results to prior periods and is useful in understanding operational trends. We do not believe reviewing these periods in isolation would be useful in identifying trends in, or reaching conclusions regarding, our overall operating performance. Accordingly, in addition to presenting our results of operations as reported in accordance with GAAP, the tables and discussion below also present combined results for the three and six months ended June 30, 2026.

The tables below present the combined results for the three months ended June 30, 2026, which are the sum of the reported amounts for the Current Predecessor Quarter (April 1, 2026 through May 6, 2026) and the Successor Period (May 7, 2026 through June 30, 2026) (“Current Combined Quarter”), and the combined results for the six months ended June 30, 2026 represent the sum of the reported amounts for the Current Predecessor YTD Period (January 1, 2026 through May 6, 2026) and the Successor Period (“Current Combined YTD Period”). Other than the effects of reporting as a consolidated entity following the Acquisitions, there were no changes in accounting policies between the Predecessor and Successor periods, and any material impacts resulting from acquisition accounting are addressed in the discussion below. These combined results are not prepared in accordance with GAAP and have not been prepared as pro forma results under Article 11 of Regulation S-X. The combined results do not reflect the actual results we would have achieved absent the Acquisitions and may not be indicative of future results.

The following table summarizes our results of operations for the Successor Period, Current Predecessor Quarter and Current Combined Quarter, as compared to the Prior Predecessor Quarter:

(in thousands)

53

The following table summarizes our results of operations for the Successor Period, Current Predecessor YTD Period and Current Combined YTD Period, as compared to the Prior Predecessor YTD Period:

(in thousands)

Products revenue

Products revenue increased by $0.5 million, or 100% for both the Current Combined Quarter and Current Combined YTD Period compared to the corresponding Prior Predecessor periods, driven by the inclusion of products revenue from Constellation and Bond Street acquired in May 2026. The predecessor business did not generate products revenue.

Services revenue

Services revenue decreased by $7.4 million, or 11% for the Current Combined Quarter compared to the Prior Predecessor Quarter, primarily due to an approximately $10.0 million decline in Predecessor revenue. The decline in Predecessor revenue was primarily attributable to delays in awarded project launches, a reduction in the number of early-stage projects under construction during the quarter, and a shift in project mix toward publicly bid utility projects, which generally generate revenue at a slower pace, and lower contract values and margins than comparable commercial projects. Weather-related disruptions continued to adversely impact project activity and productivity during the three months ended June 30, 2026. New project awards remained strong during the three months ended June 30, 2026, however, project starts were delayed on new projects until late in the quarter due to market uncertainty and cost volatility. The decrease in Predecessor services revenue was partially offset by $2.6 million of services revenue contributed by other acquired Portfolio Companies.

Services revenue decreased by $10.9 million, or 9% for the Current Combined YTD Period compared to the Prior Predecessor YTD Period. The decrease was attributable to an approximately $13.5 million decline in Predecessor revenue driven by similar factors, including delayed project starts, unfavorable weather conditions, and project mix, partially offset by $2.6 million of services revenue contributed by other acquired Portfolio Companies.

Products cost of sales

Products cost of sales increased by $0.4 million, or 100% for both the Current Combined Quarter and Current Combined YTD Period compared to the corresponding Prior Predecessor periods, driven by the inclusion of products cost of sales from Portfolio Companies acquired in May 2026. The predecessor business did not generate products cost of sales.

Services cost of sales

Cost of sales decreased by $5.3 million, or 9%, to $53.0 million during the Current Combined Quarter compared to $58.3 million during the Prior Predecessor Quarter. As a percentage of revenue, cost of sales increased to 91% during the Current Combined Quarter from 89% during the Prior Predecessor Quarter. The decrease in cost of sales was primarily driven by a $6.2 million decrease in Predecessor cost of sales, resulting in an increase in Predecessor cost of as a percentage of revenue of approximately 5%%. The increase in Predecessor cost of sales as a percentage of revenue was driven by inefficiencies arising from adverse weather conditions which limited construction activity as well as customer-driven delays in project starts which limited the Predecessor’s ability to efficiently deploy labor resources. The Predecessor maintained its workforce throughout the reporting period irrespective of construction slowdowns in order to support ongoing and anticipated customer projects. Also contributing to increased costs were inflationary costs pressures associated with fuel and materials which could not be passed on to customers. The reduction in gross margin was also partially attributable to a shift towards lower‑margin single‑family and government projects resulting from a recent decline in commercial market conditions driven by higher fuel and materials costs. Competitive market conditions for publicly bid projects also contributed to a decrease in overall contract size and margin compression on successfully bid projects during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The decrease in cost of sales at the Predecessor was partially offset by an increase in services cost of sales of $1.0 million contributed by other acquired Portfolio Companies acquired in the period.

For the Current Combined YTD Period, cost of sales decreased by $3.4 million, or 3%, to $108.4 million compared to $111.8 million during the Prior Predecessor YTD Period. As a percentage of revenue, cost of sales increased to 92% from 88% in the Prior Predecessor YTD Period. The decrease in cost of sales was primarily driven by a $4.3 million decrease in Predecessor cost of sales, resulting in an increase in Predecessor cost of as a percentage of revenue of approximately 6.6%. The increase in predecessor cost of sales was driven by similar factors as experienced in the Current Combined Quarter, including labor cost inefficiencies due to unfavorable weather conditions, delayed project starts, and project mix. Both the decrease in cost of sales and the increase in cost of sales as a percentage of revenue were partially offset by an increase in cost of sales and a decrease in cost as a percentage of revenue contributed by other Portfolio Companies.

Acquisition and related costs

Acquisition and related costs consist primarily of legal, accounting, valuation and other professional fees incurred in connection the direct listing of our common stock and the acquisitions of the Portfolio Companies completed on May 6, 2026. These costs relate to the evaluation, negotiation and execution of the direct listing and the acquisition transactions, and are not representative of the Company's ongoing operating costs.

Acquisition and related costs increased by $20.6 million for the Current Combined Quarter and the Current Combined YTD Period compared to $0 for the Predecessor periods, as all associated costs are associated with operations of the Successor entity, incurred at or after closing of the Acquisitions. The substantial majority of Acquisition and related costs, $14.3 million, is payable in equity in the form of AIAI Class A common stock, of which $2.0 million remains unpaid as of June 30, 2026 and has been recorded within Accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheet. Additionally, $3.9 million of stock based compensation expense was recognized related to issuance of Constellation Replacement Awards and associated vesting at the Closing Date.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $23.4 million, or 395%, to $29.3 million for the Current Combined Quarter compared to $5.9 million for the Prior Predecessor Quarter and increased by $24.4 million, or 204%, to $36.3 million for the Current Combined YTD Period compared to $11.9 million for the Prior Predecessor YTD Period. The increase in both periods was driven by approximately $17.6 million of amortization expense associated with the AI Technology License and intangible assets acquired in connection with acquisition of the Portfolio Companies, and $2.2 million of share-based compensation expense recognized in connection with equity awards issued to directors and certain employees of the Company in following completion of the Direct Listing. A further $2.9 million of the increase was driven by selling, general and administrative expenses, excluding intangible amortization, contributed by the acquired Portfolio Companies other than the Predecessor.

Additionally, AIAI incurred $1.3 million of corporate operating expenses during the Current Combined Quarter, partially offset by a $0.6 million decrease in the Predecessor's operating expenses due to lower professional fees following the completion of the transaction.

Loss on digital assets

Loss on digital assets arises from acquired digital asset operation at the Portfolio Companies, which were consolidated beginning on the Closing Date. Because these operations were acquired as part of the Acquisitions, no loss on digital assets was recognized in the Predecessor periods.

For the Combined Current Quarter and the Combined Current YTD Period, the Company recognized a loss on digital assets of $0.5 million and $0.5 million, respectively, primarily driven by declines in market value of digital asset holdings.

Interest expense

Interest expense increased by $0.9 million, or 313%, to $1.2 million for the Combined Current Quarter compared to $0.3 million for the Prior Predecessor Quarter. Interest expense increased by $0.9 million, or 144%, to $1.5 million for the Combined Current YTD Period compared to $0.6 million for the Prior Predecessor YTD Period. The increase in both periods primarily reflects interest expense associated with greater outstanding borrowings under the Predecessor's revolving credit facilities and short-term borrowing that were assumed as part of the Acquisitions.

Income tax benefit

The income tax benefit resulted in recognition of a $5.7 million benefit for both the Combined Current Quarter and the Combined Current YTD Period. There was no provision of income taxes in the Predecessor periods as the Predecessor entity operated as a partnership and was not subject to federal and most state income taxes, with taxable income passed through to its partners.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity consist of cash generated from operations, cash and cash equivalents held by the Company and its Portfolio Companies, available borrowing capacity under existing credit facilities, financial support from the Founder and access to capital markets. Following the completion of the Acquisitions on May 6, 2026, the Company's liquidity position is principally driven by the operating activities and cash-generating capabilities of the acquired Portfolio Companies, as well as incremental general and administrative costs associated with operating as a public company, acquisition funding, capital expenditures, and research and development investments. Prior to the Closing Date, the Company did not conduct substantive operating activities, and its liquidity requirements primarily related to transaction advisory costs incurred in connection with the Direct Listing and acquisition process.

We believe that the sources of liquidity, as described above, will be sufficient to fund working capital requirements, capital expenditures, debt service obligations, integration activities, and strategic initiatives for at least the next twelve months. To the extent additional capital is required, the Company may pursue debt or equity financing opportunities in the capital markets.

Cash position

As of June 30, 2026 (Successor), cash and cash equivalents were $11.2 million, compared to $15.6 million as of December 31, 2025 (Predecessor). Working capital was a surplus of $26.5 million as of June 30, 2026, compared to a surplus of $8.9 million as of December 31, 2025 (Predecessor).

The increase in cash and working capital primarily reflects the completion of the Acquisitions and the consolidation of the acquired Portfolio Companies, partially offset by acquisition and related costs, integration activities, and ongoing operating expenditures incurred during the period.

In connection with the acquisitions completed on May 6, 2026, we acquired approximately $13.5 million of cash and cash equivalents from the Portfolio Companies. These acquired cash balances contributed significantly to our liquidity position following the Closing Date and support ongoing operating, investing, and financing activities across the consolidated organization.

Cash flows

The following tables summarize our consolidated cash flows for the periods presented:

(in thousands)

Operating activities

For the Combined Current YTD Period, net cash used in operating activities was $14.3 million compared to cash provided by operating activities of $8.8 million for the Prior Predecessor YTD Period, a decrease of $23.1 million. The variance was driven by a $47.8 unfavorable change in net income and a $6.2 million unfavorable change in operating assets and liabilities, offset by a $31.0 million favorable change in non-cash expenses.

Net income was unfavorable by $47.8 million as AIAI generated a net loss of $44.7 million in the Combined Current YTD Period, as compared to net income of $3.1 million in the Prior Predecessor YTD Period. The reasons for the decrease in net income are set forth under “Results of operations.”

The change in operating assets and liabilities during Combined Current YTD Period resulted in a $6.2 million decrease in cash as compared to the change in operating assets and liabilities during the Prior Predecessor YTD Period. This change was driven by $25.6 million unfavorable change in contract assets, a $9.6 million unfavorable change in accounts payable, a $1.5 million unfavorable change in accrued expenses, a $0.9 million unfavorable change in prepaid expense, and a $0.4 million unfavorable change in change in amounts due from related parties. These decreases were partially offset by a $28.4 million favorable change in accounts receivable, and a $3.4 million favorable change in contract liabilities.

Investing activities

For the Combined Current YTD Period, net cash provided by investing activities was $13.6 million, compared to net cash used in investing activities of $3.1 million for the Prior Predecessor YTD Period, an increase of $16.7 million. The increase was primarily attributable to $13.5 million in cash acquired from Portfolio Companies through the Acquisitions. Investing cash flows in the Combined Current YTD Period also increased due to a $2.4 million reduction in net cash outflows related to the origination of related-party notes receivable as compared to the Prior Predecessor YTD Period.

Financing activities

For the Combined Current YTD Period, net cash provided by financing activities was $8.2 million, compared to net cash provided by financing activities of $0.4 million for Prior Predecessor YTD Period, an increase of $7.8 million. The increase was primarily driven by $4.1 million of capital contributions from the Founder and $6.6 million in borrowings under a lending facility with the Founder during the Combined Current YTD Period, partially offset by greater net repayments under the CCCI revolving credit facilities relative to the Prior Predecessor YTD Period.

Debt arrangements

In connection with the Acquisitions completed on May 6, 2026, we assumed various debt obligations maintained by the Portfolio Companies, including revolving credit facilities, equipment financing arrangements, and other borrowing facilities used to support ongoing operations and working capital requirements of the Portfolio Companies. Additionally, during the Successor period, we entered into a loan arrangement with the Founder (the “Founder Loan”) to provide funding for general corporate costs and investments into our Portfolio Company operations.

As of June 30, 2026, short-term debt and current maturities of long-term debt totaled $10.8 million and long-term debt outstanding consisted of $18.9 million due to third party lenders and $7.1 million due under the Founder Loan. We continuously monitor debt service obligations, covenant compliance, and available borrowing capacity to support operations and future growth initiatives. See Note 13 to the unaudited condensed consolidated financial statements for additional information regarding outstanding debt obligations.

Lines of credit

We maintain a revolving credit note agreement (the “Revolving Credit Note”), assumed in connection with the acquisition of CCCI, with an interest rate of 1% plus Prime (Prime being the highest prime rate published in the Wall Street Journal or announced by the principal office of Citibank, N.A., J.P. Morgan Chase or Bank of America), but at no less than 7% per annum and no more than 14% per annum, and a maturity date of December 19, 2028. As of June 30, 2026 (Successor) and December 31, 2025 (Predecessor), the maximum availability was $16.6 million and $16.6 million, respectively, and the principal balance outstanding was $13.8 million and $11.1 million, respectively. As of June 30, 2026 and December 31, 2025, there were no debt covenant violations.

We also maintain an $8.0 million revolving line of credit (the “Revolving Credit Line”), assumed in connection with the acquisition of CCCI, which bears interest at the Wall Street Journal's prime rate plus 0.50% and has a maturity date of December 26, 2027, as amended. As of June 30, 2026 and December 31, 2025, there was $8.0 million and $8.0 million of principal balance outstanding with $8.0 and $0 available to borrow, respectively. As of June 30, 2026 and December 31, 2025, there were no debt covenant violations.

The aggregate effective interest rate under the CCCI lines of credits was approximately 7.75% and 8.11% for the periods ended June 30, 2026 and June 30, 2025, respectively.

Additionally, we maintain a revolving line of credit within MediGuide (the “MediGuide Credit Line”) with a maximum borrowing capacity of approximately $1.6 million and aggregate outstanding borrowings were $1.5 million of June 30, 2026 (Successor). Borrowings under this facility bear interest at 6.0% per annum. Payment of principal revolving line of credit is due upon maturity on October 10, 2026 with interest payments on the outstanding balance due monthly. The facility is secured by a certificate of deposit pledged as collateral. There was no outstanding borrowing under this facility at December 31, 2025 (Predecessor). As of June 30, 2026 and December 31, 2025, there were no debt covenant violations.

Equipment financing notes payable

As of June 30, 2026, we also have outstanding notes payable associated with equipment financing with maturity dates ranging from October 2027 through December 2030. As of June 30, 2026 and December 31, 2025, outstanding notes payable totaled $4.9 million and $5.1 million, respectively. These notes were primarily issued to equipment suppliers and are secured by machinery and equipment. The notes carry stated interest rates between 0% to 6.89% with monthly installment payments.

Founder loan

As of June 30, 2026, $7.1 million was outstanding under a lending arrangement with the Founder. The loan bears interest at a rate of 4.0%, payable in kind and repayment shall not be required prior to September 30, 2027.

Known Trends, Uncertainties and Other Material Factors

Following the May 6, 2026 closing date for the Acquisitions, we continue to execute our growth strategy through the integration of six Portfolio Companies and the deployment of our licensed AI technology across those businesses to improve operations and generate revenue through AI-enabled products and services. We believe our implementation approach enables faster deployment than traditional software solutions, allowing acquired companies to realize operational benefits, enhance decision-making capabilities, and support revenue growth more quickly following acquisition.

Our financial performance depends on our ability to efficiently implement our AI platform across acquired businesses and successfully execute our acquisition strategy. Future results are driven by our ability to acquire businesses at attractive valuations, complete due diligence, integrate acquired operations, deploy AI solutions effectively, achieve anticipated operational improvements, and maintain consistent implementation timelines. Delays in integration or deployment, increased implementation costs, challenges in realizing anticipated efficiencies, or failure to achieve expected operational improvements could adversely affect profitability, growth, and overall operating performance.

We expect that executing our acquisition and integration strategy, including the deployment of our AI platform across acquired businesses, will require additional capital. We anticipate funding these initiatives through a combination of cash generated from operations, existing cash and cash equivalents, and potential future debt or equity financing. Our ability to access capital on favorable terms, or at all, will depend on market conditions and other factors, and any inability to do so could limit our ability to pursue acquisitions, complete integration efforts, or fully implement our AI platform. Operating results may also be affected by other risks described under “Risk Factors.”

We may continue to pursue strategic acquisitions to support future growth. While these initiatives provide opportunities to expand the business and enhance operating performance, they also involve operational, financial, accounting, and integration risks that could impact future results, liquidity, and capital resources.

Critical Accounting Policies and Estimates

The Company's management's discussion and analysis of financial condition and results of operations is based on the Company's unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the balance sheet date, and the reported amounts of revenue and expenses recognized during the reporting period. The Company considers an accounting judgment, estimate or assumption to be critical when the nature of the estimate or assumption is material and when different estimates or assumptions could have a material impact on the Company's unaudited condensed consolidated financial statements.

On an ongoing basis, the Company evaluates its estimates and judgments based on historical experience and various other factors that management believes to be reasonable under the circumstances. The Company periodically reviews its financial reporting and disclosure practices and accounting policies to ensure that its financial statements provide transparent and reliable information reflective of current economic conditions, business trends, and operational developments. A summary of the Company's significant accounting policies is included in Note 1 – Summary of Significant Accounting Policies.

We believe the following estimates involve the most significant judgments and uncertainties and could materially impact the Company's reported financial results.

Business combinations and valuation estimates

Business combination accounting requires significant judgments in measuring the fair value of consideration transferred, allocating purchase price to acquired assets and liabilities, including identifying and valuing intangible assets. We must also estimate the future performance of acquired companies and the expected synergies from implementing our AI solutions, which affects the valuation of acquired businesses and potential contingent consideration obligations.

We account for business combinations in accordance with ASC Topic 805, which requires the identification of the acquirer, determination of the acquisition date, and recognition and measurement of the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree. The purchase price, as measured based upon the estimated fair value of consideration transferred, is allocated to the acquired assets and liabilities based on their estimated fair values at the acquisition date. Significant judgment is required in identifying and valuing intangible assets, estimating future performance of acquired entities, and assessing expected synergies. Any excess of the purchase price over the fair value of net assets acquired is recognized as goodwill.

Contingent consideration

The Company recognized contingent consideration related to the Vanguard acquisition, which was measured at fair value using a Monte Carlo simulation model. The valuation requires significant judgment regarding future revenue forecasts, probability-weighted achievement of performance targets, expected timing of milestone achievement, and discount rates. Changes in these assumptions could materially impact future earnings.

Digital assets

The Company holds digital assets that are measured at fair value on an ongoing basis or otherwise require valuation assessments under applicable accounting guidance. The valuation of digital assets requires judgment in determining the appropriate market prices and other valuation inputs. Due to the volatility of digital asset markets, changes in market conditions may materially affect the amounts reported in the Company's unaudited condensed consolidated financial statements.

Revenue recognition on construction contracts

Our accounting policies establish principles for recognizing revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, and subsequently issued additional related ASUs. The majority of our contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and, therefore, is not distinct. However, occasionally we have contracts with multiple performance obligations.

For contracts with multiple performance obligations, we allocate the contract's transaction price to each performance obligation using the observable standalone selling price, if available, or alternatively the best estimate of the standalone selling price of each distinct performance obligation in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach for each performance obligation.

Revenue related to construction contracts with customers is recognized over time as work is completed due to the continuous transfer of control to the customer, typically using an input measure such as costs incurred to date relative to total estimated costs at completion to measure progress. Costs that do not depict progress toward satisfaction of the performance obligation are included in contract costs but may not result in revenue being recognized, such as significant re-work. Revenue from construction contracts with customers is measured based on consideration specified in a contract with a customer and excludes any amount collected on behalf of third parties. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and that are collected from a customer are excluded from revenue.

Costs of revenues earned include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. The cost of significant uninstalled materials, re-work, or scrap is generally excluded from the cost-to-cost measure of progress as it is not proportionate to our progress in satisfying the performance obligation. Costs to fulfill a contract, including mobilization costs, prior to substantive work beginning are capitalized as incurred and amortized over the expected duration of the contract. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Contract estimates including claims, unapproved change orders and variable consideration

We account for long-term construction contracts through the use of various techniques to estimate total transaction price, total estimated costs at completion, and progress toward satisfaction of performance obligations, which are used to recognize revenue earned. Unforeseen events and circumstances can alter the estimate of the costs associated with a particular contract. Total estimated costs at completion can be impacted by changes in productivity, scheduling, the unit cost of labor, subcontracts, materials and equipment. Additionally, external factors such as weather, customer needs, customer delays in providing permits and approvals, labor availability, governmental regulation and politics may affect the progress of a project's completion and push the timing and amount of revenue recognition.

To the extent that original cost estimates are modified, estimated costs to complete increase, delivery schedules are delayed, or progress under a contract is otherwise impeded, cash flow, revenue recognition and profitability from a particular contract may be adversely affected.

The nature of our construction contracts gives rise to several types of variable consideration that can either increase or decrease the transaction price. Transaction price for contracts is required to include evaluation of variable consideration to which we have an enforceable right to compensation or obligation for a reduction, which can result in increases or decreases to a contract's transaction price. The effect of a change in variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis.

Contract modifications can result in contract specifications or requirements that either create new or change existing enforceable rights and obligations of the parties to the contract. We consider unapproved change orders to be contract modifications for which customers have agreed to changes in the scope of the contract but have not agreed to the price. Costs associated with contract modifications are included in the estimated costs to complete the contracts and are treated as project costs when incurred. In most instances, contract modifications are for goods or services that are not distinct and, therefore, are accounted for as a part of the existing contract. In those instances, the effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.

Contract assets and contract liabilities

We bill customers on long-term construction contracts depending upon agreed-upon contractual terms, which may include milestone billings based on the completion of certain phases of the work, or when services are provided. When, as a result of contingencies, billings cannot occur until after the related revenue has been recognized, the result is unbilled revenue, which is included in contract assets. Additionally, we may receive advances or deposits from customers before revenue is recognized, resulting in deferred revenue, which is included in contract liabilities.

Retainage for which we have an unconditional right to payment that is only subject to the passage of time is classified within accounts receivable. Retainage subject to conditions other than the passage of time does not meet the definition of a receivable and is therefore included in contract assets and contract liabilities, as determined on a contract-by-contract basis.

Contract assets represent revenues recognized in excess of amounts paid or payable (contract receivables) on uncompleted contracts. Contract liabilities represent our obligation to perform on uncompleted contracts with customers for which we have received payment or for which contract receivables are outstanding.

Stock-based compensation

The Company measures stock-based compensation based on the grant date fair value of equity awards. Valuation of stock options requires significant judgment regarding expected volatility, expected term, risk-free interest rates, and other assumptions used in the Black-Scholes model. Changes in these assumptions could materially affect stock-based compensation expense recognized in future periods.

Fair value of goodwill and other long-lived assets

We have goodwill and other intangible assets and are required to perform an annual, or in certain situations a more frequent, assessment for possible impairment for accounting purposes.

In accordance with GAAP, we test goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that the assets might be impaired. If the carrying amount of our goodwill exceeds its implied fair value, an impairment loss equal to the excess is recorded. Additionally, long-lived assets, including intangible assets with finite lives and property and equipment, are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the market price of an asset or asset group, a significant adverse change in the extent or manner in which an asset or asset group is being used, the loss of legal ownership or title to the asset, significant negative industry or economic trends or the presence of other factors that would indicate that the carrying amount of an asset or asset group is not recoverable. Long-lived assets are considered to be impaired if the estimated undiscounted future cash flows resulting from the use of the asset and its eventual disposition are not sufficient to recover the carrying value of the asset. If an asset is deemed to be impaired, the amount of the impairment loss represents the excess of the asset’s carrying value over its estimated fair value.

Impairment may result from overall stock market volatility including volatility in the exchange traded value of our equity, and any impairment charges in the future may have a material impact on our financial results. See Note 1, “Summary of Significant Accounting Policies,” and Note 9, “Intangibles,” to the accompanying unaudited condensed consolidated financial statements for additional information regarding our goodwill and other intangible assets.

Non-GAAP Measures

In addition to net income (loss) determined in accordance with U.S. GAAP, AIAI uses Adjusted EBITDA, a non-GAAP measure, to evaluate its business, measure its performance and make strategic decisions. Adjusted EBITDA is calculated as net income (loss) adjusted to exclude interest income (expense), net, income tax benefit, and depreciation and amortization, and further adjusted to exclude state franchise tax expense, share-based compensation, non-core costs related to strategic initiatives including transaction related expenses, certain non-recurring public company costs, system implementation and enhancement costs and certain other non-recurring charges.

Management uses Adjusted EBITDA to assess the AIAI’s financial performance because it allows them to compare its operating performance on a consistent basis across periods by removing the effects of AIAI’s capital structure, asset base and other items that impact the comparability of financial results from period to period. AIAI presents Adjusted EBITDA because it believes it provides useful information regarding the factors and trends affecting its business in addition to measures calculated in accordance with U.S. GAAP.

Management believes that the presentation of this non-GAAP financial measure will provide useful information to investors and analysts in assessing its financial performance and results of operations across reporting periods by excluding items it does not believe are indicative of its core operating performance. Net income (loss) is the U.S. GAAP measure most directly comparable to Adjusted EBITDA. AIAI’s non-GAAP financial measure should not be considered as an alternative to the most directly comparable U.S. GAAP financial measure. You are encouraged to evaluate each of these adjustments and the reasons management considers them appropriate for supplemental analysis.

In evaluating Adjusted EBITDA, you should be aware that in the future AIAI may incur expenses that are the same as or similar to some of the adjustments in such presentation. AIAI’s presentation of Adjusted EBITDA should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. There can be no assurance that management will not modify the presentation of Adjusted EBITDA in the future, and any such modification may be material. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider Adjusted EBITDA in isolation or as a substitute for analysis of AIAI’s operating results as reported under U.S. GAAP. Adjusted EBITDA may be defined differently by other companies in the industry and may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

The table below presents AIAI’s Adjusted EBITDA, reconciled to AIAI’s net income (loss) for the periods indicated:

(in thousands)

(in thousands)

Adjusted EBITDA was negative $3.6 million in Combined Current Quarter, a decrease of $10.4 million, or 153%, from $6.8 million for the Prior Predecessor Quarter. The decrease was driven primarily by lower underlying operating performance during the Combined Current Quarter. Net loss increased by $47.8 million, partially offset by higher adjustments excluded from Adjusted EBITDA, including a $17.9 million increase in depreciation and amortization expense, a $20.6 million increase in acquisition and transaction-related costs, and a $2.2 million increase in stock-based compensation expense. In addition, income tax benefit increased by $5.7 million compared to the Prior Predecessor Quarter. As a result, the increase in net loss was partially mitigated by these higher add-backs, resulting in a $10.4 million decrease in Adjusted EBITDA.

Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, AIAI is exposed to market risks, including interest rate risk and effects of inflation. The Company currently does not enter into derivatives or other financial instruments for trading or speculative purposes. Substantially all of the Company's operations are in the U.S., and accordingly, we do not have material foreign currency exposure.

Interest Rate Risk

As of June 30, 2026, the Company's market risk exposure primarily relates to interest rate fluctuations associated with cash balances, indebtedness assumed in connection with the Portfolio Company acquisitions, and future financing activities. The Company maintains borrowing arrangements through certain Portfolio Companies, including revolving credit facilities and other debt instruments bearing variable or market-based interest rates.

As of June 30, 2026 (Successor) and December 31, 2025 (Predecessor), the Company had $8.0 million and $8.0 million, respectively, of aggregate principal outstanding under the CCCI Revolving Credit Line, which bears interest at the Wall Street Journal’s prime rate plus 0.50%. Additionally, as of June 30, 2026 (Successor) and December 31, 2025 (Predecessor), the Company had $13.8 million and $11.1 million, respectively, of aggregate principal amount outstanding under the Revolving Credit Note, which bears interest at 1% plus Prime (Prime being the highest prime rate published in the Wall Street Journal or announced by the principle office of Citibank, N.A., J.P. Morgan Chase or Bank of America), but at no less than 7% per annum and no more than 14% per annum.

As of June 30, 2026 (Successor), the Company's other outstanding debt facilities bore fixed rates were not subject to market-based interest rate adjustments.

The Company does not currently intend to hedge company’s exposure to interest rate risk. The impact of a 1% increase in interest rates on outstanding variable-rate debt as of June 30, 2026 would result in an annual increase in interest expense of approximately $0.2 million.

The Company is exposed to market risk for changes in interest rates applicable to our cash and cash equivalents and debt. Cash and cash equivalents totaled $11.2 million and $15.6 million as of June 30, 2026 (Successor) and December 31, 2025 (Predecessor), respectively. All cash and cash equivalents were invested in demand deposit accounts.

Fair Value and Valuation Risk

The Company is exposed to valuation risk associated with certain liabilities measured at fair value, primarily contingent consideration obligations related to acquisitions. The fair value of these obligations is determined using valuation models, including Monte Carlo simulations, that require significant assumptions regarding future operating performance, revenue growth, volatility, discount rates and other market-based inputs. Changes in these assumptions or broader economic conditions could result in material changes in the fair value of such obligations, which are recognized in earnings each reporting period. The Company may also enter into future financing arrangements that include warrants, conversion features, or other instruments requiring recurring fair value measurements.

Digital Asset Market Risk

The Company holds certain digital assets, including DAG, Bitcoin, USD Coin, COTI and other crypto assets. The fair value of these assets is subject to significant market volatility and can fluctuate materially over short periods. Changes in digital asset market prices are recognized in earnings and may result in significant unrealized gains or losses. While the Company continually monitors its digital asset exposure and liquidity needs, significant declines in market prices could adversely affect reported earnings and the value of its digital asset holdings.

Inflation and Tariff Risk

The Company is exposed to inflationary pressures that may increase labor, technology, occupancy, licensing, professional service, and operational costs across its portfolio of businesses. In particular, inflationary cost increases can affect the profitability of our construction contracts we operate in and provides services to capital-intensive industries in which federal trade policies could significantly impact the availability and cost of materials. In addition, global supply chain disruptions, geopolitical events, trade restrictions, and tariffs may increase costs incurred by certain Portfolio Companies and customers. Prolonged lead times on the delivery of raw materials, supply chain disruptions, or further tariff increases on raw materials and finished products could adversely affect our business, financial condition and results of operations.

As of the date of this Quarterly Report on Form 10‑Q, there have been no material changes to the risk factors previously disclosed in the Company's Registration Statement on Form S‑1/A.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) prior to the filing of this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective at a reasonable assurance level due to the material weaknesses described below.

• Historically, our Predecessor, CCCI, and other Portfolio Companies were not subject to SEC reporting requirements and did not maintain internal control over financial reporting or disclosure controls designed for a public company reporting environment. As CCCI is included in the Company's financial reporting during the Predecessor periods and all Portfolio Companies are included in the Company’s financial reporting in the Successor period, management continues to evaluate and integrate the control environment of CCCI and the other Portfolio Companies as part of its post-acquisition integration activities.
• In connection with the audits of CCCI for the years ended December 31, 2025, 2024 and 2023, management and the independent auditors identified material weaknesses related to deficiencies in control design and implementation, including information technology general controls, segregation of duties, and an insufficient complement of personnel with appropriate public company accounting and financial reporting expertise. These material weaknesses existed at CCCI as of the acquisition date and continue to be reported as part of the Company's evaluation of internal control over financial reporting until such deficiencies are remediated.

Changes in Internal Control over Financial Reporting

Following the identification of the material weaknesses at CCCI described above, management commenced remediation activities during the quarter ended June 30, 2026, to address the identified deficiencies and support the integration of CCCI's control environment into the Company's overall internal control framework.

• To address the material weaknesses related to internal controls over financial reporting, management engaged qualified external consultants to assist with financial reporting processes, account reconciliations, and review controls. These consultants provide an additional layer of oversight and help mitigate risks associated with limited internal staffing. As the Company grows and additional resources become available, management plans to expand the finance organization and reassign responsibilities to achieve a more effective segregation of duties. Enhanced management review procedures have also been implemented.
• Management has initiated the development of comprehensive accounting and financial reporting policies and procedures covering key processes, including revenue recognition, expense accruals, account reconciliations, financial close procedures, estimate preparation, and journal entry documentation and review.

The material weaknesses identified will not be considered fully remediated until the applicable controls have been designed, implemented, operated for a sufficient period of time, and tested by management to conclude that they are operating effectively. Management will continue to evaluate the effectiveness of these remediation efforts and implement additional measures, as necessary.

If the material weaknesses identified are not remediated, they could adversely affect the reliability of financial information included in the Company's unaudited condensed consolidated financial statements. Management is continuing its remediation and integration efforts and will monitor the effectiveness of the related controls on an ongoing basis until the identified deficiencies have been fully remediated.

There were no changes in internal control over financial reporting during the quarter end June 30, 2026 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting, except as described above.

Our business has many risks. Factors that could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our common stock or senior notes are described below and in our Registration Statement S-1/A filed on May 1, 2026.