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Classover Holdings (NASDAQ: KIDZ) posts steep Q1 2026 loss on crypto and convertible note volatility

Filing Impact
(Moderate)
Filing Sentiment
(Neutral)
Form Type
10-Q

Rhea-AI Filing Summary

Classover Holdings reported a sharply wider loss for the quarter ended March 31, 2026. Revenue fell to $519,198 from $816,016 a year earlier, though gross margin stayed at 50%. Operating loss increased to $894,815, driven mainly by higher general and administrative expenses.

Net loss expanded to $4,187,534, largely due to fair value losses on crypto assets of $2,444,670, a $860,631 loss on convertible notes, and a $77,625 increase in warrant liabilities. Cash was $2,116,631 with a working capital deficit of $125,316. Management disclosed substantial doubt about going concern but points to existing cash, equity from prior SPAC and PIPE transactions, and remaining capacity under senior secured convertible notes as mitigation.

Positive

  • None.

Negative

  • Net loss expanded sharply to $4.19 million for the three months ended March 31, 2026, from $0.30 million a year earlier, driven by fair value losses on crypto assets, convertible notes, and warrant liabilities.
  • Revenue declined 36% year over year, falling to $519,198 from $816,016 for the three months ended March 31, 2025, while operating expenses increased 65%, significantly pressuring profitability.
  • Going concern risk disclosed: recurring losses, a working capital deficit of $125,316, and dependence on senior secured convertible notes led management to state that substantial doubt exists about the company’s ability to continue as a going concern.
  • High exposure to volatile crypto assets and structured financing: investment accounts fell to $4.94 million from $7.30 million, and the fair value of senior secured convertible notes remained material at $5.16 million as of March 31, 2026.

Insights

Large Q1 loss driven by crypto and convertible note fair value hits amid weaker revenue.

Classover Holdings saw Q1 2026 revenue drop to $519,198 from $816,016, while maintaining a 50% gross margin. Operating expenses rose to $1,155,713, mainly from higher general and administrative costs, pushing operating loss to $894,815.

Below operating income, results were dominated by fair value movements: a $2,444,670 loss on crypto assets, a $860,631 loss on senior secured convertible notes measured at fair value, and a $77,625 increase in warrant liabilities. These non-cash items took net loss to $4,187,534.

The balance sheet shows cash of $2,116,631, restricted crypto investment accounts of $4,729,446, and convertible notes at fair value of $5,162,521 as of March 31, 2026. Management acknowledges substantial doubt about going concern but cites the prior $11,000,000 note issuance and capacity under a $500,000,000 note program as support. Future filings will clarify how further conversions of notes and preferred stock, and crypto price changes, affect leverage and equity.

Revenue $519,198 For the three months ended March 31, 2026
Revenue prior-year quarter $816,016 For the three months ended March 31, 2025
Gross profit $260,898 For the three months ended March 31, 2026
Net loss $4,187,534 For the three months ended March 31, 2026
Fair value loss on crypto assets $2,444,670 Other expense for the three months ended March 31, 2026
Fair value loss on convertible notes $860,631 Other expense for the three months ended March 31, 2026
Cash balance $2,116,631 As of March 31, 2026
Convertible notes fair value $5,162,521 As of March 31, 2026
reverse recapitalization financial
"The Merger is considered as a reverse recapitalization in accordance with Accounting Standards Codification (“ASC”) 805-40."
A reverse recapitalization is a way for a privately held company to become publicly traded by taking control of an existing public company and swapping ownership rather than going through a traditional public offering. For investors it matters because it can quickly change who controls a company and reshape its share structure and value — like a homeowner swapping houses and keys rather than building a new one — so it can create sudden shifts in stock supply, dilution and market expectations.
Senior Secured Convertible Notes financial
"Certain digital assets are pledged as collateral under the Company’s Senior Secured Convertible Notes."
A senior secured convertible note is a loan a company issues that sits near the top of its repayment order (senior), is backed by specific assets as collateral (secured), and can be swapped into company shares later (convertible). For investors this matters because it combines lower risk of repayment and legal protection from the collateral with the upside of converting into equity—so it affects both the safety of debt holders and potential dilution for shareholders.
going concern financial
"The continuing losses raise substantial doubt about the ability of the Company to continue as a going concern."
A going concern is a business that is expected to continue its operations and meet its obligations for the foreseeable future, rather than shutting down or selling off assets. This assumption matters to investors because it indicates stability and ongoing profitability, making the business a more reliable investment. Think of it as believing a restaurant will stay open and serve customers, rather than closing down suddenly.
fair value option financial
"The Company had elected the fair value option for the convertible notes in accordance with ASC 825-10, Financial Instruments."
An accounting election that lets a company measure eligible financial assets and liabilities at their current market price, recording gains and losses in the income statement as those prices move. For investors it matters because choosing the fair value option makes reported profits and asset values respond immediately to market swings—like revaluing a house to today’s sale price—so it can increase earnings volatility while giving a more up‑to‑date view of value.
Level 3 financial
"The fair value measurement is classified as Level 3 within the fair value hierarchy due to the use of significant unobservable inputs."
Level 3 describes the lowest-confidence category in the accounting “fair value” hierarchy, covering assets or liabilities whose prices are not observable in the market and must be estimated using judgment and internal models. For investors, Level 3 items matter because they can introduce greater uncertainty and potential valuation swings—like valuing a unique antique versus checking a price tag on a supermarket shelf—so they signal higher model risk and lower liquidity.
relief-from-royalty method financial
"The fair value of the Company’s patented technology was determined in accordance with ASC 820 using an income approach, specifically the relief-from-royalty method."
10-Q Quarterly Reports: What Changes Quarter to Quarter →

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2026

 

OR

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to __________

 

Commission File Number: 001-42588

 

Classover Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

 

99-2827182

(State or other jurisdiction

 

(IRS Employer

of incorporation or organization)

 

Identification Number)

 

450 7th Avenue, Suite 905, New York, NY

 

10123

(Address of principal executive offices)

 

(Zip code)

 

(800) 345-9588

(Issuer’s telephone number including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

symbol(s)

 

Name of each exchange on which

registered

Class B Common Stock, par value $0.0001 per share

 

KIDZ

 

The Nasdaq Stock Market LLC

Redeemable warrants, each exercisable for one share of Class B Common Stock, each at an exercise price of $11.50 per share

 

KIDZW

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

 

 

Emerging growth company

☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

 

As of May 14, 2026, the registrant had 130,701 shares of Class A Common Stock, par value $0.0001 per share, and 7,813,359 shares of Class B Common Stock, par value $0.0001 per share, outstanding. 

 

 

 

 

 

 

INDEX

 

Part I - Financial Information

 

 

 

 

 

 

 

Item 1 – Financial Statements

 

3

 

 

 

 

 

Balance Sheets (Unaudited)

 

3

 

 

 

 

 

Statement of Operations (Unaudited)

 

4

 

 

 

 

 

Statement of Changes in Shareholders’ Deficit (Unaudited)

 

5

 

 

 

 

 

Statement of Cash Flows (Unaudited)

 

6

 

 

 

 

 

Notes to Unaudited Financial Statements

 

7

 

 

 

 

 

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

28

 

 

 

 

 

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

 

36

 

 

 

 

 

Item 4 – Controls and Procedures

 

36

 

 

 

 

 

Part II - Other Information

 

 

 

 

 

 

 

Item 5 – Other Information

 

37

 

 

 

 

 

Item 6 – Exhibits

 

37

 

 

 

 

 

Signatures

 

38

 

 

 
2

Table of Contents

 

Part I - Financial Information

 

Item 1 – Financial Statements

 

CLASSOVER HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

 (EXPRESSED IN US DOLLARS)

 

 

 

March 31,

 

 

December 31,

 

 

 

2026

 

 

2025

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$2,116,631

 

 

$2,751,594

 

Prepayments and other current assets

 

 

13,448

 

 

 

10,129

 

Due from related parties

 

 

4,666

 

 

 

45,493

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

2,134,745

 

 

 

2,807,216

 

 

 

 

 

 

 

 

 

 

Noncurrent assets:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

172,548

 

 

 

154,713

 

Intangible assets, net

 

 

3,920,053

 

 

 

4,026,000

 

Operating lease right-of-use assets, net

 

 

1,168,705

 

 

 

1,246,766

 

Investment accounts-restricted

 

 

4,729,446

 

 

 

7,084,194

 

Investment accounts-unrestricted

 

 

215,326

 

 

 

220,566

 

Deposit

 

 

5,000

 

 

 

5,000

 

 

 

 

 

 

 

 

 

 

Total noncurrent assets

 

 

10,211,077

 

 

 

12,737,239

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$12,345,822

 

 

$15,544,455

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$125,689

 

 

$145,987

 

Deferred revenues

 

 

1,756,361

 

 

 

1,871,722

 

Due to related parties

 

 

63,316

 

 

 

63,316

 

Operating lease liabilities - current

 

 

280,678

 

 

 

195,353

 

Accrued liabilities and other payables

 

 

34,017

 

 

 

36,178

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

2,260,061

 

 

 

2,312,556

 

 

 

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

Convertible notes payable

 

 

5,162,521

 

 

 

8,201,746

 

Operating lease liabilities - noncurrent

 

 

960,320

 

 

 

1,046,141

 

Deferred tax liabilities

 

 

-

 

 

 

-

 

Warrant liabilities

 

 

284,625

 

 

 

207,000

 

 

 

 

 

 

 

 

 

 

Total noncurrent liabilities

 

 

6,407,466

 

 

 

9,454,887

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

8,667,527

 

 

 

11,767,443

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred Stock, $0.0001 par value, 10,000,000 shares authorized,

 

 

 

 

 

 

 

 

-Series A, 522,801 shares issued and outstanding as of March 31, 2026 and December 31, 2025*

 

 

52

 

 

 

52

 

-Series B, 1,875 and 2,775 shares issued and outstanding as of March 31, 2026 and December 31, 2025*, respectively

 

 

1

 

 

 

1

 

-Series C, 2,000 shares issued and outstanding as of March 31, 2026 and 2025*, respectively

 

 

-

 

 

 

-

 

Class A Common Stock, $0.0001 par value, 1,000,000 shares authorized, 130,701 shares issued and outstanding as of March 31, 2026 and 2025*

 

 

13

 

 

 

13

 

Class B Common Stock $0.0001 par value, 40,000,000 shares authorized, 1,174,718 and 496,434 shares issued and outstanding as of March 31, 2026 and 2025*, respectively

 

 

117

 

 

 

50

 

Additional paid-in capital

 

 

19,510,235

 

 

 

15,421,485

 

Accumulated deficit

 

 

(15,832,123)

 

 

(11,644,589)

 

 

 

 

 

 

 

 

 

Total stockholders' equity

 

 

3,678,295

 

 

 

3,777,012

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY

 

$12,345,822

 

 

$15,544,455

 

 

* Giving retroactive effect to reverse recapitalization effected on April 4, 2025 and reverse stock split on March 9, 2026

 

See accompanying notes to the consolidated financial statements.

 

 
3

Table of Contents

 

CLASSOVER HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (EXPRESSED IN US DOLLARS)

 

 

 

For the Three Months Ended March 31,

 

 

 

2026

 

 

2025

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Revenues:

 

 

 

 

 

 

Service revenues

 

$519,198

 

 

$816,016

 

 

 

 

 

 

 

 

 

 

Total revenues

 

 

519,198

 

 

 

816,016

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Cost of revenues

 

 

258,300

 

 

 

410,650

 

 

 

 

 

 

 

 

 

 

Total cost of revenues

 

 

258,300

 

 

 

410,650

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

260,898

 

 

 

405,366

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling and marketing

 

 

45,021

 

 

 

121,427

 

General and administrative

 

 

1,096,156

 

 

 

573,539

 

Research and development

 

 

14,536

 

 

 

6,307

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

1,155,713

 

 

 

701,273

 

 

 

 

 

 

 

 

 

 

(Loss) from operations

 

 

(894,815)

 

 

(295,907)

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

Change in fair value of warrants

 

 

(77,625)

 

 

-

 

Change in fair value of crypto assets

 

 

(2,444,670)

 

 

-

 

Change in fair value of convertible debt

 

 

(860,631)

 

 

-

 

Staking rewards

 

 

84,680

 

 

 

-

 

Interest and other expense

 

 

5,527

 

 

 

(1,300)

 

 

 

 

 

 

 

 

 

Total other (expense)

 

 

(3,292,719)

 

 

(1,300)

 

 

 

 

 

 

 

 

 

(Loss) before provision for income taxes

 

 

(4,187,534)

 

 

(297,207)

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net (loss)

 

$(4,187,534)

 

$(297,207)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding-Preferred Stock-Series A*

 

 

522,801

 

 

 

1,000,000

 

Basic and diluted net income per share-Preferred Stock-Series A*

 

$(1,462,541)

 

$(219,607)

Weighted average shares outstanding-Preferred Stock-Series B*

 

 

2,295

 

 

 

-

 

Basic and diluted net income per share-Preferred Stock-Series B*

 

$(6,420)

 

$-

 

Weighted average shares outstanding-Preferred Stock-Series C*

 

 

2,000

 

 

 

-

 

Basic and diluted net income per share-Preferred Stock-Series C*

 

$(5,595)

 

$-

 

Weighted average shares outstanding-Class A Common Stock*

 

 

130,701

 

 

 

130,701

 

Basic and diluted net income per share-Class A Common Stock*

 

$(365,637)

 

$(28,703)

Weighted average shares outstanding-Class B Common Stock*

 

 

839,082

 

 

 

222,659

 

Basic and diluted net income per share-Class B Common Stock*

 

$(2,347,341)

 

$(48,897)

 

* Giving retroactive effect to reverse recapitalization effected on April 4, 2025 and reverse stock split on March 9, 2026

 

See accompanying notes to the consolidated financial statements.

 

 
4

Table of Contents

  

CLASSOVER HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED INTERIM CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

 (EXPRESSED IN US DOLLARS)

 

 

 

Preferred Stock-Series A*

 

 

Preferred Stock-Series A amount

 

 

Preferred Stock-Series B*

 

 

Preferred Stock-Series B amount

 

 

Preferred Stock-Series C*

 

 

Preferred Stock-Series C amount

 

 

Class A Common Stock*

 

 

Class A Common Stock amount

 

 

Class B Common Stock*

 

 

Class B Common Stock amount

 

 

Additional Paid-in Capital

 

 

Accumulated deficit

 

 

Total

 

Balance at December 31, 2025

 

 

522,801

 

 

$52

 

 

 

2,775

 

 

$1

 

 

 

2,000

 

 

$-

 

 

 

130,701

 

 

$13

 

 

 

496,434

 

 

$50

 

 

$15,421,485

 

 

$(11,644,589)

 

$3,777,012

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,187,534)

 

 

(4,187,534)

Conversion of convertible debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

529,749

 

 

 

53

 

 

 

3,899,804

 

 

 

-

 

 

 

3,899,857

 

Employee stock compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

43,000

 

 

 

4

 

 

 

188,956

 

 

 

-

 

 

 

188,960

 

Conversion of preferred stock to common stock

 

 

-

 

 

 

-

 

 

 

(900)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

93,104

 

 

 

9

 

 

 

(9)

 

 

-

 

 

 

-

 

Issuance of common stock for warrants excise

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,431

 

 

 

1

 

 

 

(1)

 

 

-

 

 

 

-

 

Balance at March 31, 2026 (Unaudited)

 

 

522,801

 

 

$52

 

 

 

1,875

 

 

$1

 

 

 

2,000

 

 

$-

 

 

 

130,701

 

 

$13

 

 

 

1,174,718

 

 

$117

 

 

$19,510,235

 

 

$(15,832,123)

 

$3,678,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2024

 

 

1,000,000

 

 

$100

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

130,701

 

 

$13

 

 

 

222,659

 

 

$22

 

 

$80,435

 

 

$(4,053,883)

 

$(3,973,313)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(297,207)

 

 

(297,207)

Balance at March 31, 2025 (Unaudited)

 

 

1,000,000

 

 

$100

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

130,701

 

 

$13

 

 

 

222,659

 

 

$22

 

 

$80,435

 

 

$(4,351,090)

 

$(4,270,520)

 

* Giving retroactive effect to reverse recapitalization effected on April 4, 2025 and reverse stock split on March 9, 2026

 

See accompanying notes to the consolidated financial statements.

 

 
5

Table of Contents

  

CLASSOVER HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (EXPRESSED IN US DOLLARS)

 

 

 

For the Three Months Ended March 31,

 

 

 

2026

 

 

2025

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net (loss)

 

$(4,187,534)

 

$(297,207)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

120,695

 

 

 

16,221

 

Amortization of operating lease right-of-use assets

 

 

78,061

 

 

 

75,221

 

Employee stock compensation

 

 

188,960

 

 

 

-

 

Change in fair value of warrants

 

 

77,625

 

 

 

-

 

Change in fair value of crypto assets

 

 

2,444,670

 

 

 

-

 

Change in fair value of convertible debt

 

 

860,631

 

 

 

-

 

Staking rewards

 

 

(84,680)

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Due from related parties

 

 

40,827

 

 

 

6,421

 

Prepayments and other current assets

 

 

(3,319)

 

 

12,119

 

Deposit

 

 

-

 

 

 

(5,000)

Accounts payable

 

 

(20,299)

 

 

530

 

Deferred revenues

 

 

(115,361)

 

 

(104,044)

Operating lease liabilities

 

 

(496)

 

 

(77,063)

Due to related parties

 

 

-

 

 

 

48,365

 

Accrued liabilities and other payables

 

 

(2,160)

 

 

36,171

 

Net cash (used in) operating activities

 

 

(602,380)

 

 

(288,266)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(32,583)

 

 

-

 

Net cash (used in) investing activities

 

 

(32,583)

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from promissory notes related party

 

 

-

 

 

 

318,000

 

Net cash provided by financing activities

 

 

-

 

 

 

318,000

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash

 

 

(634,963)

 

 

29,734

 

Cash, beginning of period

 

 

2,751,594

 

 

 

50,682

 

 

 

 

 

 

 

 

 

 

Cash, end of period

 

$2,116,631

 

 

$80,416

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest

 

$-

 

 

$-

 

Income taxes

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Noncash activities:

 

 

 

 

 

 

 

 

Issuance of common stock for warrants excise

 

 

1

 

 

 

-

 

Conversion of convertible debt to common stock

 

 

3,899,857

 

 

 

-

 

Conversion of preferred stock to common stock

 

 

9

 

 

 

-

 

 

See accompanying notes to the consolidated financial statements.

 

 
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 CLASSOVER HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREETHREE MONTHS ENDED MARCH 31, 2026 AND 2025

(UNAUDITED)

 

Note 1. Description of the Business and Basis of Presentation

 

Classover Holdings, Inc. (the “Company”) is a company incorporated on May 2, 2024 under Delaware law as a wholly owned subsidiary of the Battery Future Acquisition Corp., a Cayman Islands exempted Company (the “BFAC”).

 

On April 4, 2025, upon the closing of the business combination (the “Closing”), BFAC Merger Sub 1 Corp. (“Merger Sub 1”) merged with and into BFAC (the “Reorganization Merger”), with BFAC being the surviving corporation of the Reorganization Merger and becoming a wholly-owned subsidiary of the Company, and then, immediately following the consummation of the Reorganization Merger, BFAC Merger Sub 2 Corp. (“Merger Sub 2”) merged with and into Class Over Inc. (“Classover DE”), with Classover DE being the surviving corporation of the acquisition merger and becoming a wholly-owned subsidiary of the Company.

 

The Merger is considered as a reverse recapitalization in accordance with Accounting Standards Codification (“ASC”) 805-40. Under this method of accounting, BFAC will be treated as the “acquired” company for financial reporting purposes. This determination is primarily based on Classover DE stockholders comprise majority of the voting power of the Company, directors appointed by Classover DE constituting majority of the Company’s board of directors, Classover DE’s operations prior to the merger comprising the only ongoing operations of the Company, and Classover DE’s senior management comprising all of the senior management of the Company.

 

Accordingly, for accounting purposes, the financial statements of the Company will represent a continuation of the financial statements of Classover DE with the merger treated as the equivalent of Classover DE issuing stock for the net assets of BFAC, accompanied by a recapitalization. The net assets of BFAC will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the merger will be presented as those of Classover DE in financial statements of the Company. The consolidation of the Company and its subsidiaries have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements in accordance with ASC 805-50-45-5. All share and per share data has been retroactively restated to reflect the current capital structure of the Company.

 

Classover DE was formed on March 16, 2022 as a holding company in Delaware, which was 100% controlled by the sole owner Hui Luo. Class Over Inc. (“Classover NJ”) was formed on June 16, 2020 in New Jersey, which was 100% controlled by the sole owner Hui Luo. Classover NJ is an online enrichment program that offers over 20 courses taught by certified instructors. It caters to children aged 4 to 17, providing personalized attention and a supportive learning environment. On April 19, 2022, Classover DE entered into a stock transfer agreement with Classover NJ. After the share exchange, Classover DE owned 100% of Classover NJ. 

 

Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”), regarding financial reporting, and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operating results. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of results to be expected for any other interim period or for the full year of 2026. Accordingly, these statements should be read in conjunction with the Company’s audited financial statements and notes thereto as of and for the years ended December 31, 2025 and 2024.

 

 
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Note 2. Summary of Significant Accounting Policies

 

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.

 

Liquidity and Going Concern

 

As of March 31, 2026, the Company had cash of $2,116,631, current liabilities of $2,260,061, a working capital deficit of $125,316 and a stockholders’ equity of $3,678,295. For the three months ended March 31, 2026 and 2025, the Company had loss of $4,187,534 and $297,207, respectively. The continuing losses raise substantial doubt about the ability of the Company to continue as a going concern. The Company completed business combination with Battery Future Acquisition Corp (the “BFAC”) on April 3, 2025 and received $1,075,936 from BFAC’s trust account. Additionally, on May 30, 2025, the Company entered into a Securities Purchase Agreement with an investor and the Company may sell to the investor up to an aggregate of $500 million in newly issued senior secured convertible notes (the “Notes”).  On June 6, 2025, the Company consummated the initial closing of $11 million of Notes. Management of the Company has evaluated the mitigation plans and determined that the current working capital, cash position, and Notes available for future issuance are sufficient to support its continuous operations and to meet its payment obligations when liabilities fall due within the next twelve months from the date of issuance of these combined and consolidated financial statements. Accordingly, the Company’s combined and consolidated financial statements are prepared on going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.

 

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 courses.  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 a single performance obligation which is satisfied ratably over the service period. We charge fixed fees for 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.

 

 
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Consulting Revenue

 

The Company also generates revenue from consulting services. The Company’s consulting program is designed to teach startup founders within the education sector how to market their product, refine their course content, infrastructure, and business models, achieve market fit and operating efficiency, and scale the startup into a high growth education business. The Company’s performance obligation is to provide consulting services to startup founders for a specific term. Customers are required to prepay the full consulting service charge, which is fixed and determinable, at contract inception to secure program spot, and revenue is recognized over time on a straight-line basis through the service term.

 

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 the 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 occurs. 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 sessions 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.

 

Referral Incentives

 

Referral incentives are course credits that we offer to our customers for referring new customers. The incentives are expensed as incurred when the credits are consummated and the corresponding expenses, which are independent educators’ compensation allocated to service the referral credits, are included in selling expenses.

 

Cash and Cash Equivalents

 

Cash consists primarily of cash on hand and bank deposits. The Company maintains cash deposits with financial institutions that may exceed federally insured limits at times. The following table shows the breakout between cash on hand and bank deposits.

 

 

 

March 31, 2026

 

 

December 31, 2025

 

 

 

 

 

 

 

 

Cash on hand

 

$3,146

 

 

$3,144

 

Bank deposits

 

 

2,113,485

 

 

 

2,748,450

 

Total cash shown in the Statement of Cash Flows

 

$2,116,631

 

 

$2,751,594

 

 

 
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Deposits

 

Deposits consist of credit card security deposits, which paid to the bank upon the account open. Management regularly reviews the age of these deposits and changes in payment trends and records an allowance when management believes collection of amounts due are at risk. Accounts considered uncollectible are written off against the allowance after exhaustive efforts at collection is made. As of March 31,2026, there was no allowance for deposits.

 

Property and Equipment

 

Property and equipment primarily includes computers and furniture 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. 

 

Certain digital assets are pledged as collateral under the Company’s Senior Secured Convertible Notes. Pursuant to the terms of the Securities Purchase Agreement and related Security Documents, approximately 80% of the net proceeds from the issuance of the Notes are required to be used to acquire specified digital assets and deposited into a controlled collateral account for the benefit of the noteholder. These pledged digital assets are subject to a first priority security interest and are held in a block control account while the Notes remain outstanding. Digital assets that are subject to contractual restrictions or are pledged as collateral and not available for general corporate purposes are classified as restricted digital assets. Restricted digital assets are presented separately on the Company’s consolidated balance sheets or disclosed parenthetically within digital assets.

 

The Company earns staking rewards from certain digital assets held by the Company. Staking rewards are recognized as income when earned and measured at fair value at the time of receipt. Such rewards are not subject to contractual restrictions and are classified as unrestricted digital assets.

 

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.

 

 
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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 March 31, 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, accounts payable, deferred revenues, interest payable, due to related parties, 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 are expensed as incurred and include compensation-related expenses to the outsourced subcontractors for maintenance of our online learning platform.

 

Segment Information and Geographic Data

 

FASB ASC 280, Segment Reporting, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in consolidated financial statements for details on the Company’s business segments.

 

The Company uses the management approach to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance. The Company’s CODM has been identified as the CEO, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. Based on management’s assessment, the Company determined that it has only one operating segment and therefore one reportable segment as defined by ASC 280.

 

Advertising Costs

 

Advertising costs amounted to $5,075 and $7,402 for the three months ended March 31, 2026 and 2025, respectively. Advertising costs are expensed as incurred and included in selling expenses.

 

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.

 

 
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Operating Leases

 

Effective January 1, 2022, the Company adopted ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require the Company to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. On November 1, 2022, the Company recognized approximately $2.2 million of right of use (“ROU”) assets and operating lease liabilities based on the present value of the future minimum rental payments of the sublease with related party Dream Go for its office space expiring on October 31,2029, using an incremental borrowing rate of 4%.

 

The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty. The Company’s real estate sublease has been classified as an operating lease.

 

Since the implicit rate for the Company’s sublease was not readily determinable, the Company used its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.

 

The Company generally considers the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception; therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Our sublease does not provide a residual guarantee. The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term.

 

The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and includes the associated operating lease payments in the undiscounted future pre-tax cash flows.

 

Earnings (loss) per Share

 

The Company computes earnings (loss) per share (“EPS”) in accordance with FASB ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average ordinary shares outstanding for the period. Diluted EPS presents the diluted effect on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the three months ended March 31, 2026 and 2025, the convertible notes payable were excluded from the calculation of diluted EPS as their inclusion would have been anti-dilutive.

 

Recently Adopted Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which modifies the measurement of expected credit losses of certain financial instruments. This new guidance was effective for private companies for fiscal years beginning after December 15, 2021, but early adoption was permitted. The adoption of this guidance did not have an impact on our consolidated financial statements and related disclosures.

 

 
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In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 requires in-scope crypto assets (including the Company's bitcoin holdings) to be measured at fair value in the statement of financial position, with gains and losses from changes in the fair value of such crypto assets recognized in net income each reporting period. ASU 2023-08 also requires certain interim and annual disclosures for crypto assets within the scope of the standard. The Company adopted this guidance effective January 1, 2025.

 

Note 3. Property and Equipment, net

 

Property and equipment consists of the following as of March 31, 2026 and December 31, 2025:

 

 

 

March 31, 2026

 

 

December 31, 2025

 

Computers and electronic equipment

 

$57,570

 

 

$55,532

 

Robots

 

 

30,545

 

 

 

-

 

Furniture and fixtures

 

 

92,052

 

 

 

92,052

 

Leasehold improvements

 

 

177,865

 

 

 

177,865

 

Total property and equipment

 

 

358,032

 

 

 

325,449

 

Less: accumulated depreciation

 

 

(185,484 )

 

 

(170,736)

Total property and equipment, net

 

$172,548

 

 

$154,713

 

 

Depreciation expense was $14,748 and $16,221 for the three months ended March 31, 2026 and 2025, respectively. Depreciation expense is included within general and administrative expenses in the Company’s statements of operations.

 

Note 4.  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 accounts for its crypto assets, which are currently primarily consisting of Solana and Worldcoin, as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other and ASU 2023-08. The Company’s crypto assets are initially recorded at cost and subsequently are measured at fair value as of each reporting period. The Company determines the fair value of its crypto assets in accordance with ASC 820, Fair Value Measurement, based on quoted (unadjusted) prices on the Coinbase exchange, the active exchange that the Company has determined is its principal market for bitcoin (Level 1 inputs). Changes in fair value are recognized in the Company’s consolidated statement of operations.

 

As of March  31, 2026, digital assets with a fair value of $4,729,446 were pledged as collateral under the Company’s Senior Secured Convertible Notes. Pursuant to the terms of the Securities Purchase Agreement, approximately 80% of the net proceeds from the issuance of the Notes were required to be used to acquire specified digital assets and deposited into a controlled collateral account for the benefit of the noteholder. Such digital assets are subject to a first priority security interest and are not available for general corporate purposes while the notes remain outstanding.

 

 
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The following table summarizes the Company’s digital asset holdings, as of:

 

 

 

March 31, 2026

 

 

December 31, 2025

 

Number of Solana-purchased (restricted)

 

 

56,908.26

 

 

 

56,908.26

 

Number of Solana- Staking rewards

 

 

2,505.39

 

 

 

1,672.82

 

Number of World Coin purchased

 

 

24,690.80

 

 

 

24,690.80

 

Number of World Coin - Staking rewards

 

 

-

 

 

 

-

 

Crypto asset purchased carrying value

 

$8,578,600

 

 

$8,578,600

 

Staking rewards

 

 

376,012

 

 

 

291,333

 

Unrealized gain (loss) on crypto assets

 

 

(4,009,841 )

 

 

(1,565,173)

Total investment accounts

 

$4,944,771

 

 

$7,304,760

 

 

Note 5. Intangible Assets

 

On June 30, 2025, the Company acquired certain intellectual property rights and trademarks (“IP”) with fair value $8,500,000 from Silver Run Group, LLC and its wholly owned subsidiary, Deer Creek IP, LLC, which are expected to enhance the Company’s development and future commercialization strategy. The total consideration for the acquisition was approximately $5,775,000, consisting of the following components:

 

 

·

Cash consideration of $1,250,000;

 

·

Issuance of 16,000 shares of the Company’s Class B common stock (reflecting the March 2026 reverse stock split; 800,000 shares on a pre-split basis, valued at $2.94, totaling $2,352,000, based on the fair value of the shares on the acquisition date);

 

·

Issuance of warrants to purchase 14,786 shares of Class B common stock (reflecting the March 2026 reverse stock split; 739,278 shares on a pre-split basis, with an exercise price of $0.01 per share and an expiration date of June 30, 2030. The pre-funded warrants are exercisable on a cash or cashless basis and are subject to a 9.9% beneficial ownership blocker.) The fair value of the warrants on the acquisition date was estimated at $2.94 using the Black-Scholes option pricing model with the following assumptions:

 

 

○

Expected term: 5 years

 

○

Expected volatility: 4.43%

 

○

Risk-free interest rate: 4.2460%

 

○

Dividend yield: 0%

 

The Company accounts for asset acquisitions in accordance with ASC 805-50, Business Combinations – Related Issues. An asset acquisition occurs when a transaction does not meet the definition of a business under ASC 805-10. In such cases, the total cost of the acquisition, including consideration transferred, transaction costs, and other directly attributable costs. No bargain purchase gain is recognized in an asset acquisition.

 

All equity securities issued in the transaction are subject to a nine-month lock-up pursuant to a Lock-Up Agreement entered into on the same date. The acquired IP is recorded as an intangible asset and is being amortized over its estimated useful life of 10 years. Amortization expense related to the acquired IP for the three months ended March 31, 2026 was $105,947.

 

During the year ended December 31, 2025, the Company identified indicators of impairment related to the IP. The Company performed a recoverability test by comparing the carrying amount of the IP to the estimated undiscounted future cash flows. As a result of this analysis, the Company determined that the carrying amount was not recoverable.

 

Accordingly, the Company recorded an impairment loss of $1,460,704 for the year ended December 31, 2025, representing the excess of the carrying amount over the estimated fair value of the IP. No additional impairment loss was recorded for the three months ended March 31, 2026.

 

The fair value of the Company’s patented technology was determined in accordance with ASC 820 using an income approach, specifically the relief-from-royalty method. Under this method, the fair value was estimated based on the present value of projected future royalty savings attributable to the ownership of the patented technology.

 

The valuation incorporated significant assumptions, including forecasted revenues provided by management, royalty rates ranging from approximately 5.0% to 12.0% based on comparable licensing transactions, and a discount rate of approximately 23.0%, which reflects the Company’s weighted average cost of capital and the risks associated with achieving the projected cash flows.

 

 
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The fair value measurement is classified as Level 3 within the fair value hierarchy due to the use of significant unobservable inputs

 

As of March 31, 2026, the fair value of the patented technology was determined to be $3,920,053.

 

Following the impairment, the Company revised the remaining useful life and amortization of the intangible asset. Future amortization is expected to be as follows:

 

Year ended December 31,

 

 

 

2026

 

$317,842

 

2027

 

 

423,789

 

2028

 

 

423,789

 

Remaining

 

 

2,754,633

 

Total

 

$3,920,053

 

 

Note 6. Leases

 

On November 1, 2022, the Company entered into an operating sublease with a related party Dream Go for its office space located at 450 7th Avenue, Suite 905, New York, NY 10123 expiring on October 31, 2029. On November 1, 2022, the Company recognized approximately $2.2 million of right of use (“ROU”) assets and operating lease liabilities based on the present value of the future minimum rental payments of the sublease, using an incremental borrowing rate of 4%.

 

As of March  31, 2026, the Company’s operating sublease had a remaining lease term of approximately 3.6 years.

 

For the quarter ended March 31, 2026 and 2025, rent expense for the operating sublease was $90,253.

 

The Company’s sublease obligations as of March 31, 2026 are presented below:

 

Year ending December 31,

 

 

 

2026

 

$229,523

 

2027

 

 

388,790

 

2028

 

 

407,405

 

Remaining

 

 

310,115

 

Total future lease payments

 

 

1,335,833

 

Less: Interest

 

 

(94,835 )

Present value of lease liabilities

 

$1,240,998

 

 

Future amortization of the Company’s ROU assets is presented below:

 

Year ended December 31,

 

 

 

2026

 

$236,092

 

2027

 

 

326,160

 

2028

 

 

340,709

 

Remaining

 

 

265,744

 

Total

 

$1,168,705

 

 

 
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Subleases

 

On November 1, 2022, the Company entered into sublease agreements with related parties (1) Dream Legal Group, Inc., (2) Tigerless Health, Inc., and (3) First Cover, Inc. to sub rent portions of its office space located at 450 7th Avenue, Suite 905, New York, NY 10123. These subleases are month-to-month leases starting on November 1, 2022 and ending upon a notice of 30 days from either party.

 

On July 1, 2024, the Company terminated the subleases with Tigerless Health, Inc, and First Cover, Inc. Sublease income is recognized on the straight-line basis over the lease term. Billed and uncollected operating lease receivables will be included in due from related parties which are stated at their estimated net realizable value.

 

For the three months ended March 31, 2026 and 2025, the Company’s income from these subleases totaled $4,666 and $24,854 respectively (which has been reflected as a reduction of general and administrative expenses in the accompanying consolidated Statements of Operations).

 

Note 7. Accrued Liabilities and Other Payables

 

 Accrued liabilities and other payables consisted of the following:

 

 

 

March 31, 2026

 

 

December 31, 2025

 

Credit card payable

 

$23,572

 

 

$31,268

 

Payroll tax payable

 

 

10,445

 

 

 

4,910

 

Total

 

$34,017

 

 

$36,178

 

 

Note 8. Income Taxes

 

The Company had nil income tax provision for the three months ended March 31, 2026 and 2025.

 

 

 

For the three months ended

March 31,

 

 

 

2026

 

 

2025

 

Deferred income tax expense

 

$-

 

 

$-

 

Current income tax expense

 

 

-

 

 

 

-

 

Total

 

$-

 

 

$-

 

 

The Company has the following deferred tax assets (liabilities) as of March 31, 2026 and December 31 2025:

 

 

 

As of March 31, 2026

 

 

As of December 31, 2025

 

Net operating loss carryforwards

 

$1,937,479

 

 

$1,768,511

 

Change in fair value of crypto assets

 

 

842,067

 

 

 

328,686

 

Change in fair value of convertible debt

 

 

350,350

 

 

 

169,618

 

Impairment loss on intangible assets

 

 

306,748

 

 

 

306,748

 

Other expense temporary difference

 

 

2,813

 

 

 

2,813

 

Total deferred tax assets

 

 

3,439,457

 

 

 

2,576,376

 

Deferred tax liability- Depreciation

 

 

(2,263 )

 

 

(2,263 )

Allowance

 

 

(3,437,194 )

 

 

(2,574,113)

Net deferred tax liability

 

$-

 

 

$-

 

 

 
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The Company evaluated the recoverable amounts of deferred tax assets, and provided a valuation allowance to the extent that future taxable profits will not be available against which the net operating loss and temporary differences can be utilized. A valuation allowance is provided against deferred tax assets when the Company determines that it is more likely than not that the deferred tax assets will not be utilized in the future. In making such determination, the Company considered factors including future taxable income exclusive of reversing temporary differences and tax loss carry forwards. The Company has provided a valuation allowance for the net deferred tax asset as it is not more likely than not that the asset will be realized.

 

The provision for income taxes differs from the amounts computed by applying the federal statutory rate as follows for the periods ended March 31, 2026 and 2025:

 

 

 

March  31, 2026

 

 

March 31, 2025

 

Federal statutory rate

 

 

21.0%

 

 

21.0%

Nondeductible expense

 

 

(0.4 )%

 

 

-

 

Valuation allowance

 

 

(20.6 )

 

 

(21.0 )

 

 

 

 

 

 

 

 

 

Effective income tax rate

 

 

0.0%

 

 

0.0%

 

The effective tax rate for the three months ended March 31, 2026 and 2025 is less than the statutory rate primarily as a result of the valuation allowance for net deferred tax assets.

 

No uncertain tax benefits have been recorded for the three months ended March 31, 2026 and 2025.

 

On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” (the “Act”) was signed into law. The Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company analyzed the provisions of the Act and determined there was no significant impact to its income taxes for the periods presented.

 

As of March 31, 2026, Classover NJ and Classover Holdings, Inc. has approximately $8,379,483 and $846,608 in federal net operating loss carryforwards, respectively. These loss carryforwards have an indefinite life.

 

The Company’s tax years 2023 and forward generally remain subject to examination by federal and state tax authorities.

 

Note 9. Related parties

 

As of March 31, 2026 and 2025, The Company has related party transactions with the following affiliates and affiliated entities:

 

Related Party Name

Relationship

Hui Luo

Majority owner of the Company

Liu Yi

Spouse of Hui Luo

Dream Legal Group, Inc

 

An entity controlled by Hui Luo

Ideal Force LLC

 

An entity controlled by Yi Liu

Dreamgo Inc.

 

An entity controlled by Hui Luo

 

 
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Due from related parties

 

 

 

March 31, 2026

 

 

December 31, 2025

 

 

 

 

 

 

 

 

Dream Legal Group, Inc.

 

 

4,666

 

 

 

45,493

 

Total due from related parties

 

$4,666

 

 

$45,493

 

 

Due to related parties

 

 

 

March 31,  2026

 

 

December 31, 2025

 

 

 

 

 

 

 

 

Due to Dream Go Inc.

 

 

63,316

 

 

 

63,316

 

Total due to related parties - current

 

$63,316

 

 

$63,316

 

 

The following table represents related party transactions for the quarter ended March 31, 2026 and 2025:

 

 

 

 

Three Months Ended

December 31,

 

Name

 

Business Purpose of Transaction

 

2026

 

 

2025

 

Dream Legal Group, Inc

 

Sublease income

 

$4,666

 

 

$23,471

 

Dreamgo Inc.

 

Rent expense

 

 

90,253

 

 

 

90,253

 

Yi Liu

 

Interest expense

 

 

—

 

 

 

161

 

Luo Hui

 

Interest expense

 

 

—

 

 

 

1,300

 

Totals

 

 

 

$94,919

 

 

$115,185

 

 

Sublease income has been reflected as a reduction of general and administrative expenses in the accompanying consolidated statements of operations.

 

As of March 31, 2026 and December 31, 2025, the Company has the following ROU assets and operating lease liabilities recognized from related party under ASC 842 (Note 4):

 

 

 

 

 

March 31, 2026

 

 

December 31, 2025

 

Dreamgo Inc.

 

ROU assets

 

$1,168,705

 

 

$1,246,766

 

Dreamgo Inc.

 

Short term obligation under operating leases

 

$(280,678 )

 

$(195,353 )

Dreamgo Inc.

 

Long term obligation under operating leases

 

$(960,320 )

 

$(1,046,141 )

 

Note 10. Convertible notes

 

2025 Convertible Notes

 

On May 30, 2025, the Company entered into a Securities Purchase Agreement for up to an aggregate of $500 million in newly issued senior secured convertible notes (the “2025 Convertible Notes”). The Purchase Agreement provides for an initial closing of $11 million of convertible notes, subject to customary closing conditions.  The Company has agreed, subject to certain exceptions contained in the Purchase Agreement, to use 80% of the net proceeds from the  notes to purchase certain cryptocurrency as set forth in the Purchase Agreement.

 

The Notes will be convertible into Class B common stock of the Company at the option of the holder at an initial conversion price equal to 200% of the closing price of the Common Stock on the trading day immediately prior to the closing date, subject to adjustment as provided for in the Notes.  Interest is payable under the notes at a rate of 7% per annum and is payable, quarterly, at the option of the Company in cash, through the issuance of additional notes or, under certain situations, through the issuance of shares of Common Stock.  The Notes will rank senior to all outstanding and future indebtedness of the Company and its subsidiaries (subject to certain exceptions contained in the notes) and will be secured by a first priority perfected security interest in all of the existing and future assets of the Company and its direct and indirect subsidiaries, including all of the capital stock of each of the subsidiaries and the cryptocurrency purchased with the proceeds of the Notes. The Notes are due on the two-year anniversary of the date of issuance unless earlier converted or repaid.

 

 
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Description of 2025 Convertible Note upon issuance:

 

Issue Date

June 6, 2025

Face Value

$11,000,000

Maturity

June 6, 2027

Coupon

7.0% per annum, quarterly, PIK-eligible

Conversion Price

Initially $7.36 subject to adjustments

Floor Price

$0.74 per share

Redemption

120% upon Issuer’s Call, 0% on Maturity

Use of Proceeds

80% for SOL investment; 20% for operations

 

During the fourth quarter ended December 31, 2025, the Company converted an aggregate principal amount of $3,225,000 of convertible notes into equity securities in accordance with the terms of the note agreements. Upon conversion, $2,000,000 of the notes were converted into 2,000 shares of Series C Preferred Stock, and $1,225,000 of the notes were converted into 53,526 shares of Class B Common Stock (reflecting the March 2026 reverse stock split; 2,675,975 shares on a pre-split basis). The Company had elected the fair value option for the convertible notes in accordance with ASC 825-10, Financial Instruments. Accordingly, the convertible notes were measured at fair value at each reporting date, with changes in fair value recognized in earnings. At the conversion date, the equity instruments issued were measured based on the quoted market price of the Company’s common stock on the conversion date. The fair value of the Series C Preferred Stock and Class B Common Stock issued upon conversion was $2,109,774 and $1,496,183, respectively.

 

During the three months ended March 31, 2026, the Company converted an aggregate principal amount of $2,742,500 of convertible notes into equity securities in accordance with the terms of the note agreements. Upon conversion, $2,742,500 of the notes were converted into 529,749 shares of Class B Common Stock (reflecting the March 2026 reverse stock split; 26,487,424 shares on a pre-split basis). The Company had elected the fair value option for the convertible notes in accordance with ASC 825-10, Financial Instruments. Accordingly, the convertible notes were measured at fair value at each reporting date, with changes in fair value recognized in earnings. At the conversion date, the equity instruments issued were measured based on the quoted market price of the Company’s common stock on the conversion date. The fair value of the Class B Common Stock issued upon conversion was $3,899,856.

 

Immediately prior to conversion, the carrying value of the convertible notes approximated their fair value. As a result, the derecognition of the convertible notes and issuance of equity securities did not result in a material gain or loss upon conversion. The carrying value of the notes was reclassified to equity upon issuance of the shares.

 

The Company elected the fair value option (“FVO”) under ASC 825 for its senior secured convertible notes issued on June 6, 2025. Accordingly, the convertible notes are measured at fair value at each reporting date, with changes in fair value recognized in earnings within other income (expense), net.

 

The fair value of the convertible notes was estimated using a lattice (binomial tree) model, which captures the hybrid nature of the instrument, including the embedded conversion feature, issuer redemption option, payment-in-kind (“PIK”) interest accretion, floor-price reset provisions, and contractual call premiums. The valuation incorporates market participant assumptions consistent with ASC 820 and is classified within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs. As of March 31, 2026 and December 31, 2025, the aggregate contractual principal amount of the convertible notes was $5,162,521 and $5,032,500.

 

 
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Level 3 Quantitative Inputs

 

The significant inputs used in the valuation as of December 31, 2025 were as follows:

 

Input

 

December 31, 2025

 

 

March 31, 2026

 

Face value

 

$7,775,000

 

 

$5,032,500

 

Fair value

 

$8,201,746

 

 

$5,162,522

 

Volatility

 

 

100.0%

 

 

94.0%

Risk-free rate

 

 

3.48%

 

 

3.68%

Remaining contractual term

 

1.43 years

 

 

1.18 years

 

PIK interest rate

 

 

7.00%

 

 

7.00%

Stock price

 

$0.178

 

 

$0.0616

 

Conversion price (floor)

 

$0.74

 

 

$0.74

 

Redemption premium

 

 

120%

 

 

120%

 

The Company applied a contractual floor conversion price of $0.74 per share, as the market-price reset formula would otherwise have resulted in a lower conversion price based on 95% of the lowest six-day VWAP. The Company did not separately isolate the portion of the fair value change attributable to instrument-specific credit risk. The fair value measurement primarily reflects changes in the Company’s stock price, expected volatility, time to maturity, collateral coverage triggers, conversion reset provisions, and other market-based factors. No separate credit spread or own-credit adjustment was applied in the valuation model. The fair value of the convertible notes is sensitive to changes in expected volatility, which represents a significant unobservable input.

 

Based on the sensitivity analysis performed as of December 31, 2025, a hypothetical 10% increase in expected volatility would have decreased the fair value by approximately $220,805, while a 10% decrease would have decreased the fair value adjustment to approximately $44,519, with all other assumptions held constant. Based on the sensitivity analysis performed as of March 31, 2026, increasing volatility from 94% to 120% would decrease the fair value by approximately $128,332, while decreasing volatility from 94% to 80% would increase the fair value by approximately $149,096.

 

The following table summarizes the changes in the fair value of the Company’s convertible notes classified within Level 3 of the fair value hierarchy:

 

Fair value at December 31, 2024

 

 

-

 

Initial recognition at principal amount

 

 

11,000,000

 

Changes in fair value recognized in earnings

 

 

807,703

 

Conversion into common and preferred stock

 

 

(3,605,957)

Fair value at December 31, 2025

 

 

8,201,746

 

Changes in fair value recognized in earnings

 

 

860,631

 

Conversion into common stock

 

 

(3,899,856)

Fair value at March 31, 2026

 

 

5,162,521

 

 

Note 11. Warrant Liabilities

 

In connection with the Reorganization Merger, the Company has assumed 345,000 warrants outstanding (reflecting the March 2026 reverse stock split; 17,250,000 warrants on a pre-split basis) from BFAC public shareholders.

 

 
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Each whole warrant entitles the holder to purchase one ordinary share at a price of $11.50 per share, subject to adjustment as described below, commencing 30 days after the completion of its initial business combination, and expiring five years from after the completion of an initial business combination. No fractional warrant will be issued and only whole warrants will trade.

 

The Company may redeem the warrants at a price of $0.01 per warrant upon 30 days’ notice, only in the event that the last sale price of the ordinary shares is at least $18.00 (as adjusted for share sub-divisions, share dividends, reorganizations and recapitalizations) per share for any 20 trading days within a 30-trading day period ending on the third day prior to the date on which notice of redemption is given, provided there is an effective registration statement and current prospectus in effect with respect to the ordinary shares underlying such warrants during the 30 day redemption period. If the Company redeems the warrants as described above, management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” If a registration statement is not effective within 90 days following the consummation of a business combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their warrants on a cashless basis and in no event (whether in the case of a registration statement being effective or otherwise) will the Company be required to net cash settle the warrant exercise. If an initial business combination is not consummated, the warrants will expire and will be worthless.

 

In addition, if (a) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of its initial business combination at a newly issued price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by our board of directors and, in the case of any such issuance to our initial shareholders or their affiliates, without taking into account any founders’ shares held by the Company’s initial shareholders or such affiliates, as applicable, prior to such issuance), (b) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial business combination on the date of the consummation of the Company’s initial business combination (net of redemptions), and (c) the volume weighted average trading price of the Company’s ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial business combination is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the market value and the newly issued price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the market value and the newly issued price.

 

The Company accounts for the 345,000 warrants (reflecting the March 2026 reverse stock split; 17,250,000 warrants on a pre-split basis) issued in connection with the Public Offering of BFAC in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. Accordingly, the Company classifies each warrant as a liability at its fair value. This liability is subject to remeasurement at each condensed balance sheet date. With each such remeasurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s unaudited condensed statements of operations.  

 

The following table presents the changes in the fair value of warrant liabilities: 

 

Fair value as of December 31, 2025

 

$207,000

 

Change in fair value

 

 

77,625

 

Fair value as of March 31, 2026

 

$284,625

 

 

 
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Note 12. Recurring fair value measurements 

 

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP (as defined in Note 2) establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of: 

 

 

·

Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;

 

 

 

 

·

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and 

 

 

 

 

·

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

The following tables present fair value information as of March 31, 2026, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value: 

 

March 31, 2026

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Investment- Crypto asset

 

$4,944,771

 

 

$-

 

 

$-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$284,625

 

 

$-

 

 

$-

 

Convertible notes payable

 

$-

 

 

$-

 

 

$5,162,521

 

 

December 31, 2025

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Investment- Crypto asset

 

$7,304,760

 

 

$-

 

 

$-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$207,000

 

 

$-

 

 

$-

 

Convertible notes payable

 

$-

 

 

$-

 

 

$8,201,746

 

 

Note 13. Segment information and revenue analysis

 

The Company follows ASC 280, Segment Reporting, which requires that companies disclose segment data based on how management makes decisions about allocating resources to each segment and evaluating their performances. The Company has one reporting segment. The Company’s chief operating decision maker has been identified as the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company and hence the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting.

 

Disaggregated information of revenues by stream are as follows:

 

 

 

Three Months Ended

 

 

 

March 31, 2026

 

 

March 31, 2025

 

Revenues:

 

 

 

 

 

 

Time-based subscriptions

 

$131,296

 

 

$253,238

 

Credit-based subscriptions

 

 

387,902

 

 

 

562,778

 

Total revenues

 

$519,198

 

 

$816,016

 

 

 
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Note 14. Commitments and Contingencies

 

Legal Proceedings

 

The Company may be involved in various claims and legal actions arising in the ordinary course of business. The Company establishes an accrued liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable. At March 31, 2026, the Company was not involved in any material legal proceedings regarding claims or legal actions against the Company.

 

Note 15. Equity

 

As of March 31, 2026, the total number of shares which the Company shall have the authority to issue is 51,000,000 shares (reflecting the March 2026 reverse stock split; 510,000,000 shares on a pre-split basis), which include 1,000,000 shares of Class A common stock (reflecting the March 2026 reverse stock split; 50,000,000 shares on a pre-split basis, par value $0.0001 per share), 40,000,000 shares of Class B common stock (reflecting the March 2026 reverse stock split; 200,000,000 shares on a pre-split basis, par value $0.0001 per share, par value $0.0001 per share), and 10,000,000 shares of preferred stock. The Preferred Stock authorized by this Certificate of Incorporation may be issued in series. Each Series A Preferred Shares are convertible to Class B Common Shares on a 50 to 1 basis , Each Series B and Series C Preferred Shares are convertible to Class B Common Shares. The conversion price of Series B Preferred Shares are the greater of 92% of the lowest Volume Weighted Average Price (“VMAP”) of the stock price five days before conversion, or adjusted floor price. The conversion price of Series C Preferred Shares are the lower of 95% of the lowest VMAP of the stock price six days before conversion, or initial conversion price. Holders of shares of Common Stock will exclusively possess all voting power with respect to the Company and are entitled vote on all matters submitted to the Company’s stockholders for their vote or approval. Each share of Class A Common Stock has the voting power of twenty-five votes and each share of Class B Common Stock has the voting power of one vote.

 

Reverse Recapitalization and De-SPAC Merger

 

On April 4, 2025, The Company consummated a business combination with Classover DE and BFAC (the SPAC), resulting in a reverse recapitalization. As part of the transaction:

 

 

·

Former Classover DE shareholders received 12,500,000 shares of Company’s equity, including:

 

 

○

130,701 Class A common shares to Hui Luo (reflecting the March 2026 reverse stock split; 6,535,014 shares on a pre-split basis)

 

 

○

30,638 Class B common shares to other Classover shareholders (reflecting the March 2026 reverse stock split; 1,531,864 shares on a pre-split basis)

 

 

○

1,000,000 Series A Preferred Shares to Classover equity holders

 

 

○

88,663 Class B common shares to convertible note holders upon conversion (reflecting the March 2026 reverse stock split; 4,433,122 shares on a pre-split basis)

 

·

BFAC Sponsor received 192,021 Class B common shares (reflecting the March 2026 reverse stock split; 9,600,000 shares on a pre-split basis)

 

·

Remaining BFAC IPO investors were issued 3,368 Class B common shares (reflecting the March 2026 reverse stock split; 168,356 shares on a pre-split basis), representing residual trust shares post-redemptions (3,683,125 original shares less 3,514,769 redeemed)

 

·

345,000 warrants (reflecting the March 2026 reverse stock split; 17,250,000 warrants on a pre-split basis were exchanged 1-for-1 with original BFAC warrant holders)

 

These equity issuances were part of the reverse recapitalization and accounted for in accordance with ASC 805-40. No goodwill or intangible assets were recorded. The conversion of convertible notes was accounted for in accordance with ASC 470-20, with no gain or loss recognized upon conversion.

 

 
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Shares issued in connection with the Company’s Merger on April, 4, 2025:

 

 

 

Common Share- reflecting the March 2026 reverse stock split

 

 

Common Share- on a pre-split basis

 

 

 

 

 

 

 

 

Holders of BFAC public shareholders – Class B

 

 

3,368

 

 

 

168,356

 

BFAC sponsors – Class B

 

 

192,021

 

 

 

9,600,000

 

Founder of Classover DE – Class A

 

 

130,701

 

 

 

6,535,014

 

Rest of Classover DE shareholders prior to merger – Class B

 

 

30,638

 

 

 

1,531,864

 

Convertible note holders of Classover Inc. prior to merger – Class B

 

 

88,663

 

 

 

4,433,122

 

Classover DE equity holders-Series A Preferred Shares

 

 

1,000,000

 

 

 

1,000,000

 

Total Class A common shares

 

 

130,701

 

 

 

6,535,014

 

Total Class B common shares

 

 

314,690

 

 

 

15,733,342

 

Total Series A Preferred Shares

 

 

1,000,000

 

 

 

1,000,000

 

 

PIPE Investment

 

On April 4 and April 14, 2025, a PIPE investor invested $5,000,000 via a PIPE agreement with 5,000 Series B Preferred Shares to the PIPE investor. Preferred shares were classified as equity under ASC 480. $5,000,000 was delivered, less $300,000 in transaction costs, with net proceeds of $4,700,000. On May 30, 2025, the Company issued 500 Class B common shares (reflecting the March 2026 reverse stock split; 25,000 shares on a pre-split basis) to the investor as consideration for waving specific financing restrictions under the PIPE agreement. Shares issued as contract modifications are recorded at fair value and $66,500 expense was recorded when the waiver becomes effective, per ASC 470 and ASC 505.

 

2024 Incentive Plan

 

In connection with the Reorganization Merger, the Company adopted the Equity Incentive Plan (the “2024 Incentive Plan”). The 2024 Incentive Plan will provide for grants of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or equity-related cash-based awards. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting or advisory services for the Company, will be eligible for grants under the 2024 Incentive Plan.

 

The 2024 Incentive Plan provides for the future issuance of shares of the Company’s Class B Common Shares, representing 8% of the number of shares of the Company’s Common Stock outstanding following the Business Combination (after giving effect to the Redemption). Accordingly, the 2024 Incentive Plan is eligible to issue up to 65,373 Class B Common Shares (reflecting the March 2026 reverse stock split; 3,268,668 shares on a pre-split basis).

 

 

·

On April 17, 2025, 16,400 shares (reflecting the March 2026 reverse stock split; 820,000 shares on a pre-split basis) were granted as equity-based compensation to two employees of the Company, which will be vested over three years.

 

·

On April 28, 2025, 2,000 shares (reflecting the March 2026 reverse stock split; 100,000 shares on a pre-split basis) were issued to a third-party advisor for advisory services which will be vested over one year.

 

·

On September 6, 2025, 80 shares (reflecting the March 2026 reverse stock split; 4,000 shares on a pre-split basis) were issued to a third-party advisor for advisory services which was fully vested.

 

·

On October 28, 2025, 200 shares (reflecting the March 2026 reverse stock split; 10,000 shares on a pre-split basis) were issued to a third-party advisor to collaborate on joint branding, public relations initiatives, and exploration of blockchain-based educational products which will be vested over one year.

 

·

On October 31, 2025, 60 shares (reflecting the March 2026 reverse stock split; 3,000 shares on a pre-split basis) were issued to a third-party advisor for advisory services to provide strategic and technical guidance related to the Company’s AI education initiatives which will be vested over 90 days.

 

·

On January 21, 2026, 28,000 shares (reflecting the March 2026 reverse stock split; 1,400,000 shares on a pre-split basis) were issued to three employees of the Company which will be vested over four years.

 

 
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2025 Incentive Plan

 

On January 9, 2026, the Company registered 100,000 shares (reflecting the March 2026 reverse stock split; 5,000,000 shares on a pre-split basis), issuable pursuant to the Company’s 2025 Long-Term Incentive Equity Plan (the “2025 Incentive Plan”).  The purpose of the Classover Holdings, Inc. 2025 Incentive Plan (“Plan”) is to enable the Company to offer to its employees, officers, directors and consultants whose past, present and/or potential future contributions to the Company and its Subsidiaries have been, are or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the Company and aligning their interests with those of the Company's stockholders

 

 

·

On January 21, 2026, 15,000 shares (reflecting the March 2026 reverse stock split; 750,000 shares on a pre-split basis) were granted as equity-based compensation to two employees of the Company, which will be vested over four years.

 

Shares were measured at fair value on grant date under ASC 718. Compensation cost is recognized ratably over the vesting period. For the three months ended March 31, 2026, stock compensation cost under 2024 and 2025 inventive plan was $188,960. There was no stock compensation for the three months ended March 31, 2025.

 

Other equity transactions

 

On April 17, 2025, 3,800 shares (reflecting the March 2026 reverse stock split; 190,000 shares on a pre-split basis) were issued to a professional service provider as part of an outstanding bill payment amount to $430,000.

 

On June 30, 2025, 415,131 Series A Preferred Shares were converted into 8,304 Class B common shares (reflecting the March 2026 reverse stock split; 415,131 shares on a pre-split basis on a 1:1 basis). The conversion was accounted for as an equity-for-equity exchange under ASC 505. No gain or loss recognized.

 

On June 30, 2025, the Company acquired intellectual property using $1,250,000 cash, 16,000 Class B common shares (reflecting the March 2026 reverse stock split; 800,000 shares on a pre-split basis) and 14,786 warrants (reflecting the March 2026 reverse stock split; 739,278 warrants on a pre-split basis). The transaction was accounted for under ASC 805-50 as an asset acquisition. Shares and warrants were valued at fair value on grant date. (See Note 5)

 

On October 9, 2025, 62,068 series A preferred shares were canceled, in exchange, the company issued 11,938 class B common shares (reflecting the March 2026 reverse stock split; 596,808 shares on a pre-split basis) to the investors

 

On December 22, 2025, the company's shareholders approved a few proposals through a special meeting: a). redomestiacate the company from Delaware Corporation to Nevada Corporation, b) adopt the new incentive plan - 2025 Long-Term Incentive Equity Plan, a total of 100,000 shares of Class B stock (reflecting the March 2026 reverse stock split; 5,000,000 shares on a pre-split basis) is reserved for employee, the size of pool is subject to increase at the time the market cap of the company hits certain milestones. c) approve to execute a reverse stock split of all outstanding shares, including Class A and Class B, at a ratio from 1-for-2, to 1-for-50, to be determined by board of directors.

 

 
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Table of Contents

 

During the fourth quarter ended December 31, 2025, the Company converted an aggregate principal amount of $3,225,000 of convertible notes into equity securities in accordance with the terms of the note agreements. Upon conversion, $2,000,000 of the notes were converted into 2,000 shares of Series C Preferred Stock, and $1,225,000 of the notes were converted into 53,526 shares of Class B Common Stock (reflecting the March 2026 reverse stock split; 2,675,975 shares on a pre-split basis). The Company had elected the fair value option for the convertible notes in accordance with ASC 825-10, Financial Instruments. Accordingly, the convertible notes were measured at fair value at each reporting date, with changes in fair value recognized in earnings. At the conversion date, the equity instruments issued were measured based on the quoted market price of the Company’s common stock on the conversion date. The fair value of the Series C Preferred Stock and Class B Common Stock issued upon conversion was $2,109,774 and $1,496,183, respectively. Immediately prior to conversion, the carrying value of the convertible notes approximated their fair value. As a result, the derecognition of the convertible notes and issuance of equity securities did not result in a material gain or loss upon conversion. The carrying value of the notes was reclassified to equity upon issuance of the shares. ranking senior to common but subordinate to Series B Preferred, Each Series C convertible preferred share entitled to 7% annual dividends payable every quarter in Class B common shares, and can be converted to class B common at $0.2029.

 

During the fourth quarter ended December 31, 2025, the Company received several conversion notices from a holder of its Series B Convertible Preferred Stock to convert 2,225 shares of Series B Convertible Preferred Stock into 68,936 shares (reflecting the March 2026 reverse stock split; 3,446,349 shares on a pre-split basis)of the Company’s Class B common stock in accordance with the terms of the Certificate of Designations governing the Series B Convertible Preferred Stock. Upon conversion, the Company recorded the par value of the Class B common stock issued as common stock, with the remaining amount recorded as additional paid-in capital.

 

During the three months ended March 31, 2026, the Company converted an aggregate principal amount of $2,742,500 of convertible notes into equity securities in accordance with the terms of the note agreements. Upon conversion, $2,742,500 of the notes were converted into 529,749 shares of Class B Common Stock (reflecting the March 2026 reverse stock split; 26,487,424 shares on a pre-split basis). The Company had elected the fair value option for the convertible notes in accordance with ASC 825-10, Financial Instruments. Accordingly, the convertible notes were measured at fair value at each reporting date, with changes in fair value recognized in earnings. At the conversion date, the equity instruments issued were measured based on the quoted market price of the Company’s common stock on the conversion date. The fair value of the Class B Common Stock issued upon conversion was $3,899,857.

 

During the three months ended March 31, 2026, the Company received several conversion notices from a holder of its Series B Convertible Preferred Stock to convert 900 shares of Series B Convertible Preferred Stock into 93,104 shares (reflecting the March 2026 reverse stock split; 4,655,200  shares on a pre-split basis) of the Company’s Class B common stock in accordance with the terms of the Certificate of Designations governing the Series B Convertible Preferred Stock. Upon conversion, the Company recorded the par value of the Class B common stock issued as common stock, with the remaining amount recorded as additional paid-in capital.

 

On February 10, 2026, the Company's board authorized to repurchase up to $2,000,000 Class B common shares. The repurchase program does not obligate the Company to acquire any particular amount of shares of Class B common stock.

 

On March 6, 2026, the Company terminated an Equity Purchase Facility Agreement (the “EPFA”) with Solana Strategic Holdings LLC (the “Investor”) pursuant to which, subject to certain conditions precedent contained therein, the Company had the right to issue and sell to the Investor up to an aggregate of $400 million in newly issued shares of the Company’s Class B common stock, par value $0.0001 per share.

 

Note 16. Concentration of risk

 

Credit risk

 

The Company’s concentration of credit risk relates to financial institutions holding the Company’s cash. The Company maintains cash deposits with financial institutions that may exceed federally insured limits at times. The insurance coverage for cash deposits at each bank is $250,000. As of March 31, 2026, a cash balance of $1,049,764 deposited with three financial institutions was uninsured. Management believes that the financial institutions that hold the Company’s deposits are financially credit worthy and, accordingly, minimal credit risk exists with respect to those balances.

 

 
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Table of Contents

 

Customer concentration risk

 

For the three months ended March 31, 2026 and 2025, no customer accounted for more than 10% of the Company’s total revenues.

 

Vendor concentration risk

 

For the three months ended March 31, 2026 and 2025, no vendor accounted for over 10% of the Company’s total purchases.

 

Note 17. Subsequent Event

 

In April 2026, 1,875 shares of Series B Preferred Stock were converted into 1,291,763 shares of Class B Common Stock per the existing agreement。

 

In April and May 2026, an aggregate of $5,032,500 convertible debt was converted into 5,346,878 shares of Class B common stock per the existing agreement。

 

 
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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

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

 

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

 

Overview

 

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

 

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 March 31, 2026 and 2025, we have 73,881 and 65,614 registered users, respectively.

 

"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.

 

 
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"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 March 31, 2026 and 2025, we have 1,229 and 977 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, and (iii) marketing consulting services. 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.

 

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.

 

 
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Results of Operations

 

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.

 

 

 

 

For the Three Months Ended

March 31,

 

 

Variance

 

 

 

 

 

 

2026

 

 

2025

 

 

 Amount

 

 

Variance %

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$519,198

 

 

$816,016

 

 

$(296,818)

 

 

-36%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

 

519,198

 

 

 

816,016

 

 

 

(296,818)

 

 

-36%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

258,300

 

 

 

410,650

 

 

 

(152,350)

 

 

-37%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cost of revenues

 

 

258,300

 

 

 

410,650

 

 

 

(152,350)

 

 

-37%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

260,898

 

 

 

405,366

 

 

 

(144,468)

 

 

-36%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

45,021

 

 

 

121,427

 

 

 

(76,406)

 

 

-63%

General and administrative

 

 

1,096,156

 

 

 

573,539

 

 

 

522,617

 

 

 

91%

Research and development

 

 

14,536

 

 

 

6,307

 

 

 

8,229

 

 

 

130%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

1,155,713

 

 

 

701,273

 

 

 

454,440

 

 

 

65%

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

(Loss) from operations

 

 

(894,815)

 

 

(295,907)

 

 

(598,908)

 

 

202%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrants

 

 

(77,625)

 

 

-

 

 

 

(77,625)

 

 

100%

Change in fair value of crypto assets

 

 

(2,444,670)

 

 

-

 

 

 

(2,444,670)

 

 

100%

Change in fair value of convertible debt

 

 

(860,631)

 

 

-

 

 

 

(860,631)

 

 

100%

Staking rewards

 

 

84,680

 

 

 

-

 

 

 

84,680

 

 

 

100%

Interest and other expense

 

 

5,527

 

 

 

(1,300)

 

 

6,827

 

 

 

-525%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

(3,292,719)

 

 

(1,300)

 

 

(3,291,419)

 

 

253186%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) before provision for income taxes

 

 

(4,187,534)

 

 

(297,207)

 

 

(3,890,327)

 

1309

% 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

100%

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

Net (loss)

 

$(4,187,534)

 

$(297,207)

 

$(3,890,327)

 

1309%

 

 

Revenue

 

The summary information by revenue stream are as follows:

 

 

 

For the Three Months Ended

March 31,

 

 

 Variance

 

 

 

 

 

 

2026

 

 

2025

 

 

Amount

 

 

Variance %

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$519,198

 

 

$816,016

 

 

$(296,818)

 

 

-36%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$519,198

 

 

$816,016

 

 

$(296,818)

 

 

-36%

 

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

 

Costs of Revenue 

 

 

 

For the Three Months Ended

March 31,

 

 

 Variance

 

 

 

 

 

2026

 

 

2025

 

 

Amount

 

 

Variance %

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

 

Compensation

 

$240,302

 

 

$371,390

 

 

 

(131,088)

 

 

-35%

Payment Processing Fee

 

 

4,297

 

 

 

16,809

 

 

 

(12,512)

 

 

-74%

Streaming Services

 

 

13,700

 

 

 

22,450

 

 

 

(8,750)

 

 

-39%

Total

 

$258,300

 

 

$410,650

 

 

$(152,350)

 

 

-37%

 

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

 

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

 

Gross profit margin

 

 

 

For the Three Months Ended

March 31,

 

 

 

 

 

 

2026

 

 

2025

 

 

Variance

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

Service revenues

 

 

 

 

 

 

 

 

 

Gross profit

 

 

260,898

 

 

 

405,366

 

 

 

(144,468)

Gross margin

 

 

50%

 

 

50%

 

 

1%

 

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

 

Operating expenses

 

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

 

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

 

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

 

Employee compensation expenses increased by $146,441 from $294,900 for the three months ended March 31, 2025, to $441,341 for the three months ended March 31, 2026. The increase is primarily driven by additional hiring during 2026 to support our growth. In addition, there was an upward adjustment to executive compensation, further contributing to the overall compensation growth.

 

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

 

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

 

Other expense

 

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

 

Provision for income taxes

 

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

 

Net Loss

 

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

 

Liquidity and Capital Resources

 

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

 

 

 

March 31, 2026

 

 

December 31, 2025

 

 

 

 

 

 

 

 

Cash on hand

 

$3,146

 

 

$3,144

 

Bank deposits

 

 

2,113,485

 

 

 

2,748,450

 

Total cash shown in the Statement of Cash Flows

 

$2,116,631

 

 

$2,751,594

 

 

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

 

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

 

 
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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.

 

 

 

 

For the three months ended

March 31,

 

 

 

 

2026

 

 

2025

 

 

 

 

 

 

 

 

 

Net cash (used in) operating activities

 

 

$(602,380)

 

$(288,266)

Net cash (used in) investing activities

 

 

 

(32,583)

 

 

-

 

Net cash provided by financing activities

 

 

 

-

 

 

 

318,000

 

Change in cash and cash equivalents

 

 

 

(634,963)

 

 

29,734

 

Cash and cash equivalents, beginning of year

 

 

 

2,751,594

 

 

 

50,682

 

Cash and cash equivalents, end of year

 

 

$2,116,631

 

 

$80,416

 

 

Operating Activities

 

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

 

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

 

Investing Activities

 

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

 

Net cash used in investing activities was $0 for the three months ended March 31, 2025.

 

Financing Activities

 

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

 

Net cash provided by financing activities was $318,000 for the three months ended March 31, 2025, an increase of $218,000, as compared to $100,000  net cash provided by financing activities for the three months ended March 31, 2024. The increase was mainly due to the issuance of promissory notes in the amount of $140,000 to the related party, and an advance of $178,000 from related party for the Company’s operating fund.

 

 
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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.

 

Consulting Revenue

 

The Company also generates revenue from consulting services. The Company’s consulting program is designed to teach startup founders within the education sector how to market their product, refine their course content, infrastructure, and business models, achieve market fit and operating efficiency, and scale the startup into a high growth education business. The Company’s performance obligation is to provide consulting services to startup founders for a specific term. Customers are required to prepay full consulting service charge, which is fixed and determinable, at contract inception to secure program spot, and revenue is recognized overtime on a straight-line basis through the service term.

 

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.

 

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.

 

 
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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 March 31, 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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Item 3 – Quantitative and Qualitative Disclosures About Market Risk

 

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.

 

Item 4 – Controls and Procedures

 

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 March 31, 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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Table of Contents

 

Part II - Other Information

 

Item 5 – Other Information

 

During the quarter ended March 31, 2026, no director or officer adopted or terminated any (i) “Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K intending to satisfy the affirmative defense conditions of Rule 10b5–1(c) or (ii) “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(c) of Regulation S-K.

 

Item 6 – Exhibits

 

Exhibit No.

 

Description

31.1*

 

Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2*

 

Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1**

 

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2**

 

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS

 

Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

 

104

 

Cover Page Interactive Data File. The cover page XBRL tags are embedded within the Inline XBRL document.

 

* Filed herewith

** These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

 

 
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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

CLASSOVER HOLDINGS, INC.

 

 

 

 

 

Dated: May 15, 2026

By.

/s/ Hui Luo

 

 

 

Hui Luo

 

 

 

Chief Executive Officer

 

 

 

(Principal Executive Officer)

 

 

 

 

 

Dated: May 15, 2026

By.

/s/ Yanling Peng

 

 

 

Yanling Peng

 

 

 

Chief Financial Officer

 

 

 

(Principal Financial Officer)

 

 

 
38

 

Source: View Original Filing on SEC EDGAR

FAQ

How did Classover Holdings (KIDZ) perform financially in Q1 2026?

Classover reported a net loss of $4.19 million for the three months ended March 31, 2026, compared with a $0.30 million loss a year earlier. Revenue declined 36% to $519,198, while operating expenses increased, particularly in general and administrative costs.

What drove the large net loss at Classover Holdings (KIDZ) in Q1 2026?

The net loss was mainly driven by non-operating items, including a $2.44 million fair value loss on crypto assets, a $0.86 million fair value loss on senior secured convertible notes, and a $77,625 increase in warrant liabilities, on top of higher operating expenses.

What is Classover Holdings’ (KIDZ) liquidity position as of March 31, 2026?

As of March 31, 2026, Classover held $2.12 million in cash and had current liabilities of $2.26 million, resulting in a working capital deficit of $125,316. It also held restricted crypto investment accounts valued at $4.73 million and disclosed substantial doubt about going concern.

How important are crypto assets to Classover Holdings’ (KIDZ) results?

Crypto assets are significant to Classover’s financials. Investment accounts, primarily Solana and Worldcoin, totaled $4.94 million as of March 31, 2026. A fair value loss of $2.44 million on these assets was a major contributor to the quarter’s overall net loss.

What are the key terms of Classover Holdings’ (KIDZ) 2025 senior secured convertible notes?

The notes have a $11 million initial face value, a 7% coupon payable quarterly, and mature on June 6, 2027. The initial conversion price is $7.36 per share with a $0.74 floor, and about 80% of net proceeds must be invested in specified crypto assets.

Did Classover Holdings (KIDZ) convert any debt to equity in Q1 2026?

Yes. During the three months ended March 31, 2026, Classover converted $2.74 million of convertible notes into 529,749 Class B common shares. The related fair value of the shares issued was $3.90 million, and the carrying value of the notes was reclassified to equity.