KIDZ AI Inc.: Form 10-Q for the period ended Jun 30, 2026

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 .

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

Overview

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.

Business Model

We understand that it is easier to learn when students are interested, so we highlight variety in our business model. Our platform offers a wide breadth of affordable enrichment programs including language, science, technology, engineering, arts, mathematics, music, and many more. Since our platform handles enrollments, record keeping, and many other administrative tasks that usually take up educators’ time, our educator can focus on sharing knowledge about topics they love with our students.

We analyze data gathered on our platform to better determine our students’ most relevant education needs, helping us match them with relevant courses and learning paths, thereby driving higher customer satisfaction. Once a learner enrolls in a course, we strive to provide an effective learning experience through tutoring, assessments, Q&As, and interactive sessions.

We provide time-based subscriptions and credit-based subscriptions to our online courses. For time-based subscriptions, we provide students with unlimited access to our courses for a specified period of time. For credit-based subscriptions, we offer our students the flexibility to take courses at any time up to the limit of their prepaid balance.

Key Factors Affecting Our Performance

Our results of operations and financial condition have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and elsewhere in the Form 10-Q.

Ability to attract new registered users and paid subscribers

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.

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"Registered users" are individuals who have signed up and created an account on our platform. This group includes all users who access our services, regardless of whether they have made a financial commitment to our offerings. Registered users may take advantage of free trials, access limited content, or use basic features available at no cost. While registered users do not directly contribute to subscription revenue, they play a crucial role in the overall revenue strategy by expanding the potential market. They provide a pool of potential customers who can be converted into paying customers through targeted marketing and engagement strategies. Additionally, registered users might generate revenue through advertisements, in-app purchases, or by upgrading to paid plans.

"Paid subscribers," on the other hand, include those registered users who have opted for a subscription plan and have made a financial commitment to access our premium content and features. Paid subscribers also encompass customers who purchase lesson credit packages, allowing them to access specific lessons or courses without committing to a recurring subscription. These subscribers typically pay either a recurring fee, which can be monthly, quarterly, or annually, depending on the subscription model, or a one-time fee for lesson credit packages. Paid subscribers are the primary source of revenue for the Company. The consistent and recurring nature of subscription payments ensures a steady revenue stream, while lesson credit packages offer flexibility and contribute additional non-recurring revenue. This combination supports the Company's operational costs, development, and expansion plans.

Ability to retain existing paid subscribers and customer relationships

Our ability to increase our revenues and profitability will depend on the ability to retain our existing customers as well as to convert registered users to paid subscribers.

Ability to attract and retain high quality independent teacher contractors

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.

Operating Efficiency

Our ability to maintain and increase profitability also depends on our ability to effectively control our costs and expenses. The significant component of our cost of revenues is the compensation expense to our educators. We pay our educators based on the number of hours they teach. In addition, we initiated time limit on certain courses, which encouraged students to pick courses in a shorter period of time, which also lead to an increase in the number of students in each class. However, to ensure quality of our online courses, we generally maintain a student to teacher ratio within 6:1.

Key Components of Results of Operations

Revenues

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.

Cost of revenues

Cost of revenue consists of streaming services, third-party payment processing fees, and compensation for teachers and certain employees.

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Selling expenses

Selling expenses consist primarily of advertising costs on social media platforms such as Google and WeChat.

General and administrative expenses

General and administrative expenses consist primarily of (i) compensation for our management and administrative personnel, (ii) expenses in connection with operation supporting functions such as legal, accounting, consulting, and other professional service fees, and (iii) office rental, depreciation, and other administrative related expenses.

Research and Development Expenses

Our research and development expenses include compensation-related expenses to the outsourced subcontractors for maintenance of our online learning platform.

Results of Operations

For the three months ended June 30, 2026 and 2025

The following table summarizes our results of operations for the years presented. The results below are not necessarily indicative of results to be expected for future periods.

(Unaudited)

(Unaudited)

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Revenue

The summary information by revenue stream are as follows:

(Unaudited)

(Unaudited)

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.

Costs of Revenue

(Unaudited)

(Unaudited)

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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.

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.

Gross profit margin

(Unaudited)

(Unaudited)

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

Operating expenses

June 30, 2026, we incurred total operating expenses of $1,360,028, a decrease of $661,723, or 33%, as compared to total operating expenses of $2,021,751 during the three months ended June 30, 2025., 2025.

General and administrative expenses decreased significantly by $621,228, or 33%, from $1,889,175 for the three months ended June 30, 2025, to $1,267,947 for the three 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 three months ended June 30, 2026 as compared to same period last year was primarily attributable to a decrease of $692,462 professional expense and $84,084 on compensation, as well as the decrease was offset an increase of $103,564 on amortization expenses in relation to our IP assets.

The decrease of professional expense was primarily attributable to lower regulatory registration expenses and professional accounting fees after we completed a merger with Battery Future Acquisition Corp. (“BFAC”) and became a public listed company.

Employee compensation expenses decreased by $84,084 from $468,655 for the three months ended June 30, 2025, to $384,571 for the three months ended June 30, 2026. The decrease was primarily attributable to a reduction in headcount and salary levels across the Company's operations, as well as lower outsourced staffing costs. These reductions were partially offset by higher US-based employee payroll expenses, reflecting the Company's expanded corporate and compliance infrastructure following its 2025 listing.

Other expense

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.

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Provision for income taxes

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.

Net Loss

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.

For the six months ended June 30, 2026 and 2025

The following table summarizes our results of operations for the years presented. The results below are not necessarily indicative of results to be expected for future periods.

(Unaudited)

(Unaudited)

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Revenue

The summary information by revenue stream are as follows:

(Unaudited)

(Unaudited)

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. 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.

Cost of revenue

(Unaudited)

(Unaudited)

Cost of revenues decreased by $285,171, or 35%, from $813,580 for the six months ended June 30, 2025, to $528,4 09 for the six months ended June 30, 2026.

The decrease in cost of revenues was primarily attributable to lower customer activity and reduced sales volume during the six months and was generally consistent with the decrease in revenues. Compensation expenses for independent educators and employees directly involved in providing services decreased by $255,646, or 34%, from $743,256 for the six months ended June 30, 2025, to $487,610 for the six months ended June 30, 2026.

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Gross profit margin

Our gross profit and gross profit margin from the two revenue streams are summarized as follows:

(Unaudited)

(Unaudited)

The total gross profit margin remains at 47% for the six months ended June 30, 2026 and 2025.

Operating expenses

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.

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.

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.

Employee compensation expenses increased by $62,356 from $763,555 for the six months ended June 30, 2025, to $825,911 for the six months ended June 30, 2026. The increase is primarily due to additional hiring and higher executive compensation, partially offset by a reduction in headcount during the second quarter of 2026.

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.

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.

Provision for income tax

We had no income tax provision for the six 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 six months ended June 30, 2025 was $38,360.

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Net loss

As a result of the combination of factors discussed above, our net loss increased from $4,163,376 for the six months ended June 30, 2025 to $6,683,608 for the six months ended June 30, 2026.

Liquidity and Capital Resources

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:

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 1st 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.

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.

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These financial statements do not include any adjustment relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

We may, however, need additional cash resources in the future if we experience changes in business conditions or other developments, or if we find and wish to pursue opportunities for investments, acquisitions, capital expenditures or similar actions. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue additional equity or debt securities. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Operating Activities

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.

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.

Investing Activities

Net cash provided by investing activities was $3,953,027 for the six months ended June 30, 2026. The increase was primarily due to proceeds from sales of crypto assets.

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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.

Financing Activities

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,

Net cash provided by financing activities was $8,852,667 for the Six months ended June 30, 2025. The increase was mainly due to the issuance of promissory notes of $3,089,400, capital contribution from private placement of $4,700,000, and proceeds from the reverse recapitalization of $1,077,752.

Critical Accounting Policies and Estimates

**Accounting Principles—**The consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States of America (GAAP).

**Principles of consolidation—**The consolidated financial statements include the financial statements of the Company and its subsidiary. All significant intercompany transactions and balances between the Company and its subsidiary are eliminated upon consolidation.

Use of Estimates— The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates and assumptions reflected in the consolidated financial statements include, but are not limited to, useful lives of property and equipment, valuation of deferred tax assets and liabilities, operating lease right-of-use assets and liabilities and deferred revenue. Actual results may differ materially from such estimates. Management believes that the estimates, and judgments upon which they rely, are reasonable based upon information available to them at the time that these estimates and judgments are made. To the extent that there are material differences between these estimates and actual results, the Company’s consolidated financial statements will be affected.

Revenue Recognition— The Company has Three predominant sources of revenue: time-based subscriptions, credit-based subscriptions to our online courses, and marketing consulting services.

Subscription Revenue

Customers are required to pay in advance to enroll for course. For time-based subscriptions, we are obligated to provide students with unlimited access to our course for a specified term. For credit-based subscriptions, we offer our students the flexibility to take courses at any time up to the limit of their prepaid balance. Each contract of the online education service is accounted for as single performance obligation which is satisfied ratably over the service period. We charge fixed fees to the services contracts. The proceeds collected are initially recorded as deferred revenue. For credit-based subscriptions, revenues are recognized proportionately as the courses are delivered. For time-based subscriptions, revenues are recognized on a straight-line basis over the subscription period from the date in which the students activate the courses to the date of expiration. Refunds are provided to the students who decide to withdraw from the subscribed courses within the course offer period and a proportional refund is based on the percentage of untaken courses to the total courses purchased. Historically, the Company has not experienced material refunds.

**Principal Agent Considerations—**The Company makes its application available to be downloaded through third-party digital distribution service providers. Users who intend to enroll our courses are directed to third-party payment platforms before completing subscription with us. The Company evaluates the purchases via third-party payment processors to determine whether its revenues should be reported gross or net of fees retained by the payment processor. The Company is the principal in the transaction with the end user as a result of controlling, hosting, and integrating the delivery of the virtual items to the end user. The Company records revenue on a gross basis as a principal and records fees paid to third-party payment platforms as cost of revenues.

Deferred Revenue— Deferred revenue mostly consists of payments we receive in advance of revenue recognition. Revenue is recognized over the life of the subscription, or as the delivery of the pre-purchased class sessions. The Company classifies deferred revenue as a short-term liability on the balance sheets as the longest subscription plan is for twelve months and the remaining session are expected to be delivered within twelve months or less.

**Cost of Revenue—**Cost of revenue predominantly consists of streaming services, third-party payment processing fees, and wages for teachers and certain employees engaged in producing the revenue.

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**Property and Equipment—**Property and equipment primarily includes computers and furniture are stated at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over 5 years.

Leasehold improvements are amortized over the lesser of the life of the lease or the estimated useful life of the leasehold improvements. Costs related to maintenance and repairs that do not extend the assets’ useful life are expensed as incurred.

**Investment accounts—**Investment accounts consist of cash and crypto assets held for investment purposes. Cash is carried at cost, which approximates fair value due to its short-term nature. The Company has elected to use the weighted average cost (WAC) method to determine the cost basis for its initial recognition of crypto asset holdings. Under this method, the cost of crypto assets sold or exchanged is calculated using the weighted average cost per unit at the time of the transaction. This method is applied consistently across all crypto asset holdings. The Company measures the fair value of its crypto assets subsequently, with gains and losses from changes in the fair value of such crypto assets recognized in net income each reporting period. The Company establishes a deferred tax liability if the market value of crypto assets at the reporting date is greater than the average cost basis of the Company’s crypto holdings at such reporting date, and any subsequent increases or decreases in the market value of crypto assets increases or decreases the deferred tax liability. In determining the gain (loss) to be recognized upon sale, the Company calculates the difference between the sales price and carrying value of the crypto assets with WAC method.

**Intangible assets—**Intangible assets acquired by the Company are stated at cost less accumulated amortization (where the estimated useful life is finite) and impairment losses. Amortization of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets’ estimated useful life, which is the period over which an asset is expected to be available for use. The estimates and associated assumptions of useful life determined by the Company are based on technical or commercial obsolescence, legal or contractual limits on the use of the asset, and other relevant factors. Both the period and method of amortization are reviewed annually. Intangible assets are not amortized while their useful lives are assessed to be indefinite. Any conclusion that the useful life of an intangible asset is indefinite is reviewed annually to determine whether events and circumstances continue to support the indefinite useful life assessment for that asset. If they do not, the change in the useful life assessment from indefinite to finite is accounted for prospectively from the date of change and in accordance with the policy for amortization of intangible assets with finite lives as set out above.

**Income Taxes—**The Company provides for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities for financial reporting and for income tax reporting. The deferred tax asset or liability represents the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. A valuation allowance is established for any deferred tax asset for which it is determined that it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with the asset and liability method. The first step is to evaluate the tax position for recognition by determining whether evidence indicates that it is more likely than not that a position will be sustained if examined by a taxing authority.

The second step is to measure the tax benefit as the largest amount that is 50% likely of being realized upon settlement with a taxing authority. There were no amounts recorded at June 30, 2026 and 2025 related to uncertain tax positions.

**Fair Value of Financial Instruments—**The Company accounts for certain assets and liabilities at fair value in accordance with the accounting guidance applicable to fair value measurements and disclosures.

The carrying values of cash, cash equivalents, accounts payable, deferred revenues, interest payable, loan payable, due to related parties, operating lease liabilities and accrued liabilities and other payables are deemed to be reasonable estimates of their fair values because of their short-term nature.

Research and Development Costs— Research and development expenses include compensation-related expenses to the outsourced subcontractors for maintenance of our online learning platform.

Recent Issued Accounting Pronouncements

For a detailed discussion on recent accounting pronouncements, see Note 2 to the consolidated financial statements included elsewhere in the Form 10-K.

**Contingencies—**The Company records accruals for contingencies and legal proceedings expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated. If a loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss, would be disclosed.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements including arrangements that would affect the Company’s liquidity, capital resources, market risk support and credit risk support or other benefits.

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We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2026. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that during the period covered by this report, our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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