# EDGAR Filing Document

**Accession Number:** 0001637147
**File Stem:** 0001104659-26-036940
**Filing Date:** 2026-3
**Character Count:** 738154
**Document Hash:** 45005dc8264d7b735aeef91030ba402c
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-26-036940.hdr.sgml**: 20260330

**ACCESSION NUMBER**: 0001104659-26-036940

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 117

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260330

**DATE AS OF CHANGE**: 20260330

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** zSpace, Inc.
- **CENTRAL INDEX KEY:** 0001637147
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PREPACKAGED SOFTWARE [7372]
- **ORGANIZATION NAME:** 06 Technology
- **EIN:** 352284050
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-42431
- **FILM NUMBER:** 26813901

**BUSINESS ADDRESS:**
- **STREET 1:** 2050 GATEWAY PLACE
- **STREET 2:** SUITE 100-302
- **CITY:** SAN JOSE
- **STATE:** CA
- **ZIP:** 95110
- **BUSINESS PHONE:** (408)498-4050

**MAIL ADDRESS:**
- **STREET 1:** 2050 GATEWAY PLACE
- **STREET 2:** SUITE 100-302
- **CITY:** SAN JOSE
- **STATE:** CA
- **ZIP:** 95110

?xml version='1.0' encoding='ASCII'? ZSPACE, INC._December 31, 2025

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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K**

&nbsp;&nbsp;&nbsp;&nbsp;**☒** **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** 

**For the fiscal year ended December 31, 2025**

**OR**

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

**For The Transition Period From&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To**

**Commission file number: 001-42431**

**ZSPACE, INC.**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Delaware** | **35-2284050** |
| (State of Other Jurisdiction of incorporation or Organization) | (I.R.S. Employer Identification No.) |
| **55 Nicholson Lane San Jose, CA**  | **95134** |
| (Address of principal executive offices) | (Zip code) |

---

**Registrant's telephone number, including area code: (408) 498-4050**

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

---

| | | |
|:---|:---|:---|
| <br>**Title of Each Class** | <br>**Trading Symbol(s)** | **Name Of Each Exchange**<br>**On Which Registered** |
| **Common Stock, $0.00001 Par Value per Share** | **ZSPC** | **The Nasdaq Stock Market LLC** |

---

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☒

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 (§232.0405 of this chapter) 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, a smaller reporting company, or an emerging growth company. See the 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive oﬃcers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the common stock held by non-affiliates of the registrant on June 30, 2025 (the last business day of the most recently completed second fiscal quarter), based on the closing price of the registrant's common stock of $3.26 per share as reported by the Nasdaq Stock Market LLC on that date, was approximately $16.2 million. Shares of common stock held by each executive officer and director and by each shareholder affiliated with a director or an executive officer have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The number of outstanding shares of the Registrant's common stock as of March 23, 2026 was 38,654,852.

**Documents Incorporated by Reference**

None.

------

[**Table of Contents**](#TOC)

TT**TABLE OF CONTENTS**

---

| | |
|:---|:---|
|  | **Page** |
| [**PART I**](#PARTI_407364) | [**PART I**](#PARTI_407364) |
| [Item 1. Business](#Item1Business_796444) | 6 |
| [Item 1A. Risk Factors](#Item1ARiskFactors_779197) | 12 |
| [Item 1B. Unresolved Staff Comments](#Item1BUnresolvedStaffComments_678761) | 37 |
| [Item 1C. Cybersecurity](#_Item_1C._Cybersecurity) | 37 |
| [Item 2. Properties](#Item2Properties_403331) | 38 |
| [Item 3. Legal Proceedings](#Item3LegalProceedings_41800) | 38 |
| [Item 4. Mine Safety Disclosures](#Item4MineSafetyDisclosures_506551) | 39 |
| [**PART II**](#PARTII_569253) | [**PART II**](#PARTII_569253) |
| [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#Item5MarketforRegistrantsCommonEquityRel) | 40 |
| [Item 6. \[Reserved\]](#_Item_6._Reserved) | 40 |
| [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](#Item7ManagementsDiscussionandAnalysisofF) | 40 |
| [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](#Item7AQuantitativeandQualitativeDisclosu) | 56 |
| [Item 8. Financial Statements and Supplementary Data](#Item8FinancialStatementsandSupplementary) | 57 |
| [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#Item9ChangesinandDisagreementswithAccoun) | 99 |
| [Item 9A. Controls and Procedures](#Item9AControlsandProcedures_436735) | 99 |
| [Item 9B. Other Information](#Item9BOtherInformation_943406) | 100 |
| [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#Item_9C) | 100 |
| [**PART III**](#PARTIII_730858) | [**PART III**](#PARTIII_730858) |
| [Item 10. Directors, Executive Officers and Corporate Governance](#Item10DirectorsExecutiveOfficersandCorpo) | 101 |
| [Item 11. Executive Compensation](#Item11ExecutiveCompensation_535692) | 106 |
| [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#Item12SecurityOwnershipofCertainBenefici) | 113 |
| [Item 13. Certain Relationships and Related Transactions, and Director Independence](#Item13CertainRelationshipsandRelatedTran) | 115 |
| [Item 14. Principal Accountant Fees and Services](#Item14PrincipalAccountantFeesandServices) | 116 |
| [**PART IV**](#PartIV_797095) | [**PART IV**](#PartIV_797095) |
| [Item 15. Exhibits and Financial Statement Schedules](#Item15ExhibitsandFinancialStatementSched) | 117 |
| [Item 16. Form 10-K Summary](#Item16Form10KSummary_405498) | 121 |
| [Signatures](#SIGNATURES_762154) | 122 |

---

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In this Annual Report on Form 10-K, "we," "our," "us," "zSpace," and "the Company" refer to zSpace, Inc., together with its consolidated subsidiaries, unless the context requires otherwise.

#### SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Many of the forward-looking statements are located in "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as "anticipate," "believe," "envision," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," "ongoing," "contemplate" and similar terms. Forward-looking statements are not guarantees of future performance and actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled "Risk Factors" under Part I, Item 1A of this Annual Report on Form 10-K. The forward-looking statements in this Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future developments or otherwise.

**MARKET DATA AND FORECASTS**

We are responsible for the disclosures contained in this Annual Report on Form 10-K. However, unless otherwise indicated, information in this Annual Report on Form 10-K concerning economic conditions, our industry, our markets and our competitive position is based on information obtained from a variety of sources, including information from independent industry analysts and publications, as well as our own estimates and research.

Our estimates are derived from publicly available information released by third parties, as well as data from our internal research, and are based on such data and our knowledge of our industry, which we believe to be reasonable. None of the independent industry publications discussed in this Annual Report on Form 10-K were prepared on our behalf.

In presenting this information, we have made certain assumptions that we believe to be reasonable based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets in which we operate. Market and industry data, which is derived in part from management's estimates and beliefs, are subject to change and may be limited by the availability of raw data, the voluntary nature of the data gathering process and other limitations inherent in any statistical survey of such data. In addition, projections, assumptions and estimates of the future performance of the markets in which we operate, and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in the subsection entitled "Risk Factors" under Part I, Item 1A of this Annual Report on Form 10-K. These and other factors could cause results to differ materially from those expressed in the estimates made by third parties and by us.

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**TRADEMARKS, TRADENAMES, SERVICE MARKS, AND COPYRIGHTS**

We own or have rights to use various trademarks, tradenames, service marks, and copyrights, which are protected under applicable intellectual property laws, as further described herein. This Annual Report on Form 10-K also contains trademarks, tradenames, service marks, and copyrights of other companies, which are, to our knowledge, the property of their respective owners. Solely for convenience, certain trademarks, tradenames, service marks, and copyrights referred to in this Annual Report on Form 10-K may appear without the©,®, and™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, tradenames, service marks, and copyrights. We do not intend our use or display of other companies' trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, such other companies.

**SUMMARY OF PRINCIPAL RISK FACTORS**

This summary briefly lists the principal risks and uncertainties facing our business, which are only a select portion of those risks. A more complete discussion of those risks and uncertainties is set forth in Part I, Item 1A of this Annual Report, entitled "Risk Factors." Additional risks not presently known to us or that we currently deem immaterial may also affect us. If any of these risks occur, our business, financial condition or results of operations could be materially and adversely affected. Our business is subject to the following principal risks and uncertainties:

● Changes to the U.S. Department of Education and federal funding have created significant budgetary uncertainty for our customers.

● We will require additional capital to fund our operations and growth, and such capital may not be readily available.

● We may not be able to grow revenue in the future or manage our growth effectively.

● We may not be able to develop new products and successfully manage frequent product introductions and transitions.

● We face intense competition from companies more established and better capitalized than us and potential new technologies.

● Substantial time and effort are typically required to make a sale of our products.

● We may not be able to appropriately manage our inventory and supply chain.

● We may be unable to effectively expand our sales and marketing capabilities.

● Any errors, bugs, or vulnerabilities in our technology could significantly impact our business.

● Our existing and future levels of indebtedness could adversely affect our financial health, ability to obtain financing in the future, and ability to fulfill our obligations under such indebtedness.

● There is uncertainty regarding our ability to continue as a going concern.

● We have identified material weaknesses in our internal control over financial reporting.

● Our business has been adversely affected by dramatic changes in U.S. and international trade policies, as well as ongoing uncertainty regarding the current administration's trade agenda.

● We are and could continue to be involved in legal disputes that are expensive and time consuming, and, if resolved adversely, could harm our business, operating results and financial condition.

● The obligations associated with operating as a public company will require significant resources and management attention and will cause us to incur additional expenses, which will adversely affect our results of operations.

● Failure to protect our proprietary technology and intellectual property rights could substantially harm our business.

● An inability to maintain licenses from third parties could severely harm our business.

● The failure of our IT systems or a security breach involving customer, student or employee personal data could dramatically impact our business.

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● If our common stock fails to comply with the continued listing requirements of the Nasdaq Capital Market, we would face possible delisting, which would result in a limited public market for our common stock and make obtaining future debt or equity financing more difficult for us.

● We are a "controlled company" for purposes of the Nasdaq Listing Rules and as a result, our stockholders may not have the same protections afforded to stockholders of companies that are not controlled companies.

● We are an emerging growth company and a smaller reporting company, and the applicable reduced disclosure requirements may make our common stock less attractive to investors.

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#### PART I

#### Item 1. Business

#### Our Company
We are a leading provider of augmented reality (AR) and virtual reality (VR) educational technology products. We focus on United States K-12 schools, the Career & Technical Education (CTE) sector and select international markets. Our proprietary hardware and software platform provides the unique ability to deliver an interactive, stereoscopic three-dimensional (3D) learning experience to our users without the need to utilize VR goggles or specialty glasses.

![Graphic](zspc-20251231x10k001.jpg)

Our hands-on "learning by doing" products have been shown to enhance the learning process and drive higher student test scores, as evidenced by a study on the utility of 3D virtual reality technologies for student knowledge gains published in the Journal of Computer Assisted Learning in 2021. We believe that our platform leads to (i) deeper understanding of content, (ii) increased motivation of students to learn, (iii) additional engagement of students with content and (iv) improved preparedness for the workforce. We allow students and teachers to experience learning in the classroom that may otherwise be dangerous, impossible, counterproductive, or expensive using traditional techniques. Our platform serves a broad range of educational tools designed for K-12 science, technology, engineering and math (STEM) lessons as well as training skilled trades in areas such as health sciences, automotive engineering/repair, Unity3D<sup>®</sup> software programming and advanced manufacturing.

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We sell our products directly to United States school districts, both as a primary educational tool in K-12 classrooms and as a career training solution, as well as to community college customers through both a direct sales and support team as well as regional resellers. Internationally, we rely exclusively on resellers to bring our products to those markets. Today, our platform is implemented in more than 3,500 of the approximately 13,000 United States public school districts. Our K-12 platform is currently deployed in over 80% of the largest 100 K-12 public school districts in the United States, as measured by student enrollment, and our CTE solutions have been deployed in approximately 73% of those public school districts we serve. In addition, we have partnered with over 25 resellers and have expanded our customer network into over 50 countries. We believe the applicability of our products in education environments provides an opportunity for significant scale.

From a technology perspective, graphics and speed of computing have increased exponentially over time, but the physical computing experience has remained largely static since the introduction of the mouse and touchscreen in the 1980s. We believe limiting the user experience to the confines of a screen creates inherent limitations such as slowing technological breakthroughs, discouraging engagement and hampering creativity, particularly when utilizing technology as a learning tool. We were founded with the goal of eliminating that barrier between students and content and reinventing the student experience. You can find additional information on our website at *www.zspace.com*. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this Annual Report on Form 10-K.

#### Our Products
Our platform consists of three key components — hardware, software and services.

● *Hardware.* Our proprietary hardware is the enabler of the 3D learning experience on our platform, allowing students to interact directly with complex, spatial, and abstract concepts . We work closely with original equipment manufacturers (OEMs) to produce devices that deliver a 3D experience.

![Graphic](zspc-20251231x10k002.jpg)

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● *Inspire Laptops*. Inspire is our current generation laptop product, built in partnership with a major PC OEM. It incorporates and delivers autostereoscopic 3D graphics not requiring any eyewear or headset. With a specialized optical lens and eye-tracking technology, a set of images for each eye is created and directly projected through the lens to where the eyes are looking for a unique 3D experience. We deliver each Inspire laptop with our patented hand-held stylus.

![Graphic](zspc-20251231x10k003.jpg)

● *Imagine Laptops*. Our Imagine laptops are focused on elementary school students. They also were built in partnership with a major PC OEM. Like the Inspire, the Imagine delivers autostereoscopic 3D graphics not requiring any eyewear or headset and uses the zSpace hand-held stylus. The Imagine, built with safety and comfort in mind for young learners, is smaller and lighter than the Inspire, making it easier for younger learners to use in the classroom. It also features a smaller screen, but similar CPU performance.

● *Tracked styluses*. Our patented tracked styluses allow users to interact with the projection of the 3D information from our laptops to provide a comfortable and realistic experience as well as the precise interaction with the virtual objects in open space. It allows students to bring objects out of the screen and interact with them as if they were real objects. Our styluses, working together with the eye-tracking technology in our products to read the position of the user's body and respond to movements throughout the interaction, creating a natural, comfortable and effortless experience. Each stylus includes three buttons designed to map the buttons on a traditional mouse to provide a familiar interface model for the user. The buttons on the stylus perform different actions depending on the application. The styluses also support haptic feedback allowing applications to provide a physical response to engagement in the learning process, enhancing realism and providing distinct feedback to the user.

● *Software*. We develop and deliver both platform management software, enabling the easy distribution, licensing and management of web enabled applications, and end user applications that students use on our devices. Our platform offers a full range of applications, developed both in-house and by third-party application developers, that provide learning experiences designed for the K-12 STEM and CTE markets. In the K-12 market, we offer applications in areas such as Science, Health and Math, and in the CTE markets we provide applications in key areas such as Automotive, Advanced Manufacturing, Health and Agri-Sciences.

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● *Services*. Implementation and professional development services are part of the overall solution we offer to our customers so they can quickly use, and be fully trained on, our products. We have developed a network of trainers in the United States with education experience with the goal of making our customers' experience with our products positive and effective. Internationally, we rely exclusively on resellers to provide these services to our customers.

#### Manufacturing and Suppliers
We utilize an outsourced manufacturing model for the production of our hardware and peripheries. We do not own or operate any manufacturing facilities. Instead, we rely on third-party contract manufacturers and original equipment manufacturers (OEMs) to produce our products in accordance with our specifications. We believe this asset-light approach allows us to minimize capital expenditures, scale production to meet demand, and leverage the purchasing power and supply chain expertise of our partners.

For our core Inspire laptop, we rely on major personal computer OEMs. By partnering with established PC manufacturers, we are able to leverage their extensive global supply chain networks, component purchasing power, and quality control certifications. This relationship allows us to deliver high-performance hardware without the overhead of managing a bespoke computer manufacturing line.

We rely on a specific third-party manufacturing partner located in China to assemble our proprietary stylus. This partner is responsible for component procurement, final assembly, and quality assurance testing based on our proprietary designs. Because our stylus utilizes specialized tracking technology that is integral to the zSpace user experience, this manufacturing relationship is critical to our product delivery.

In addition, we rely on third-party software developers to create and maintain appropriate software products for our platform. We engage these external development firms and contractors to augment our internal engineering teams, specifically to assist in the creation of educational content applications and system integrations. Relying on these third parties allows us to accelerate our content roadmap and offer a broader library of curriculum-aligned modules to our K-12 and CTE customers without bearing the full fixed costs of a large in-house content development staff.

#### Sales and Marketing
We believe we have developed a scalable go-to-market business built upon the strength of our platform and a targeted sales approach designed for education customers. We have deployed a multi-channel sales approach to reach potential customers. In general, in the United States, we employ a combination of a direct sales approach and a channel partner approach to expand our reach with the aim of providing a frictionless, convenient purchase process for customers. In international markets, we utilize an indirect partner go-to-market approach, and we have found that these third-party resellers offer strong relationships in particular schools or geographies. We believe this structure allows us to market our solutions effectively and efficiently to public schools of all sizes across the world.

#### Competitive Business Conditions
According to market analysis by Grand View Research, the global education technology market was valued at $163.5 billion in 2024 and is expected to grow at a compound annual growth rate (CAGR) of 13.3% from 2025 to 2030. Further, according to The Insight Partners, the global AR, VR and mixed reality market is expected to grow at a 37% CAGR to $647 billion by 2031 compared to $52 billion in 2023. Markets and Markets Research predicts that spending on AR and VR in the education market globally will grow to $14.2 billion by 2028 (CAGR of 30% from 2023).

The markets that we serve are highly competitive. In our experience, potential buyers in the United States K-12 market are typically not evaluating an alternative AR/VR technology purchase, but rather whether to use any available funding for our products or for an entirely different class of purchase, such as student safety, IT products or standard computing devices. In the CTE market, we compete with physical training solutions, for example welding simulators. Additionally, potential customers might evaluate our products against a non-immersive alternative such as a 2D human anatomy web-based experience rather than the immersive content available on our platform.

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Competitors in the education technology ecosystem include:

● Companies that provide technology solutions and services to educators and students, such as Chegg, Coursera, Docebo, Duolingo, Instructure, Kahoot, Powerschool, and Udemy;

● CTE companies such as Degreed, Inc., LinkedIn Corporation through its LinkedIn Learning services and Pluralsight, Inc.;

● Companies that operate in the virtual technology market, such as Apple, Google, Meta Platforms, Matterport Inc and Unity Software;

● Providers of free educational resources such as Khan Academy, Inc., The Wikipedia Foundation, Inc. and Google LLC through its YouTube services; and

● AR/VR focused companies such as Avantis Education, Prisms VR, Interplay Learning, Umety Solutions Ltd, Transfr VR and Victory XR.

Outside the United States, certain Chinese companies have produced replicas of our original edition hardware products that require specialty eyewear, which we no longer produce or sell in the United States. We have also found imitation products being sold at a small scale in the Middle East and Turkey. We are currently not aware of any other companies producing or selling solutions substantially similar to our products.

We believe that we have a number of competitive strengths that will enable us to grow our business. Our competitive strengths include:

● *Breadth and depth of our platform*. Our platform is focused on delivering virtual interactive learning capabilities across the worldwide education spectrum. The same platform can be used by third grade learners and college students. Our growing range of software content, developed both in house and by third-party software developers, includes hundreds of STEM, Game Design and CTE lessons, including Physical Science, Math, Health, Automotive, Unity3D <sup>®</sup> Programming, and Advanced Manufacturing.

● *Highly Differentiated and Proprietary Technology*. Our product offerings are designed to facilitate intuitive, responsive, and comfortable learner experiences, with hardware that includes built-in eye-tracking technology that allows for 3D images without the use of specialized glasses and a hand-held stylus device that allows users to bring objects out of the screen and manipulate them as if they were real objects. We believe our proprietary platform offers a unique solution to educators interested in effective kinesthetic learning tools.

● *Brand recognition.* We believe we are a trusted brand in the K-12 education market that has a track record of attracting and maintaining customers. We believe we are recognized as a market leader in AR/VR and the "eduverse" for schools. We expect to continue to leverage our position and increase our brand awareness to grow our customer base.

#### Recent Developments
The majority of our customer base consists of United States public school districts, who purchase products as a primary K-12 educational tool and also to support career training education at the higher grade levels. These schools frequently rely on funding from the U.S. Department of Education ("US DoE") for specific populations of students or strategic initiatives. When this funding is unavailable, schools rarely cut the core classes and services; instead, they cut the specialized support services that federal money supports.

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Our business in the United States K-12 market is significantly influenced by the availability of government funding. In previous years, our revenue growth was supported by substantial federal stimulus funding allocated to schools, such as the Elementary and Secondary School Emergency Relief (ESSER) funds. However, as these specific funding programs have expired or been fully allocated, the budgetary environment for our K-12 customers has tightened. In addition, in January 2025, the current administration moved to make significant changes at the US DoE, including freezing federal grants and loans that many of our customers relied upon to purchase our products and services.

The operational disruptions and funding freezes initiated at the U.S. DoE in early 2025 created a volatile contracting environment for the education technology sector. As the administration moved to withhold federal grants and signal a potential dissolution of the agency, school districts—already grappling with the expiration of pandemic-era ESSER funds—adopted a defensive spending posture, freezing capital outlays to preserve cash for essential operations. This resulted in extended sales cycles for zSpace and a decrease in capital expenditures by schools, which has caused a decline in our revenue from this sector. We expect that our future results will continue to be sensitive to the cyclical nature of state and federal education budgets.

In this context, we are focused on scaling execution across a carefully selected set of growth vectors. These include:

● *Targeted software growth via additional application acquisition.* We intend to pursue additional software applications in order to increase the growth of our software offerings. Such acquisitions, if completed, are intended to be accretive to earnings and materially increase our software revenue.

● *Continued Focus in the United States education market*. We expect to continue to drive growth by expanding use cases and introducing new applications within the United States. We are particularly focused on acquiring and retaining both K-12 and CTE users while expanding our sales with our Inspire products. With our large content library and pioneering AR/VR capabilities, we pride ourselves on our ability to deliver value across the education landscape including K-12 schools, community colleges, technical colleges and trade colleges. Going forward, we plan to continue to expand our content library and platform to address the needs of our current and future customers.

#### Research and Development
Our R&D team is headquartered in San Jose, California, with engineering resources situated throughout the United States. The R&D team has extensive experience in many key engineering disciplines including electrical engineering, firmware development, software application development and quality assurance.

#### Intellectual Property
Our ability to drive innovation in our business depends in part upon our ability to protect our core technology and intellectual property. We attempt to protect our intellectual property rights, both in the United States and abroad, through a combination of patent, trademark, copyright and trade secret laws, as well as nondisclosure and invention assignment agreements with our consultants and employees and through non-disclosure agreements with our commercial partners and vendors. Unpatented research, development, know-how and engineering skills make an important contribution to our business, but we pursue patent protection when we believe it is possible and consistent with our overall strategy for safeguarding intellectual property.

As of December 31, 2025, we had over 80 patents issued, and more than ten United States and foreign patent applications that are pending.

#### Human Capital Resources
Our employees are critical to our success. As of December 31, 2025, we had 54 full-time employees. We also employ part-time subject matter experts and engage consultants and contractors to supplement our permanent workforce. To date, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing. None of our employees are represented by a labor union or subject to a collective bargaining agreement. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing

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and additional employees. We believe we offer competitive compensation and benefits packages, the principal purposes of which are to attract, retain and motivate our employees.

#### Facilities
Our corporate headquarters is located in a leased facility in San Jose, California. The facility is approximately 6,464 square feet, and our lease of this facility expires in October 2027. We believe this facility is adequate for the needs of our business.

#### Government Regulation
We are subject to various federal, state, local and foreign laws and regulations that affect our business, including those related to the education industry, data privacy, and data security. Because our hardware supply chain and sales reach international markets, we are also subject to complex trade restrictions. These include economic sanctions administered by the U.S. Treasury's Office of Foreign Assets Control (OFAC), U.S. export control laws, and anti-corruption regulations such as the U.S. Foreign Corrupt Practices Act (FCPA) and the U.K. Bribery Act.

These laws prohibit business with certain embargoed countries, sanctioned persons, and restricted entities. As U.S. export policies evolve, particularly regarding technology manufacturing in Asia, we may face increased compliance costs or administrative burdens.

#### Item 1A. Risk Factors
*An investment in our common stock involves risks. You should carefully consider each of the following risks and all of the other information set forth in this Annual Report on Form 10-K, before deciding to invest in our common stock. The risks and uncertainties described below are not the only ones we face. If any of the following risks and uncertainties develop into actual events, our business, financial condition, results of operations and cash flows could be materially adversely affected. In that case, the price of our common stock could decline, and you may lose all or part of your investment.*

#### Risks Related to Our Business and Industry
**Changes to the U.S. Department of Education and the elimination, freezing or impoundment of federal funding have created significant budgetary uncertainty for our customers, which could materially adversely affect our liquidity, results of operations and financial condition.**

A significant portion of our customers are public school districts, state education agencies, and higher education institutions whose budgets are heavily dependent on federal funding. Recent administrative actions by the federal government—specifically the U.S. Department of Education—have introduced substantial volatility into the education market. For example:

● *Freezing and Impoundment of Allocated Funds*: There have been recent instances of the federal government withholding, delaying, or "impounding" congressionally appropriated funds. When federal allocation tables are withheld, state education agencies cannot distribute funds to local districts. This has forced many of our district customers to freeze their own discretionary spending, delay payments to vendors, or halt pilot programs indefinitely while they await clarity on their fiscal position.

● *Structural Reorganization and Dissolution Risks*: Proposals to fundamentally restructure, downsize, or abolish the U.S. Department of Education create existential uncertainty for long-term funding streams. If federal education functions are transferred to other agencies (such as the Department of the Treasury or Department of Commerce) or converted entirely into block grants with fewer restrictions but potentially lower overall value, districts may prioritize personnel retention over technology investments.

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● *Increased Scrutiny and Policy Divergence*: The shift toward stricter federal oversight regarding the use of funds for specific curriculum content, diversity, equity, and inclusion (DEI) initiatives, or social-emotional learning (SEL) has led to heightened scrutiny of educational technology vendors, in general. Districts may pause procurement to ensure all vendor products comply with rapidly changing federal guidance to avoid clawback of funds.

As a result of this uncertainty, we have observed and may continue to experience extended sales cycles, the loss of sales, the reduction in the size of anticipated purchases and a lack of visibility or certainty into our anticipated revenue. In addition, any other reductions in government structure or spending, such as the elimination of the U.S. Department of Education, could result in a decrease in funds available to our customers for the purchase of our products. Further, there is ongoing uncertainty regarding the federal budget and federal spending levels, including the possible impacts of a failure to increase the "debt ceiling." Any future shutdown of the federal government, failure to enact annual appropriations or continued disruption in our customers' funding sources could have a material adverse impact on our liquidity, results of operations and financial condition.

**We will require additional capital to fund our operations and growth, and such capital may not be available on favorable terms or at all.**

We have historically relied on outside financing to fund our operations, capital expenditures and expansion. We expect that we will require additional capital from equity or debt financing in the near future to support our growth, fund our operations or to respond to competitive pressures or strategic opportunities. We may not be able to secure additional financing on favorable terms or at all.

Because we will likely need to raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our stockholders, including you, could suffer significant dilution in their percentage ownership of us, and any new securities that we issue could have rights, preferences and privileges senior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, including the ability to pay dividends. This may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms that are satisfactory to us, if and when required, our ability to grow or support our business and to respond to business challenges that we may face could be significantly limited.

**We may not be able to grow revenue in the future or manage our growth effectively, which would adversely affect our business, operating results and financial condition.**

Our consolidated revenue for the year ended December 31, 2025 decreased 27% as compared to the year ended December 31, 2024 and consolidated revenue for the year ended December 31, 2024 decreased 13% as compared to the year ended December 31, 2023. To grow revenue, we must continue to implement our operational plans and strategies and generate increased demand for our products.

The growth of our business may require significant additional resources, which may not scale in a cost-effective manner or may negatively affect the quality of our customers' experience. We are also required to manage multiple relationships with customers and other third parties. Further growth of our operations, our information technology ("IT") systems or our internal controls and procedures may not be adequate to support our operations. We will need to continue to improve our operational, financial and management controls and reporting systems and procedures. Failure to manage growth effectively could result in difficulties or delays in attracting new customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing or enhancing products and services, loss of customers, information security vulnerabilities or other operational difficulties, internal controls over financial reporting and procedures being inadequate to support our operations, any of which could adversely affect our business performance and operating results.

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**To remain competitive and stimulate demand, we must continue to develop new products, successfully manage frequent product introductions and transitions and adapt to rapid technological change and evolving industry standards.**

To remain competitive in our industry, we must continually introduce new products and services, enhance existing products and services, and effectively stimulate customer demand for new and upgraded products. We cannot be sure that any new products or services will be widely accepted and purchased by our customers or that we will be able to successfully manage product introductions and transitions. Failure by our customers to accept our new products and services, or our failure to manage product introductions and transitions, could adversely affect our operating results.

As we develop new products, we may not be able to anticipate future market needs or be able to improve our products or platform or to develop new products, services or software enhancements to meet such needs on a timely basis, if at all. Our ability to successfully develop new products is also subject to the risk of future disruptive technologies. If new technologies emerge that deliver AR/VR learning tools at lower prices, more efficiently, more conveniently or more securely than ours, and if we fail to adopt such technologies or do so in a timely manner, our ability to compete effectively would be adversely affected.

#### Our business is highly competitive and competition presents an ongoing threat to the success of our business.
The markets that we serve are highly competitive. In our experience, potential buyers in the United States K-12 market are not typically evaluating an alternative AR/VR technology purchase, but rather whether to use any available funding for our products or for an entirely different class of purchase, such as student safety, IT products or standard computing devices. In the CTE market, we compete with physical training solutions, such as welding simulators. Additionally, potential customers might evaluate our products against a non-immersive alternative such as a 2D human anatomy web-based experience rather than the immersive content available on our platform.

Outside the United States, certain Chinese companies have produced replicas of our original edition hardware products that require specialty eyewear, which we no longer produce or sell in the United States. We have also found imitation products being sold at a small scale in the Middle East and Turkey. We are currently not aware of any other companies producing or selling solutions substantially similar to our products.

Other companies in the industry may develop products that are more directly competitive with ours. In addition, new entrants to the education technology market may introduce new or improved education technology solutions or platforms and technology-enabled services that are more compelling or widely accepted than ours. In addition, our customers may choose to continue using or to develop their own educational tools or training solutions in-house, rather than pay for our products.

If we cannot compete successfully against our current competitors and new entrants or new technology in the market, our ability to grow our business and achieve profitability could be impaired.

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**Our business is dependent on our ability to maintain and scale our hardware and software offerings and technical infrastructure, and any significant disruption in the performance of our products could damage our reputation, result in a potential loss of customers and engagement, and adversely affect our business, operating results and financial condition.**

Our reputation and ability to attract, retain and serve our customers and to scale our product offerings and solutions are dependent upon the reliable performance of our platform and its underlying technical infrastructure. We have in the past experienced immaterial, and may in the future experience immaterial or material, interruptions in the performance of our platform. Our systems may not be adequately designed or may not operate with the reliability and redundancy necessary to avoid performance delays that could be harmful to our business. Our customers may not invest in additional products offered by us, and our ability to expand our customer base or offer additional software solutions to such customers may be disrupted. Any of the foregoing could adversely affect our business, operating results and financial condition. As the application and solutions offerings provided by us grow and evolve, and as our internal operational demands continue to grow, we will need an increasing amount of technical infrastructure, including network capacity and computing power, to continue to satisfy our needs. If we fail to continue to effectively scale and grow our technical infrastructure to accommodate these increased demands, customer retention and revenue growth may be adversely impacted. Moreover, to the extent we scale our platform, product and application offerings, including additional hardware and software features, that may place strain on our technical infrastructure. In addition, we may be unsuccessful in scaling our technical infrastructure to accommodate new product offerings and increased usage cost-effectively.

**We have in the past been, and may in the future be, dependent on a limited number of significant customers.**

Due to the size and nature of our arrangements with customers, one or a few customers have in the past and may in the future represent a substantial portion of our consolidated revenues and gross profits in any one year or over a period of several consecutive years. In 2025, our five largest customers accounted for approximately $4.1 million of revenue and our largest customer accounted for $1.9 million of revenue, representing approximately 15% and 7% of our total 2025 revenue, respectively. In 2024, our five largest customers accounted for $9.8 million of revenue and our largest customer accounted for $4.9 million of revenue, representing approximately 26% and 13% of our total 2024 revenue, respectively. We cannot predict whether any of these customers will have a significant downturn in funding, and whether any such downturn, or any loss of funding or delay in payment from any one of these customers resulting therefrom, would have a material adverse effect on our business, results of operations, cash flows and financial condition.

#### Substantial time and effort are typically required to make a sale.
A number of factors influence the time and effort required for us to make sales, including, for example, the purchasing approval processes of potential customers (which are typically public school districts with a large number of stakeholders involved in decision-making), the need to educate potential customers about the uses and benefits of our products, the discretionary nature of potential customers' purchasing and budget cycles and fluctuations in the needs of potential customers. The recent changes in funding allocations and priorities from the U.S. Department of Education have exacerbated these challenges. These changes have created budgetary uncertainty for our customers, often resulting in extended evaluation periods, additional layers of required approval, or the freezing of funds previously earmarked for our category of products. Consequently, we may incur significant sales and marketing expenses and invest significant time and effort in anticipation of a sale that may never occur.

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**Our future revenues and operating results will be harmed if our customers do not renew their contracts with us, or if we are unable to expand sales to our existing customers.**

Upon purchasing our products, our customers generally enter into software application subscription agreements with a one-to-three-year term and have no obligation to renew such agreements. Our customers may decide not to renew these agreements with a similar contract period, at the same prices and terms, with the same or greater application/solution coverage or at all. Although our customer renewals have historically been strong, some of our customers have elected not to renew their agreements with us, and it is difficult to accurately predict long-term customer retention, churn and expansion rates. Our retention and expansion rates may decline or fluctuate as a result of a number of factors, including our customers' satisfaction with our platform, our customer support and professional services, our prices and pricing plans, the competitiveness of other software products and services, reductions in our customers' spending levels, customer adoption of our solutions, deployment success, utilization rates by our customers and users, new product releases and changes to our product offerings. If our customers do not renew their software application subscription agreements, or renew on less favorable terms, our business, financial condition and operating results may be adversely affected.

Our ability to increase revenue also depends in part on our ability to increase deployment of our solutions to existing customers. Our ability to increase sales to existing customers depends on several factors, some of which are outside our control. These factors may include our customers' experience with implementing and using our platform, user demand for our platform, their ability to integrate our solutions with existing technologies and our pricing model. A failure to increase sales to existing customers could adversely affect our business, operating results and financial condition.

**We must incur significant expense in technology and content development to launch a new product or software application, and we may not generate sufficient revenue from new offerings to offset our costs.**

We invest, and plan to continue to invest, significant resources in developing new products and attracting new customers, including sales and marketing, and other costs and we may not recoup these costs. In addition, delays in the implementation of a new application could negatively impact our revenue and operating results.

The time that it takes for us to recover our investment in a new product or application depends on a variety of factors including our customer acquisition costs and customer retention rate. Because of the lengthy period of time required to recoup our investment, unexpected developments beyond our control could occur that result in the customer ceasing or significantly curtailing the scope of the applications it utilizes on our platform before we generate any revenue therefrom. In addition, third-party software partners generally do not grant us exclusive rights to their content. Even when they do, such arrangements are typically of limited duration. As such, partners may choose to offer the same or similar content on one of our competitors' platforms, which could limit the number of customers willing to purchase such products and solutions from us. In addition, if a third-party developer were to terminate our use of their application(s), customers whose subscriptions include such application(s) may stop using our platform, which in turn could negatively impact customer adoption generally. As a result of any of the foregoing, we may ultimately be unable to recover the full investment that we make in a new offering or achieve any level of profitability from such offering.

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**If we fail to manage our inventory and supply chain effectively, our business, financial condition and results of operations may be materially and adversely affected.**

Our business requires us to manage a large volume of inventory, including a large number of stock-keeping units ("SKUs") stored at multiple sites globally. We depend on our forecasts of demand for, and popularity of, various products to make purchasing decisions and to manage our supply and inventory of SKUs. To assist in management of manufacturing operations and in order to minimize inventory costs, we forecast anticipated product sales to predict our inventory needs up to six months (and for certain select items, up to twelve months) in advance and enter into purchase orders on the basis of these forecasts, subject to limitations on the lead time of our product components and items with long lead times. We also maintain safety stock of long lead time items. If we overestimate our requirements, we and our contract manufacturers will have excess inventory, increasing our costs and the amount of our capital tied up in inventory. If we underestimate our requirements, we and our OEM partners and/or contract manufacturers may have inadequate components and materials inventory, which could interrupt, delay or prevent delivery of our products to our customers. The occurrence of any of these risks related to inventory and supply chain management could adversely affect our business, operating results and financial condition.

We also depend on limited source suppliers for some of our product components and sub-assemblies. Our suppliers may encounter problems during manufacturing due to a variety of reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, equipment malfunction and environmental factors including severe weather events, earthquakes and pandemics, such as COVID-19. While we believe we could obtain replacement components from alternative suppliers, we may be unable to do so. If we cannot secure on a timely basis sufficient quantities of the materials we depend on to manufacture our products, if we encounter delays or contractual or other difficulties in our relationships with these suppliers, or if we cannot find replacement suppliers at an acceptable cost, then manufacturing our products may be disrupted, which could increase our costs, prevent or impair our development or commercialization efforts, and have a material adverse effect on our business, financial condition, and results of operations.

**If we fail to maintain, enhance or protect our brand, our ability to expand our customer base will be impaired and our business, financial condition and results of operations may suffer.**

We believe that building a strong reputation and brand as an innovative and effective educational tool and continuing to increase the strength of our customer base is critical to our future success. The successful development of our reputation and brand will depend on a number of factors, many of which are outside our control. Negative perception of us or our platform may harm our reputation and brand, and affect our ability to achieve results of operations at the levels we expect.

**Another regional or global health pandemic, such as the COVID-19 pandemic, could severely affect our business, results of operations and financial condition.**

Another regional or global health pandemic, depending upon its duration and severity, could have a material adverse effect on our business. For example, the COVID-19 pandemic had numerous effects on the global economy. Governmental authorities around the world implemented measures to reduce the spread of COVID-19 and these measures, including shutdowns and "shelter-in-place" orders suggested or mandated by governmental authorities or otherwise elected by companies as a preventive measure, adversely affected workforces, customers, consumer sentiment, economies and financial markets, and, along with decreased consumer spending, led to an economic downturn.

In response to the COVID-19 pandemic, we modified our business practices (including employee travel, recommending that all non-essential personnel work from home and canceling or reducing physical participation in meetings, events and conferences), and implemented additional safety protocols for essential workers. If significant portions of our workforce are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with a regional or global health pandemic, our operations will be negatively impacted.

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**We plan to continue to make acquisitions, which could negatively impact our financial condition or results of operations and may adversely affect the price of our common stock.**

As part of our business strategy, we have made, and intend to make, acquisitions to add new software offerings, specialized employees and complementary companies, products or technologies, and enter new geographic regions. Our previous and future acquisitions may not achieve our goals, and we may not realize benefits from acquisitions we make in the future. If we fail to successfully integrate companies, products or technologies we acquire, our business, operating results and financial condition could be harmed. Any integration process will require significant time and resources, and we may not be able to manage the process successfully. Our acquisition strategy may change over time and any future acquisitions we complete could be viewed negatively by customers, partners, investors or other parties with whom we do business. We may not successfully evaluate or utilize acquired technology and accurately forecast the financial impact of an acquisition, including accounting charges. We may also incur unanticipated liabilities that we assume as a result of acquiring companies. We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, any of which could affect our financial condition or the value of our common stock. In the future, we may not be able to find suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms or at all. Our acquisition strategy could require significant management attention, disrupt our business and harm our business, operating results and financial condition.

**Our business depends largely on our ability to attract and retain talented employees, including senior management.**

Our future success depends on the continuing ability to attract, train, integrate and retain highly skilled personnel, including software engineers and sales personnel with experience in the education market. We face intense competition for qualified individuals from numerous software and other technology companies. We may not be able to retain current key employees or attract, train, integrate or retain other highly skilled personnel in the future. We may incur significant costs to attract and retain highly skilled personnel, and we may lose new employees to competitors or other technology companies before we realize the benefit of our investment in recruiting and training them. As we move into new geographies, we will need to attract and recruit skilled personnel in those areas. If we are unable to attract and retain suitably qualified individuals who are capable of meeting our growing technical, operational, and managerial requirements, on a timely basis or at all, our business, operating results and financial condition may be adversely affected.

Our future success also depends in large part on the continued services of our senior management and other key personnel. Even though we have employment agreements with our executive officers, our executive officers and other key personnel are all employed on an at-will basis, which means that they could terminate their employment with us at any time, for any reason, and without notice. We do not currently maintain key-person life insurance policies on any of our officers or employees. If we lose the services of senior management or other key personnel, our business, operating results, and financial condition could be adversely affected.

Volatility or lack of appreciation in our stock price may also affect our ability to attract and retain key employees. Employees may be more likely to leave us if the common stock they own or the common stock underlying their vested options have significantly appreciated in value relative to the original purchase price of the common stock or the exercise price of the options, or conversely, if the exercise price of the options that they hold are significantly above the market price of our common stock. If we are unable to retain employees, or if we need to increase our compensation expenses to retain our employees, our business, operating results and financial condition could be adversely affected.

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**If we fail to effectively expand our sales and marketing capabilities, we could harm our ability to increase our customer base and achieve broader market acceptance of our platform.**

Our ability to broaden our customer base and achieve broader market acceptance of our platform will depend to a significant extent on the ability of our sales and marketing organizations to work together to drive our sales pipeline and cultivate customer and partner relationships to drive revenue growth. Our marketing efforts include industry event participation, the use of search engine optimization, paid search, and custom website development and deployment.

We plan to expand our sales and marketing organizations in the future, both domestically and, to a more limited extent, internationally. Identifying, recruiting and training sales personnel will require significant time, expense, and attention. If we are unable to hire, develop, and retain talented sales or marketing personnel, if our new sales or marketing personnel are unable to achieve desired productivity levels in a reasonable period of time (including as a result of working remotely), or if our sales and marketing programs are not effective, our ability to broaden our customer base and achieve broader market acceptance of our platform could be harmed. In addition, the investments we make in our sales and marketing organization will occur in advance of experiencing benefits from such investments, making it difficult to determine in a timely manner if we are efficiently allocating our resources in these areas.

**Our platform and internal systems rely on software and hardware that is highly technical, and any errors, bugs, or vulnerabilities in these systems, or failures to address or mitigate technical limitations in our systems, could adversely affect our business.**

Our platform and internal systems rely on software and hardware, including software and hardware developed or maintained internally and/or by third parties, that is highly technical and complex. In addition, our platform and internal systems depend on the ability of such software and hardware to store, retrieve, process and manage immense amounts of data. The software and hardware on which we rely has contained, and will likely in the future contain, errors, bugs or vulnerabilities, and our systems are subject to certain technical limitations that may compromise our ability to meet our objectives. Some errors, bugs or vulnerabilities inherently may be difficult to detect and may only be discovered after the code has been released for external or internal use. Any errors, bugs, vulnerabilities or defects in our systems or the software and hardware on which we rely, failures to properly address or mitigate the technical limitations in our systems or associated degradations or interruptions of service or failures to fulfill our commitments to our customers, have in the past led to, and may in the future lead to, outcomes including delays in bringing new products to market, damage to our reputation, loss of customers, loss of revenue, regulatory inquiries, litigation, or liability for fines, damages, or other remedies, any of which could adversely affect our business, operating results, and financial condition.

**We face risks related to our contracts with state and local government entities as well as difficulties with contracting with large customers with substantial negotiating leverage, and in the past have faced risks related to contracts with federal government agencies, any of which could harm our results of operations.**

We have in the past entered into, and expect to continue to enter into, agreements with local, state and federal education agencies. Selling to government entities can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that we will successfully sell our products to such governmental entity. Government entities may require contract terms that differ from our standard arrangements. In addition, government demand and payment for our products may be more volatile as they are affected by public sector budgetary cycles, funding authorizations, and the potential for funding reductions or delays, making the time to close such transactions more difficult to predict. This risk is enhanced as the size of such sales to government entities increases. As we expand our customer base and the application/solution coverage of our existing customers, we may be subject to increased scrutiny, potential reputational risk or potential liability should our platform and products fail to perform as contemplated in such deployments or should we not comply with the terms of our government contracts or government contracting requirements.

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**If we fail to maintain relationships with third-party software developer partners or fail to expand our partnerships with industry partners, our ability to grow our business and revenue will suffer.**

The success of our business depends in large part on the continued and increased development and volume of compelling content and on continuing to recruit and work with third-party developers. We may face several challenges in establishing and expanding these relationships. For instance, third-party developers who contribute to our platform must invest significant time and resources to adjust the manner in which they develop their applications for an AR/VR learning environment. The delivery of AR/VR educational programs at educational institutions is still growing in acceptance, and it is possible that administrators and faculty members may have concerns regarding such services. We cannot be certain that AR/VR educational programs, such as those offered on our platform, will ever achieve significant market acceptance, and industry partners may therefore decline to continue to create content for our platform. Further, if we were to lose certain key third-party developers, or otherwise lose a significant number of third-party developers, our growth and revenue would be negatively impacted.

**Failure of our resellers or other commercial partners to use acceptable ethical business practices or comply with applicable laws could negatively impact our business.**

As part of our sales and marketing strategy, we rely on third-party resellers and other commercial partners to distribute and market our products and outside of the United States, we rely exclusively on resellers to distribute and market our products. We expect these resellers and partners to operate in compliance with applicable laws, rules, and regulations, but we cannot control their conduct. If any of our resellers or partners violate applicable laws or implements business practices that are regarded as unethical, the distribution of our products in those jurisdictions could be interrupted, usage of our platform could decline, our reputation could be damaged, and we may be subject to liability. Any of these events could have a negative impact on our business, financial condition, and results of operations.

#### Risks Related to Financial and Accounting Matters
**Our existing and future levels of indebtedness could adversely affect our financial health, ability to obtain financing in the future, and ability to fulfill our obligations under such indebtedness.**

As of December 31, 2025, we had outstanding indebtedness in the aggregate principal amount of approximately $17.7 million with maturity dates ranging from 2026 through 2027. This level of indebtedness could:

● unless refinanced, require us to dedicate a substantial portion of our cash to the payment of principal and interest on our indebtedness, thereby reducing the amount of funds to be used for working capital, acquisitions, product development, capital expenditures and other general corporate purposes;

● limit our ability to obtain additional financing;

● limit our ability to refinance indebtedness or cause the associated costs of such refinancing to increase;

● increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; and

● place us at a competitive disadvantage compared to our competitors with proportionately less debt or comparable debt at more favorable interest rates which, as a result, may be better positioned to withstand economic downturns.

In addition, the agreements governing our indebtedness contain, and any future debt instruments likely will contain, financial and operating covenants that limit our flexibility in operating our business. Our ability to comply with these covenants may be affected by events beyond our control, and we may be unable to satisfy them. A breach of any of these covenants could result in a default under the applicable debt instrument, which could cause all of our outstanding debt to become immediately due and payable. If our debt were to be accelerated, we may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or repay it, which would have a material adverse effect on our business, financial condition and results of operations.

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#### There is uncertainty regarding our ability to continue as a going concern.
Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2025, which stated that management has concluded that substantial doubt exists about our ability to continue as a going concern for one year after the date our consolidated financial statements are issued. As discussed in Note 1 to our consolidated financial statements, we have suffered recurring losses from operations, negative cash flows from operations, non-compliance with certain debt covenants and have a net working capital deficiency that raises substantial doubt about our ability to continue as a going concern. Further, we had an accumulated deficit of approximately $315.8 million as of December 31, 2025. To address our shortage of working capital necessary to fund our operations, management is developing a remediation plan that includes refinancing existing debt facilities and raising new sources of capital. As a result of the uncertainty regarding our ability to continue as a going concern, there is increased risk that you could lose the entire amount of your investment in us. The financial statements included in this report do not include any adjustments that might result from the outcome of this uncertainty.

**Our operating results may fluctuate significantly, which makes our future results difficult to predict.**

Our quarterly and annual operating results have fluctuated in the past and are expected to fluctuate in the future. As a result, you should not rely upon our past quarterly and annual operating results as indicators of future performance. We have encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly evolving markets, such as the risks and uncertainties described herein. Our operating results in any given quarter can be influenced by numerous factors, many of which are unpredictable or are outside of our control, including:

● our ability to generate revenues from our platform;

● our ability to attract and retain customers;

● our ability to recognize revenue or collect payments from customers or other third parties in a particular period;

● the ability of our third-party partners to manufacture and deliver our hardware, including due to global supply chain issues;

● fluctuations in spending by our customers due to availability of government funding and subsidies, episodic regional or global events, or other factors;

● changes to our platform or the development and introduction of new products or services by our competitors;

● changes in local, state or federal regulations regarding education, particularly the introduction of limitations on education products or topics for the K-12 school population, including, for example, Florida's Parental Rights in Education bill, which became effective as of July 1, 2022;

● system failures, disruptions, breaches of security or privacy, whether on our platform or on those of third parties, and the costs associated with any such breaches and remediation;

● negative publicity associated with our products;

● health epidemics, such as the COVID-19 pandemic, influenza, and other highly communicable diseases or viruses;

● the timing of incurring additional expenses, such as increases in sales and marketing or research and development expenses;

● adverse litigation judgments, settlements or other litigation-related costs;

● other changes in the legislative or regulatory environment, including with respect to education standards and privacy and cybersecurity, or actions by governments or regulators, including fines, orders or consent decrees;

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● changes in United States generally accepted accounting principles; and

● changes in domestic and global business and macroeconomic conditions, including as a result of increasing interest rates, inflation, instability in the global banking system, and global unrest, including the wars in the Middle East and Ukraine.

The impact of one or more of the foregoing or other factors may cause our operating results to vary significantly. As such, quarter-to-quarter comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future performance. If we fail to meet or exceed the expectations of investors or securities analysts, the trading price of our common stock could fall substantially, and we could face costly lawsuits, including securities class action suits. Furthermore, any quarterly or annual fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.

**We have identified material weaknesses in our internal control over financial reporting, and the failure to achieve and maintain effective internal controls over financial reporting could harm our business and negatively impact the value of our common stock.**

Effective internal control over financial reporting is necessary for us to provide reliable financial reports in a timely manner. In connection with the preparation of our financial statements for the years ended December 31, 2024 and 2025, we concluded that there were material weaknesses in our internal control over financial reporting. A material weakness is a significant deficiency, or a combination of significant deficiencies, in internal control over financial reporting such that it is reasonably possible that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, we identified five material weaknesses related to: (1) lack of segregation of duties; (2) certain information technology general controls, including controls over the review of user access roles and administrative access; (3) account reconciliations and cutoff; (4) analysis of significant and unusual transactions; and (5) lack of a formal risk assessment policy for entity-level controls.

During the fiscal year ended December 31, 2025, management successfully remediated two of these five material weaknesses. The material weakness related to information technology general controls was remediated through the implementation of formalized user access review and recertification processes, restriction of administrative access, and quarterly access recertification cycles that operated effectively throughout fiscal year 2025. The material weakness related to the analysis of significant and unusual transactions was remediated through the establishment of formal policies and procedures for identifying and evaluating non-routine transactions, management review and sign-off controls, and quarterly identification checklists that operated effectively across multiple quarterly close cycles during fiscal year 2025. As of December 31, 2025, three material weaknesses remain outstanding:

● lack of segregation of duties;

● account reconciliations and cutoff; and

● lack of a formal risk assessment policy for entity-level controls.

Due to the nature of the remediation process and the need to allow adequate time after implementation to evaluate and test the effectiveness of the controls, no assurance can be given as to the timing or cost of full remediation. The material weaknesses will be considered fully remediated when, in the opinion of our management, the revised control processes have been operating for a sufficient period of time and have been tested for operating effectiveness.

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If we are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or if we identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our stock price may decline as a result. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to capital markets. In addition, investors' perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our products to new and existing customers.

**We have a history of net losses. We expect to continue to experience net losses in the future, and we may not achieve profitability. If we do not achieve profitability, our business, financial condition and operating results will be adversely affected.**

We have experienced significant net losses since we began operations in 2014, including a net loss of approximately $25.4 million for the year ended December 31, 2025 and approximately $20.8 million for the year ended December 31, 2024. We have an accumulated deficit of $315.8 million and a total stockholders' deficit of $22.5 million as of December 31, 2025. We anticipate that our operating expenses will increase in the foreseeable future as we continue to invest in acquiring additional customers, expanding our platform and operations, hiring additional employees, developing and enhancing our platform and application and solutions offerings, marketing and sales, and enhancing our infrastructure. Our expansion efforts may prove more expensive than we anticipate, and we may not succeed in increasing our revenues sufficiently to offset these higher expenses. Given the significant operating and capital expenditures associated with our business, we expect to continue to incur net losses for the foreseeable future and cannot assure you that we will be able to achieve profitability.

**Our business is subject to seasonal sales fluctuations which could result in volatility in our operating results, some of which may not be immediately reflected in our financial position and results of operations.**

Our business may be affected by the general seasonal trends common to the education markets. These include but are not limited to increased new subscriptions and expansions to existing subscriptions in connection with annual budgetary decisions made at the local, state and governmental level.

This seasonality may adversely affect our business and cause our results of operations to fluctuate.

**Our ability to use our United States federal and state net operating losses to offset future taxable income may be subject to certain limitations which could subject our business to higher tax liability.**

As of December 31, 2025, we had United States federal net operating loss ("NOL") carryforwards of approximately $219.8 million and state NOL carryforwards of approximately $176.9 million after Section 382 limitations. Under the 2017 Tax Cuts and Jobs Act (the "Tax Act"), as modified by the Coronavirus Aid, Relief, and Economic Security Act, unused United States federal NOLs generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely, but the deductibility of such federal NOLs in taxable years beginning after December 31, 2020 is limited to 80% of current year taxable income. NOLs arising in taxable years ending before 2018 are generally limited to a 20-year carryforward period.

Under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), and corresponding provisions of state law, if a corporation that undergoes an "ownership change," which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, the corporation's ability to utilize its pre-change NOL carryforwards to offset its post-change income or taxes may be limited. We have completed an initial Section 382 analysis, and it is most likely that we have previously undergone one or more ownership changes so that our use of NOLs is currently subject to limitation.

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We may also experience ownership change(s) in the future as a result of subsequent shifts in our stock ownership, some of which may be outside our control. Therefore, it is possible that such an ownership change could limit the amount of NOLs we can use to offset future taxable income. Our current NOL carryforwards, and any NOL carryforwards of companies we acquire in the future, may be subject to limitations, thereby increasing our overall tax liability. Our NOL carryforwards may also be impaired under similar provisions of state law. We have recorded a full valuation allowance related to our United States federal and state NOL carryforwards and other net deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets. Our NOL carryforwards may expire unutilized or underutilized, which could prevent us from offsetting future taxable income. Any future changes in United States tax laws in respect of the utilization of NOL carryforwards may further affect the limitation in future years. In addition, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited at the state level, which could also impact our ability to utilize NOL carryforwards. As a result, even if we attain profitability, we may be unable to use all or a material portion of our NOLs, which could adversely affect our business, operating results, financial condition, and cash flows.

**We may have exposure to greater-than-expected tax liabilities, which could seriously harm our business.**

We have entered into transfer pricing arrangements that establish transfer prices for our intercompany operations. However, our transfer pricing procedures are not binding on the applicable taxing authorities. No official authority in any jurisdiction has made a determination as to whether or not we are operating in compliance with such authority's transfer pricing laws. Accordingly, taxing authorities in any of these jurisdictions could challenge our transfer prices and require us to adjust them to reallocate our income. Any change to the allocation of our income as a result of review by such taxing authorities could have a negative effect on our operating results and financial condition. In addition, the determination of our provision for income taxes and other uncertain tax liabilities requires significant judgment and there are many transactions and calculations where the ultimate tax determination is uncertain. Tax authorities may disagree with and may challenge our tax positions. If our tax positions were not sustained, we could be required to pay additional taxes, interest, penalties or other costs, or have other material consequences.

#### Risks Related to Legal and Regulatory Matters
**We have been, and expect to continue to be, adversely affected by changes in U.S. and international trade policies, as well as ongoing uncertainty regarding the current administration's trade agenda.**

Our reliance on international suppliers subjects us to significant risks related to U.S. and international trade policy. The current presidential administration has pursued protectionist trade policies and has frequently utilized executive authority to impose significant tariffs and trade restrictions, particularly on imports from China and Mexico. These actions have materialized into higher costs for our imported components and have disrupted our logistics and supply chain.

Rising political tensions could reduce trade volume, investment, technological exchange and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets. Additionally, the resulting environment of tariffs, retaliatory trade or other practices or additional trade restrictions or barriers, if implemented on a broader range of products or raw materials, could harm our ability to obtain necessary raw materials and product components or sell our products and services at prices customers are willing to pay, which could have a material adverse effect on our business, prospects, results of operations, and cash flows.

**Failure to comply with applicable laws and regulations, including export controls, anti-corruption, and education-specific data privacy regulations, could subject us to significant liability and adversely affect our business.**

We operate in a highly regulated environment subject to U.S. export controls (EAR), economic sanctions (OFAC), and anti-corruption laws (including the FCPA and UK Bribery Act). Because we rely heavily on third-party distributors and agents to conduct business internationally, we face increased risk of liability for their actions; we may be held responsible for corrupt or illegal activities by these partners even if we do not explicitly authorize them. Violations of these laws could result in criminal penalties, loss of export privileges, and severe fines.

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Simultaneously, as a provider to the education sector, we are subject to stringent regulations regarding the collection and security of student personally identifiable information. This includes evolving compliance requirements in the U.S. (at both federal and state levels) and the EU. Any failure by us or our third-party partners to comply with these complex trade, anti-corruption, or student privacy laws could result in government investigations, litigation, significant financial penalties, and reputational damage that would materially adversely affect our results of operations.

**Our business is subject to complex and evolving United States and foreign laws, regulations and industry standards, many of which are subject to change and uncertain interpretation, which uncertainty could harm our business, operating results and financial condition.**

We are subject to many United States federal and state and foreign laws, regulations and industry standards that involve matters central to our business, including laws and regulations that involve data privacy, cybersecurity, intellectual property (including copyright and patent laws), content, rights of publicity, advertising, marketing, competition, protection of minors, consumer protection, taxation and telecommunications. These laws and regulations are constantly evolving and may be interpreted, applied, created, or amended, in a manner that could harm our business. In addition, the introduction of new products, expansion of our activities in certain jurisdictions, or other actions that we may take may subject us to additional laws, regulations or other government scrutiny.

We collect, store, use and otherwise process data, some of which contains personal information about our employees, customers and business partners, including contact details, network details, and location data. Therefore, we are or may become subject to United States (federal, state, local) and foreign laws and regulations regarding data privacy and security and the processing of personal information and other data from customers, end users or business partners. The regulatory framework for privacy, information security, data protection and processing worldwide and interpretations of existing laws and regulations is likely to continue to be uncertain and current or future legislation or regulations in the United States and other jurisdictions, or new interpretations of existing laws and regulations, could significantly restrict or impose conditions on our ability to process data we use in our business operations, which could affect our operating results.

**We are and could continue to be involved in legal disputes that are expensive and time consuming, and, if resolved adversely, could harm our business, operating results and financial condition.**

From time to time, we may be involved in actual and threatened legal proceedings, claims, investigations and government inquiries arising in the ordinary course of our business. We are currently involved in litigation with EdtechX Holdings Acquisition Corp. II related to a failed merger with a special purpose acquisition company. While we believe that the claims asserted against us are without merit and intend to defend ourselves vigorously, litigation is inherently unpredictable. Any proceedings, claims or inquiries involving our company, whether successful or not, may be time consuming, result in costly litigation, unfavorable outcomes or increased costs of business, require us to change our business practices or platform, require a significant amount of management's time or may harm our reputation or otherwise harm our business, operating results, and financial condition.

In addition, companies in the Internet, technology and education industries typically own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As we face increasing competition and grow our business and platform offerings, the possibility of receiving a larger number of intellectual property claims against us grows. In addition, various "non-practicing entities" that own patents and other intellectual property rights may in the future attempt to assert intellectual property claims against us to extract value through licensing or other settlements.

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From time to time, we receive letters from patent holders alleging that our platform infringes on their patent rights and from trademark holders alleging infringement of their trademark rights. We also receive letters from holders of copyrighted content alleging infringement of their intellectual property rights. Our technologies and content, including the content that partners may create for use on our platform, may not be able to withstand such third-party claims, and could have a material adverse effect on our business. We may have to seek a license to continue using technologies or engaging in practices found to be in violation of a third-party's rights, which may not be available on reasonable terms and may significantly increase our operating expenses (for example, by being required to pay significant royalties in connection with such licenses). A license to continue using such technologies or practices may not be available to us at all and we may be required to discontinue use of such technologies or practices or to develop alternative non-infringing technologies or practices. The development of alternative non-infringing technologies or practices could require significant effort and expense or may not be achievable at all. Our business, operating results and financial condition could be harmed as a result

**The obligations associated with operating as a public company will require significant resources and management attention and will cause us to incur additional expenses, which will adversely affect our results of operations.**

Following our initial public offering, our expenses increased as a result of the additional accounting, legal and various other additional expenses usually associated with operating as a public company and complying with public company disclosure obligations. We are required to comply with certain requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and other applicable securities rules and regulations. The Exchange Act requires, among other things, us to file annual, quarterly, and current reports with respect to our business and operating results with the Securities and Exchange Commission ("SEC"). We are also required to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis. Compliance with these rules and regulations has increased our legal and financial compliance costs, made some activities more difficult, time-consuming or costly and increased demand on our systems and resources. As a public company, we are required to, among other things:

● prepare and file periodic public reports and other stockholder communications in compliance with our obligations under the United States federal securities laws;

● create or expand the roles and duties of our board of directors and committees of our board of directors;

● institute more comprehensive financial reporting and disclosure compliance functions; and

● establish new and enhance existing internal policies, including those relating to disclosure controls and procedures.

These requirements, and the involvement of accountants and legal advisors, require a significant commitment of additional resources. We might not be successful in complying with these obligations and the significant commitment of resources required for complying with them could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we intend to increase our directors' and officers' insurance coverage, which will increase our insurance cost. In the future, it may be more expensive or more difficult for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

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#### Risks Related to Intellectual Property
**Failure to register, protect or enforce our proprietary technology and intellectual property rights could substantially harm our business, operating results and financial condition.**

We rely on trademark, copyright, patent, trade secret, and domain name protection and other intellectual property laws, to protect our proprietary rights. In the United States and internationally, we have filed various applications for protection of certain aspects of our intellectual property, and we currently hold issued patents and copyrights in the United States and foreign jurisdictions, and trademark registrations in the United States and other foreign countries. Third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, and pending and future applications covering our intellectual property rights may not be issued.

Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually provide adequate defensive protection or competitive advantages to us. Patent applications in the United States are typically not published until at least 18 months after filing, or, in some cases, not at all. We cannot be certain that we were the first to make the inventions claimed in our pending patent applications or that we were the first to file for patent protection. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. The uncertainty and changing landscape regarding the patentability of software and the interpretation of the United States patent laws with respect thereto may also bring into question the validity of certain software patents and may make it more difficult and costly to prosecute patent applications. Such changes may lead to uncertainties or increased costs and risks surrounding the prosecution, validity, ownership, enforcement, and defense of our issued patents and patent applications and other intellectual property rights, the outcome of third-party claims of infringement, misappropriation, or other claims of intellectual property violations brought against us and the actual or enhanced damages (including treble damages) that may be awarded in connection with any such current or future claims, and could have a material adverse effect on our business.

We rely on our trademarks, trade names, and brand names to distinguish our platform from the products of our competitors. However, third parties may have already registered identical or similar marks for products or solutions that also address the software market in which we operate. Efforts by third parties to limit use of our brand names or trademarks and barriers to the registration of brand names and trademarks may restrict our ability to promote and maintain a cohesive brand throughout our key markets. We cannot be certain that pending or future United States or foreign trademark applications will be approved in a timely manner or at all, or that such registrations will effectively protect our brand names and trademarks. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our platform, which would result in loss of brand recognition and would require us to devote resources to advertising and marketing new brands.

In addition, effective intellectual property protection may not be available in every country in which we conduct or intend to conduct our business. In any or all of these cases, we may be required to expend significant time and expense in order to prevent infringement or to enforce our rights. Although we have generally taken measures to protect our proprietary rights, others may offer products or concepts that are substantially similar to ours and compete with our business. If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of our brands and other intangible assets may be diminished and competitors may be able to mimic our platform and methods of operations more effectively.

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To prevent substantial unauthorized use of our intellectual property and proprietary rights, it may be necessary to prosecute actions for infringement and/or misappropriation of our proprietary rights against third parties. Any such action could result in significant costs and diversion of our resources and management's attention, and we cannot be certain that we would be successful in any such action. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights (or to contest claims of infringement) than we do. Accordingly, despite our efforts, we may not be able to prevent third parties from knowingly or unknowingly infringing upon, misappropriating or circumventing our intellectual property rights. If we are unable to protect our proprietary rights (including aspects of our software and platform protected other than by patent rights), we will find ourselves at a competitive disadvantage to others who need not incur the additional expense, time and effort required to create our platform. Moreover, we may need to expend additional resources to defend our intellectual property rights in foreign countries, and our inability to do so could impair our business, results of operations and financial condition or adversely affect our business, operating results, and financial condition.

**Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and proprietary information.**

We have devoted substantial resources to the development of our intellectual property and proprietary rights. To protect our intellectual property and proprietary rights, we rely in part on confidentiality agreements with our employees, vendors, licensees, independent contractors and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Effective trade secret protection may also not be available in every country in which our platform is used or where we have employees or independent contractors. The loss of trade secret protection could make it easier for third parties to compete with our platform by copying functionality. In addition, any changes in, or unexpected interpretations of, the trade secret and employment laws in any country in which we operate may compromise our ability to enforce our trade secret and intellectual property and proprietary rights. In addition, others may independently discover trade secrets and proprietary information and in such cases, we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

**Third parties may claim that our platform infringes their intellectual property rights, and this may create liability for us or otherwise adversely affect our business, operating results and financial condition.**

Third parties may claim that our platform infringes their intellectual property rights, and such claims may result in legal claims against us and our technology partners and customers. These claims may damage our brand and reputation and create liability for us. We expect the number of such claims to increase as the functionality of our platform and services overlaps with that of other products and services, and as the volume of our software patents and patent applications continues to increase.

Companies in the software and technology industries own large numbers of patents, copyrights, trademarks, trade secrets and other intellectual property and proprietary rights, and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. In addition, many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, patent holding companies, non-practicing entities, and other adverse patent owners that are not deterred by our existing intellectual property protections may seek to assert patent claims against us. We have in the past received immaterial, and may in the future receive material or immaterial, claims we have misappropriated, misused, or infringed other parties' intellectual property rights, and, to the extent we gain greater market visibility, we may face a higher risk of being the subject of intellectual property infringement claims.

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We may also face exposure to third-party intellectual property infringement, misappropriation or violation actions if we engage software engineers or other personnel who were previously engaged by competitors or other third parties and those personnel inadvertently or deliberately incorporate proprietary technology and intellectual property of third parties into our products. This could also result in us losing valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to develop, market and support potential products or enhancements, which could severely harm our business. Any intellectual property claims, with or without merit, could be very time-consuming, could be expensive to settle or litigate, and could divert our management's attention and other resources. These claims could also subject us to significant liability for damages, potentially including treble damages if we are found to have willfully infringed patents or copyrights. These claims could also result in us having to stop using technology found to be in violation of a third party's rights. We might be required to seek a license for these intellectual property rights, which may not be available on reasonable terms or at all. Even if a license were available, we could be required to pay significant royalties, which would increase our operating expenses. Alternatively, we could be required to develop alternative non-infringing technology, which could require significant time, effort and expense, and may affect the performance or features of our platform. If we cannot license or develop alternative non-infringing substitutes for any infringing technology used in any aspect of our business, we would be forced to limit use of our platform. Any of these results would adversely affect our business, operating results and financial condition.

**Our use of "open source" software could subject us to possible litigation or could prevent us from offering products that include open source software or require us to obtain licenses on unfavorable terms.**

A portion of the technologies we use incorporates "open source" software, and we may incorporate open source software in the future. Open source software is generally licensed by its authors or other third parties under open source licenses. These licenses may subject us to certain unfavorable conditions, including requirements that we offer our products that incorporate the open source software for no cost, that we make publicly available the source code for any modifications or derivative work we create based upon, incorporating or using the open source software, or that we license such modifications or derivative works under the terms of the particular open source license. From time to time, companies that use third-party open source software have also faced claims challenging the use of such open source software and their compliance with the terms of the applicable open source license. We may be subject to suits by parties claiming ownership of open source software or claiming non-compliance with the applicable open source licensing terms.

In addition to using open source software, we also license to others some of our software through open source projects. Open sourcing our own software requires us to make the source code publicly available, and therefore can affect our ability to protect our intellectual property rights with respect to that software. Additionally, if a third-party software provider has incorporated open source software into software that we license from such provider, we could be required to disclose any of our source code that incorporates or is a modification or derivative work of such licensed software. If an author or other third-party that distributes open source software that we use or license alleges that we did not comply with the conditions of the applicable license, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from offering our products that contained the open source software, required to release proprietary source code, required to obtain licenses from third parties or required to comply with the conditions unless and until we can re-engineer the product so that it complies with the open source license or does not incorporate the open source software.

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Neither the United States nor foreign courts have interpreted a large number of open source licenses, and accordingly, there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to commercialize our platform. In that event, we could be required to seek licenses from third parties in order to continue offering our platform, to re-develop our platform or to release our proprietary source code under the terms of an open source license, any of which could harm our business. Enforcement activity for open source licenses can also be unpredictable. Were it determined that our use was not in compliance with a particular license, we could be required to release our proprietary source code, defend claims, pay damages for breach of contract or copyright infringement, grant licenses to our patents, re-engineer our platform, or take other remedial action that may divert resources away from our product development efforts, any of which could negatively impact our business. Open source compliance problems can also result in damage to our reputation and challenges in recruitment or retention of engineering personnel. Further, given the nature of open source software, it may be more likely that third parties might assert copyright and other intellectual property infringement claims against us based on our use of these open source software programs. Litigation could be costly for us to defend, have a material adverse effect on our business, results of operations and financial condition, or require us to devote additional development resources to change our platform.

**We license technology from third parties, and our inability to maintain those licenses could harm our business.**

We incorporate technology that we license from third parties, including software, into our platform. Licensing technologies from third parties exposes us to increased risk of being the subject of intellectual property infringement claims due to, among other things, our lower level of visibility into the development process with respect to such technology and the care taken to safeguard against infringement risks. We cannot be certain that our licensors do not or will not infringe on the intellectual property rights of third parties or that our licensors have or will have sufficient rights to the licensed intellectual property in all jurisdictions in which we conduct business. Some of our agreements with our licensors may be terminated by them for convenience, or otherwise provide for a limited term. If we are unable to continue to license technology because of intellectual property infringement claims brought by third parties against its licensors or against us, or if we are unable to continue our license agreements or enter into new licenses on commercially reasonable terms, our ability to develop our platform that is dependent on that technology would be limited, and our business could be harmed. Additionally, if we are unable to license technology from third parties, we may be forced to acquire or develop alternative technology, which we may be unable to do in a commercially feasible manner or at all and which may require us to use alternative technology of lower quality or performance standards. As a result, our business, operating results and financial condition would be adversely affected.

**The failure of our IT systems or a security breach involving customer, student or employee personal data, and the remediation of any such failure or breach, could materially impact our reputation and adversely affect our business, results of operations or financial condition.**

Our business operations utilize a variety of IT systems. Although we have established appropriate contingency plans to mitigate the risks associated with a failure of our IT systems or a security breach, if one of our key IT systems were to suffer a failure or security breach, this could have a material adverse effect on our business, results of operations or financial condition. Further, we rely on third parties for certain IT services. If an IT service provider were to fail or the relationship with us were to end, we might be unable to find a suitable replacement in a timely manner, and our business, results of operations or financial condition could be materially adversely affected. We continually modify and enhance our IT systems and technologies to increase productivity and efficiency. As new systems and technologies are implemented, we could experience unanticipated difficulties resulting in unexpected costs and adverse impacts to our business processes. When implemented, the systems and technologies may not provide the benefits anticipated and could add costs and complications to ongoing operations, which may have a material adverse effect on our business, results of operations or financial condition.

Any security breach of our IT systems or those of our IT service providers could result in disruptions to our operations. To the extent that such a breach results in a loss or damage to our data, or an inappropriate disclosure of confidential or personal information, it could cause significant damage to our reputation, affect our relationships, lead to claims against us and ultimately materially adversely affect our business, results of operations or financial condition. In addition, since our customers consists largely of educational institutions, maintaining the trust of schools, parents, and students is critical. Consequently, any breach involving student information would likely result in disproportionate reputational damage compared to other types of corporate breaches.

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**Any interruptions in our operations due to cyberattacks or to our failure to maintain adequate security and supporting infrastructure as we scale, could damage our reputation, business, operating results, and financial condition.**

We have been the target of attempted cyber-attacks in the past, and we may be subject to unauthorized access of digital data with the intent to misappropriate information, corrupt data or cause operational disruptions in the future. Computer malware, viruses, physical or electronic break-ins and similar disruptions could lead to interruption and delays in our services and operations and loss, misuse or theft of data. Computer malware, viruses, ransomware, hacking and phishing attacks against online networks have become more prevalent and may occur on our systems in the future. Any successful attempts by cyber attackers to disrupt our services or systems could result in mandated user notifications, litigation, government investigations, significant fines and expenditures, divert management's attention from operations, deter people from using our platform, damage our brand and reputation, and materially adversely affect our business and results of operations. Insurance may not be sufficient to cover significant expenses and losses related to cyber-attacks. Efforts to prevent cyber attackers from entering computer systems are expensive to implement, and we may not be able to avoid attacks that arise through computer systems of our third-party vendors. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability of systems and technical infrastructure may, in addition to other losses, harm our reputation, brand and ability to attract customers.

We have not previously experienced, but may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, third-party service providers, human or software errors and capacity constraints. State-supported and geopolitical-related cyberattacks may increase in connection with Russia's invasion of Ukraine and any related political or economic responses and counter-responses. The war in Ukraine and associated activities in Ukraine and Russia have increased the risk of cyberattacks on various types of infrastructure and operations, and the United States government has warned companies to be prepared for a significant increase in Russian cyberattacks in response to the sanctions on Russia. If our services are unavailable when end users attempt to access them, our customers may seek other services, which could reduce demand for our solutions from target customers.

We have processes and procedures in place designed to enable us to recover from a disaster or catastrophe and continue business operations and have tested this capability under controlled circumstances. Although we believe we maintain cybersecurity and data privacy programs sufficient for our current operations and intend to expand such programs as our operations grow, as an early-stage company, we have not made significant investments in such programs. Further, there are several factors ranging from human error to data corruption that could materially impact the efficacy of such processes and procedures. It may be difficult or impossible to perform some or all recovery steps and continue normal business operations due to the nature of a particular disaster or catastrophe, especially during peak periods, which could cause additional reputational damages, or loss of revenues, any of which would adversely affect our business and financial results.

#### Risks Related to our Common Stock
**If our common stock fails to comply with the continued listing requirements of the Nasdaq Capital Market, we would face possible delisting, which would result in a limited public market for our common stock and make obtaining future debt or equity financing more difficult for us.**

Companies listed on Nasdaq are subject to delisting for, among other things, failure to maintain a minimum closing bid price of $1.00 per share for 30 consecutive business days or failure to maintain a minimum market value of listed securities ("MVLS") of at least $35,000,000. As previously reported, on November 25, 2025, we received a letter from Nasdaq indicating that the MVLS of our common stock was below $35 million for the previous 30 consecutive business days. In addition, on December 11, 2025, we received another letter from Nasdaq notifying us that the closing bid price of our common stock was below $1.00 for the previous 30 consecutive business days.

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Neither of the letters from Nasdaq have an immediate effect on the listing or trading of our common stock on Nasdaq. In accordance with Nasdaq's listing rules, we have a period of 180 calendar days, or until May 26, 2026, to regain compliance with the MVLS requirement and a period of 180 calendar days, or until June 9, 2026, to regain compliance with the bid price requirement. To regain compliance with the MVLS requirement, the MVLS of our common stock must close at $35 million or more for a minimum of 10 consecutive business days during this compliance period, unless Nasdaq exercises its discretion to require a longer period. To regain compliance with the bid price requirement, the minimum bid price of our common stock must be $1.00 or more for a minimum of 10 consecutive business days during this compliance period, unless Nasdaq exercises its discretion to require a longer period.

If we do not regain compliance within either of the prescribed periods, Nasdaq will provide written notification that our securities are subject to delisting. We may then appeal the determination to a Hearings Panel pursuant to Nasdaq Listing Rule 5815(a), but there can be no assurance that Nasdaq would grant our request for approval of its compliance plan.

If we cannot comply with the Nasdaq Listing Rules either now or in the future, our common stock would be subject to delisting and would likely trade on the over-the-counter market. If our common stock were to trade on the over-the-counter market, selling shares of our common stock could be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and security analysts' coverage of us may be reduced. In addition, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in shares of our common stock, further limiting the liquidity of our common stock. As a result, the market price of our common stock may be depressed, and you may find it more difficult to sell shares of our common stock. Such delisting from Nasdaq and continued or further declines in our stock price could also greatly impair our ability to raise additional necessary capital through equity or debt financing.

#### The price of our common stock may be volatile.
The price of our common stock may fluctuate due to a variety of factors, including:

● actual or anticipated fluctuations in our user growth, retention, engagement, revenue or other operating results;

● developments involving our competitors;

● variations between our actual operating results and the expectations of securities analysts, investors and the financial community;

● actual or anticipated fluctuations in quarterly or annual operating results;

● any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information;

● publication of research reports by securities analysts about us, our competitors or our industry;

● the public's reaction to our press releases, our other public announcements and our filings with the SEC;

● additional shares of common stock being sold into the market by us or our stockholders, or the anticipation of such sales, or the sale of shares by existing stockholders subject to lock-up agreements into the market, when applicable "lock-up" periods end;

● additions and departures of key personnel;

● commencement of, or involvement in, litigation involving us;

● changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

● the number of shares of common stock available for public sale;

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● announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;

● announcements by us or estimates by third parties of actual or anticipated changes in the number of our customers or the level of user engagement;

● changes in operating performance and stock market valuations of technology companies in our industry, including our partners and competitors;

● price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole, including interest rate changes and inflation;

● developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and

● other events or factors, including those resulting from wars, recessions, instability in the global banking system, local and national elections, international currency fluctuations, corruption, political instability and acts of terrorism.

In addition, extreme price and volume fluctuations in the stock markets have affected and continue to affect many technology companies' stock prices. Often, their stock prices have fluctuated in ways unrelated or disproportionate to the companies' operating performance. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and seriously harm our business.

**We are classified as a "controlled company" for purposes of the Nasdaq Listing Rules and therefore qualify for certain exceptions from certain corporate governance requirements. As a result, in the event we rely on such exceptions, our stockholders would not have the same protections afforded to stockholders of companies that are not controlled companies.**

Currently, dSpace, bSpace and Fiza control a majority of the voting power of our outstanding common stock. As a result, we are a "controlled company" within the meaning of the corporate governance standards of the Nasdaq Listing Rules. Under the Nasdaq Listing Rules, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain stock exchange corporate governance requirements, including:

● the requirement that a majority of a company's board of directors consist of independent directors;

● the requirement that nominating matters be decided solely by independent directors; and

● the requirement that executive and officer compensation matters be decided solely by independent directors.

Accordingly, in the event that we decide to rely on the "controlled company" exemption to reduce our corporate governance requirements, our stockholders would not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

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**We are an emerging growth company and a smaller reporting company, and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.**

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act, or JOBS Act, and may remain an emerging growth company for up to five years following the fifth anniversary of the date of our initial public offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenues exceed $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. The reduced disclosure and other requirements that we may take advantage of include:

● not being required to have our registered independent public accounting firm attest to management's assessment of our internal control over financial reporting;

● presenting reduced disclosure about our executive compensation arrangements;

● not being required to hold non-binding advisory votes on executive compensation or golden parachute arrangements;

● being exempt from any rule adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation and identification of critical audit matters, and

● relying on extended transition periods for complying with new or revised accounting standards, a result of which is that our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements.

We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may decline or be more volatile.

We are also a "smaller reporting company," meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Reports on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

**We do not intend to pay cash dividends for the foreseeable future, and as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.**

We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in agreements and financing instruments, business prospects and such other factors as our board of directors deems relevant. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases.

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**If analysts do not publish research about our business or if they publish inaccurate or unfavorable research, our stock price and trading volume could decline.**

The trading market for our common stock depends in part on the research and reports that analysts publish about our business. We do not have any control over these analysts. If any of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price of our common stock would likely decline. If few analysts cover us, demand for our common stock could decrease and the price and trading volume of our common stock may decline. Similar results may occur if one or more of these analysts stop covering us in the future or fail to publish reports on us regularly.

**We may be subject to securities litigation, which is expensive and could divert management attention.**

The market price of our common stock may be volatile and, in the past, in certain instances companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert management's attention from other business concerns, which could seriously harm our business.

**Compliance obligations under the Sarbanes-Oxley Act may require substantial financial and management resources.**

Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are applicable to us as a public company. If we are not able to implement the requirements of Section 404, as well as any additional requirements once we are no longer an emerging growth company, in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our common stock. Additionally, once we are no longer an emerging growth company, we will be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting.

**Provisions in our charter documents and under Delaware law, including anti-takeover provisions, could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may limit attempts by our stockholders to replace or remove our current management.**

Our second amended and restated certificate of incorporation (our "Charter") and second amended and restated bylaws (our "Bylaws") include anti-takeover provisions, which may have the effect of delaying or preventing a merger, acquisition or other change of control of us that our stockholders may consider favorable. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, the Charter and Bylaws include provisions that:

● require super-majority voting to amend provisions in the Charter and Bylaws;

● provide that stockholders holding more than 40% of our voting securities will be entitled to nominate two persons for election to our board of directors and stockholders holding 40% or less but more than 25% of our voting securities will be entitled to nominate one person for election to our board of directors;

● provides that our board of directors will be classified, such that the initial term of our independent directors will expire at our first annual meeting of stockholders to be held in 2025 and the initial term of our non-independent directors will expire at our second annual meeting of stockholders to be held in 2026;

● provide that only a majority of our board of directors, the chairman of our board of directors, our chief executive officer, our President or stockholders collectively holding more than 30% of our voting securities will be authorized to call a special meeting of stockholders;

● do not provide for cumulative voting;

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● provide that directors may only be removed "for cause" and only with the approval of two-thirds of our stockholders entitled to vote at an election of directors;

● provide that our board of directors is expressly authorized to make, alter, or repeal our bylaws, subject to Delaware General Corporation Law ("DGCL") requirements; and

● establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

Moreover, Section 203 of the DGCL may discourage, delay, or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock.

**Our Charter contains exclusive forum provisions for certain claims, which may limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.**

Our Charter provides that the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, will be the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the DGCL, the Charter, the Bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine.

Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholders' ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, officers, or employees, which may discourage lawsuits against us and our directors, officers, and employees. Alternatively, if a court were to find the choice of forum provision contained in our Charter or Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition and operating results.

**There may be a limited market for our common stock.**

Our common stock is a relatively new and illiquid security. There is no assurance that an active trading market for our common stock will develop or be sustained. If an active trading market does not develop or is not sustained, it may be difficult for you to sell your shares at a time and price that you deem appropriate. Low trading volume can also make it difficult for us to raise additional capital through the sale of equity securities. If we need to raise additional capital in the future, we may be unable to do so on favorable terms, or at all, if an active trading market for our common stock does not exist.

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#### Item 1B. Unresolved Staff Comments
None.

#### Item 1C. Cybersecurity
**Risk Management and Strategy**

We have adopted processes for assessing, identifying, and managing material risks from cybersecurity threats as part of our implementation of the NIST Cybersecurity Framework (CSF) 2.0. These processes are integrated into our overall risk management approach, as overseen by our board of directors, primarily through its audit committee. We do not regularly engage third-party consultants, legal advisors, or audit firms in connection with such processes. However, our processes include overseeing and identifying risks from cybersecurity threats associated with the use of various other third-party service providers. We conduct assessments of certain third-party providers before engagement and have established procedures in its effort to mitigate risks related to data breaches or other security incidents originating from third parties. We also continue to provide our employees with cybersecurity and data protection training to support our risk mitigation efforts.

**Governance**

**Board of Directors**

The audit committee of our board of directors is responsible for, among other things, reviewing and discussing with management and the internal audit group management's risk assessment and risk management policies, including cybersecurity risks. The audit committee would be informed of material risks from cybersecurity threats pursuant to the escalation criteria as set forth in our NIST CSF 2.0 procedures.

**Management**

Under the oversight of the audit committee of our board of directors, and as directed by our Chief Executive Officer, our Chief Information Security Officer ("CISO") is primarily responsible for the assessment and management of material cybersecurity risks.

The CISO has over 25 years of experience in information security, risk management, and compliance, has served as the President and CEO at other organizations with cybersecurity responsibility. The CISO is also supported by a group of internal stakeholders, which is comprised of certain members of senior management and provides cross-functional support for cybersecurity risk management and facilitates the response to any cybersecurity incidents.

The CISO oversees our cybersecurity incident response plan and related processes that are designed to assess and manage material risks from cybersecurity threats. The CISO also coordinates with our legal counsel and, if necessary, third parties, such as consultants and legal advisors, to assess and manage material risks from cybersecurity threats. The CISO is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents pursuant to criteria set forth in our incident response plan and related processes.

The CISO, or a delegate, informs the audit committee of certain cybersecurity incidents that may potentially be determined to be material pursuant to escalation criteria set forth in our incident response plan and related processes. The audit committee is also responsible for advising our Chief Executive Officer and Chief Financial Officer regarding cybersecurity disclosures in public filings. The CISO also notifies the audit committee chair of any material cybersecurity incident.

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As of the date of this Annual Report on Form 10-K, we are not aware of any cybersecurity incidents that have materially affected or are reasonably likely to materially affect our Company, including our business strategy, results of operations, or financial condition. For further discussion of the risks associated with cybersecurity incidents, see the cybersecurity risk factor titled "Any interruptions in our operations due to cyberattacks or to our failure to maintain adequate security and supporting infrastructure as we scale, could damage our reputation, business, operating results, and financial condition." in the section entitled "Item 1A. Risk Factors" included elsewhere in this Annual Report on Form 10-K.

#### Item 2. Properties
We maintain our current principal office at 55 Nicholson Lane, San Jose, CA 95134. The San Jose office is comprised of 6,464 square feet of office space in a multi-tenant building under a multi-year lease that expires in October 2027.

#### Item 3. Legal Proceedings
There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our company or any of our subsidiaries or has a material interest adverse to our company or any of our subsidiaries. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years. No current director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years. No current director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years. No current director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.

We are from time to time subject to claims, lawsuits and other legal and administrative proceedings arising in the ordinary course of business. Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition other than as follows:

On May 16, 2022, we entered into a merger agreement (the "EdtechX Merger Agreement") with EdtechX Holdings Acquisition Corp II ("EdtechX"), a Special Purpose Acquisition Company ("SPAC"). The Original Merger Agreement with Edtech was terminated on June 21, 2023. On July 12, 2024, EdtechX filed a complaint in the Superior Court of the State of Delaware in connection with the termination of the EdtechX Merger Agreement, claiming breaches of contract and the implied covenant of good faith and fair dealing. Trial has been set for January 20, 2027. The Company believes this lawsuit is without merit and intends to vigorously defend itself against these allegations. See Note 11 (Commitments and Contingencies) of the consolidated financial statements, for additional information.

On February 9, 2026, Jiangxi Kmax Industrial Co., Ltd. ("KMax") filed a complaint against zSpace in the United States District Court for the Northern District of California. The complaint arises from a Software Resale License Agreement, dated July 24, 2019, and alleges breach of contract related to unpaid revenue share invoices totaling $557,940 plus interest. We have recorded an account payable of $0.6 million as of December 31, 2025 in connection with this matter, however, we intend to assert counterclaims. Our response to the complaint is due April 20, 2026.

On March 11, 2026, Kmax filed a second complaint against the Company and certain of its current and former officers in the U.S. District Court for the Southern District of New York. The complaint alleges violations of federal securities laws as well as various state common law claims. The allegations arise from Kmax's $15 million investment in the Company's pre-IPO private placement financings between 2017 and 2019. Kmax seeks compensatory and rescissory damages, interest, and costs. The Company believes the claims are without merit and intends to defend itself vigorously against these allegations.

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#### Item 4. Mine Safety Disclosures
Not applicable.

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#### PART II

#### Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
***Market Information and Holders***

Our common stock is listed on the Nasdaq Capital Market® ("Nasdaq") under the symbol "ZSPC" and began trading on December 5, 2024. Prior to that date, there was no public trading market for our common stock. On January 31, 2026, there were 208 holders of record of our common stock. The actual number of holders of our common stock is greater than the number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or by other nominees. The number of holders of record presented here also does not include stockholders whose shares may be held in trust by other entities.

***Dividend Policy***

We have never declared or paid any cash dividends on our capital stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects, and other factors our board of directors may deem relevant.

***Recent Sales of Unregistered Equity Securities***

Other than those previously disclosed in our Current Reports on Form 8-K and/or Quarterly Reports on Form 10-Q, each as filed with the SEC, there have been no unregistered sales of our equity securities during the period covered by this Annual Report on Form 10-K.

#### Item 6. [Reserved]

#### Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
*Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and all other non-historical statements in this discussion are forward-looking statements and are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly in "Risk Factors" or in other sections of this report.*

*In this discussion, we use certain non-GAAP financial measures. Explanation of these non-GAAP financial measures and reconciliation to the most directly comparable accounting principles generally accepted in the United States of America ("GAAP") financial measures are included in this Management's Discussion and Analysis of Financial Condition and Results of Operations. Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.*

#### Overview
We are a leading provider of augmented and virtual reality educational technology products, focusing primarily on United States K-12 schools, the Career and Technical Education sector, and select international markets. Our proprietary hardware and software platform delivers interactive, stereoscopic three-dimensional (3D) learning experiences without the need for VR goggles or specialty glasses. We generate revenue through the sale of our hardware (such as our Inspire and Imagine laptops and tracked styluses), and software licenses for STEM and CTE applications, and implementation and professional development services.

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For the year ended December 31, 2025, our total revenue decreased by 27% to $27.9 million, primarily driven by a decline in hardware revenues. Our operations and financial results in 2025 were significantly impacted by shifts in government spending. Actions by the federal government in early 2025—specifically freezing and delaying U.S. Department of Education grants and funds—created severe budgetary uncertainty for our public school district customers. This forced many districts to freeze discretionary spending, resulting in extended sales cycles, decreased capital expenditures, and a decline in our revenue from this sector.

We expect that our future results will continue to be sensitive to the cyclical nature of state and federal education budgets. In this context, we are focused on scaling execution across a carefully selected set of growth vectors. These include:

● *Targeted software growth via additional application acquisition.* We intend to pursue additional software applications in order to increase the growth of our software offerings. Such acquisitions, if completed, are intended to be accretive to earnings and materially increase our software revenue.

● *Continued Focus in the United States education market*. We expect to continue to drive growth by expanding use cases and introducing new applications within the United States. We are particularly focused on acquiring and retaining both K-12 and CTE users while expanding our sales with our Inspire products. With our large content library and pioneering AR/VR capabilities, we pride ourselves on our ability to deliver value across the education landscape including K-12 schools, community colleges, technical colleges and trade colleges. Going forward, we plan to continue to expand our content library and platform to address the needs of our current and future customers.

As of December 31, 2025 and 2024, we had an accumulated deficit of $316.3 million and $290.4 million, respectively. Our net losses were $25.9 million and $20.8 million for the years ended December 31, 2025 and 2024, respectively. A portion of our net losses in the years ended December 31, 2025 and 2024 related to $7.6 million and $7.7 million, respectively, in stock compensation and RSU expense from RSUs and options issued during the period.

As of December 31, 2025 and 2024, we had cash and cash equivalents of $1.0 million and $4.9 million, respectively. In the years ended December 31, 2025 and 2024, we raised $22.6 million and $18.5 million, respectively, for an aggregate of $41.1 million through debt and financing arrangements, including the $5.6 million of net proceeds from our equity line, $7.5 million of net proceeds from our initial public offering ("the IPO"), $9.3 million under loan and security agreements with Fiza, $18.0 million in convertible notes and $10.6 million in other debt issuances. In May 2024 and June 2024, we entered into multiple loan agreements from an existing lender to borrow a total of $3.5 million secured by certain of our assets. Our accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. Our financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should we be unable to continue as a going concern. The recurring losses and negative cash flows from operations, working capital deficiency, the need for additional financing and uncertainties frequently encountered by companies in the technology industry are factors that raise substantial doubt about our ability to continue as a going concern for the twelve-month period from the date the financial statements included herein were issued. See Note 1 (Description of Business and Basis of Presentation) to our consolidated financial statements for the year ended December 31, 2025 included elsewhere in this Annual Report on Form 10-K for additional information on our assessment.

#### Our Business Model
We generate revenue by selling software to customers, selling our products, including our flagship product, the Inspire laptop, and by providing services to customers from our professional development team. We are focused on driving substantial annual growth in software applications revenue and product revenue while maintaining modest growth in services revenue.

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**Hardware Product Revenue**

Our platform is designed to work with a wide range of learning applications, for both K-12 education and CTE, that come to life by having 3D models projected out of the screen. Our flagship product is Inspire, our latest laptop product built in partnership with a major PC OEM. Hardware product revenue accounted for between 51% and 58% of our total revenue for the years ended December 31, 2025 and 2024.

**Software Applications Revenue**

We derive software applications revenue from the sale of licenses and subscription plans to the software applications available on our platform.

Our software applications are priced based on the number of devices or users and length of the contract. We offer discount programs based on increases in volume of devices or users and the length of the contract. We believe the wide variety and flexibility of our software applications help us retain existing customers and acquire additional customers. Software applications revenue accounted for between 34% and 38% of our total revenue for the years ended December 31, 2025 and 2024. We expect that going forward our software applications revenue will grow faster in absolute dollars and as a percentage of our total revenue than our product or service revenues.

We typically invoice our customers annually in advance of providing software and services. Software sales consist of licenses of our functional intellectual property that are materially satisfied at a point in time when key codes are provided to allow customers to access the software. In transactions where a third-party is involved in providing software licenses to a customer, we recognize the revenue from the third-party ratably over-time on a straight-line basis.

**Services Revenue**

Our services are a "turn-key" solution that aids customers with configuring purchased products with software and license keys specific to the customer's use. This service allows the applicable school to quickly get started with an out-of-the-box ready system. We derive services revenue from installation and/or training services for products, both of which are separate performance obligations and typically are satisfied within a short period of time, often less than one month delivered remotely or on-site at the customer's location. Additionally, we offer one-and two-year extended warranty contracts that customers can purchase at their option, which are also separate performance obligations. Services revenue accounted for between 9% and 11% of our total revenue for the years ended December 31, 2025 and 2024.

#### Key Metrics
We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. The calculation of the key metrics discussed below may differ significantly from other similarly titled metrics used by other companies, analysts, investors and other industry participants.

**Bookings Growth**

We track the bookings growth in our business very closely and we believe this is a key indicator of our business. Bookings represent customer orders that have hardware, software and service components. Bookings indicate future revenue, which lags based on product shipping date, monthly recognition of certain subscription revenue and service delivery completion. Our bookings growth is represented below for each of the periods presented:

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
| **(in thousands)** | **2025** | **2024** |
| Bookings | $26087 | $39265 |

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*United States CTE & K-12 Bookings*

We believe our ability to retain and grow our product and software revenue will be dependent on our ability to grow in both our United States CTE and K-12 market segments. We track our performance in this area by measuring our bookings from customers in each of these markets. We calculate this metric on a quarterly basis by comparing the aggregate number of bookings in each market for the most recent quarter divided by the number of bookings attributable to the same market for the same quarter in the previous fiscal year. CTE bookings accounted for approximately 41% and 37% of our total United States bookings for the years ended December 31, 2025 and 2024, respectively, while K-12 bookings accounted for approximately 59% and 63% of our total United States bookings for the years ended December 31, 2025 and 2024, respectively.

Subsequent to fiscal year 2024, we experienced significant cancellations ("debooks") of previously reported customer commitments that affect full year bookings performance. These debooks, totaling $1.7 for the year ended December 31, 2024, primarily occurred in the last three quarters of fiscal year 2024. The primary factors contributing to these debooks were customer financial constraints.

Management believes the disclosure of these material debooks provides investors with important context for evaluating business performance. While we do not routinely adjust previously reported bookings figures for normal course cancellations, the magnitude of these debooks was deemed material enough to warrant specific disclosure in this Annual Report on Form 10-K.

*International Bookings*

We track our performance in international sales by measuring bookings from our international reseller partners relative to total bookings. We calculate this metric on a quarterly basis by comparing the aggregate amount of bookings attributable to international partners for the most recent quarter compared to the number of bookings attributable to international partners for the same quarter in the previous fiscal year and the prior quarter. International bookings accounted for approximately 15% of our total bookings for each year ended December 31, 2025 and 2024.

**Software Subscription Renewable Revenue Growth**

We believe that our ability to renew and increase the software revenues on our platform from existing customers is an indicator of market penetration, adoption, the growth of our business and future revenue trends. Software sales of our solutions are purchased on an annual or multi-year basis, as well as one-time licenses to allow (i) an unlimited number of users on a particular device or (ii) a particular number of users to access our applications. We include subscriptions for both device and user-based applications and services in our measure of renewing revenue. Our customers typically enter into annual licenses or subscriptions with us, although some enter into multi-year agreements. Customers have no contractual obligation to renew their licenses or subscriptions with us after the completion of their initial term.

We believe the level of renewing revenue is an important indicator of future business success, as it is an indicator of sales growth of customer expansion accounts, utilization of our platform and future margin improvement. Our renewing revenue includes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) renewal of prior customer agreements in whole or in part, plus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) additional software titles added to existing customer agreements, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) software revenues related to sales of new systems as part of an expansion of the customer footprint.

The above aspects of software revenue are captured in the annualized contract value ("ACV") and net dollar revenue retention rate ("NDRR") metrics described below under "Retention and Expansion of Customers." We believe that these annualized measures provide important context to understanding the strength and growth of our software license revenue. We expect to accelerate the transition of our revenue mix to software from hardware through continued improvement in renewing revenue from the retention and expansion of our customers.

[**Table of Contents**](#TOC)

**Retention and Expansion of Customers**

Our ability to increase revenue depends in part on retaining our existing customers and expanding their use of our platform. We offer an integrated, comprehensive set of solutions that cover K-12/STEM and CTE. We have a variety of software bundles targeted at different areas of learning and grade levels. Retaining and expanding our existing customer base is critical to our success.

To monitor our ability to retain and grow our customer base for our software we monitor the ACV of active software licenses, with particular attention to customers with at least $50,000 in ACV. Our ACV for the year ended December 31, 2025 and December 31, 2024 was approximately $9.9 million and $11.3 million, respectively. We calculate our Dollar-Based Retention Rate as of a given period end by starting with the ACV from all customers as of 12 months prior to such period end ("Prior Period ACV") and calculating the ACV from these same customers as of the current period end ("Current Period ACV"). Current Period ACV includes any upsells and is net of contraction or attrition over the trailing 12 months but excludes revenue from new customers in the current period. We then divide the total Current Period ACV by the total Prior Period ACV to arrive at our Dollar-Based Retention Rate. For the years ended December 31, 2025 and December 31, 2024, our NDRR on customers with at least $50,000 of ACV was 71% and 92%, respectively.

**Average Term Length**

We measure the ACV dollar-weighted term length of our renewable software license agreements. We believe, an increase in term length is a signal that customers are adopting our products for long-term use, which decreases the risk that a customer will choose not to renew their software licenses. CTE agreements are typically longer-term than K-12 agreements, and as a result, the dollar-weighted term length measure can reflect a mix shift of license agreements between these product lines.

**Non-GAAP Financial Measures**

We use non-GAAP financial measures in addition to our results of operations reported in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools when assessing our operating performance and should not be considered in isolation or as a substitute for GAAP measures, including gross profit and net income (loss). We may calculate or present our non-GAAP financial measures differently than other companies who report measures with similar titles and, as a result, the non-GAAP financial measures we report may not be comparable with those of companies in our industry or in other industries.

**Adjusted EBITDA**

We calculate Adjusted EBITDA as GAAP net loss adjusted for interest expense, depreciation and amortization expense, stock-based compensation, loss on change in fair value of convertible debt, loss on debt extinguishment and income tax expense. We believe this measure provides our management and investors with consistency and comparability with our past financial performance and is an important indicator of the performance and profitability of our business.

[**Table of Contents**](#TOC)

The following table presents our Adjusted EBITDA from operations for each of the periods presented:

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2025** | **2024** |
| **GAAP Net Loss** | $(25388) | $(20823) |
| *Add back (deduct):* |  |  |
| &nbsp;&nbsp;Interest expense  | 1478 | 2815 |
| &nbsp;&nbsp;Depreciation and amortization  | 10 | 12 |
| &nbsp;&nbsp;Income tax expense  | 14 | 34 |
| &nbsp;&nbsp;Stock-based compensation  | 7120 | 7735 |
| &nbsp;&nbsp;Loss on change in fair value of convertible debt | 1945 |  |
| &nbsp;&nbsp;Loss on extinguishment of debt  |  | 359 |
| **Adjusted EBITDA**  | $(14821) | $(9868) |

---

**Factors Affecting Our Performance**

We believe that our growth and financial performance are dependent upon many factors, including the key factors described below which are in turn subject to significant risks and challenges, including those discussed below and in the section of this report entitled "*Risk Factors*."

**Retention of Key Employees**

In 2020, in response to concerns relating to the COVID-19 pandemic, we made significant changes to our business, including changes to our structure and employee base. We moved to a remote working environment at the onset of the pandemic and have transitioned to a hybrid working environment. In many respects, we believe these changes have better positioned our workforce and our company for profitability. However, we believe we have many employees that are key to our operations, and in the event some of these key employees were to leave our company, it would have a detrimental effect on our business and operations.

**Strategic PC OEM Partnerships**

Prior to our most recent laptop product, Inspire, we worked exclusively with tier-one Original Development Manufacturers ("ODMs") to manufacture our products. In 2021, we made the strategic decision to partner with a major PC OEM, working together to build Inspire, a proprietary laptop product, which allowed us to leverage the OEM's supply chain network and volumes. As of December 31, 2025, approximately 21,700 Inspires have been shipped under our agreement with this PC OEM. Our master agreement with our PC OEM partner is subject to an initial one-year term, with automatic renewal for subsequent one-year terms. Either party is permitted to terminate the agreement upon written notice delivered to the other party not later than three months prior to the expiration of the applicable term. During 2023, we entered into an agreement with another PC OEM for the manufacture of an additional laptop product. If either PC OEM decided to discontinue their relationship with us, our business could be materially and adversely impacted. We also rely upon one third-party partner located in China to manufacture our stylus. If our manufacturing partners that we rely upon decide to discontinue their relationship with us and we are unable to replace such parties on similar terms or at all, our business could be materially and adversely impacted.

**Scaling in the United States**

Our fundamental go-to-market model is built upon a solution-oriented selling approach. We believe it is critical that we continue to grow and scale our business in the United States in order to be successful. School districts can at times be prone to long sales cycles as a result of the bureaucratic purchasing process. In addition, education funding is subject to change based on political, policy or economic variables at the federal, state or local level, which can impact a school district's funding, both positively and negatively, and impact our business in the United States.

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**Software Acquisitions for Growth**

An important component to our future growth plan going forward is the acquisition of key software companies and/or intellectual property in specific areas within the education market. We believe that the completion and successful integration of such companies and assets will be important to our success.

#### Components of Results of Operations
**Revenue**

Our revenue consists of hardware revenue, software applications revenue and services revenue. We recognize revenue at the amount to which we expect to be entitled when control of the products, software or services is transferred to its customers as described below. We have elected to record revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other current liabilities until remitted to the relevant government authority.

*Hardware Revenue —* Hardware revenue is generated from the sale of our learning stations bundled with pre-loaded perpetual license software, accessories necessary for full use of our products, including stylus, eyewear (if needed) and power adapters, and a standard assurance type warranty. Hardware accessories are also sold on a stand-alone basis. Customers place orders for the hardware and we fulfill the order and ship the hardware directly to the customer or authorized resellers. Generally, we receive payment from customers or authorized resellers at the time of hardware delivery; however, in certain circumstances our United States customers may remit payment at a later date pursuant to the terms of their agreement with us. We recognize hardware revenue associated with a sale in full at the time of shipment. Customers purchasing hardware from us also typically purchase our enabled software applications for use on their devices.

*Software Applications Revenue —* Software applications revenue is generated from the sale of internally developed and third-party applications enabled for use on our products licensed over specified contractual terms. Most software applications reside on our products and require license keys to activate, although certain applications are web-based and require user log-ins. Customers who license our software use it on our products under different subscription terms based on the number of devices or users and length of the contract. We do not require customers to license software applications when purchasing our products.

We typically invoice our customers annually in advance based on their subscription. Software sales that consist of licenses of functional intellectual property are satisfied at a point in time when key codes are provided to allow customers to access the software, which is the contract start date and we recognize revenue ratably over the length of the contract. In transactions where we provide user-based software licenses to a customer, we recognize software revenue ratably on a straight-line basis. For the sale of third-party applications where we obtain control of the application before transferring it to the customer, we recognize revenue based on the gross amount billed to customers.

*Services Revenue —* We derive services revenue from implementation, professional development and technical services delivered remotely or on-site at the customer's location and extended service type warranties. Services are either delivered by our personnel or our qualified third-party representatives. Under the third-party arrangements, we will pay the third-party for their delivery services and bill the customer directly. We will also repair our products for a fee if the nature of the repair is outside the scope of the applicable warranty, but this is not a significant source of revenue. Each service type does not significantly impact the functionality of the others, or the hardware/software being provided. Services are typically invoiced in advance and revenue is recognized based on the passage of time during the contract period. We believe that the passage of time corresponds directly to the satisfaction of the performance obligations.

**Cost of Goods Sold**

Cost of goods sold consists of cost of hardware sold, cost of software sold and cost of services sold. Overall cost of revenue is largely dependent on a combination of revenue types, hardware component supply and pricing and cost of third-party software applications.

[**Table of Contents**](#TOC)

*Cost of Hardware Sold —* Cost of hardware sold consists primarily of costs associated with the manufacture of our products and personnel-related expenses associated with manufacturing employees, including salaries, benefits, bonuses, overhead and stock-based compensation.

All of our products are manufactured by manufacturers located primarily in China. We have entered into agreements for the supply of many components; however, there can be no guarantee that we will be able to extend or renew these agreements on similar terms, or at all. Although most components in the products essential to our business are generally available from multiple sources, certain custom and new technology components are currently obtained from single or limited sources. We compete for various components with other participants in the markets for personal computers, tablets and accessories. Therefore, many components, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant commodity pricing fluctuations.

Cost of hardware sold also includes costs of acquiring third-party devices and components, and costs associated with shipping devices to customers. We have outsourced much of our transportation and logistics management for the distribution of products. While these arrangements can lower operating costs, they also reduce our direct control over distribution. During the COVID-19 pandemic, certain of our logistical service providers experienced disruptions. Refer to "*Supply Chain Challenges*" for more information.

Cost of goods sold related to delivered hardware and bundled software, including estimated standard warranty costs, are recognized at the time of sale.

*Cost of Software Sold —* Cost of software sold consists primarily of fees paid to third parties for software licenses, costs associated with the technical support of software applications and the cost of our customer success operations. Costs incurred to provide product-related bundled services and unspecified software upgrade rights are recognized as cost of sales as incurred.

*Cost of Services Sold —* Cost of services sold consists primarily of personnel costs associated with the development and delivery of the services. Some of these costs are internal resources while others are associated with third parties engaged to develop or deliver the services. Other costs include travel and technology used in the development or delivery of the services. Cost of services revenue, including those for extended service type warranty and repair expenses relating to our products, are recognized as cost of sales as incurred or upon completion of the service obligation.

**Operating Expenses**

Our operating expenses consist primarily of selling, general and administrative expenses and product engineering and R&D expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation and sales commissions. Operating expenses also include overhead costs, including rent, utilities, insurance, legal and office supplies.

*Research and development expenses —* Research and development expenses consist primarily of product engineering and personnel-related expenses associated with our hardware and software engineering employees, including salaries, benefits, bonuses and stock-based compensation. R&D expenses also include third-party contractor or professional services fees, and software and subscription services dedicated for use by our engineering organization. We expect that our R&D expenses will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in our platform and products. In addition, R&D expenses that qualify as internal-use software development costs are capitalized, the amount of which may fluctuate significantly from period-to-period.

*Selling and marketing —* Selling and marketing expenses consist of labor and other costs directly related to the promotion of our products, including compensation for our marketing team and travel expense incurred in connection with promotional efforts.

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*General and administrative expenses —* General, and administrative expenses consist primarily of personnel-related expenses associated with our finance, legal, information technology, human resources, facilities and administrative employees, including salaries, benefits, bonuses, sales commissions and stock-based compensation. Commissions paid on the sale of hardware and short-term software licenses are recognized upon delivery. Commissions paid on the sale in which at least a portion of the goods and services will be satisfied over a period of time (services primarily consisting of extended warranties) are not material and are expensed when incurred. General and administrative expenses also include external legal, accounting and other professional services fees, operational software and subscription services and other corporate expenses.

*Other operating expenses —* Other operating expenses consist of offering costs incurred as part of the terminated EdtechX Merger Agreement that were initially deferred but then expensed upon termination of the EdtechX Merger Agreement. We incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to remediating our material weaknesses and compliance and reporting obligations, and increased expenses for insurance, investor relations and professional services. In addition, we expect that our selling, general and administrative expenses will increase in absolute dollars as our business grows.

**Interest Expense**

Interest expense consists primarily of changes in accrued interest expense, interest payments and amortization of debt issuance costs for our debt facilities. See "*Liquidity and Capital Resources — Debt and Financing Arrangements*."

**Income Tax Expense**

Income tax expense consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business. We record income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of existing assets and liabilities. These differences are measured using the enacted statutory tax rates that are expected to apply to taxable income for the years in which differences are expected to reverse. We recognize the effect on deferred income taxes of a change in tax rates in income in the period that includes the enactment date.

We record a valuation allowance to reduce our deferred tax assets and liabilities to the net amount that we believe is more likely than not to be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance.

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#### Results of Operations
*The following table sets forth our results of operations for the years ended December 31, 2025 and 2024*:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | **Change** |
| **(in thousands)** | **2025** | **2024** | $**%** |
| **Revenues:** |  |  |  |
| &nbsp;&nbsp;*Hardware* | $14208 | $21991 | (35)% |
| &nbsp;&nbsp;*Software* | 10558 | 12857 | (18)% |
| &nbsp;&nbsp;*Services* | 3092 | 3250 | (5)% |
| **Total Revenues** | **27858** | **38098** | **(27)%** |
| **Cost of goods sold**<sup>(1)</sup> | **14597** | **22529** | **(35)%** |
| **Gross profit** | **13261** | **15569** | **(15)%** |
| **Operating expenses:** |  |  |  |
| &nbsp;&nbsp;*Research and development*<sup>(1)</sup> | 5298 | 4893 | 8% |
| &nbsp;&nbsp;*Selling and marketing*<sup>(1)</sup> | 16232 | 15915 | 2% |
| &nbsp;&nbsp;*General and administrative*<sup>(1)</sup> | 13872 | 12419 | 12% |
| **Total operating expenses** | **35402** | **33227** | **7**% |
| **Loss from operations** | **(22141)** | **(17658)** | **25%** |
| **Other (expense) income:** |  |  |  |
| &nbsp;&nbsp;*Interest expense* | (1478) | (2815) | (47)% |
| &nbsp;&nbsp;*Other income (expense), net* | 190 | 43 | 341% |
| &nbsp;&nbsp;*Loss on extinguishment of debt* |  | (359) | (100)% |
| &nbsp;&nbsp;*Loss on change in fair value of convertible debt* | (1945) |  | N/A% |
| **Loss before income taxes** | **(25374)** | **(20789)** | **22%** |
| &nbsp;&nbsp;*Income tax expense*  | 14 | 34 | (59)% |
| **Net loss** | $**(25388)** | $**(20823)** | **22%** |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Includes stock-based compensation expense as follows:

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,**  | **Year Ended December 31,**  |
| **(in thousands)** | **2025** | **2024** |
| Cost of goods sold | $77 | $130 |
| Research and development | 388 | 802 |
| Sales and marketing | 2122 | 2808 |
| General and administrative | 4533 | 3995 |
| &nbsp;&nbsp;Total stock-based compensation expense | $7120 | $7735 |

---

**Revenue**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Year Ended December 31,**  | **Year Ended December 31,**  | **Change** | **Change** |
| **(in thousands)** | **2025** | **2024** | **$** | **%** |
| **Revenues:** |  |  |  |  |
| &nbsp;&nbsp;*Hardware* | $14208 | $21991 | $(7783) | (35)% |
| &nbsp;&nbsp;*Software* | 10558 | 12857 | (2299) | (18)% |
| &nbsp;&nbsp;*Services* | 3092 | 3250 | (158) | (5)% |
| **Total Revenues** | $**27858** | $**38098** | $**(10240)** | **(27)%** |
| ***Retention and Expansion Metrics***  |  |  |  |  |
| *Annualized Contract Value (ACV)* | $*9917* | $*11257* | $*(1340)* | *(12)%* |
| *Net Dollar Retention Rate (NDRR)* | *71*<br>*%*  | *92*<br>*%*  | *(21)*<br>*%*  |  |

---

Total revenue decreased by $10.2 million, or 27%, to $27.9 million for the year ended December 31, 2025, from $38.1 million for the year ended December 31, 2024. This decrease in revenue was primarily attributable to lower hardware revenues and uncertainty in the Company's K-12 end-user markets where funding sources have been disruptive, causing longer than usual sales cycles, and in some cases prompting customers to delay receipt of confirmed order bookings. Potential tariff volatility surcharges have also contributed to potentially elongated sales cycles as we communicate these pricing impacts to customers in revised quotes.

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Hardware revenue decreased by $7.8 million or 35%, to $14.2 million for the year ended December 31, 2025, from $22.0 million for the year ended December 31, 2024. The decrease in hardware revenue was primarily attributable to tariff and trade policy uncertainty, as well as uncertainty in federal funding sources for education available to our K-12 segment customers, and the resulting impact on laptop shipments, during the year ended December 31, 2025.The decrease in hardware revenue is primarily attributable to constraint of available working capital to fund hardware purchases to fulfill order backlog. For the years ended December 31, 2025 and 2024, hardware revenue as a percentage of total revenue is 51% and 58%, respectively.

Software revenue decreased by $2.3 million or 18%, to $10.6 million for the year ended December 31, 2025, from $12.9 million for the year ended December 31, 2024. Notwithstanding adverse factors affecting hardware shipments, and software content purchased on new unit deployments, retention of existing software licenses revenue, and increases in the sales price of software, generated an improvement in software revenue relative to the decline in hardware revenue. The decrease in revenue is attributable to third-party annual software sales. For the years ended December 31, 2025 and 2024, software revenue as a percentage of total revenue is 38% and 34%, respectively.

Our key retention metrics are as follows: (1) ACV for the year ended December 31, 2025 decreased to $9.9 million as compared to the year ended December 31, 2024 of $11.3 million and (2) NDRR for the trailing twelve-month period ended December 31, 2025 was 71% and for December 31, 2024 was 92%.

Service revenue decreased by $0.2 million or 5%, to $3.1 million for the year ended December 31, 2025, from $3.3 million for the year ended December 31, 2024. The decrease in revenue is attributable to decreased sales of extended warranty and technology support services. For the years ended December 31, 2025 and 2024, services revenue as a percentage of total revenue is 11% and 9%, respectively.

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| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,**  | **Year Ended December 31,**  | **Change** |
| **(in thousands)** | **2025** | **2024** | $**%** |
| **Cost of goods sold:** |  |  |  |
| &nbsp;&nbsp;*Hardware* | $9374 | $15950 | (41)% |
| &nbsp;&nbsp;*Software* | 3097 | 5025 | (38)% |
| &nbsp;&nbsp;*Services*  | 1944 | 1152 | 69% |
| &nbsp;&nbsp;*Excess and obsolete* | 182 | 402 | (55)% |
| **Total cost of goods sold**  | $**14597** | $**22529** | **(35)%** |

---

For the year ended December 31, 2025, total cost of goods sold decreased by $7.9 million, or 35%, to $14.6 million as compared to $22.5 million for the year ended December 31, 2024. This decrease was primarily attributable to reduced hardware costs of $6.6 million due to fewer shipments of Inspire units, a decrease in software costs of $1.9 million and a decrease in excess and obsolete inventory of $0.2 million, partially offset by an increase in service cost of $0.8 million. For the years ended December 31, 2025 and 2024, gross margin is 48% and 41%, respectively.

Cost of hardware sold decreased by $6.6 million, or 41%, to $9.4 million for the year ended December 31, 2025, from $16.0 million for the year ended December 31, 2024. The decrease in cost of hardware sold was primarily attributable to a decrease in the volumes shipped of Inspire laptops, as well as reductions in the bill of materials costs of the new Inspire 2 laptop relative to the Inspire 1 model which was sold during the year ended December 31, 2024. For the years ended December 31, 2025 and 2024, hardware gross margin is 34% and 27%, respectively.

Cost of software sold decreased by $1.9 million or 38%, to $3.1 million for the year ended December 31, 2025, from $5.0 million for the year ended December 31, 2024. The decrease in cost of software sold corresponded to decreased sales of third party point-in-time software and overall software application sales. The decrease in third-party point-in-time software costs was also related to success in acquiring software applications on which the company formerly incurred revenue share. For the years ended December 31, 2025 and 2024, software gross margin is 71% and 61%, respectively.

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Cost of services sold increased by $0.8 million or 69%, to $1.9 million for the year ended December 31, 2025, from $1.2 million for the year ended December 31, 2024. The increase in cost of services sold is attributable to purchases of extended warranty contracts and increased delivery costs for sales of Inspire laptops and technology support services, respectively. For the years ended December 31, 2025 and 2024, services gross margin is 37% and 65%, respectively.

Excess and obsolete write-downs decreased by $0.2 million or 55% to $0.2 million for the year ended December 31, 2025, from $0.4 million for the year ended December 31, 2024. The decrease was attributable to the write-off of inventory costs in the year ending December 31, 2024.

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | **Change** |
| **(in thousands)** | **2025** | **2024** | $**%** |
| **Operating Expenses:** |  |  |  |
| &nbsp;&nbsp;*Research and development* | $5298 | $4893 | 8% |
| &nbsp;&nbsp;*Selling and marketing* | 16232 | 15915 | 2% |
| &nbsp;&nbsp;*General and administrative* | 13872 | 12419 | 12% |
| **Total operating expenses** | $**35402** | $**33227** | **7%** |

---

For the year ended December 31, 2025, total operating expenses increased by $2.2 million, or 7%, to $35.4 million, from $33.2 million for the year ended December 31, 2024. The increase in expenses was primarily attributable to increased costs in personnel.

Research and development expenses increased by $0.4 million or 8%, to $5.3 million for the year ended December 31, 2025, from $4.9 million for the year ended December 31, 2024. The increase in expenses was primarily attributable to an increase in compensation costs resulting from higher headcount, as well as expanded R&D project activities including new product development and outside services.

Selling and marketing expenses increased by $0.3 million or 2%, to $16.2 million for the year ended December 31, 2025, from $15.9 million for the year ended December 31, 2024. The increase in expenses was primarily attributable to increased headcount and compensation expense partially offset by a decrease in stock-based compensation expense of $0.7 million due to grants to employees in March 2024.

General and administrative expenses increased by $1.5 million or 12%, to $13.9 million for the year ended December 31, 2025, from $12.4 million for the year ended December 31, 2024. The increase in expenses was primarily attributable to increased costs in personnel and professional expenses in 2025 related to being a public company and a $0.5 million increase in stock compensation expenses due to grants to employees in April 2025.

#### Interest Expense

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| | | | |
|:---|:---|:---|:---|
|  | **Year Ended**  | **Year Ended**  | |
|  | **December 31,**  | **December 31,**  | <br>**Change** |
| **(in thousands)** | **2025** | **2024** | $**%** |
| *Interest expense* | $(1478) | $(2815) | (47)<br>*%* |

---

For the year ended December 31, 2025, interest expense decreased by $1.3 million, or 47%, to $1.5 million, from $2.8 million for the year ended December 31, 2024. The decrease in interest expense was attributable to the convertible loans converted into our common stock as part of the IPO in December 2024 and a lower interest rate on the convertible debt entered into in April 2025 compared to the debt paid off with a portion of the proceeds from the convertible debt.

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**Income Tax Expense** 

The decrease in income tax expense for the year ended December 31, 2025 was immaterial. The United States federal statutory rate is 21% while our effective tax rate for the years ended December 31, 2025 and 2024 was 0.1% and 0.1%, respectively. No federal or state income taxes are expected outside of immaterial state tax payments.

**Cash Flows**

The following table summarizes our cash flows for the periods presented:

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| | | |
|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** |
| **(in thousands)** | **2025** | **2024** |
| Net cash used in operating activities | $(17969) | $(8874) |
| Net cash used in investing activities | $(26) | $(13) |
| Net cash provided by financing activities | $14382 | $10482 |

---

*Operating Activities*

For the year ended December 31, 2025, our operating activities used cash of $18.0 million, primarily due to our net loss of $25.9 million and the changes in our operating assets and liabilities of $2.0 million, partially offset by adjustments for non-cash charges, including stock-based compensation expense of $7.1 million, the change in fair value of convertible debt of $1.9 million, issuance of restricted stock units of $0.5 million, provision for excess and obsolete inventory of $0.2 million, and non-cash amortization of other debt discount of $0.1 million. The change in our operating assets and liabilities was primarily the result of an increase in prepaid and other assets of $0.5 million and a decrease in accounts payable of $1.6 million, accrued expenses of $1.6 million and deferred revenue of $1.4 million, partially offset by a decrease in accounts receivable of $1.6 million and inventory of $0.7 million and an increase in accrued interest of $0.8 million.

For the year ended December 31, 2024, our operating activities used cash of $8.9 million, primarily due to our net loss of $20.8 million and change in the fair value of embedded derivative of $0.2 million, partially offset by changes in our operating assets and liabilities of $3.6 million and adjustments for non-cash charges, including stock-based compensation expense of $7.7 million, provision for excess and obsolete inventory of $0.4 million, non-cash amortization of other debt discount of $0.1 million, and loss on extinguishment of debt of $0.4 million. The change in our operating assets and liabilities was primarily the result of a decrease in accounts receivable of $1.9 million and an increase in accounts payable of $0.9 million, deferred revenue of $0.6 million, and accrued interest of $1.6 million, partially offset by an increase in inventory of $0.1 million and prepaid expenses and other assets of $0.3 million, and a decrease in accrued expenses of $1.1 million.

*Investing Activities*

For the years ended December 31, 2025 and December 31, 2024, net cash used in investing activities was immaterial due to our low capital equipment requirements.

*Financing Activities*

For the year ended December 31, 2025, net cash provided by financing activities was $14.4 million primarily due to proceeds from convertible debt of $13.0 million, other debt issuances of $4.0 million, proceeds from issuance of common stock from equity line-of-credit of $5.6 million, and proceeds from exercise of stock options of $0.2 million partially offset by repayment of other debt issuances of $7.2 million, and fees paid for debt issuance of $0.1 million.

For the year ended December 31, 2024, net cash provided by financing activities was $10.5 million primarily due to proceeds from initial public offering of $10.0 million, convertible notes of $5.0 million, and other debt issuances of $3.5 million partially offset by repayment of other debt issuances of $5.7 million, and fees paid for deferred offering costs of $2.5 million.

[**Table of Contents**](#TOC)

#### Liquidity and Capital Resources
For the years ended December 31, 2025 and 2024, we incurred net losses of $25.9 million and $20.8 million, respectively, and incurred negative cash flows from operations of $18.0 million and $8.9 million, respectively. We had combined cash and cash equivalents of $1.0 million and $4.9 million as of December 31, 2025 and December 31, 2024, respectively. We have incurred operating losses and negative cash flows from operations since inception. In January 2026, we entered into a Securities Purchase Agreement with an institutional investor, pursuant to which the Company agreed to issue and sell to the institutional investor shares of the Company's Series P Preferred Stock, and five-year warrants, that provided us initially with $3.0 million in financing. In addition, on March 16, 2026, we issued an additional senior secured convertible note to an institutional investor pursuant to a securities purchase agreement dated April 10, 2025, which provided us with an additional $4.0 million in financing. See Note 15 (Subsequent Events) of the consolidated financial statements for more information.

Management has projected cash on hand may not be sufficient to allow us to continue operations and there is substantial doubt about our ability to continue as a going concern within 12 months from the date of issuance of the financial statements if we are unable to raise additional funding for operations. We expect our working capital needs to increase in the future as we continue to expand and enhance our operations. Our ability to raise additional funds for working capital through equity or debt financings or other sources may depend on the financial success of our business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond our control. Further financings may have a dilutive effect on stockholders and any debt financing, if available, may require restrictions to be placed on our future financing and operating activities. If we require additional capital and are unsuccessful in raising that capital at a reasonable cost and at the required times, or at all, we may not be able to continue our business operations or we may be unable to advance our growth initiatives, either of which could adversely impact our business, financial condition and results of operations.

#### Sources of Liquidity
We have historically funded our operations through the issuance of common stock and preferred stock to private investors, our IPO and debt financing. Our accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. The recurring losses and negative cash flows from operations, working capital deficiency, the need for additional financing, and the uncertainties frequently encountered by companies in the technology industry are factors that raise substantial doubt about our ability to continue as a going concern for the twelve-month period from the date the financial statements included herein were issued. The conditions identified above raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not contain any adjustments that might result if we are unable to continue as a going concern.

[**Table of Contents**](#TOC)

*Issuance of Common Stock*

On December 6, 2024, we completed our IPO of 2.2 million shares of common stock at a price of $5.00 per share, which included 0.3 million shares sold to the underwriters pursuant to their option to purchase additional shares. After underwriting discounts and commissions of $0.8 million and offering expenses of $2.5 million, we received net proceeds from the IPO of $7.5 million. In connection with the IPO, 4.0 million outstanding shares of preferred stock were converted into 18.7 million shares of common stock. See Note 1 (Description of Business and Basis of Presentation) and Note 6 (Temporary Redeemable Preferred Stock and Stockholders' Equity) for more information.

*Series P Preferred Stock Agreements*

On January 23, 2026, the Company entered into a Securities Purchase Agreement with an institutional investor for the issuance and sale of Series P Convertible Preferred Stock (the "Series P Preferred Stock") and five-year warrants to purchase common stock. At the initial closing held on January 27, 2026, the investor purchased 1,500,000 shares of Series P Preferred Stock and warrants to purchase 1,000,000 shares of common stock for an aggregate purchase price of $3,000,000. The initial purchase price per share of Series P Preferred Stock was $2.00. The initial exercise price for the warrants is $3.00 per share, subject to standard and customary adjustments. The Series P Preferred Stock entitles holders to cumulative dividends at an annual rate of 18%, payable in additional shares of Series P Preferred Stock, and feature a liquidation preference equal to the stated value plus accrued dividends. Under the terms of the agreement, the Company and the purchaser may mutually agree to additional closings within one year, up to a total aggregate limit of $10.0 million for all cumulative purchases.

**Contractual Obligations**

Our principal commitments consist of obligations for office space under a non-cancelable operating lease that expires in January 2026, as well as repayment of borrowings under other financing arrangements as described above under *"— Liquidity and Capital Resources — Debt and Financing Arrangements*." In addition, we have agreements with certain hardware suppliers to purchase inventory; as of December 31, 2025, we had approximately $10.4 million in purchase obligations outstanding under such agreements, all of which are scheduled to come due on or before December 31, 2026.

**Critical Accounting Estimates**

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. We evaluated the development and selection of our critical accounting estimates and believe that the following involve a higher degree of judgement or complexity and are most significant to reporting our results of operations and financial position and are therefore discussed as critical. The following critical accounting estimates reflect the significant estimates and judgements used in the preparation of our consolidated financial statements. Actual results could differ materially from those estimates and assumptions, and those differences could be material to our consolidated financial statements.

We re-evaluate our estimates on an ongoing basis. For information on our significant accounting policies, refer to Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements contained elsewhere in this report.

**Revenue Recognition**

We recognize revenue from signed contracts with customers, change orders (approved and unapproved) and claims on those contracts that we conclude to be enforceable under the terms of the signed contracts. Some of our contracts have one clearly identifiable performance obligation. However, many contracts provide the customer several promises that include hardware, software and professional services. The determination of the number of performance obligations in a contract requires significant judgment and could change the timing of the amount of revenue recorded for a given period.

[**Table of Contents**](#TOC)

For contracts with multiple performance obligations, the transaction price is allocated based on standalone selling prices ("SSP"), with list prices typically used for most items. For post-contract support services ("PCS") significant judgement is involved based on factors such as specific services offered, business models and operational efficiency. The Company regularly reassesses this estimate as changes could materially impact revenue recognition timing and amounts.

Discounts in certain contracts with customers are deemed variable consideration but are known at the time of revenue recognition.

**Inventory**

Our inventory, which includes raw materials and finished goods is valued using the weighted average cost method for hardware inventory while software inventory is recorded at actual cost. We periodically review the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold.

**Convertible Debt**

We have issued convertible debt under numerous convertible promissory notes. We evaluate embedded conversion and other features within convertible debt to determine whether any embedded features should be bifurcated from the host instrument and accounted for as a derivative at fair value, with changes in fair value recorded in the consolidated statement of operations. No material embedded features have been bifurcated as of the financial statement dates.

For the recent convertible note described in Note 5 (Debt and Related Party Debt), we elected the fair value option under accounting Standards Codification ("ASC") 825, *Financial Instruments*, ("ASC 825") measuring the entire instrument at fair value with changes recognized in earnings. This election is irrevocable and applied to the whole instrument, consistent with ASC 825-10 guidance. Key estimates include the valuation of original issue discount, accrued interest, and make-whole provisions, which require assumptions about discount rates, credit risk, and market conditions. The fair value option under ASC 825 simplifies the accounting by eliminating the need to bifurcate embedded derivatives under ASC 815, *Derivatives and Hedging* ("ASC 815") and aligns with the principles outlined in ASC 470, *Debt* ("ASC 470") for debt instruments. This approach requires ongoing reassessment of fair value inputs and assumptions, which can significantly affect reported earnings and liabilities*.* All fees related to the convertible note were expensed as incurred and not recorded as debt issuance costs.

**Income Taxes**

We use the asset and liability method under FASB ASC Topic 740, *Income Taxes*, when accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax asset and liability.

We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income, and ongoing tax planning strategies in assessing the need for a valuation allowance.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we will make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

[**Table of Contents**](#TOC)

**JOBS Act**

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore, we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies until such time that we either (i) irrevocably elect to "opt out" of such extended transition period or (ii) no longer qualify as an emerging growth company. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

We are also a smaller reporting company meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue was less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue was less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. To the extent we continue to qualify as a smaller reporting company after we cease to qualify as an emerging growth company, we will continue to be permitted to make certain reduced disclosures in our periodic reports and other documents that we file with the SEC. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

#### Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this item.

[**Table of Contents**](#TOC)

#### Item 8. Financial Statements and Supplementary Data

#### zSPACE, INC.

#### INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

---

| | |
|:---|:---|
|  | **Page** |
| [Report of Independent Registered Public Accounting Firm](#ReportofIndependentRegisteredPublicAccou) (PCAOB ID 1195)  | 58 |
| [Report of Independent Registered Public Accounting Firm](#ReportofIndependentRegisteredPub_Acc) (PCAOB ID 243) | 59 |
| [Consolidated Balance Sheets as of December 31, 2025 and 2024](#CONSOLIDATEDBALANCESHEETS_536094) | 60 |
| [Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2025 and 2024](#CONSOLIDATEDSTATEMENTSOFOPERATIONSANDCOM) | 61 |
| [Consolidated Statements of Temporary Redeemable Preferred Stock and Stockholders' Deficit for the Years Ended December 31, 2025 and 2024](#Consolidated_Statement_of_Temporary) | 62 |
| [Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024](#CONSOLIDATEDSTATEMENTSOFCASHFLOWS_789603) | 63 |
| [Notes to Consolidated Financial Statements](#NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS_1) | 64 |

---

[**Table of Contents**](#TOC)

**Report of Independent Registered Public Accounting Firm**

To the Board of Directors and Stockholders of zSpace, Inc.

#### Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of zSpace, Inc. (the Company) as of December 31, 2025, and the related consolidated statements of operations and comprehensive loss, temporary redeemable preferred stock and stockholders' deficit, and cash flows for each of the year ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

#### Going Concern Uncertainty
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's significant operating losses and negative cash flows from operations raise substantial doubt about its ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

#### Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ UHY

We have served as the Company's auditor since 2025.

Melville, New York

March 30, 2026

[**Table of Contents**](#TOC)

**Report of Independent Registered Public Accounting Firm**

Shareholders and Board of Directors

zSpace, Inc.

San Jose, California

#### Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of zSpace, Inc. (the Company) as of December 31, 2024, the related consolidated statements of operations and comprehensive loss, temporary redeemable preferred stock and stockholder's deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for the year then ended**,** in conformity with accounting principles generally accepted in the United States of America.

#### Going Concern Uncertainty
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

#### Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ BDO USA, P.C.

We served as the Company's auditor from 2022 to 2024.

Spokane, Washington

March 27, 2025

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**zSpace, Inc.**

#### CONSOLIDATED BALANCE SHEETS
**(In thousands, except share and per share data)**

---

| | | |
|:---|:---|:---|
|  | **December 31,** <br>**2025** | **December 31,** <br>**2024** |
| **ASSETS** |  |  |
| Current assets |  |  |
| &nbsp;&nbsp;Cash, cash equivalents and restricted cash | $1021 | $4864 |
| &nbsp;&nbsp;Accounts receivable, net of allowance for credit losses of $94 and $44 | 1438 | 3176 |
| &nbsp;&nbsp;Inventory, net | 2404 | 3238 |
| &nbsp;&nbsp;Prepaid expenses and other current assets | 1622 | 1655 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total current assets** | 6485 | 12933 |
| &nbsp;&nbsp;Property and equipment, net | 37 | 21 |
| &nbsp;&nbsp;Capitalized software, net | 981 | 578 |
| &nbsp;&nbsp;Other assets | 83 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total assets** | $7586 | $13532 |
| **LIABILITIES AND STOCKHOLDERS' DEFICIT** |  |  |
| Current liabilities |  |  |
| &nbsp;&nbsp;Accounts payable | $4081 | $5656 |
| &nbsp;&nbsp;Accrued expenses and other current liabilities | 3703 | 5365 |
| &nbsp;&nbsp;Convertible debt | 6199 |  |
| &nbsp;&nbsp;Other current debt | 1405 | 5764 |
| &nbsp;&nbsp;Current accrued interest | 12 | 783 |
| &nbsp;&nbsp;Deferred revenue, current portion | 1911 | 3324 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total current liabilities** | 17311 | 20892 |
| &nbsp;&nbsp;Convertible debt, noncurrent | 2724 |  |
| &nbsp;&nbsp;Other noncurrent debt | 7385 | 6191 |
| &nbsp;&nbsp;Noncurrent accrued interest | 2354 | 819 |
| &nbsp;&nbsp;Deferred revenue, net of current portion | 320 | 318 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities** | 30094 | 28220 |
| **Commitments and contingencies (Note 11)** |  |  |
| **Stockholders' deficit:** |  |  |
| &nbsp;&nbsp;Common stock, $0.00001 par value; 100,000,000 shares authorized as of December 31, 2025; 32,353,546 and 22,849,378 shares issued and outstanding as of December 31, 2025 and 2024, respectively |  |  |
| &nbsp;&nbsp;Additional paid-in capital | 293137 | 275383 |
| &nbsp;&nbsp;Accumulated other comprehensive income | 143 | 329 |
| &nbsp;&nbsp;Accumulated deficit | (315788) | (290400) |
| &nbsp;&nbsp;Total stockholders' deficit | (22508) | (14688) |
| **Total liabilities and stockholders' deficit** | $7586 | $13532 |

---

*See accompanying notes to consolidated financial statements.*

[**Table of Contents**](#TOC)

**zSpace, Inc.**

#### CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
**(In thousands, except share and per share data)**

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,**  | **Year Ended December 31,**  |
|  | **2025** | **2024** |
| Revenue | $27858 | $38098 |
| Cost of goods sold | 14597 | 22529 |
| Gross profit | 13261 | 15569 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;Research and development | 5298 | 4893 |
| &nbsp;&nbsp;Selling and marketing | 16232 | 15915 |
| &nbsp;&nbsp;General and administrative | 13872 | 12419 |
| Total operating expenses | 35402 | 33227 |
| Loss from operations | (22141) | (17658) |
| Other (expense) income: |  |  |
| &nbsp;&nbsp;Interest expense | (1478) | (2815) |
| &nbsp;&nbsp;Other income, net | 190 | 43 |
| &nbsp;&nbsp;Loss on extinguishment of debt |  | (359) |
| &nbsp;&nbsp;Loss on change in fair value of convertible debt | (1945) |  |
| Loss before income taxes | (25374) | (20789) |
| Income tax expense  | 14 | 34 |
| **Net loss** | (25388) | (20823) |
| Other comprehensive loss, net of tax: |  |  |
| &nbsp;&nbsp;Foreign currency translation adjustment | (186) | 101 |
| **Comprehensive loss** | $**(25574)** | **(20722)** |
| Net (loss) income available to common shareholders used in basic earnings per share | $(25388) | $22524 |
| Net (loss) income available to common shareholders used in diluted earnings per share | $(25388) | $23748 |
| Net (loss) income per common share – basic | $(1.01) | $13.03 |
| Net (loss) income per common share – diluted | $(1.01) | $1.03 |
| Weighted-average common shares outstanding – basic | 25039431 | 1728127 |
| Weighted-average common shares outstanding – diluted | 25039431 | 23127693 |

---

*See accompanying notes to consolidated financial statements.*

[**Table of Contents**](#TOC)

**zSpace, Inc.**

#### CONSOLIDATED STATEMENTS OF TEMPORARY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
**(Amounts in thousands, except for share amounts)**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Temporary Redeemable** | **Temporary Redeemable** |  |  | | | | |
|  | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | <br>**Additional**<br>**Paid-in**<br>**Capital** | **Accumulated**<br>**Other**<br>**Comprehensive**<br>**Income** | <br>**Accumulated**<br>**Deficit** | <br>**Total**<br>**Stockholders'**<br>**Deficit** |
| **Balance, December 31, 2023** | **3978898** | $**106952** | **174077** | $**—** | $**138878** | $**228** | $**(269577)** | $**(130471)** |
| Stock based compensation |  |  |  |  | 7735 |  |  | 7735 |
| Cancellation of NCNV 1 preferred stock | (562) | (562) |  |  |  |  |  |  |
| Issuance of common stock from options exercised |  |  | 14841 |  | 34 |  |  | 34 |
| Issuance of NCNV 2 preferred stock | 5752 | 5752 |  |  |  |  |  |  |
| Reduction of the original issue price of NCNV preferred share value from $1,000 to $600 per share |  | (43656) |  |  | 43656 |  |  | 43656 |
| Proceeds from initial public offering, net of underwriting fees and offering costs of $2.9 million |  |  | 2156250 |  | 7462 |  |  | 7462 |
| Conversion of temporary redeemable preferred stock | (3984088) | (68486) | 18677710 |  | 68486 |  |  | 68486 |
| Conversion of SAFE agreements |  |  | 650029 |  | 3250 |  |  | 3250 |
| Conversion of debt |  |  | 1176471 |  | 5882 |  |  | 5882 |
| Net loss |  |  |  |  |  |  | (20823) | (20823) |
| Foreign currency translation adjustments |  |  |  |  |  | 101 |  | 101 |
| **Balance, December 31, 2024** | **—** | **—** | **22849378** | **—** | **275383** | **329** | **(290400)** | **(14688)** |
| Stock based compensation |  |  | 330926 |  | 7120 |  |  | 7120 |
| Issuance of common stock from options exercised |  |  | 100274 |  | 156 |  |  | 156 |
| Issuance of common stock for note conversions |  |  | 2590827 |  | 4902 |  |  | 4902 |
| Issuance of common stock under equity line of credit, net |  |  | 6482141 |  | 5576 |  |  | 5576 |
| Net loss |  |  |  |  |  |  | (25388) | (25388) |
| Foreign currency translation adjustments |  |  |  |  |  | (186) |  | (186) |
| **Balance, December 31, 2025** | **—** | $**—** | **32353546** | $**—** | $**293137** | **143** | $**(315788)** | $**(22508)** |

---

*See accompanying notes to consolidated financial statements.*

[**Table of Contents**](#TOC)

**zSpace, Inc.**

#### CONSOLIDATED STATEMENTS OF CASH FLOWS
**(In thousands)**

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,**  | **Year Ended December 31,**  |
|  | **2025** | **2024** |
| **Cash flows from operating activities:** |  |  |
| Net loss | $(25388) | $(20823) |
| *Adjustments to reconcile net loss to net cash used in operating activities:* |  |  |
| &nbsp;&nbsp;Change in fair value of convertible debt | 1945 |  |
| &nbsp;&nbsp;Non-cash amortization of other debt discount | 66 | 59 |
| &nbsp;&nbsp;Change in fair value of embedded derivative |  | (158) |
| &nbsp;&nbsp;Provision for excess and obsolete inventory | 227 | 402 |
| &nbsp;&nbsp;Stock-based compensation expense | 7120 | 7735 |
| &nbsp;&nbsp;Depreciation | 10 | 12 |
| &nbsp;&nbsp;Bad debt expense | 91 |  |
| &nbsp;&nbsp;Loss on extinguishment of debt |  | 359 |
| *Changes in operating assets and liabilities:* |  |  |
| &nbsp;&nbsp;Accounts receivable | 1647 | 1864 |
| &nbsp;&nbsp;Inventory | 652 | (105) |
| &nbsp;&nbsp;Prepaid expenses and other assets | (498) | (256) |
| &nbsp;&nbsp;Accounts payable | (1575) | 921 |
| &nbsp;&nbsp;Accrued expenses | (1619) | (1089) |
| &nbsp;&nbsp;Deferred revenue | (1411) | 601 |
| &nbsp;&nbsp;Accrued interest | 764 | 1604 |
| &nbsp;&nbsp;**Net cash used in operating activities** | **(17969)** | **(8874)** |
| **Cash flows from investing activities:** |  |  |
| Capital expenditures | (26) | (13) |
| &nbsp;&nbsp;**Net cash used in investing activities** | **(26)** | **(13)** |
| **Cash flows from financing activities:** |  |  |
| Proceeds from convertible debt | 13000 | 5000 |
| Repayments of convertible debt | (1121) |  |
| Proceeds from other debt issuances | 4000 | 3500 |
| Fees paid for debt issuance | (61) | (18) |
| Repayment of other debt issuances | (7169) | (5524) |
| Proceeds from initial public offering, net of underwriting fees of $0.8 million |  | 10027 |
| Proceeds from issuance of common stock from equity line-of-credit | 5576 |  |
| Fees paid for deferred offering costs |  | (2537) |
| Proceeds from exercise of common stock options | 157 | 34 |
| &nbsp;&nbsp;**Net cash provided by financing activities** | **14382** | **10482** |
| Effects of exchange rate changes on cash and cash equivalents | (230) | 141 |
| Net (decrease) increase in cash, cash equivalents and restricted cash | (3843) | 1736 |
| Cash, cash equivalents and restricted cash, beginning of period | 4864 | 3128 |
| **Cash, cash equivalents and restricted cash, end of period** | $**1021** | $**4864** |
| **Supplemental disclosure of cash flow information:** |  |  |
| &nbsp;&nbsp;Cash paid for interest | $579 | 1704 |
| &nbsp;&nbsp;Cash paid for income taxes | $17 |  |
| **Non-cash investing and financing activities:** |  |  |
| &nbsp;&nbsp;Leased assets obtained in exchange for new operating lease liabilities | $— | $295 |
| &nbsp;&nbsp;Issuance of NCNV in exchange for related party debt and accrued interest | $— | $5190 |
| &nbsp;&nbsp;Issuance of SAFE agreements in exchange for accrued liabilities | $— | $3250 |
| &nbsp;&nbsp;Conversion of convertible debt principal and interest payments into common stock | $4902 | $— |
| &nbsp;&nbsp;Conversion of Series A preferred stock into common stock in connection with initial public offering | $— | $3000 |
| &nbsp;&nbsp;Conversion of debt into common stock in connection with initial public offering | $— | $5882 |
| &nbsp;&nbsp;Conversion of temporary redeemable preferred stock into common stock in connection with initial public offering | $— | $65486 |

---

*See accompanying notes to consolidated financial statements.*

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#### ZSPACE, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

#### AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
&nbsp;&nbsp;&nbsp;&nbsp;1. **DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION** 

**Description of Business**

zSpace, Inc. ("zSpace", "we," "our," "us" or the "Company") was incorporated in the state of Delaware in 2006 and is headquartered in San Jose, California with wholly owned subsidiaries in China and Japan. The Company is the developer of full-service augmented reality/virtual reality ("AR/VR") solutions built for K-12 education and career technical education. zSpace's primary product is a mixed reality hardware device that provides an immersive, collaborative, and interactive learning experience. zSpace generates revenues via hardware sales in addition to recurring software revenue for access to zSpace interactive learning applications and related services. The Company's customer base includes federal, state, local, and international governments who are making large investments in education technology.

**Basis of Presentation**

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and have been prepared in accordance with United States generally accepted accounting principles ("GAAP") and include the assets, liabilities, results of operations and cash flows of the Company.

All intercompany accounts and transactions have been eliminated in consolidation.

Certain prior period amounts have been reclassified to conform to the current period presentation.

**Liquidity Risk and Going Concern**

For the years ended December 31, 2025 and 2024, the Company incurred net losses of $25.4 million and $20.8 million, respectively. For the years ended December 31, 2025 and 2024, the Company incurred negative cash flows from operations of $18.0 million and $8.9 million, respectively. The Company had combined cash, cash equivalents and restricted cash balance of $1.0 million and $4.9 million as of December 31, 2025 and 2024, respectively. The Company has incurred operating losses and negative cash flows from operations since inception. The Company's prospects are subject to risks, expenses, and uncertainties frequently encountered by companies in the technology industry. These risks include, but are not limited to, the uncertainty of successfully developing its products, availability of additional financing, gaining customer acceptance, and uncertainty of achieving future profitability. The Company's success depends on obtaining additional financing, increasing sales, controlling costs, and continued research and development activities to improve product offerings to end-users. The Company has historically funded its operations through the issuance of common and temporary redeemable preferred stock to private investors (Note 6), the sale of registered common stock to a private investor (Note 6), the proceeds of its Initial Public Offering (the "IPO") in December 2024 and debt financing (Note 5). The Company evaluated its financial condition as of the date of issuance and determined it is probable that, without consideration of a remediation plan to refinance existing debt facilities and raise new sources of capital, the Company would be unable to meet repayment obligations and the ongoing working capital shortfall in the next twelve months, and there is uncertainty about the Company's ability to continue as a going concern. The conditions identified above raise substantial doubt about the Company's ability to continue as a going concern for at least twelve months from the issuance date of the consolidated financial statements.

The consolidated financial statements have been prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business and does not include any adjustments to reflect the outcome of this uncertainty.

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**Foreign Operations**

Operations outside the United States include subsidiaries in China and Japan. Foreign operations are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes to existing tax laws, possible limitations on foreign investment and income repatriation, government price or foreign exchange controls, and restrictions on currency exchange.

**Initial Public Offering**

On December 6, 2024, we completed the IPO of 2.2 million shares of common stock at a price of $5.00 per share, which included 0.3 million shares sold to the underwriters pursuant to their option to purchase additional shares. After underwriting discounts and commissions of $0.8 million and offering expenses of $2.6 million, we received net proceeds from the IPO of $7.5 million. In connection with the IPO, 4.0 million outstanding shares of preferred stock were converted into 18.7 million shares of common stock. See Note 6 (Temporary Redeemable Preferred Stock and Stockholders' Equity) for more information.

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** 

**Use of Estimates**

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management bases its estimates on historical experience and on various other factors it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Accordingly, actual results could differ materially from those estimates. Significant items subject to such estimates and assumptions include revenue recognition, including standalone selling price ("SSP") and the allocation of the transaction price, valuation of accounts receivable, valuation of inventory, fair value of convertible notes, valuation of the Company's common stock and temporary redeemable preferred stock prior to the IPO, valuation allowance of deferred tax assets and liabilities, and stock-based compensation. To the extent the Company's actual results differ materially from those estimates and assumptions, the Company's future consolidated financial statements could be affected.

**Emerging Growth Company**

The Company is an emerging growth company ("EGC"), as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, EGCs can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The Company expects to use the extended transition period for any other new or revised accounting standards during the period in which it remains an EGC.

**Segment Information**

The Company manages its operations and allocates resources as a single reportable segment. The Company's chief operating decision maker is its chief executive officer who reviews financial information presented on a consolidated basis for the purposes of making operating decisions, assessing financial performance, and allocating resources.

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**Concentration of Credit Risk**

The financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents, restricted cash, and accounts receivable. The Company maintains its cash, cash equivalents, and restricted cash with high-quality financial institutions with investment grade ratings. The Company may also have deposit balances with financial institutions which exceed the Federal Deposit Insurance Corporation insurance limit of $250,000. For accounts receivable, the Company is exposed to credit risk in the event of nonpayment by customers up to the amounts recorded on the consolidated balance sheets. The Company's accounts receivable is derived from customers located both inside and outside the United States and most of the Company's customers are educational institutions. The Company mitigates its credit risks by performing ongoing credit evaluations of the financial conditions of its customers and requires advance payment from customers in certain circumstances. The Company generally does not require collateral from its customers. For information regarding the Company's significant customers, see Note 12.

**Comprehensive Loss and Foreign Currency Translation**

The reporting currency of the Company is the United States dollar. The functional currency of the Company's Chinese subsidiary is the Chinese renminbi while the functional currency of the Company's Japanese subsidiary is the Japanese yen. Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured in the functional currency at period-end exchange rates. Foreign currency transaction gains and losses resulting from remeasurement are recognized in other income, net, in the consolidated statements of operations, and have not been material for any of the periods presented. For those subsidiaries with non-U.S. dollar functional currencies, assets and liabilities are translated into U.S. dollars at period-end exchange rates. Revenue and expenses are translated at the average exchange rates during the period. Equity transactions are translated using historical exchange rates. The resulting translation adjustments are recorded in accumulated other comprehensive income as a component of stockholders' deficit.

**Cash, Cash Equivalents, and Restricted Cash**

The Company considers cash on hand, deposits in banks, and investments with original maturities of three months or less, such as the Company's money market funds, to be cash and cash equivalents.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the consolidated balance sheet as of December 31, 2025 and 2024, to the amounts reported on the consolidated statement of cash flows (in thousands):

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| | | |
|:---|:---|:---|
|  | **December 31,** <br>**2025** | **December 31,** <br>**2024** |
| Cash  | $538 | $1329 |
| Cash equivalents | 174 | 3228 |
| Restricted cash | 309 | 307 |
| **Total cash, cash equivalents and restricted cash** | $**1021** | $**4864** |

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The restricted cash is legally restricted to secure credit card charges incurred by the Company.

**Accounts Receivable and Allowance for Credit Losses**

Accounts receivable are customer obligations due under normal trade terms. Expected credit losses include losses expected based on known credit issues with specific customers as well as a general expected credit loss allowance based on relevant information, including historical loss rates, current conditions, and reasonable economic forecasts that affect collectability. The Company updates its allowance for credit losses on a quarterly basis with changes in the allowance recognized in income from operations. The Company reserves for any accounts receivable balances that are determined to be uncollectible in the allowance for credit losses.

After all attempts to collect accounts, receivable balances have failed, the balance is written off against the allowance for credit losses. As of December 31, 2025 and 2024, the Company reported an allowance for credit losses balance of $94,000 and $44,000, respectively.

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**Inventory**

The Company's inventory, which includes raw materials and finished goods is valued using the weighted average cost method for hardware inventory while software inventory is recorded at actual cost. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold.

**Property and Equipment**

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense for property and equipment is computed using the straight-line method applied over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of their estimated useful lives or the applicable lease term, including anticipated renewals.

Upon retirement or sale of an asset, the cost and related accumulated depreciation is removed from the consolidated balance sheets and the resulting gain or loss is reflected in general and administrative expenses in the consolidated statements of operations and comprehensive loss. Maintenance and repairs are charged to operations as incurred.

Asset depreciation and amortization are computed using the following estimated useful lives:

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| | |
|:---|:---|
| **Asset Type** | **Years** |
| Lab equipment | 5 |
| Furniture and fixtures | 7 |
| Computer equipment | 5 |

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**Impairment of Long-Lived Assets**

The Company's long-lived assets with finite lives consist primarily of property and equipment. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Estimated future cash flows are based upon, among other things, assumptions about expected future operating performance and may differ from actual cash flows. If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is made. There is no impairment to long-lived assets as of and for the years ended December 31, 2025 and 2024. The Company periodically reviews the remaining estimated useful lives of its long-lived assets. If the estimated useful life assumption for any asset is changed, the remaining balance would be depreciated or amortized over the revised estimated useful life, on a prospective basis.

**Classification of Redeemable Preferred Stock as Temporary Equity**

The Company applies the guidance in Accounting Standards Committee ("ASC") 480, *Distinguishing Liabilities from Equity "ASC 480")*, to determine the classification of financial instruments issued. The Company first determines if the instruments should be classified as liabilities under this guidance based on the redemption features, if mandatorily redeemable or not, and the method of redemption, if in cash, a variable number of shares or a fixed number of shares.

If the terms provide that an instrument is mandatorily redeemable in cash, or the holder can compel a settlement in cash, or will be settled in a variable number of shares predominantly based on a fixed monetary amount, the instrument is generally classified as a liability. Instruments that are settled by issuing a fixed number of shares are generally classified as equity instruments. None of the Company's redeemable preferred stock was accounted for as a liability as none of the above-mentioned conditions were present.

The Company's certificate of incorporation does not provide redemption rights to the holders of the Series A preferred stock. If a liquidation event occurs, all the funds and assets of the Company available for distribution among all the stockholders shall be distributed based on a defined mechanism. Although the Series A preferred stock is not redeemable, in the event of certain "deemed liquidation events" that are not solely within the Company's control (including merger, acquisition, or sale of all or substantially all of the Company's assets, or public offerings), the holders of the preferred stock would be entitled to preference amounts paid before distribution to other stockholders and hence

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effectively redeeming the preference amount outside of the Company's control. In accordance with Accounting Series Release No. 268 ("ASR 268") and ASC 480, the Company's Series A redeemable preferred shares are classified outside of stockholders' deficit in temporary equity as a result of these in-substance contingent redemption rights.

**Deferred Offering Costs**

Deferred offering costs consist of legal, accounting, underwriting fees and other costs incurred that were directly related to the Company's planned public offering transaction. These costs were charged to stockholders' equity (deficit) upon the completion of the transaction. The Company incurred in the year ended December 31, 2024, $2.4 million in offering costs related to the Company's planned public offering, the IPO, that was completed in December 2024.

**Revenue**

The Company accounts for revenue in accordance with ASC Topic 606, *Revenue from Contracts with Customers*. The revenue recognition guidance provides a single model to determine when and how revenue is recognized. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company recognizes revenue using a five-step model resulting in revenue being recognized as performance obligations within a contract have been satisfied. The steps within that model include: (i) identifying the existence of a contract with a customer; (ii) identifying the performance obligations within the contract; (iii) determining the contract's transaction price; (iv) allocating the transaction price to the contract's performance obligations; and (v) recognizing revenue as the contract's performance obligations are satisfied. Judgment is required to apply the principles-based, five-step model for revenue recognition. Management is required to make certain estimates and assumptions about the Company's contracts with its customers, including, among others, the nature and extent of its performance obligations, its transaction price amounts and any allocations thereof, the events which constitute satisfaction of its performance obligations, and when control of any promised goods or services is transferred to its customers. The standard also requires certain incremental costs incurred to obtain or fulfill a contract to be deferred and amortized on a systematic basis consistent with the transfer of goods or services to the customer.

The Company assesses the goods and/or services promised in each customer contract and separately identifies a performance obligation for each promise to transfer to the customer a distinct good or service. The Company then allocates the transaction price to each performance obligation in the contract using relative SSP. The Company determines standalone selling prices based on the price at which a good or service is sold separately. If the standalone selling price is not observable through historic data, the Company estimates the standalone selling price by considering the cost-plus margin approach, along with all reasonably available information, including peer-company selling information while taking into consideration market conditions and other factors, such as customer size, volume purchased, market and industry conditions, product specific factors and historical sales of the deliverables.

The Company sells proprietary augmented reality and virtual reality hardware, software, and related installation and training services to education customers. The Company has contractual agreements with customers that set forth the general terms and conditions of the relationship, including pricing of goods and services, payment terms and contract duration. Revenue is recognized when the obligation under the terms of the Company's contract with its customer is satisfied and is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

The Company offers standard warranty coverage on substantially all products which provides the customer with assurance that the product will function as intended during the first year. This standard warranty coverage is accounted for as an assurance warranty and is not considered to be a separate performance obligation. Returns and repairs under the Company's general assurance warranty of products have not been material.

Payment is generally due within 30 days of invoice issuance. The Company uses the practical expedient and does not recognize a significant financing component for payment considerations of less than one year.

***Hardware***: Hardware sales represent separate performance obligations, all of which are satisfied at a point in time when the hardware is delivered to the customer, which is typically FOB shipping point.

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***Software***: Software sales consist of licenses of functional intellectual property that are satisfied at a point in time when key codes are provided to allow customers to access the software, which is the contract start date.

In transactions where the Company provides user-based software licenses to a customer, zSpace recognizes software revenue ratably on a straight-line basis. These fees charged to its customers are recognized on a gross basis as zSpace has determined that it is the principal in the transaction. As a principal to the transaction, the Company obtains control of the third-party software licenses before control is transferred to the customer. The fees paid to third parties for software licenses are recognized as transaction expenses and recorded in cost of goods sold in the consolidated statements of operations.

***Services***: The Company offers installation and/or training services for its products, both of which are separate performance obligations and typically are satisfied within a short period of time, often less than one month. Additionally, the Company offers one-and two-year extended warranty contracts customers can purchase at their option, which are also separate performance obligations. All warranty-related performance obligations are generally fulfilled evenly throughout the contract term. Services also includes post-contract support ("PCS") which is akin to a stand-ready performance obligation that is provided throughout the contract term. For all services related performance obligations, the Company believes that the passage of time corresponds directly to the satisfaction of the performance obligations; therefore, an output method of measuring progress based on time elapsed during the contract period is used to recognize revenue ratably on a straight-line basis.

***Contract Liabilities***: The Company typically bills in advance of providing goods and services, including for installation and training services, PCS, and extended warranties, resulting in contract liabilities (i.e., deferred revenue). Contract liabilities are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations.

***Contract Costs***: The Company incurs incremental contract commission costs to obtain contracts with customers which are expected to be recoverable through the term of those contracts. The Company allocates contract costs among the underlying performance obligations to which they relate and amortizes those costs on a systematic basis consistent with the pattern of the transfer of the goods and services. Contract cost assets are typically completely amortized soon after initial recognition as the majority of the Company's revenue on the underlying performance obligations is recognized upon delivery of the goods or services.

**Cost of Goods Sold**

The Company includes within cost of goods sold those costs related to the manufacture and distribution of its AR/VR products, as well as the cost to purchase third-party software. Specifically, the Company includes in cost of goods sold each of the following: material costs, labor and employee benefit costs related to the manufacture of our products, and freight and shipping costs. Costs are expensed as incurred, or as control of products is transferred, except for costs incurred to fulfill a contract, which are capitalized and amortized on a straight-line basis over the expected period of performance. The Company does not incur significant incremental costs to acquire contracts.

**Research and Development**

Research and development expenses primarily consist of salaries, bonus payments, benefits, travel and other related costs, including equity-based compensation expense, facility-related expenses for personnel engaged in research and development functions, and professional service fees primarily related to consulting and outsourcing services. All the Company's research and development costs are expensed as incurred.

**Selling and Marketing**

The Company tracks all expenses on a departmental basis and allocates between categories of expenses as they are related. The Company includes within sales and marketing expenses labor and other costs directly related to the promotion of our products, including expenses, such as compensation for the Company's marketing team and travel expense incurred in connection with promotion efforts, and equity-based compensation expense. The Company does not incur any material advertising costs. Sales and marketing costs are expensed as incurred.

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**General and Administrative**

The Company tracks all expenses on a departmental basis and allocates between categories of expenses as they are related. Our general and administrative expenses consist primarily of compensation and related costs for our finance, human resources and other administrative personnel, and include stock-based compensation, employee benefits and travel expenses. In addition, general and administrative expenses include our third-party consulting and advisory services, legal, audit, accounting services and facilities costs.

**Income Taxes**

The Company applies the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

The Company records a valuation allowance, when necessary, to reduce deferred tax assets to the amount expected to be realized. Estimates of the realizability of deferred tax assets, as well as the Company's assessment of whether an established valuation allowance should be reversed, are based on projected future taxable income, the expected timing of the reversal of deferred tax liabilities, and tax planning strategies. When evaluating whether projected future taxable income will support the realization of the Company's deferred tax assets, the Company considers both its historical financial performance and general economic conditions. In addition, the Company considers the time frame over which it would take to utilize the deferred tax assets prior to their expiration.

The Company utilizes a two-step approach to recognizing and measuring uncertain income tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained upon examination by the Internal Revenue Service ("IRS") or other taxing authorities, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and may not accurately forecast actual outcomes. Management determined there were no uncertain tax positions at December 31, 2025 and 2024 that would more likely than not be subject to tax by the taxing authorities. No examinations are currently pending.

**Stock-Based Compensation**

The Company has three stock incentive plans which grant incentive and nonqualified stock options to employees, directors, and consultants. All stock-based payments to employees, including grants of employee stock options, are recognized in the consolidated financial statements based on their respective grant-date fair values. The Company estimates the fair value of stock-based payment award on the date of grant using the Black-Scholes-Merton option pricing model in accordance with ASC 718, *Compensation — Stock Compensation*. The model requires management to make several assumptions, including expected volatility, expected life, risk-free interest rate, and expected dividends. The Company accounts for forfeitures when they occur. The value of the portion of the award that is ultimately expected to vest is recognized in the Company's consolidated statements of operations ratably over the requisite service periods, which is generally 4 years. No option is exercisable for more than 10 years. Share-based awards issued to non-employees are measured at the grant date and not subject to remeasurement.

**Convertible and Non-Convertible Debt**

The Company issued numerous convertible and non-convertible debt instruments. The Company evaluates embedded conversion and other features within its debt to determine whether any embedded features should be bifurcated from the host instrument and accounted for as a derivative at fair value, with changes in fair value recorded in the consolidated statement of operations and comprehensive loss.

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For the convertible note issued in 2025 described in Note 5, we elected the fair value option under accounting Standards Codification ("ASC") 825, *Financial Instruments*, ("ASC 825") measuring the entire instrument at fair value with changes recognized in earnings. This election is irrevocable and applied to the whole instrument, consistent with ASC 825-10 guidance. Key estimates include the valuation of original issue discount, accrued interest, and make-whole provisions, which require assumptions about discount rates, credit risk, and market conditions. The fair value option under ASC 825 simplifies the accounting by eliminating the need to bifurcate embedded derivatives under ASC 815, *Derivatives and Hedging* ("ASC 815") and aligns with the principles outlined in ASC 470, *Debt* ("ASC 470") for debt instruments. This approach requires ongoing reassessment of fair value inputs and assumptions, which can significantly affect reported earnings and liabilities*.* All fees related to the convertible note were expensed as incurred and not recorded as debt issuance costs.

The Company's other debt is carried on the consolidated balance sheets on a historical cost basis net of unamortized discounts and premiums because the Company has not elected the fair value option of accounting. Costs associated with acquiring debt are capitalized as a debt discount. The debt discount is presented in the consolidated balance sheets as a direct deduction from the carrying amount of the debt liability. The costs are amortized over the estimated contractual life of the related debt instrument using the effective interest method and are included in interest expense in the consolidated statements of operations.

**Fair Value of Financial Instruments**

The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and establishes the disclosure requirements regarding fair value measurements. Fair value is defined as the price that would be received in the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

*Level 1 Inputs*

Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

*Level 2 Inputs*

Inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

*Level 3 Inputs*

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities at the measurement date. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The Company develops these inputs based on the best information available.

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The carrying amounts of cash, cash equivalents, and restricted cash, accounts receivable, accrued liabilities, and accounts payable approximate fair value due to their relatively short-term maturities and are classified as short-term assets and liabilities in the accompanying balance sheets. The following table represents the fair value hierarchy for the financial assets and liabilities held by the Company measured at fair value on a recurring basis (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** |
| **(in thousands)** | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Money market funds | $174 | $— | $— | $174 |
| **Total financial assets** | $**174** | $**—** | $**—** | $**174** |
| Convertible debt subject to credit risk analysis | $— | $8923 | $— | $8923 |
| **Total financial liabilities** | $**—** | $**8923** | $**—** | $**8923** |
|  | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** |
| **(in thousands)** | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Money market funds | $3228 | $— | $— | $3228 |
| **Total financial assets** | $**3228** | $**—** | $**—** | $**3228** |

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During the year ended December 31, 2024, the Company had embedded derivatives related to its outstanding debt instruments. In connection with the Company's IPO on December 6, 2024, the outstanding debt instruments were converted into shares of common stock, and accordingly, no embedded derivatives remain outstanding at the year ended December 31, 2025 and 2024.

The Company has elected the fair value option under ASC 825-10 to measure its Senior Secured Convertible Note (the "Senior Secured Convertible Note") at fair value on a recurring basis, with the election made at issuance. Changes in the fair value of the Note are recorded in the consolidated statements of operations. The Company measures its convertible debt at fair value on a recurring basis. The fair value was determined utilizing a Monte Carlo simulation using observable market conditions for items such as risk-free rates, discount rates, and volatility assumptions. The fair value of the convertible debt has been categorized as a Level 2 item as of December 31, 2025. See Note 5 for further details regarding the Company's debt.

**Net (Loss) Income Per Share Available to Common Stockholders**

Basic net (loss) income per share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net (loss) income per share is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. For purposes of this calculation, temporary redeemable preferred stock, stock options, restricted stock units, warrants and shares available for future issuance under the convertible debt and equity line-of-credit agreements are considered to be common stock-equivalents.

**Accounting Pronouncements Issued, But Not Yet Adopted**

In November 2024, the FASB issued ASU 2024-04, Debt — Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. The ASU clarifies the requirements for determining whether the settlement of a convertible debt instrument should be accounted for as an induced conversion. The amendment is effective for all entities for fiscal years beginning after December 15, 2025, including interim periods within those annual periods . Early adoption is permitted for entities that have adopted ASU 2020-06. The Company is currently evaluating the impact of adopting this ASU on its financial statements.

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In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard requires public business entities to disaggregate, in a tabular footnote disclosure, certain income statement expense captions into specified natural expense categories. The amendment is effective for fiscal years beginning after December 15, 2026, with interim periods beginning after December 15, 2027. Early adoption is permitted and the amendments may be applied prospectively or retrospectively. The Company is currently evaluating the impact of adopting this ASU on its disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which improves income tax disclosures through enhanced disaggregation within the rate reconciliation table and disaggregation of income taxes paid by jurisdiction. The amendment is effective for fiscal years beginning after December 15, 2025 for emerging growth companies and early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company is currently evaluating the impact of adopting this ASU on its disclosures.

We are an emerging growth company, as defined in the Jumpstart Our Business Startups (JOBS) Act. For so long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation. The JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies. This provision allows an emerging growth company to delay the adoption of some accounting standards unless and until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act for the adoption of accounting standards until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

&nbsp;&nbsp;&nbsp;&nbsp;**3.** **REVENUE** 

**Disaggregation of Revenue**

The Company earns revenue through the sale of products and services. Product and service revenue are the disaggregation of revenue primarily used by management, as this disaggregation allows for the evaluation of market trends and certain product lines and services vary in renewing versus non-renewing nature.

The following table disaggregates revenue by recognition method for the years ended December 31, 2025 and 2024 (in thousands):

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,**  | **Year Ended December 31,**  |
|  | **2025** | **2024** |
| Point in time | $26518 | $36414 |
| Over time | 1340 | 1684 |
| Total | $**27858** | $**38098** |

---

The following table disaggregates revenue by type of products and services for the years ended December 31, 2025 and 2024 (in thousands):

---

| | | |
|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2025** | **2024** |
| Hardware | $14208 | $21991 |
| Software | 10558 | 12857 |
| Services | 3092 | 3250 |

---

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---

| | | |
|:---|:---|:---|
| Total | $**27858** | $**38098** |

---

The following table disaggregates revenue by geographic area for the years ended December 31, 2025 and 2024 (in thousands):

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,**  | **Year Ended December 31,**  |
|  | **2025** | **2024** |
| United States | $23641 | $33496 |
| International | 4217 | 4602 |
| Total | $**27858** | $**38098** |

---

The amount of deferred revenue as of December 31, 2025 and December 31, 2024 reflects the revenue expected to be recognized in future periods related to remaining performance obligations as the Company collects payment in advance of satisfaction of performance obligations. Because a majority of the Company's performance obligations are satisfied at a point in time soon after the contract is formed or within one year after the contract is formed, revenue recognized in the following year related to remaining performance obligations is expected to equal deferred revenue, current portion at the beginning of the year.

As of December 31, 2025 and 2024, the Company has $2.2 million and $3.6 million, respectively, in deferred revenue, and as of January 1, 2024, the Company had $3.0 million in deferred revenue. As of December 31, 2025 approximately $1.9 million of the balance is expected to be earned within the next 12 months and $0.3 million to be earned within the next 13 to 24 months.

As of December 31, 2024, approximately $3.3 million was expected to be earned within the next 12 months, with $0.2 million to be earned within the next 13 to 24 months and $0.1 million to be earned with the next 25 to 60 months.

As of December 31, 2025 and 2024, the Company had no contract assets.

&nbsp;&nbsp;&nbsp;&nbsp;**4.** **BALANCE SHEET COMPONENTS** 

**Inventory, net**

As of December 31, 2025 and 2024, inventory, net of reserve consisted of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **December 31,** <br>**2025** | **December 31,** <br>**2024** |
| Finished goods | $2091 | $2935 |
| Raw materials | 313 | 303 |
| **Inventory, net** | $**2404** | $**3238** |

---

The Company writes down inventory for obsolete inventory items and when the net realizable value of inventory items is less than their carrying value. The Company wrote down inventory of $0.2 million and $0.4 million during the years ended December 31, 2025 and 2024, respectively.

**Prepaid expenses and other current assets**

Prepaid expenses and other current assets consisted of the following at December 31, 2025 and 2024 (in thousands):

---

| | | |
|:---|:---|:---|
|  | **December 31,** <br>**2025** | **December 31,** <br>**2024** |
| Advances to suppliers | $1163 | $670 |
| Deferred software costs | 147 | 471 |
| Prepaid operating expense | 312 | 514 |
| **Total prepaid expenses and other current assets** | $**1622** | $**1655** |

---

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**Accrued expenses and other current liabilities**

Accrued expenses and other current liabilities consisted of the following at December 31, 2025 and 2024 (in thousands):

---

| | | |
|:---|:---|:---|
|  | **December 31,** <br>**2025** | **December 31,** <br>**2024** |
| Accrued purchases | $685 | $685 |
| Accrued compensation | 1147 | 2074 |
| Other current liabilities | 1871 | 2606 |
| **Total accrued expenses and other current liabilities** | $**3703** | $**5365** |

---

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&nbsp;&nbsp;&nbsp;&nbsp;**5.** **DEBT AND RELATED PARTY DEBT** 

As of December 31, 2025 and 2024, debt and related party debt is comprised of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **December 31,** <br>**2025** | **December 31,** <br>**2024** |
| **Short-term debt:** |  |  |
| Fiza Investments Limited Loans, term debt  | $— | $2202 |
| Other term loans | 1405 | 3562 |
| Total other current debt | 1405 | 5764 |
| Convertible debt | 6199 |  |
| **Total short-term debt** | $**7604** | $**5764** |
| **Other noncurrent debt:** |  |  |
| Convertible debt | $8923 | $— |
| Other term loans | 8809 | 9780 |
| Less: debt issuance costs | (19) | (27) |
| Less: current portion | (7604) | (3562) |
| **Total other noncurrent debt** | $**10109** | $**6191** |

---

As of December 31, 2025, future principal payments for long-term debt, including the current portion, are summarized as follows (in thousands):

---

| | |
|:---|:---|
| **Year Ending December 31,** | **Amount** |
| 2026 | $9768 |
| 2027 | 9406 |
| Less adjustment to fair value of Senior Secured Convertible Debt | (1461) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $**17713** |

---

During the year ended December 31, 2025, the Company capitalized $0.1 million of debt discount and issuance costs on term loans incurred. Debt discount and issuance costs incurred on convertible debt instruments were either eliminated through restructuring or extinguishment accounting or were considered immaterial and expensed when incurred for the year ended December 31, 2024.

Debt discount and issuance costs incurred on convertible debt instruments were either eliminated through restructuring or extinguishment accounting or were considered immaterial and expensed when incurred for the years ended December 31, 2025 and 2024.

As a result of the May 2022 troubled debt restructurings, which are described in further detail below, the maximum future cash flows of certain of the Company's convertible debt instruments was less than the carrying amount of the debt at the time of restructuring. For the year ended December 31, 2024, $0.1 million less interest expense was recorded in the consolidated statements of operations than contractual interest requirements.

***bSpace Investments Limited Loan***

In May 2019, the Company entered into a loan and security agreement (the "LSA") with bSpace Investments Limited ("bSpace"), an affiliate of the Company's controlling financial interest holder. Between 2019 and 2021, the Company borrowed an aggregate of $37.5 million across multiple tranches. The loan was secured by a first-priority interest in all Company collateral and was subject to several amendments that modified maturity dates, interest rates, and repayment premiums. The Company accounted for certain of these modifications as troubled debt restructurings ("TDR").

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In May 2022, the Company and bSpace entered into an agreement to convert a portion of the indebtedness into preferred stock. In August 2022, the Company issued 58,972 shares of NCNV preferred stock to bSpace in exchange for the forgiveness of $59.0 million of indebtedness representing principal, repayment premium, and accrued interest. The Company reduced the carrying amount of the debt, including accrued interest, by $45.1 million, representing the fair value of the preferred stock on the date of the agreement.

On December 30, 2023, the Company entered into a loan termination agreement with bSpace. Under this agreement, all remaining amounts outstanding under the LSA, including $1.5 million of post-maturity interest, were exchanged for 36,918 shares of NCNV Preferred Stock 3. This termination agreement relieved the Company of any further obligations under the LSA. As of December 31, 2025 and 2024, there was no outstanding balance due under the LSA.

***Kuwait Investment Authority Loan***

In February 2019, the Company entered into a $5.0 million promissory note with Kuwait Investment Authority ("KIA"), a principal shareholder. The note was subject to various amendments between 2020 and 2021 that modified the maturity date, added a repayment premium, and established subordination terms. The Company accounted for certain of these modifications as an extinguishment of debt or a troubled debt restructuring ("TDR").

In May 2022, the Company and KIA entered into an agreement to convert a portion of the indebtedness into preferred stock. In August 2022, the Company issued 8,062 shares of NCNV preferred stock to KIA in exchange for the forgiveness of $8.1 million of indebtedness. The Company recorded a restructuring gain of $0.8 million in connection with this exchange. Upon the execution of the conversion agreement in May 2022, the Company ceased accruing interest on the remaining loan balance.

In January 2024, the Company entered into a loan termination agreement with KIA under which all remaining obligations, including $0.1 million of post-maturity interest, were exchanged for 5,752 shares of NCNV Preferred Stock 2. This agreement relieved the Company of all further obligations under the KIA loan. As of December 31, 2025 and 2024, there was no outstanding balance due to KIA.

***Term Debt***

The Company has three outstanding loans as of December 31, 2025 with Fiza Investments Limited, ("Fiza") with a total outstanding principal balance of $7.2 million. On April 10, 2025, in connection with the Senior Secured Convertible Note Financing described below, the maturity date of the Fiza loans were amended to be the latter to occur of December 31, 2027 or the date in which there is no debt outstanding under the Senior Secured Convertible Note (as defined below). As of December 31, 2025, the gross principal amount due on the Fiza term debt is $7.2 million and has been classified as non-current other term loans on the consolidated balance sheet. As of December 31, 2024, $2.2 million due on the Fiza term debt was classified as current other term loans on the consolidated balance sheet.

**Amendment of Existing Loan Agreements and Entering into the Intercreditor Agreement**

On April 11, 2025, in connection with the Senior Secured Convertible Note Financing (as defined below), the Company entered into an amendment (the "Fiza 1 Amendment") to that certain Loan and Security Agreement with Fiza dated November 3, 2022 (the "Fiza 1 Agreement"). Pursuant to the Fiza 1 Amendment, the maturity date of the Fiza 1 Agreement is extended to December 31, 2027. The Fiza 1 Amendment also amends the repayment schedule such that, beginning on the latter to occur of December 31, 2027 or the date in which there is no debt outstanding under the Senior Secured Convertible Note (the "Convertible Note Repayment Date"), the Company will repay all remaining principal and interest under the Fiza 1 Agreement over twelve equal monthly installments.

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On April 11, 2025, also in connection with the Senior Secured Convertible Note Financing, the Company entered into an amendment (the "Fiza 2 and 3 Amendment") to a Loan and Security Agreement dated July 11, 2024 with Fiza (the "Fiza 2 and 3 Agreement"). Pursuant to the Fiza 2 and 3 Amendment, the interest rate under the Fiza 2 and 3 Agreement was lowered from 25% to 20%. In addition, until the Convertible Note Repayment Date, the Company shall make monthly payments of interest only. The remaining principal and interest shall be amortized and repaid over 12 months beginning on the Convertible Note Repayment Date, the Company will repay all remaining principal and interest under the Fiza Agreement over twelve monthly installments.

On April 11, 2025, the Company and Fiza entered into an intercreditor agreement, with the institutional investor in the Senior Secured Convertible Note Financing (the "Note Investor"), pursuant to which, among other things, Fiza subordinated its security interest in the assets of the Company to the security interest of the Note Investor under the Security Agreement in the same assets and agreed to certain covenants limiting its ability to receive cash payments from the Company, including pursuant to the Fiza 1 Agreement and Fiza 2 and 3 Agreement.

#### Other Outstanding and Repaid Term Loans
On February 26, 2025, the Company entered into two Loan and Security Agreements ("Term Loans 8 and 9") in the principal amounts of $1,100,000 and $900,000 (the "Loans") with Itria Ventures LLC ("Itria"). The Term Loans 8 and 9 bore interest at a rate of 18.00% per year (subject to increases upon an event of default) and were payable on a monthly basis in 12 equal installments, maturing on February 26, 2026. In connection with the Senior Secured Convertible Note financing on April 11, 2025, all outstanding principal and accrued interest on Term Loans 8 and 9 were prepaid.

During 2025, the Company prepaid all of its outstanding Loans with Itria, including Term Loans 8 and 9 above and the following: (i) Business Loan and Security Agreement (Tranche 1), dated January 31, 2023, for $4,000,000, (ii) Business Loan and Security Agreement (Tranche 3), dated April 12, 2023 for $680,000, (iii) Business Loan and Security Agreement (Tranche 4), dated May 17, 2024, for $1,000,000 and (iv) Business Loan and Security Agreement (Tranches 5 and 6), dated May 17, 2024, for an aggregate principal amount of $1,000,000, and (v) Business Loan and Security Agreement (Tranche 7), dated June 4, 2024, for $1,500,000. As a result of these repayments, all sums owed by Company to Itria under all of the Loan and Security Agreements have been satisfied in full and all commitments to extend credit lines under the Loan and Security Agreements are terminated.

On August 20, 2025, the Company entered into two Loan and Security Agreements ("Term Loans 10 and 11") in the principal amounts of $1,000,000 each with Itria for an aggregate total of $2,000,000 (less fees payable to Itria). One of the Term Loan 10 bears interest at a rate of 18.00% per year and is payable on a monthly basis in 15 equal installments, maturing on the 15-month anniversary of the funding date. Term Loan 11 bears interest at a rate of 18.99% per year and is payable on a monthly basis in 18 equal installments, maturing on the 18-month anniversary of the funding date. The Company may prepay either of the Term Loans 10 and 11 in full at any time after the first month of the term, subject to a prepayment fee equal to 1.5% of the unpaid principal balance if the Term Loans 10 and 11 are prepaid within the first 12 months of the term.

The outstanding balance of other outstanding and repaid term loans as of December 31, 2025 and 2024 is $1.6 million and $4.8 million, respectively, and are recorded in the Other Current and Non-Current Debt line items in the consolidated balance sheet. The effective interest rates of Term Loan 1, Term Loan 2, Term Loan 3, Term Loan 4, Term Loan 5, Term Loan 6, Term Loan 7, Term Loan 8, Term Loan 9, Term Loan 10 and Term Loan 11 were 14.2%, 38.2%, 20.1%, 17.8%, 17.8%, 17.8%, 18.8%, 25.0%, 21.4%, 21.0%, and 20.5%, respectively.

**Senior Secured Convertible Note Financing**

On April 10, 2025, the Company entered into a securities purchase agreement (the "Note SPA") with the Note Investor, pursuant to which the Company sold, and the Note Investor purchased, the Senior Secured Convertible Note, (such financing, the "Senior Secured Convertible Note Financing") in the original principal amount of $13,978,495, which is convertible into shares of the Company's common stock. The Senior Secured Convertible Note Financing closed on April 11, 2025.

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The gross proceeds to the Company from the Senior Secured Convertible Note Financing, prior to the payment of legal fees and transaction expenses, was $13,000,000. Subject to the satisfaction of certain conditions contained in the Note SPA, the Company may issue an additional senior secured convertible note to the Note Investor in the principal amount of $7,526,882 (for additional gross proceeds of $7,000,000). The Company used the net proceeds from the Senior Secured Convertible Note Financing to repay existing debt and for working capital and general corporate purposes.

The Note SPA contains customary representations, warranties, and covenants of the Company and the Note Investor.

*Description of the Note*

The Senior Secured Convertible Note was issued with an original issue discount of 7.0% and accrues interest at a rate of 6.0% per annum. The Senior Secured Convertible Note matures on April 11, 2027, unless extended pursuant to the terms thereof. Interest on the Senior Secured Convertible Note is guaranteed through April 11, 2027 regardless of whether the Senior Secured Convertible Note is earlier converted or redeemed. The Senior Secured Convertible Note is secured by a first priority security interest in substantially all the assets of the Company, including its intellectual property.

The Senior Secured Convertible Note is convertible (in whole or in part) at any time prior to April 11, 2027 into the number of shares of common stock equal to (x) the sum of (i) the portion of the principal amount to be converted or redeemed, (ii) all accrued and unpaid interest with respect to such principal amount, and (iii) all accrued and unpaid late charges with respect to such principal and interest amounts, if any, divided by (y) a conversion price of $12.39 per share ("Initial Conversion Price" and such shares issuable upon conversion of the Note, the "Conversion Shares"). In addition, upon the effectiveness of the registration statement covering the resale of the Conversion Shares and before the 90<sup>th</sup> day after the closing under the Note SPA, the Note Investor has the right to convert up to $750,000 (or a higher amount mutually agreed upon by the parties) principal per month, priced at 97% of the lowest volume-weighted average price of the common stock ("VWAP") in the 10 trading days prior to the conversion. Pursuant to the Note SPA, in certain cases, the Note Investor must limit the selling of common stock to the higher of (i) 15% of the daily trading volume or (ii) $100,000 per trading day. At no time may the Note Investor hold or be required to take more than 4.99% (or up to 9.99% at the election of the Investor pursuant to the Senior Secured Convertible Note) of the outstanding common stock.

The conversion price of the Senior Secured Convertible Note was subject to a floor price of $1.98. On October 15, 2025, the Company entered into an amendment to the Senior Secured Convertible Note pursuant to which the floor price was amended to $0.60.

In addition, if an Event of Default (as defined in the Senior Secured Convertible Note) has occurred under the Note, the Note Investor may elect to convert all or a portion of the Note into shares of common stock at a price equal to the lesser of (i) 80% of the VWAP of the shares of common stock as of the trading day immediately preceding the delivery or deemed delivery of an applicable Event of Default notice and (ii) 80% of the average VWAP of common stock for the five trading days with the lowest VWAP of the shares of common stock during the ten consecutive trading day period ending and including the trading day immediately preceding the delivery or deemed delivery of an applicable Event of Default notice.

Upon the occurrence of an Event of Default, the Company is required to deliver written notice to the Note Investor within one business day. At any time after the earlier of (a) the Note Investor's receipt of an Event of Default notice, and (b) the Note Investor becoming aware of an Event of Default, the Note Investor may require the Company to redeem all or any portion of the Senior Secured Convertible Note at a 10% premium. Upon an Event of Default, the Senior Secured Convertible Note shall bear interest at a rate of 11.0% per annum.

Beginning 90 days after April 11, 2025, and every month thereafter, the Company must repay the Note Investor $665,643 towards the principal balance of the Senior Secured Convertible Note and any accrued and unpaid interest in cash or, provided certain conditions are satisfied, shares of common stock, at the Company's option (collectively, the "Installment Amount"). The Note Investor also has the right to accelerate monthly repayment obligations by receiving shares of common stock. For any Installment Amount paid in the form of shares of common stock, the applicable conversion price will be equal to the lesser of (a) the Initial Conversion Price, and (b) 95% of the lowest VWAP in the ten trading days immediately prior to such conversion.

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In connection with a "Change of Control" (as defined in the Senior Secured Convertible Note), the Note Investor shall have the right to require the Company to redeem all or any portion of the Note in cash at a price equal to 110% times the sum of (i) the portion of the principal amount to be converted or redeemed, (ii) all accrued and unpaid interest with respect to such principal amount, (iii) a "make-whole" amount to ensure that, if paid, the Note Investor will have received the guaranteed interest pursuant to the Note and (iv) all accrued and unpaid late charges with respect to the amounts described in (i), (ii) and (iii), if any.

*Security Agreement and Intellectual Property Security Agreement*

On April 11, 2025, the Company entered into a security agreement (the "Security Agreement") and an intellectual property security agreement (the "Intellectual Property Security Agreement"), pursuant to which the Company granted to the Note Investor a security interest in all of the assets of the Company, including its intellectual property.

**Conversion of Principal and Interest amounts into Common Stock**

Between April 25, 2025 and December 31, 2025, the Company reduced its obligations under the Note by $5.3 million, consisting of (i) $4.9 million of principal and interest converted into 2,590,827 shares of common stock at conversion prices ranging between $0.60 per share to $7.74 per share, and (ii) $0.4 million representing 20% of the proceeds received from certain transactions under the ELOC agreement as requested by the Investor.

In accordance with ASC 825-10-45-5, the Company determined that the changes in fair value of the Note during the periods presented were primarily attributable to changes in market interest rates and the discount rate used in the valuation model, rather than changes in the Company's own credit risk. Accordingly, the change in fair value was recognized in net income rather than other comprehensive income. The net impact for the year ended December 31, 2025 was a loss of approximately $1.9 million.

March 2024 Convertible Debt

In March 2024, the Company entered into a loan for $5.0 million from Fiza Investments Limited ("Tranche V Loan"). The loan had an annual interest rate of 20% that is accrued daily, compounded annually, and was payable on the maturity date. There were no material lender or third-party costs incurred in connection with the Tranche V Loan. The Company accounted for the March 2024 agreement as a modification of the existing loans. The loan was set to mature on March 11, 2026. Upon the IPO, the loan was automatically converted for shares of common stock at a price per share equal to the lesser of (i) 85% of the original issue price of the listing (100% of the original issue price, if the event occurs after December 31, 2024) or (ii) an assumed price per share of the stock, using a $250 million valuation for the Company. If the debt has not otherwise been redeemed prior to the maturity date, the holder has the option to convert the loan into shares of the Company at an assumed price per share, using a $150 million valuation for the Company. In connection with the Company's IPO on December 6, 2024, the March 2024 convertible debt was converted into 1,176,471 shares of common stock. No amount of the March 2024 convertible debt under the Tranche V Loan was outstanding as of December 31, 2024.

***SAFE Agreements***

During July 2024, the Company entered into multiple Simple Agreement for Future Equity ("SAFE") agreements with three suppliers in exchange for a reduction of liabilities to such suppliers in the amount of $3.3 million. In connection with the IPO on December 6, 2024, the $3.3 million of Safe Agreements were exchanged for 650,029 shares of common stock.

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&nbsp;&nbsp;&nbsp;&nbsp;**6.** **TEMPORARY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY** 

The Company has reserved shares of common stock for issuance as follows as of the periods indicated:

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| | | |
|:---|:---|:---|
|  | **December 31,** <br>**2025** | **December 31,** <br>**2024** |
| Warrants | 107813 | 93750 |
| Awards outstanding under the 2017 and 2007 Equity Incentive Plans | 5853656 | 5984204 |
| Awards outstanding under the 2024 Equity Plan | 895434 |  |
| Shares available for future issuance under the convertible debt note | 5308221 |  |
| Shares available for future issuance under equity line-of-credit agreement | 17859 |  |
| Shares available for future issuance under the 2024 Equity Incentive Plan | 1481815 | 2708175 |
| Shares authorized and available for future issuance | 53981656 | 68364493 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total shares reserved and available for future issuance of common stock** | **67646454** | **77150622** |

---

On December 6, 2024, we completed an initial public offering (the "IPO") of 2.2 million shares of common stock at a price of $5.00 per share, which included 0.3 million shares sold to the underwriters pursuant to their option to purchase additional shares. After underwriting discounts and commissions of $0.8 million and offering expenses of $2.6 million, we received net proceeds from the IPO of $7.5 million. In connection with the IPO, 4.0 million outstanding shares of preferred stock were converted into 18.7 million shares of common stock. See Note 1 (Description of Business and Basis of Presentation) for more information.

**Common Stock Purchase Agreement**

On July 8, 2025, the Company entered into a Common Stock Purchase Agreement (the "ELOC Agreement") with Tumim Stone Capital LLC ("Tumim"). Pursuant to the ELOC Agreement, the Company has the right to sell to Tumim up to $30,000,000 worth of newly issued shares (the "ELOC Shares") of the Company's common stock (subject to certain conditions and limitations), from time to time during the term of the ELOC Agreement. Sales of common stock pursuant to the ELOC Agreement, and the timing of any sales, are solely at the option of the Company and the Company is under no obligation to sell securities pursuant to this arrangement. Shares of common stock may be sold by the Company pursuant to this arrangement over a period of up to 24 months after the closing of the transactions contemplated by the ELOC Agreement.

The Company controls the timing and amount of any sales of common stock to Tumim. Actual sales of ELOC Shares to Tumim under the ELOC Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, the trading price of the common stock, trading volume of the common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.

The Company agreed to reimburse Tumim for the reasonable out-of-pocket expenses (including legal fees and expenses), up to a maximum of $25,000.

In all instances, the Company may not sell shares of our common stock to Tumim under the ELOC Agreement if it would result in Tumim beneficially owning more than 4.99% of the outstanding common stock.

The net proceeds from sales, under the ELOC Agreement, depend on the frequency and prices at which the Company sells shares of common stock to Tumim. To the extent the Company sells shares under the ELOC Agreement, the Company currently plans to use any proceeds therefrom for operating expenses, working capital and other general corporate purposes.

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The ELOC Agreement will automatically terminate on the earliest to occur of (i) the 24-month anniversary after July 8, 2025, (ii) the date on which Tumim has purchased the total commitment worth of shares of common stock, (iii) the date on which the common stock shall have failed to be listed or quoted on The Nasdaq Capital Market or any other "Eligible Market" (as defined in the ELOC Agreement), (iv) 30 trading days after the Company commences a voluntary bankruptcy proceeding or any person commences a proceeding against the Company, or (v) the date on which a custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors. The Company has the right to terminate the ELOC Agreement at any time after Commencement, at no cost or penalty, upon five trading days' prior written notice to Tumim.

As of December 31, 2025, the total shares issued under the ELOC Agreement are 6,482,141 for total proceeds of $5.6 million.

**Notice of Delisting**

On November 25, 2025, the Company received a written notice from the Listing Qualifications Department (the "Staff") of The Nasdaq Stock Market LLC ("Nasdaq") indicating that the Company is not in compliance with the continued listing requirement set forth in Nasdaq Listing Rule 5550(b)(2), which requires listed companies to maintain a minimum market value of listed securities ("MVLS") of at least $35,000,000. Based on the Staff's review of the Company's MVLS, the Company's MVLS was below $35 million for the previous 30 consecutive business days. In addition, on December 11, 2025, the Company received another notice from the Staff notifying the Company that the closing bid price of its common stock was below $1.00 for the previous 30 consecutive business days.

Neither of the notices from Nasdaq have immediate effect on the listing or trading of the Company's common stock on the Nasdaq Capital Market. In accordance with Nasdaq's listing rules, the Company has a period of 180 calendar days, or until May 26, 2026, to regain compliance with the MVLS requirement and a period of 180 calendar days, or until June 9, 2026, to regain compliance with the bid price requirement. To regain compliance with the MVLS requirement, the MVLS of the Company's common stock must close at $35 million or more for a minimum of 10 consecutive business days during this compliance period, unless Nasdaq exercises its discretion to require a longer period. To regain compliance with the bid price requirement, the minimum bid price of the Company's common stock must be $1.00 or more for a minimum of 10 consecutive business days during this compliance period, unless Nasdaq exercises its discretion to require a longer period.

If the Company does not regain compliance within the prescribed periods, the Staff will provide written notification that the Company's securities are subject to delisting. The Company may then appeal the Staff's determination to a Hearings Panel pursuant to Nasdaq Listing Rule 5815(a), but there can be no assurance that Nasdaq would grant the Company's request for approval of its compliance plan.

The Company intends to actively monitor its MVLS and its bid price and is evaluating its options to regain compliance with the Nasdaq Listing Rules. However, there can be no assurance that the Company will be able to regain compliance with the Nasdaq Listing Rules or will otherwise be in compliance with other Nasdaq listing criteria.

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**Preferred Stock**

As of December 31, 2025 and 2024, the Company was authorized to issue 5,000,000 shares of preferred stock with no shares of preferred stock designated or outstanding. As of December 31, 2023, the Company was authorized to issue 4,014,946 shares of preferred stock with a par value of $0.00001 per share, of which 3,874,946 shares were designated as Series A preferred stock and 140,000 shares were designated as NCNV preferred shares. Activity for both the Series A and NCNV preferred stock for the year ended December 31, 2024 was as follows (in thousands, except share data):

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| | | |
|:---|:---|:---|
|  | **Series A Preferred Stock** | **Series A Preferred Stock** |
|  | **Shares** | **Amount** |
| **Balance at December 31, 2023:** | **3874946** | $**3000** |
| Conversion of Series A Temporary Preferred Stock into common stock | (3874946) | (3000) |
| **Balance at December 31, 2024:** | **—** | $**—** |
| **Balance at December 31, 2025:** | **—** | $**—** |

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As part of the Recapitalization and discussed below, shares of NCNV 1 and NCNV 3 preferred stock were issued in December 2023. No amounts of NCNV 1, NCNV 2, or NCNV 3 preferred stock were previously outstanding.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **NCNV Preferred**  | **NCNV Preferred**  | **NCNV Preferred**  | **NCNV Preferred**  | **NCNV Preferred**  | **NCNV Preferred**  |
|  | **Stock 1** | **Stock 1** | **Stock 2** | **Stock 2** | **Stock 3** | **Stock 3** |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** |
| **Balance at December 31, 2023** | **55312** | $**55312** | **—** | $**—** | **48640** | $**48640** |
| Cancellation of NCNV 1 Preferred Stock | (562) | (562) |  |  |  |  |
| Issuance of NCNV 2 Preferred Stock in exchange for Debt Forgiveness |  |  | 5752 | 5752 |  |  |
| Reduction of the original issue price from $1,000 to $600 per share |  | (21900) |  | (2301) |  | (19455) |
| Conversion of NCNV 1, 2 and 3 Preferred Stock into common stock | (54750) | (32850) | (5752) | (3451) | (48640) | (29185) |
| **Balance at December 31, 2024:** | **—** | $**—** | **—** | $**—** | **—** | $**—** |
| **Balance at December 31, 2025:** | **—** | $**—** | **—** | $**—** | **—** | $**—** |

---

**Warrants**

In connection with the IPO, the Company issued to the underwriter warrants to purchase 107,813 shares of common stock (including the over-allotment option exercised) at an exercise price of $7.50 per share. The warrants expire five years after the IPO in December 2029. The Company used the Black-Scholes method to determine the fair value of the warrants at the time of issuance to the underwriter and determined the warrants meet the requirements under ASC 480, ASC 718, and ASC 815-40 to be classified as equity. The fair market value of the warrants was determined to be $0.2 million at the time of issuance in December 2024.

**Series A Preferred Stock**

The Series A preferred stock had the following rights and privileges until all outstanding shares of the Series A preferred stock were converted into 3,874,946 shares of common stock as part of the Company's IPO on December 6, 2024:

*Dividend Rights*

The holders of the Series A preferred stock are entitled to receive dividends at the rate of 11% per annum of the purchase price per share. The dividends accrued on a daily basis whether or not they are declared by the Board of Directors. No dividends were declared by the Board of Directors. Therefore, while the dividends were accruing on a daily basis, the Company had not recorded this as a liability on the Company's consolidated balance sheets.

[**Table of Contents**](#TOC)

*Redemption Rights (Liquidation)*

In the event of certain capital transactions deemed to be a liquidation transaction, the holders of the Series A preferred stock were entitled to a per share liquidation preference, plus any declared but unpaid dividends on such shares, prior to distributions to any class of common stockholders.

*Conversion Rights*

Each share of Series A preferred stock could be voluntarily converted into shares of common stock at any time. All outstanding shares of Series A preferred stock automatically converted into common stock upon the closing of the IPO by dividing the original issue price, as adjusted for dividends, by the conversion price. The initial Series A preferred conversion price was $0.7744515 per share. The conversion price was subject to adjustment upon issuances of additional shares of common stock if the consideration paid per common share is less than the conversion price in effect immediately prior to the issuance of additional shares.

*Voting Rights*

Holders of the Series A preferred stock were entitled to cast the number of votes equal to 100 times the number of shares of common stock into which the shares of Series A preferred stock could be converted. Common stockholders are entitled to one vote for each share of common stock held.

**NCNV Preferred Stock**

On January 11, 2024, 562 shares of NCNV 1 preferred stock were converted into NCNV 2 preferred stock and 5,752 shares of NCNV 2 preferred stock were issued in exchange for all the outstanding debt from KIA as described in Note 5 ("New NCNV Preferred Stock").

The New NCNV Preferred Stock had a liquidation preference senior to the Series A preferred stock and Common Stock.

The New NCNV Preferred Stock had the following rights and privileges until it was converted into 13,097,040 shares of common stock as part of the Company's IPO on December 6, 2024:

*Dividend Rights*

The holders of the New NCNV Preferred Stock were entitled to receive dividends at the rate of 5% of the issue price per share of $1,000, prior to payment of dividends to the holders of Series A preferred stock, if declared by the Board of Directors. The dividends are non-cumulative. On July 12, 2024, the Company amended its certificate of incorporation to change the issue price per share of the NCNV Preferred Stock from $1,000 to $600. As of December 31, 2023 and through December 6, 2024, no dividends had been declared by the Board of Directors.

*Conversion Rights*

New NCNV Preferred Stock were non-convertible other than the automatic mandatory conversion provision described above.

*Voting Rights*

New NCNV Preferred Stock were non-voting.

In addition to the New NCNV Preferred Stock rights and privileges, the Original NCNV preferred stock had the following rights:

*Redemption Rights*

At any time on or after March 15, 2023, the majority holders of NCNV preferred stock could request redemption at the issue price per share of $600 per share, plus all declared but unpaid dividends.

[**Table of Contents**](#TOC)

&nbsp;&nbsp;&nbsp;&nbsp;**7.** **STOCK BASED COMPENSATION EXPENSE** 

**Equity incentive plans**

Prior to December 2024, the Company had adopted two equity incentive plans in 2007 (the "2007 Plan") and 2017 (the "2017 Plan"). In December 2024, the Company adopted the 2024 Equity Incentive Plan (the "2024 Plan," and together with the 2007 Plan and the 2017 Plan, the "Stock Plans") to provide for the grant of stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units and other stock or cash-based awards to our directors, employees, non-employee directors and service providers. Equity awards are granted with an exercise price per share equal to at least the estimated fair value of the underlying common stock on the date of grant. The vesting period is determined through individual award agreements. Awards generally expire 10 years from the date of grant.

On February 13, 2025, the Company granted 724,646 Restricted Stock Units ("RSUs") to its named executive officers and the members of the Board of Directors under the 2024 Plan at a fair market value of $12.9 million. The approximately 0.7 million officer and director RSUs vest at quarterly periods over one to three years. On March 31, 2025, the Company granted 620,934 RSUs to employees at a fair market value of $4.6 million. The approximately 0.6 million employee RSUs vest at quarterly periods over three years. During the remainder of the fiscal year ended December 31, 2025, the Company granted an additional 189,219 RSUs to employees at a fair value market value of $0.6 million and vest at quarterly periods over three years.

As of December 31, 2025, a total of 8,692,379 shares were authorized for issuance under the Stock Plans. As of December 31, 2025, 7,210,564 shares have been granted or issued under the Stock Plans, leaving 1,481,815 shares available for future awards. As of December 31, 2025, there were 5,984,204 shares granted under the 2007 Plan and the 2017 Plan. The shares available for issuance under the 2024 Plan may consist, in whole or in part, of authorized and unissued shares or reacquired shares. Shares from the 2024 Plan which are forfeited due to employee termination or expiration are returned to the share pool. Similarly, shares from the 2024 Plan which are withheld upon exercise to provide for the exercise price and/or taxes due and shares repurchased by the Company are also returned to the pool.

Since December 6, 2024, we have not granted and do not intend to grant any further awards under the 2007 Plan or the 2017 Plan.

**Time-Based Restricted Stock Units**

Time-based restricted stock units (RSUs) granted to employees under the 2024 Plan typically vest over one to three years and are subject to forfeiture if employment terminates prior to the vesting or lapse of restrictions, as applicable. RSUs are not considered outstanding common stock until they vest. The value of RSUs is determined by the stock price on the grant date.

The following table summarizes the activity related to RSUs subject to time-based vesting requirements for the year ended December 31, 2025:

---

| | | |
|:---|:---|:---|
|  | **RSUs** | **RSUs** |
|  | **Number of Shares** | **Weighted Average Grant Date Fair Value** |
| **Non-vested as of January 1, 2025** | **-** | $**-** |
| &nbsp;&nbsp;&nbsp;&nbsp;Granted | 1534799 | 12.08 |
| &nbsp;&nbsp;&nbsp;&nbsp;Vested | (330926) | 14.33 |
| &nbsp;&nbsp;&nbsp;&nbsp;Forfeited | (308439) | 6.57 |
| **Non-vested as of December 31, 2025** | **895434** | $**13.13** |

---

As of December 31, 2025, total unrecognized stock-based compensation cost for RSUs was approximately $11.8 million which is expected to be recognized on a straight-line basis over a weighted average period of 1.5 years. The intrinsic value of RSUs as of December 31, 2025 was $0.4 million.

[**Table of Contents**](#TOC)

**Determination of fair value of stock options**

As of December 31, 2025 and 2024, the Company had approximately 5.9 million and 6.0 million options outstanding, respectively, under the Stock Plans. As of December 31, 2025 and 2024, all options outstanding were granted solely with time-based vesting requirements.

There were no options granted during the year ended December 31, 2025. The fair value of the stock options granted during the year ended December 31, 2024 was estimated on the grant date using the Black-Scholes valuation model with the following assumptions:

---

| | |
|:---|:---|
|  | **December 31,** <br>**2024** |
| Dividend yield |  |
| Expected term | 5.0 - 6.1 years |
| Risk-free interest rates | 1.0% - 4.5% |
| Expected volatility | 54.9% - 66.4% |

---

*Dividend Yield —* The dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to do so.

*Expected Term —* The expected term represents the period that the Company's stock-based awards are expected to be outstanding. The Company determines the expected term using the simplified method as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options, including the date provided for completion of the performance condition event.

*Expected Volatility —* Because the Company does not have any trading history of its common stock, the expected volatility is derived from the average historical stock volatilities of several unrelated public companies within the Company's industry that the Company considers to be comparable to its business over a period equivalent to the expected term of the stock option grants.

*Fair Value of Common Stock —* Given the absence of a public trading market, the Company's Board of Directors considered numerous objective and subjective factors to determine the fair value of its common stock at each grant date. These factors included, but were not limited to: (i) independent third-party valuations of common stock; (ii) the prices for the Company's redeemable temporary preferred stock sold to outside investors; (iii) the rights and preferences of redeemable temporary preferred stock relative to common stock; (iv) the lack of marketability of its common stock; (v) developments in the business; and (vi) the likelihood of achieving a liquidity event, such as an IPO or sale of the Company, given prevailing market conditions.

[**Table of Contents**](#TOC)

A summary of the Company's stock option plan and the changes during the year ended December 31, 2025 and 2024, are presented below:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | <br>**Number of**<br>**Outstanding**<br>**Options** | <br>**Weighted**<br>**Average** <br>**Exercise** <br>**Price** | <br>**Weighted**<br>**Average** <br>**Grant Date** <br>**Fair Value** | **Weighted**<br>**Average**<br>**Remaining** <br>**Contractual** <br>**Years** | <br>**Aggregate** <br>**Intrinsic** <br>**Value** |
| **Balance, January 1, 2024** | **948464** | $**6.20** |  | **7.25** |  |
| &nbsp;&nbsp;Granted  | 5059228 | 2.57 | $1.50 |  |  |
| &nbsp;&nbsp;Forfeited  | (6769) | 2.57 |  |  |  |
| &nbsp;&nbsp;Expired | (1878) | 348.07 |  |  |  |
| &nbsp;&nbsp;Exercised  | (14841) | 2.29 |  |  |  |
| **Balance, December 31, 2024** | **5984204** | $**3.04** |  | **8.00** |  |
| **Vested and Exercisable, December 31, 2024** | **5554326** | $**3.07** |  | **7.91** |  |
| **Vested and Expected to Vest, December 31, 2024** | **5984204** | $**3.04** |  | **8.00** |  |
| &nbsp;&nbsp;Expired | (1839) | 340.36 |  |  |  |
| &nbsp;&nbsp;Forfeited | (28435) | 2.46 |  |  |  |
| &nbsp;&nbsp;Exercised | (100274) | 1.56 |  |  |  |
| **Balance, December 31, 2025** | **5853656** | $**3.00** |  | **7.00** | $**—**<br><sup>(1)</sup> |
| **Vested and Exercisable, December 31, 2025** | **5834573** | $**3.01** |  | **6.91** | $**—**<br><sup>(1)</sup> |
| **Vested and Expected to Vest, December 31, 2025** | **5853656** | $**3.00** |  | **7.00** | $**—**<br><sup>(1)</sup> |

---

<sup>(1)</sup> The Company's closing stock price as of December 31, 2025 is $0.47 per share. As all outstanding options have an exercise price greater than the closing price, there does not exist any intrinsic value as of December 31, 2025.

As of December 31, 2025, there was no unrecognized stock-based compensation cost for stock options granted. The intrinsic value of stock options exercised during the year ended December 31, 2025 and 2024 was $0.2 million and $41,000, respectively.

Stock-based compensation included in the consolidated statements of operations for the year ended December 31, 2025 and 2024, are presented below:

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,**  | **Year Ended December 31,**  |
|  | **2025** | **2024** |
| Cost of goods sold | $77 | $130 |
| Research and development | 388 | 802 |
| Sales and marketing | 2122 | 2808 |
| General and administrative | 4533 | 3995 |
| **Total stock-based compensation expense** | $**7120** | $**7735** |

---

**March 2024 Stock Option Issuance**

In March 2024, the Company granted employees and members of the Board of Directors stock options to purchase a total of 5,028,756 shares of common stock. The stock options have varying vesting periods ranging from immediate at time of the grant to three years from grant date or service start date, are exercisable at $2.57 per share and have an expiration period of 10 years. These stock option grants were issued from the 2017 Stock Plan.

[**Table of Contents**](#TOC)

&nbsp;&nbsp;&nbsp;&nbsp;**8.** **TAXES** 

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the United States. The OBBBA includes significant tax-related provisions, including the permanent extension of certain provisions of the Tax Cuts and Jobs Act, modifications to Section 174 research and development capitalization rules, changes to the Section 163(j) interest expense limitation, and modifications to net operating loss provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company has evaluated the impact of the OBBBA on its deferred tax assets and liabilities as of December 31, 2025. Due to the Company's full valuation allowance against its net deferred tax assets, the OBBBA did not have a material impact on the Company's income tax expense for the year ended December 31, 2025.

The components of the income tax expense for the fiscal years ended December 31, 2025 and 2024 are as follows (in thousands):

---

| | | |
|:---|:---|:---|
|  | **December 31,**  | **December 31,**  |
|  | **2025** | **2024** |
| **Current** |  |  |
| Federal | $— | $— |
| State | 14 | 34 |
| Foreign |  |  |
| **Total current** | $**14** | $**34** |
| **Deferred** |  |  |
| Federal | $— | $— |
| State |  |  |
| Foreign |  |  |
| **Total deferred**  | $**—** | $**—** |
| **Total income tax expense** | $**14** | $**34** |

---

A reconciliation of total income tax expense and the amount computed by applying the federal statutory income tax rate of 21.0% to loss before provision from income taxes for the fiscal years ended December 31, 2025 and 2024 are as follows:

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Computed expected tax benefit at federal statutory rate | $(5437) | $(4358) |
| State benefit, net of federal benefit | (575) | (285) |
| Convertible debt change in fair value | 409 |  |
| Stock-based compensation expense | 932 | 528 |
| Extinguishment of debt |  | 75 |
| Change in valuation allowance | 4621 | 3905 |
| Foreign rate differential | (10) | 133 |
| Other permanent book-tax differences | 35 | 36 |
| Other  | 39 |  |
| **Total income tax expense** | $**14** | $**34** |

---

[**Table of Contents**](#TOC)

Temporary differences that give rise to significant portions of the Company's deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows (in thousands):

---

| | | |
|:---|:---|:---|
|  | **December 31,**  | **December 31,**  |
| **Deferred tax assets** | **2025** | **2024** |
| Accruals and revenues | $267 | $473 |
| Stock based compensation | 1717 | 1306 |
| Deferred revenue | 536 | 864 |
| Net operating loss  | 15295 | 10756 |
| Unrealized gain | 15 | 18 |
| Section 163(j)  | 945 | 634 |
| Capitalized research & development expenses | 228 | 315 |
| Property and equipment | 5 | 56 |
| **Total gross deferred assets** | $**19008** | $**14422** |
| Valuation allowance | (19005) | (14384) |
| **Total deferred tax assets** | $**3** | $**38** |
| **Deferred tax liabilities** |  |  |
| Right of use asset  | (3) | (38) |
| **Total deferred tax liabilities** | $**(3)** | $**(38)** |
| **Net deferred tax assets** | $**—** | $**—** |

---

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has recorded a full valuation allowance on its deferred tax asset balances as of December 31, 2025 and 2024. The valuation allowance increased by $4.6 million for the year ending December 31, 2025 and increased by $3.9 million for the year ending December 31, 2024.

Federal and state tax laws impose significant restrictions on the utilization of net operating loss carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue Code Section 382 ("Section 382"). The Company believes that it is more likely than not that a Section 382 change in control occurred on August 12, 2022. The Company is subject to a federal Section 382 annual limitation of $7.8 million annually for the 5 years after the change in control, and a $0.5 million annual limitation thereafter. No deferred tax assets are expected to expire unutilized as a result of this expected change in control. The Company intends to prepare and complete a formal Section 382 analysis of this change in control at the time tax attributes are expected to be utilized.

The Company has net operating loss carryforwards for Federal and State income tax purposes of approximately $219.8 million and $176.9 million, respectively, as of December 31, 2025. Of these amounts, $158.1 million of federal net operating losses and $141.7 million of state net operating losses are expected to expire unutilized and thus no deferred tax assets are established for such loss carryforwards as of December 31, 2025. In addition to the Section 382 annual limitation resulting from the August 12, 2022 change in control discussed above, the Company is also subject to a separate federal Section 382 annual limitation of $2.2 million annually for the 5 years following a change in control that occurred in December 2020, and a $0 annual limitation thereafter.

Per the Tax Cuts and Jobs Act ("TCJA") signed into law by President Trump in 2017, the federal NOL carryforwards generated in 2018 and later years can be carried forward indefinitely. The federal NOL carryforwards generated in 2017 and prior years will continue to have their 20-year carryforward period and will begin expiring in 2037. The state NOL carryforwards, if not utilized, will expire beginning in 2029.

The Company has federal and state Section 163(j) limited interest expense carryforwards of $6.1 million and $4.8 million for both federal and state as of December 31, 2025 and 2024, respectively. Of these amounts, $1.9 million and $2.2 million of both federal and state Section 163(j) carryforwards are not more likely than not to be utilized and thus no deferred tax assets are established for such NOL carryforwards as of December 31, 2025 and 2024, respectively. Section 163(j) attributes carry forward indefinitely.

[**Table of Contents**](#TOC)

The Company has $1.4 million of federal and $1.4 million of California state research and development credit carryforwards for Federal and California income tax purposes, respectively, as of December 31, 2025 and 2024. As of December 31, 2025 and 2024 these credits are subject to IRC Section 382 and are not more likely than not to be utilized and thus no deferred tax assets are established for such research credit carryforwards as of December 31, 2025 and 2024.

The Company has approximately $0.6 million and $0.5 million of foreign NOL carryforward of 10 years as of December 31, 2025 and 2024, respectively, that begin to expire in 2026.

The Company files taxes in the United States, California, various US states and foreign jurisdictions. Due to the Company's significant net operating loss (NOL) position, the tax returns for the years 2006 through 2024 for U.S. federal purposes and 2008 through 2024 for California remain open to examination by the respective tax authorities. Under the applicable statutes of limitations, the tax authorities generally retain the right to examine these periods and adjust the NOL carryforwards until the statutory period has expired for the year in which the NOLs are utilized. As of December 31, 2025, the Company is not currently under examination by the Internal Revenue Service or any other major taxing authority.

The Company had unrecognized tax benefits of $2.8 million as of December 31, 2019 related to research and development tax credits. These unrecognized tax benefits, if recognized, would not affect the effective tax rate. As of December 31, 2025 and 2024, such research and development tax credits are subject to Section 382 limitations and are not more likely than not to be utilized.

There were no interest or penalties accrued at December 31, 2025 and 2024. As of December 31, 2025 and 2024, the Company recorded a valuation allowance of $19.0 million and $14.4 million, respectively, against the deferred tax asset balance as realization is uncertain due to a history of operating losses.

&nbsp;&nbsp;&nbsp;&nbsp;**9.** **NET (LOSS) INCOME PER SHARE** 

Net (loss) income per common share ("EPS") is presented for both Basic EPS and Diluted EPS. Basic EPS is based on the weighted-average number of common shares outstanding during the period. Diluted EPS is based on the weighted-average number of common shares and common shares equivalents outstanding during the period. Diluted shares outstanding includes the dilutive effect of in-the-money options, warrants, restricted stock units, shares issued under the equity line-of-credit, and convertible securities. The dilutive effect of such in-the-money options is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options and the amount of compensation cost for future service that has not yet been recognized are collectively assumed to be used to repurchase shares. Diluted EPS for convertible securities is calculated using the 'if- converted' method, assuming all convertible securities outstanding during the period were converted into common stock at the beginning of the reporting period, resulting in an adjustment to both the numerator (net income) and denominator (weighted average shares outstanding) to reflect the potential dilution from such conversions.

When an entity has a loss from operations, including potential shares in the denominator of diluted per share computations will generally be anti-dilutive, even if the entity has net income after adjusting for discontinued operations. That is, including potential shares in the denominator of the earnings per share calculation for a loss-making entity will generally decrease the loss per share and, therefore, those shares should be excluded from calculations of diluted earnings per share.

In computing the net (loss) income available to common shareholders, adjustments to the carrying value of preferred shares as a result of a modification accounted for as an extinguishment during a period should be subtracted or added to the net (loss) income in arriving at the net (loss) income available to common shareholders. For the year ended December 31, 2024, the adjustment of $43.7 million associated with the reduction in the original issue price of the NCNV preferred shares from $1,000 to $600 per share has been accounted for as an extinguishment and is reflected as an adjustment to the net loss of $20.8 million during the period in arriving at the net income available to common shareholders. See also Note 6 — Temporary Redeemable Preferred Stock for additional information.

[**Table of Contents**](#TOC)

The following data show the amounts used in computing EPS and the effect on income and the weighted average number of shares:

---

| | | |
|:---|:---|:---|
| | **Year Ended December 31,**  | **Year Ended December 31,**  |
| <br>**(in thousands, except share and per share data)** | **2025** | **2024** |
| Net loss | $(25388) | $(20823) |
| Reduction of the original issue price of NCNV preferred share value from $1,000 to $600 per share |  | 43656 |
| Cumulative preferred stock dividends |  | (309) |
| Net (loss) income available to common shareholders used in basic earnings per share | (25388) | $22524 |
| Add back interest expense on convertible debt | - | 915 |
| Add back cumulative preferred stock dividends | - | 309 |
| Net (loss) income available to common shareholders used in diluted earnings per share | $(25388) | $23748 |
| Weighted average number of common shares used in basic earnings per share | 25039431 | 1728127 |
| Adjustments to weighted average shares for shares used in diluted earnings per share: |  |  |
| Weighted average number of common shares for assumed options exercised |  | 2823613 |
| Weighted average number of common shares for assumed warrants exercised |  | 1306 |
| Weighted average number of common shares for assumed conversion of SAFE agreements |  | 286266 |
| Weighted average number of common shares for assumed conversion of convertible debt |  | 886471 |
| Weighted average number of common shares for assumed conversion of Series A shares |  | 17401910 |
| Weighted average number of common shares used in diluted earnings per share | 25039431 | 23127693 |
| **Net (loss) income per common share – basic**  | $**(1.01)** | $**13.03** |
| **Net (loss) income per common share – diluted** | $**(1.01)** | $**1.03** |

---

For the years ended December 31, 2025 and 2024, the following items have been excluded from the computation of diluted net (loss) income per share because the effect of including these would have been anti-dilutive:

---

| | | |
|:---|:---|:---|
| **Year Ended December 31:** | **2025** | **2024** |
| Incentive stock options | 5853656 | 7681 |
| Restricted stock units | 895434 |  |
| Warrants | 107813 |  |
| Shares available for future issuance under the convertible debt note | 5308221 |  |
| Shares available for future issuance under equity line-of-credit agreement | 17859 |  |
| **Total** | **12182983** | **7681** |

---

&nbsp;&nbsp;&nbsp;&nbsp;10.  **RELATED PARTY TRANSACTIONS** 

#### Gulf Islamic Investments Holding, LLC ("GII")
GII and its related parties hold the controlling interest on the Company's Board of Directors.

In connection with the hiring in 2023 of the Company's Chief Financial Officer, Erick DeOliveira, the Company has expensed and accrued $0.2 million as of December 31, 2025 with a related party, GII, for recruitment fees paid on the Company's behalf by GII.

In May 2019, the Company entered into a loan and security agreement with bSpace, a related party with GII. The bSpace loan was amended multiple times throughout 2021 and 2022, the details are fully described in Note 5. As of December 31, 2022, the Company owed total principal amounts of $31.5 million to bSpace under the loan and security agreement and subsequent amendments. As of December 31, 2022, the Company was not in compliance with certain covenants related to the loan; therefore, the loan has been reclassified to short-term debt. As of December 31, 2023, the Company has been released from all further obligations under the loan.

[**Table of Contents**](#TOC)

As more fully described in Note 5, on August 12, 2022 bSpace forgave amounts due under its loan and security agreement, in exchange for 58,972 shares of NCNV preferred stock. On December 30, 2023, the Company entered into a loan conversion agreement under which all remaining amounts outstanding under the bSpace loan, plus unearned interest of $1.5 million, were redeemed for 36,918 shares of newly created NCNV Preferred Stock 3. Refer to Note 6 for details regarding the rights and privileges of the NCNV preferred stock series. The December 2023 conversion agreements relieved the Company of any further obligations under the loan and security agreement.

**Kuwait Investment Authority**

In February 2019, the Company entered into a loan security agreement with a related party, KIA, for $5.0 million. The KIA loan was amended during 2020 and 2021 and the details surrounding the initial and subsequent modifications are fully described in Note 5. As of December 31, 2022 the Company owed principal amounts of $5.0 million to KIA under the original agreement and subsequent amendments to the KIA loan.

As more fully described in Note 5, on August 12, 2022, KIA forgave amounts due under its loan and security agreement in exchange for 8,062 shares of NCNV preferred stock. In January 2024, the Company entered into a loan termination agreement under which all remaining amounts outstanding under the KIA loan, plus unearned interest of $0.1 million, were redeemed for 5,752 shares of newly created NCNV Preferred Stock 2 as described in Note 6. Refer to Note 6 for details regarding the rights and privileges of the NCNV preferred stock series. The January 2024 conversion agreement relieved the Company of any further obligations under the KIA loan.

&nbsp;&nbsp;&nbsp;&nbsp;**11.** **COMMITMENTS AND CONTINGENCIES** 

**Litigation**

From time to time, the Company may be involved in lawsuits, claims, investigations, and proceedings consisting of intellectual property, commercial, employment, and other matters, which arise in the ordinary course of business. In accordance with ASC Topic 450, *Contingencies*, the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. As of December 31, 2025 and 2024, there were no matters pending that required provision.

The Original Merger Agreement with Edtech was terminated on June 21, 2023. On July 12, 2024, EdtechX filed a complaint in the Superior Court of the State of Delaware in connection with the termination of the EdtechX Merger Agreement, claiming breaches of contract and the implied covenant of good faith and fair dealing. On September 20, 2024, the Company filed a motion to dismiss the complaint in Delaware Superior Court. At this time, the Company is not aware of any pending litigation related to this matter and as such has not recorded any provision for loss.

**Purchase Obligations**

The Company has agreements with hardware suppliers to purchase inventory. As of December 31, 2025, the Company had $10.4 million in purchase obligations outstanding, all of which are scheduled to come due on or before December 31, 2026.

**Employment Agreements**

The Company has employment agreements in place with three of its key executives. These executive employment agreements provide, among other things, for the payment of up to eighteen months of severance compensation for terminations under certain circumstances.

As of December 31, 2025, with respect to these agreements, aggregated annual salaries was $1.3 million and potential severance payments to these key executives was $1.4 million, if triggered.

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&nbsp;&nbsp;&nbsp;&nbsp;**12.** **MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE** 

The Company had certain customers whose revenue individually represented 10% or more of the Company's total revenue, or whose accounts receivable balances individually represented 10% or more of the Company's total accounts receivable, as follows:

For the year ended December 31, 2025 there were no individual customers which represented 10% or more of the Company's total revenue. For the year ended December 31, 2024 there was one individual customer which represented 13% of the Company's total revenue.

As of December 31, 2025, one customer accounted for approximately 11% of the Company's accounts receivable. As of December 31, 2024, one customer accounted for approximately 10% of the Company's accounts receivable.

&nbsp;&nbsp;&nbsp;&nbsp;**13.** **SEGMENT REPORTING** 

The Company's chief operating decision maker is its chief executive officer who reviews financial information presented on a consolidated basis for the purposes of making operating decisions, assessing financial performance, and allocating resources. The Company's chief operating decision maker reviews segment performance and allocates resources based upon revenues and expenses. As the Company has only one reportable segment, revenues and expenses are reported only on a consolidated basis. The measure of segment assets is reported in the consolidated balance sheet as total consolidated assets.

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The following table presents selected financial information about revenues, expenses and net loss for the years ended December 31, 2025 and 2024 for the Company's one reportable segment:

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,**  | **Year Ended December 31,**  |
|  | **2025** | **2024** |
| Revenues: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $14208 | $21991 |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 10558 | 12857 |
| &nbsp;&nbsp;&nbsp;&nbsp;Services | 3092 | 3250 |
| Total revenues | 27858 | 38098 |
| Cost of goods sold |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | 9374 | 15950 |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 3097 | 5025 |
| &nbsp;&nbsp;&nbsp;&nbsp;Services | 1944 | 1152 |
| &nbsp;&nbsp;&nbsp;&nbsp;Excess and obsolete | 182 | 402 |
| Total cost of goods sold | 14597 | 22529 |
| Gross profit | 13261 | 15569 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;Research and development | 804 | 849 |
| &nbsp;&nbsp;Software engineering | 1540 | 1158 |
| &nbsp;&nbsp;Platform engineering | 2955 | 2886 |
| &nbsp;&nbsp;Sales | 7375 | 8370 |
| &nbsp;&nbsp;General and administrative | 13871 | 12419 |
| &nbsp;&nbsp;Marketing and business development | 8367 | 6712 |
| &nbsp;&nbsp;International sales | 490 | 833 |
| Total operating expenses | 35402 | 33227 |
| Loss from operations | (22141) | (17658) |
| Other (expense) income: |  |  |
| &nbsp;&nbsp;Interest expense | (1478) | (2815) |
| &nbsp;&nbsp;Other income (expense), net | 190 | 43 |
| &nbsp;&nbsp;Loss on change in fair value of convertible debt | (1945) |  |
| &nbsp;&nbsp;Loss on extinguishment of debt |  | (359) |
| Loss before income taxes | (25374) | (20789) |
| Income tax expense (benefit) | 14 | 34 |
| Segment net loss | $(25388) | $(20823) |

---

&nbsp;&nbsp;&nbsp;&nbsp;**14.** **EMPLOYEE BENEFITS** 

The Company maintains a qualified 401(k) plan (the "401(k) Plan") which allows participants to defer from 0% to 100% of cash compensation. The 401(k) Plan allows employees to contribute on a pretax and after-tax basis to a Traditional and Roth 401(k). The 401(k) Plan allows employees who meet the age requirements and reach the 401(k) Plan contribution limits to make catch-up contributions (which are eligible for matching contributions). Employee contributions are limited to a maximum annual amount as set periodically by the Internal Revenue Code. The Company matches pretax and Roth employee contributions up to $2,000 per participant annually and all matching contributions vest immediately. The matching contributions to the 401(k) Plan totaled approximately $0.2 and $0.1 million for the years ended December 31, 2025 and 2024, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;**15.** **SUBSEQUENT EVENTS** 

Management has evaluated subsequent events and has determined that there were no subsequent events that required recognition or disclosure in the financial statements as of and for the period ending December 31, 2025, except as disclosed below.

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*Senior Secured Convertible Note Financing Amendment*

On January 8, 2026, the Company entered into an Amendment #2 to the Senior Secured Convertible Note (the "Note Amendment") with the Note Investor, which amended the terms of the Senior Secured Convertible Note.

The Note Amendment revised the definition of "Floor Price" as set forth in the Senior Secured Convertible Note from $0.60 per share to $0.22 per share, subject to adjustment for reverse and forward stock splits, recapitalizations and similar transactions.

In addition, the Note Amendment revised the definition of "Equity Conditions," the satisfaction of which is generally a prerequisite to the Company's ability to make installments payments in shares of common stock. The Note Amendment modified the definition of "Equity Conditions" to reduce the required minimum VWAP of the common stock over the 20 trading days prior to the applicable date from $0.75 to $0.30.

Except as specifically set forth in the Note Amendment, all other terms, covenants, and conditions of the Senior Secured Convertible Note remain in full force and effect.

*Preferred Stock Agreement*

On January 23, 2026, the Company entered into a Securities Purchase Agreement (the "SPA") with an institutional investor (the "Purchaser"), pursuant to which the Company agreed to issue and sell to the Purchaser shares of the Company's Series P Preferred Stock (as defined below), and five-year warrants (the "Series P Warrants") to purchase shares of the Company's common stock in one or more closings.

At the initial closing held on January 27, 2026 (the "Initial Closing"), the Purchaser purchased 1,500,000 shares of Series P Preferred Stock and Series P Warrants to purchase 1,000,000 shares of common stock for an aggregate purchase price of $3,000,000. The initial purchase price per share of Series P Preferred Stock was $2.00. The initial exercise price for the Series P Warrants is $3.00 per share, subject to standard and customary adjustments. The Company and the Purchaser may mutually agree to additional closings within one year of the Initial Closing, up to an aggregate limit of $10,000,000 for all purchases under the SPA. The SPA contains customary representations, warranties and indemnification provisions.

*Amendments to Articles of Incorporation or Bylaws*

On January 27, 2026, the Company filed a Certificate of Designations of Series P Convertible Preferred Stock (the "Series P COD") with the Secretary of State of the State of Delaware. The Series P COD establishes a new series of preferred stock designated as "Series P Convertible Preferred Stock" (the "Series P Preferred Stock") and authorizes the issuance of up to 5,000,000 shares of Series P Preferred Stock, par value $0.00001 per share.

Each share of Series P Preferred Stock has a stated value of $2.00, subject to adjustment as set forth in the Series P COD (the "Stated Value"). Holders of Series P Preferred Stock are entitled to receive cumulative dividends at a rate of eighteen percent (18%) per annum, payable annually. Dividends accrue and compound annually and are payable solely in additional shares of Series P Preferred Stock.

In the event of any liquidation, dissolution, or winding-up of the Company, or a Change of Control Transaction (as defined in the Series P COD), holders of Series P Preferred Stock are entitled to receive, prior to any distribution to holders of junior securities, an amount per share equal to the Stated Value plus any accrued and unpaid dividends.

The Series P Preferred Stock votes together with the Company's common stock on an as-converted basis. Additionally, as long as any shares of Series P Preferred Stock remain outstanding, the Company cannot take certain actions without the affirmative vote of the holders of a majority of the outstanding Series P Preferred Stock. These actions include, among others: (a) adversely altering the rights of the Series P Preferred Stock; (b) creating any class of stock senior to or pari passu with the Series P Preferred Stock; or (c) amending the Company's Certificate of Incorporation in a manner that adversely affects the holders.

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Beginning on the third anniversary of the Original Issue Date (as defined in the Series P COD), holders may opt to convert their shares of Series P Preferred Stock into shares of common stock. The conversion rate is determined by dividing the Stated Value (plus accrued unpaid dividends) by the "Conversion Price." The initial "Conversion Price" is the Stated Value ($2.00) and is subject to adjustment for stock splits, stock dividends, and similar events. All outstanding shares of Series P Preferred Stock will automatically convert into shares of common stock on the fifth anniversary of the Original Issue Date. For the automatic conversion occurring on the fifth anniversary of the Original Issue Date, the conversion rate is the lower of (y) the Conversion Price and (z) 80% of the 90-Day VWAP of the Company's common stock.

The Series P Preferred Stock may not be converted if such conversion would result in the holder (together with its affiliates) beneficially owning in excess of 4.99% of the Company's outstanding common stock. A holder may increase or decrease this limitation upon notice to the Company, up to a maximum of 9.99%, provided that any increase will not be effective until the 61st day after such notice. The Company is prohibited from issuing shares of common stock upon conversion of the Series P Preferred Stock if such issuance would breach the Company's obligations under the rules of Nasdaq, unless shareholder approval is obtained.

*Litigation*

On February 9, 2026, Jiangxi Kmax Industrial Co., Ltd. ("KMax") filed a complaint against zSpace in the United States District Court for the Northern District of California. The complaint arises from a Software Resale License Agreement, dated July 24, 2019, and alleges breach of contract related to unpaid revenue share invoices totaling $557,940 plus interest. We have recorded an account payable of $0.6 million as of December 31, 2025 in connection with this matter, however, we intend to assert counterclaims, including for violation of confidentiality agreements and infringement of our intellectual property rights. Our initial response to the complaint is due March 19, 2026.

On March 11, 2026, Kmax filed a second complaint against the Company and certain of its current and former officers in the U.S. District Court for the Southern District of New York. The complaint alleges violations of federal securities laws as well as various state common law claims. The allegations arise from Kmax's $15 million investment in the Company's pre-IPO private placement financings between 2017 and 2019. Kmax seeks compensatory and rescissory damages, interest, and costs. The Company believes the claims are without merit and intends to defend itself vigorously against these allegations.

*Reverse stock split*

On March 13, 2026, stockholders of the Company, holding shares of outstanding common stock of the Company, par value $0.00001 per share, representing in excess of a majority of the outstanding votes of the capital stock of the Company (the "Consenting Stockholders") as of the record date of March 12, 2026 (the "Record Date"), took action by written consent and without a meeting pursuant to Section 228 of the Delaware General Corporation Law and the Company's Amended and Restated Certificate of Incorporation and Bylaws (the "Written Consent"). The Written Consent: (i) authorized the Company's board of directors to effect a reverse split of the Company's issued and outstanding Common Stock (the "Reverse Stock Split") in a ratio of no less than 1-for-15 and no more than 1-for-25 (the "Range"); (ii) authorized the Board to determine whether or not to effect the Reverse Stock Split and to determine the exact ratio of any Reverse Stock Split within the Range, each as determined by the Board in its discretion at any time prior to the one year anniversary of the filing of a Definitive Information Statement on Schedule 14C with the U.S. Securities and Exchange Commission (the "SEC") pertaining to the Reverse Stock Split; and (iii) approved the form of amendment to the Amended and Restated Certificate of Incorporation effecting the Reverse Stock Split and the subsequent filing thereof with the Secretary of State for the State of Delaware.

Pursuant to rules adopted by the SEC under the Securities Exchange Act of 1934, a Definitive Information Statement on Schedule 14C was filed with the SEC on March 23, 2026 and will be sent or provided to the stockholders of the Company. The Written Consent will be effective 20 days after the Definitive Information Statement on Schedule 14C relating to such consent is mailed to stockholders.

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On the Record Date, there were issued and outstanding shares of the Company's capital stock representing 37,142,955 votes. As of the Record Date, the Consenting Stockholders held, in the aggregate, capital stock entitled to 18,694,538 votes (on an as converted basis), representing 50.33% of the outstanding voting power of the Company's stockholders. As the Reverse Stock Split was approved by the Written Consent, there were no votes against, abstaining or broker non-votes in relation to these matters.

*Additional Senior Secured Convertible Note Financing*

On March 16, 2026, the Company entered into an amendment to the Securities Purchase Agreement (the "Amendment") providing for, among other things, multiple closings pursuant to the Securities Purchase Agreement, rather than a total of two closings.

In addition, the Company and the Investor agreed in the Amendment to conduct a second closing pursuant to the Securities Purchase Agreement, which occurred on March 16, 2026 (the "Second Closing"). On the Second Closing, the Company issued an additional Note in the original principal amount of $4,301,075 (the "Senior Secured Additional Convertible Note"). The Company intends to use the net proceeds from the issuance of the Senior Secured Additional Convertible Note to repay approximately $2,000,000 of existing debt owed to the Investor, and for working capital and general corporate purposes.

The Senior Secured Additional Convertible Note is substantially similar to the form of the original Senior Secured Convertible Note issued by the Company on April 11, 2025, except that the maturity date of the Senior Secured Additional Convertible Note is March 15, 2028, the Initial Conversion Price is $0.28 per share, and the Additional Note is subject to a floor price of $0.05 per share. See Note 5 for additional information regarding the Senior Secured Convertible Note.

*Itria Refinancing*

On March 19, 2026, the Company, entered into a new Loan and Security Agreement the ("New Loan Agreement") with Itria Ventures LLC (the "Lender") in connection with the refinancing of all of its outstanding debt with the Lender. Pursuant to the New Loan Agreement, the Lender agreed to provide the Company with a term loan in the principal amount of $1,344,500 (the "New Loan") at an interest rate of 18.99% per year. The New Loan is payable on a monthly basis in 24 equal installments, maturing on the 24-month anniversary of the funding date.

The proceeds of the New Loan were used to refinance and pay off in full the two existing Loan and Security Agreements dated August 20, 2025, which had original principal amounts of $1,000,000 each. In connection with this refinancing, the Company, the Lender, and the Company's existing Senior Lender, entered into an amended intercreditor agreement (the "Intercreditor Agreement") to maintain the subordinated status of the New Loan, pursuant to which, among other things, Itria subordinated its security interest in the assets of the Company to the security interest of the Senior Lender and agreed to certain covenants limiting its ability to declare an event of default under the New Loan Agreement

The Company may prepay the New Loan in full at any time after the first month of the term, subject to a prepayment fee equal to 1.5% of the unpaid principal balance if the New Loan is prepaid within the first 12 months of the term. The New Loan is secured by a second priority lien on substantially all of the Company's assets and is guaranteed by the Company's two wholly owned subsidiaries -- zSpace Technologies (Shanghai) Ltd. and zSpace K.K. The New Loan Agreement contains standard representations, warranties and affirmative covenants, including relating to use of proceeds and information rights.

In addition, the New Loan Agreement contains certain customary negative covenants, including that the Company may incur no additional indebtedness other than certain permitted indebtedness. The New Loan Agreement also contains customary events of default, including, but not limited to, upon non-payment, the occurrence of material adverse changes to the Company's business, or bankruptcy. Upon the occurrence of an event of default, the applicable interest rate would increase by five percentage points and the Lender may declare the outstanding principal and accrued interest immediately due and payable.

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*Fiza Amendment*

On March 22, 2026, the Company and Fiza entered into an Amendment No. 4 (the "Fiza Amendment") to Loan and Security Agreement dated July 11, 2024 (as amended, the "Fiza Loan Agreement"). Pursuant to the Fiza Amendment, the parties agreed to a moratorium on the payment of interest by the Company pursuant to the Fiza Loan Agreement until December 31, 2026 (the "Moratorium Period"). During the Moratorium Period, interest will continue to accrue on the outstanding principal balance at the applicable interest rate and will be deferred and capitalized (added to the outstanding principal balance) on each corresponding accrual date. Following the Moratorium Period, the Company shall continue monthly interest-only payments to Fiza pursuant to the terms of the Fiza Loan Agreement.

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#### Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.

#### Item 9A. Controls and Procedures
**Evaluation of disclosure controls and procedures**

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2025, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed in our Exchange Act filings is recorded, processed, summarized, and reported within the required time periods.

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.

**Management's report on internal control over financial reporting**

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2025 based on the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this assessment, our management concluded that our internal control over financial reporting was not effective as of December 31, 2025 based on the following material weaknesses:

● lack of segregation of duties;

● account reconciliations and cutoff; and

● lack of a formal risk assessment policy for entity-level controls.

We are currently in the process of implementing measures designed to improve our internal control over financial reporting to remediate these remaining material weaknesses, that may include hiring additional financial personnel with accounting and financial reporting expertise, strengthening our account reconciliation framework and cutoff procedures, and developing a formal risk assessment policy in accordance with the COSO framework.

The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligation. Even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

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These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our financial statements may not be prevented or detected on a timely basis. In light of these material weaknesses, we performed additional analyses and procedures in order to conclude that our financial statements for the year ended December 31, 2025 included in this Annual Report on Form 10-K were fairly stated in accordance with GAAP. Accordingly, management believes that despite our material weaknesses, our financial statements for the quarter ended December 31, 2025 are fairly stated, in all material respects, in accordance with GAAP.

**Changes in Internal Control over Financial Reporting**

We previously identified five material weaknesses in our internal controls over financial reporting related to: (1) lack of segregation of duties; (2) certain information technology general controls, including controls over the review of user access roles and administrative access; (3) account reconciliations and cutoff; (4) analysis of significant and unusual transactions; and (5) lack of a formal risk assessment policy for entity-level controls.

During the fiscal year ended December 31, 2025, management successfully remediated two of these five material weaknesses. The material weakness related to information technology general controls was remediated through the implementation of formalized user access review and recertification processes, restriction of administrative access, and quarterly access recertification cycles that operated effectively throughout fiscal year 2025. The material weakness related to the analysis of significant and unusual transactions was remediated through the establishment of formal policies and procedures for identifying and evaluating non-routine transactions, management review and sign-off controls, and quarterly identification checklists that operated effectively across multiple quarterly close cycles during fiscal year 2025.

The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligation. Even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our financial statements may not be prevented or detected on a timely basis. In light of these material weaknesses, we performed additional analyses and procedures in order to conclude that our financial statements for the year ended December 31, 2025 included in this Annual Report on Form 10-K were fairly stated in accordance with GAAP. Accordingly, management believes that despite our material weaknesses, our financial statements for the quarter ended December 31, 2025 are fairly stated, in all material respects, in accordance with GAAP.

**Auditor Attestation Exemption**

As an Emerging Growth Company under the Jumpstart Our Business Startups (JOBS) Act, we are exempt from the requirement to obtain an independent auditor attestation report on the effectiveness of our Internal Controls over Financial Reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002.

#### Item 9B. Other Information

#### Rule 10b5-1 Trading Plans
During the three months ended December 31, 2025, none of our directors or officers (as defined in Rule16a-1(f) of the Exchange Act) adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" as such terms are defined under Item 408 of Regulation S-K during the covered period.

#### Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable

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#### PART III

#### Item 10. Directors, Executive Officers, and Corporate Governance

#### Board of Directors
Our business and affairs are managed under the direction of our board of directors. The following table lists the names, ages as of December 31, 2025, and positions of the individuals who serve as our directors:

---

| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position** |
| Paul Kellenberger | 66 | Chief Executive Officer and Chairman |
| Amit Jain | 46 | Director |
| Joanna Morris | 59 | Director |
| Abhay Pande | 58 | Director |
| Jane Swift | 60 | Director |

---

***Paul Kellenberger*** serves as our Chief Executive Officer and as the Chairman of our board of directors. Mr. Kellenberger has served as our Chief Executive Officer of and as a member of our board of directors since December 2006. Prior to his position at zSpace, Mr. Kellenberger was CEO for Chancery Software Ltd., an Enterprise SIS provider, from June 2002 until it was sold to Pearson PLC in May 2006. Prior to Chancery, Mr. Kellenberger was the CEO of Promeo Technologies, a technology company, from May 2000 to May 2002 and Senior Vice President at Inacom Corporation (acquired by Compaq/Hewlett Packard), a computer service company, from January 1997 to January 1999. Mr. Kellenberger also served as a Vice President and Director of Motorola Inc., a telecommunications company, from January 1994 to January 1997. Mr. Kellenberger holds a B.A. in economics from the University of Western Ontario and an M.B.A. from McMaster University.

***Amit Jain*** has served as a member of our board of directors since April 2021. Mr. Jain is Chief Investment Officer of Gulf Islamic Investments an investment management platform with more than $3 billion in direct investments in real estate, private equity and technology across US, UK, Europe, Middle East and India. Mr. Jain has provided investment and managed portfolio services at a global buy and build platform owned by KKR, a Sovereign Wealth Fund in Oman and family office in UAE. Mr. Jain holds a Computer Science & Engineering degree from the Indian Institute of Technology, Kanpur and an MBA from Insead.

***Dr. Joanna Morris*** has served as a member of our board of directors since December 2024. Dr. Morris is Associate Professor of Psychology and Neuroscience at Providence College in Providence, RI. She is a former Rhodes Scholar who holds an A.B. (summa cum laude) from Dartmouth College, an M.Phil. in Theoretical Linguistics and Comparative Philology from the University of Oxford, and a Ph.D. in Psychology from the University of Pennsylvania. From 1998 – 2007, Dr. Morris was an Assistant Professor at Hampshire College, from 2007 – 2018, Dr. Morris was an Associate Professor at Hampshire College and from 2018 – 2023, Dr. Morris was a Professor at Hampshire College. She has also served as the Provosts Fellow in Cognitive Science at RISD before joining the faculty at Providence College in 2020.

***Abhay Pande*** has served as a member of our board of directors since December 2024. He is currently the President and Chief Investment Officer of Leapfrog Acquisition Corporation, a publicly listed acquisition company. Mr. Pande is a former Investment Banking Managing Director at Citigroup Investment Banking, a position that he held from August 1998 until June 2013, and former private equity Managing Director at American Capital, a position that he held from July 2013 until June 2016. He has also served as a senior advisor with the Albright Stonebridge Group and is Managing Director at Princeton Capital Advisors, which provides transactions and capital advisory services. Mr. Pande received an MBA from the University of Chicago Booth School of Business and a B.A. in economics from Dartmouth College.

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***Jane Swift*** has served as a member of our board of directors since December 2024. She is the CEO of Education at Work, a subsidiary of Britebound. Education at work is a national nonprofit committed to reshaping the education-to-career journey through paid, flexible work-based learning opportunities. Ms. Swift spent over fifteen years in state government, holding the offices of governor, lieutenant governor, secretary of consumer affairs and business regulation, and state senator in the State of Massachusetts. Ms. Swift has accumulated a wealth of experience in executive leadership and governance roles including as a chief executive officer; a board chair, member, and committee chair to public, private, and not-for-profit institutions; an adviser to entrepreneurial education companies; and as a partner in a venture capital fund. Since 2007, she has served as a Director and as Chair of the Compensation Committee on the Suburban Propane (NYSE: SPH) board of directors, a publicly traded propane distribution company. Ms. Swift is a Board member of the Hunt Institute, and serves on the Advisory Board of the George W. Bush Institute.

#### Committees of the Board of Directors
Our board of directors has three standing committees — an audit committee, a compensation committee and a nominating and corporate governance committee, each of which, pursuant to its respective charter, has the composition and responsibilities described below. Copies of the charters for each committee are available on the investor relations portion of our website. Members serve on these committees until their resignation or until otherwise determined by our board of directors.

#### Audit Committee
Our audit committee consists of Abhay Pande, Joanna Morris, and Jane Swift, with Abhay Pande serving as the chair. Our board of directors has determined that each of the members of the audit committee meets the independence requirements under Nasdaq and SEC rules and is financially literate. In addition, our board of directors has determined that Abhay Pande is an "audit committee financial expert" within the meaning of the SEC regulations and meets the financial sophistication requirements of the Nasdaq listing rules. In making this determination, the board of directors considered Mr. Pande's formal education and previous experience in financial roles. This designation does not, however, impose on the individual any supplemental duties, obligations or liabilities beyond those that are generally applicable to the other members of our audit committee and board of directors. Both our independent registered public accounting firm and management periodically meet privately with our audit committee.

The principal functions of the audit committee are expected to include, among other things:

● selecting a firm to serve as our independent registered public accounting firm to audit our financial statements;

● ensuring the independence of the independent registered public accounting firm;

● discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and that firm, our interim and year-end operating results;

● establishing procedures for employees to anonymously submit concerns about questionable accounting or audit matters;

● considering the adequacy of our internal control and internal audit function;

● reviewing related-party transactions that are material or otherwise implicate disclosure requirements; and

● approving, or as permitted, pre-approving all audit and non-audit services to be performed by the independent registered public accounting firm.

The composition and function of the audit committee complies with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC rules and regulations and with future requirements to the extent they become applicable to us. The audit committee is governed by a charter that complies with the rules of Nasdaq and is available on our website.

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#### Compensation Committee
Our compensation committee is composed of Jane Swift and Abhay Pande, with Jane Swift serving as the chair. The board of directors has determined that each of the members of our compensation committee meets the independence requirements under Nasdaq and SEC rules. Each member of this committee is a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act.

The principal functions of the compensation committee are expected to include, among other things:

● reviewing and approving, or recommending that the board of directors approve, the compensation of our Chief Executive Officer and our other executive officers;

● reviewing succession plans for our Chief Executive Officer;

● reviewing and recommending to the board of directors the compensation of our directors;

● administering our stock and equity incentive plans; and

● establishing our overall compensation philosophy.

The composition and function of the compensation committee complies with all applicable requirements of Nasdaq and all applicable SEC rules and regulations. The Compensation Committee is governed by a charter that complies with the rules of Nasdaq and is available on our website.

#### Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Jane Swift and Joanna Morris, with Joanna Morris serving as the chair. The board of directors determined that each of the members of our nominating and corporate governance committee meets the independence requirements under Nasdaq and SEC rules.

The principal functions of the nominating and corporate governance committee are expected to include:

● identifying and recommending candidates for membership on the board of directors;

● recommending directors to serve on board committees;

● reviewing and recommending to our board of directors any changes to our corporate governance principles;

● reviewing proposed waivers of the code of conduct for directors and executive officers;

● overseeing the process of evaluating the performance of our board of directors; and

● advising our board of directors on corporate governance matters.

The composition and function of the nominating and corporate governance committee complies with all applicable requirements of Nasdaq and all applicable SEC rules and regulations. The nominating and corporate governance committee is governed by a charter that complies with the rules of Nasdaq and is available on our website.

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#### Board Composition
In accordance with the terms of our Charter and Bylaws, our board of directors is classified. The term of our independent directors expires at our next annual meeting of stockholders and the initial term of our non-independent directors will expire at our second annual meeting of stockholders. Each director's term will continue until the election and qualification of his or her successor, or his or her earlier death, resignation, or removal. Our Charter and Bylaws authorize only the members of the board of directors to fill vacancies on our board of directors. Stockholders representing more than 35% of our voting securities are entitled to nominate two persons for election to our board of directors and stockholders representing 35% or less but more than 25% of our voting securities are entitled to nominate one person for election to our board of directors. In addition, the number of directors constituting the board of directors may be set only by resolution adopted by a majority vote of our entire board of directors. Since dSpace Investments Limited ("dSpace") owns more than 35% of our voting securities, it is entitled to nominate two persons for election to our board of directors. However, dSpace has elected to nominate only one director in order to allow the board, at its current size, to continue to have a majority of independent members. Currently, Amit Jain has been selected by dSpace to serve on our board of directors.

#### Procedures by which Stockholders may recommend Nominees to the Board of Directors
Our Nominating and Corporate Governance Committee is responsible for identifying and recommending candidates for membership on our board of directors. However, stockholders may nominate persons for the board of directors so long as such stockholder is present and in person at the annual or special meeting called for the purpose of electing directors and (1) was a record owner of shares of the company both at the time of giving the notice of such nomination, (2) is entitled to vote at the meeting, and (3) has complied with the procedures set forth in Section 2 of our Bylaws as to such notice and nomination.

Our board of directors has not yet set a date for our 2026 annual meeting. When the board of directors sets the date for our 2026 annual meeting, to make any nomination of a person or persons for election to the board of directors at the annual meeting, a stockholder must (1) provide timely notice thereof in writing and in proper form to the secretary of the company, (2) provide the information, agreements and questionnaires with respect to such stockholder and its candidate for nomination as required to be set forth in Section 2 of our Bylaws and (3) provide any updates or supplements to such notice at the times and in the forms required by Section 2 of our Bylaws. Stockholders who wish to submit nominations for our board are advised to review the procedures in our bylaws for doing so, which contain the requirements and procedures regarding director nominations.

#### Executive Officers
The following table lists the names, ages as of December 31, 2025, and positions of the individuals who serve as our executive officers:

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position** |
| Paul Kellenberger | 66 | Chief Executive Officer and Chairman |
| Erick DeOliveira | 56 | Chief Financial Officer |
| Michael Harper | 60 | Chief Product, Engineering and Marketing Officer |

---

For Mr. Kellenberger's biography, see the Director's section of this Item 10.

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***Erick DeOliveira*** serves as our Chief Financial Officer. Mr. DeOliveira has served as our Chief Financial Officer since April 2024, and served as our Deputy Chief Financial Officer from September 2023 until he became our Chief Financial Officer in April 2024. Prior to joining us, he was the Chief Financial Officer of Fernish.com from February 2023 to July 2023 until its acquisition by Vesta Homes. From October 2021 to April 2022, he served as Head of FP&A for Anaplan (acquired by Thoma Bravo). From April 2016 to January 2020, he served 100Plus, a digital health company, as an advisor and subsequently as CFO from January 2020 to October 2021 until its acquisition by Connect America. He was CFO of Ticketfly from April 2016 until the June 2017 acquisition by Eventbrite.com, through Eventbrite's initial public offering in September 2018, until April 2019. Earlier in his career, he held leadership roles at Amazon.com and Microsoft, as well as military service as a Naval Officer. Mr. DeOliveira holds B. Eng. (Physics) and M.Eng. (Electrical Engineering) degrees from the Royal Military College of Canada, and an MBA from the Tuck School of Business at Dartmouth College.

***Michael Harper*** serves as our Chief Product, Engineering and Marketing Officer. Mr. Harper has served as our Chief Product and Marketing Officer since April 2011. Since December 2005, Mr. Harper has been the Owner of Pathway for Success, LLC, a management consulting company. Earlier in his career, Mr. Harper held executive positions with Fortisphere, Inc., a provider of policy-based management software (acquired by Red Hat Inc.), from March 2007 to July 2009 and Syfact International B.V. (acquired by Nice Ltd./Actimize), a provider of investigative software, from January 2006 to December 2006. Mr. Harper holds a B.S.E.E. from Tulane University and an M.B.A from the Wharton School of Business at the University of Pennsylvania.

Our executive officers are appointed by, and serve at the discretion of, our board of directors.

#### Family Relationships
There are no family relationships among any of our current executive officers or directors.

#### Code of Business Conduct and Ethics
Our Board of directors has adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer, and other executive and senior officers. The full text of this code of business conduct and ethics is posted on the investor relations page of our website at https://investor.zspace.com/documents-and-charters and is filed as an exhibit to the Annual Report on Form 10-K. The reference to our website address in this filing does not include or incorporate by reference the information on that website into this filing. We intend to disclose future amendments to certain provisions of this code of business conduct and ethics, or waivers of these provisions, on our website or in public filings to the extent required by the applicable rules.

#### Insider Trading Policy
Our board of directors has adopted an Insider Trading Policy which prohibits trading based on "material, nonpublic information" regarding our company or any company whose securities are listed for trading or quotation in the United States. The policy covers all officers and directors of the company and its subsidiaries, all other employees of the company and its subsidiaries, and consultants or contractors to the company or its subsidiaries who have or may have access to material non-public information and members of the immediate family or household of any such person. The policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and Nasdaq listing standards. The policy is filed as an exhibit to this Annual Report on Form 10-K.

#### Whistleblower Policy
Our board of directors has adopted a whistleblower policy to provide employees with a confidential and anonymous method for reporting concerns about our conduct or employees' conduct free from retaliation. Our whistleblower policy is available on our investor relations page on the Company's website at https://investor.zspace.com/documents-and-charters. The reference to our website address in this filing does not include or incorporate by reference the information on that website into this filing.

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#### Clawback Policy
Our board of directors has adopted a clawback policy, which provides that in the event we are required to prepare an accounting restatement due to noncompliance with any financial reporting requirements under the securities laws or otherwise erroneous data or we determine there has been a significant misconduct that causes financial or reputational harm, we shall recover a portion or all of any incentive compensation. This policy is filed as an exhibit to this Annual Report on Form 10-K.

#### Item 11. Executive Compensation
**Summary Compensation Table**

The following table presents summary information regarding the total compensation for services rendered in all capacities that was earned for 2025 and 2024 by our principal executive officer and our two most highly compensated executive officers other than our principal executive officer (together, the "NEOs") as of December 31 2025.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| <br>**Name and Principal Position** | <br>**Year** | <br>**Base Salary** | <br>**Stock Awards**<sup>(1)</sup> | <br>**Option Awards**<sup>(2)</sup> | **Non-equity** <br>**Sales Incentive** <br>**Compensation** | <br>**All other** <br>**compensation** | <br>**Total** |
| Paul Kellenberger | 2025 | $482971 | $4781120 | $— | $98167<br><sup>(3)</sup> | $46168<br><sup>(4)</sup> | $5408426 |
| *Chief Executive Officer and Director* | 2024 | $400000 | $— | $2994351 | $162311<br><sup>(5)</sup> | $2900<br><sup>(6)</sup> | $3559562 |
| Erick DeOliveira | 2025 | $383333 | $3300400 | $— | $23750<br><sup>(7)</sup> | $37514<br><sup>(4)</sup> | $3744997 |
| *Chief Financial Officer*  | 2024 | $300000 | $— | $94497 | $— | $2900<br><sup>(6)</sup> | $397397 |
| Mike Harper | 2025 | $387500 | $2426240 | $— | $159458<br><sup>(8)</sup> | $37514<br><sup>(4)</sup> | $3010712 |
| *Chief Product, Engineering and Marketing Officer* | 2024 | $325000 | $— | $674831 | $131878<br><sup>(5)</sup> | $2900<br><sup>(6)</sup> | $1134609 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) The amount reported in the "Stock Awards" column is based on the grant date fair value of restricted stock units ("RSUs") granted to the named executive officer computed in accordance with FASB ASC Topic 718. The grant date fair value of these RSU awards was determined based on the closing market price of our common stock on the date of grant. The assumptions made in the valuation of the option awards are discussed in Note 7, "Stock-based Compensation," of the Notes to the Consolidated Financial Statements included herein.

&nbsp;&nbsp;&nbsp;&nbsp;(2) The amount reported in the "Option Awards" column is based on the grant date fair value of the option award as computed in accordance with FASB ASC Topic 718. The assumptions made in the valuation of the option awards are discussed in Note 7, "Stock-based Compensation," of the Notes to the Consolidated Financial Statements included herein.

&nbsp;&nbsp;&nbsp;&nbsp;(3) The amount reported represents bonus payments made during the 2025 fiscal year to Mr. Kellenberger under the performance cash award provisions of our employee incentive plan, equal to 50% of the approved bonus amounts for each of the 2023 and 2024 fiscal years, based on Company achievement of financial targets and individual achievement of performance goals for those years.

&nbsp;&nbsp;&nbsp;&nbsp;(4) The amount reported represents (i) 401(k) company matching contributions of $2,000. (ii) $900 of monthly mobile phone compensation earned by such individual and (iii) a payout of previously accrued but unused vacation time in connection with the Company's transition to an unlimited vacation policy, pursuant to which vacation time is no longer accrued.

&nbsp;&nbsp;&nbsp;&nbsp;(5) The amount reported is the sum of bonus payments made during the 2024 fiscal year to such individual under the performance cash award provisions of our employee incentive plan for Company achievement of financial targets and personal achievement of individual performance goals during the 2022 fiscal year.

&nbsp;&nbsp;&nbsp;&nbsp;(6) The amount reported represents (i) 401(k) company matching contributions of $2,000 and $900 of monthly phone compensation earned by such individual.

&nbsp;&nbsp;&nbsp;&nbsp;(7) The amount reported represents bonus payments made during the 2025 fiscal year to Mr. DeOliveira under the performance cash award provisions of our employee incentive plan, equal to 50% of the approved bonus amounts for the 2024 fiscal year, based on Company achievement of financial targets and individual achievement of performance goals for that year.

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&nbsp;&nbsp;&nbsp;&nbsp;(8) The amount reported represents bonus payments made during the 2025 fiscal year to Mr. Harper under the performance cash award provisions of our employee incentive plan, equal to the total approved bonus amounts for each of the 2023 and 2024 fiscal years, based on Company achievement of financial targets and individual achievement of performance goals for those years.

**Narrative Disclosure to Summary Compensation Table**

The following describes the material elements of our compensation program as applicable to our NEOs and reflected in the Summary Compensation Table above.

**Base Salary**

Base salaries for our NEOs were established primarily based on individual negotiations with the executive officers when they joined our company. In determining compensation for our executive officers, we considered salaries provided to executive officers of our peer companies, each executive officer's anticipated role criticality relative to others at our company, and our determination of the essential need to attract and retain our NEOs. In 2025, the base salaries of each of our executive officers was increased to align their compensation more closely with the median base salary levels of our compensation peer group.

**Annual Incentive Awards**

Each of our NEOs is eligible to receive an annual cash bonus, payable based upon the achievement of performance goals set annually by our board of directors. During 2025, our board of directors approved a bonus with an aggregate value of $303,500 for 2023 for Messrs. Kellenberger and Harper for achievement of financial targets and personal achievement of individual performance goals during the 2023 fiscal year (the "2023 Bonuses"). In 2025, our board of directors also approved a bonus with an aggregate value of $162,292 for Messrs. Kellenberger, Harper, and DeOliveira for achievement of financial targets and personal achievement of individual performance goals during the 2024 fiscal year (the "2024 Bonuses" and, together with the 2023 Bonuses, the "Accumulated Bonuses"). During 2025, the Company paid 50% of the Accumulated Bonuses for each named executive officer except Mr. Harper, who received 100% of his Accumulated Bonus. The timing and amount of Board-approved bonus payments were determined by our management, based on a number of factors, including the Company's cash availability and retention considerations.

**Employee Benefits and Perquisites**

Our NEOs are eligible to participate in our health and welfare plans on the same terms and conditions as those provided to our full-time employees. We also reimburse our NEOs for reasonably incurred and properly documented business expenses. In connection with the Company's transition to an unlimited vacation policy during 2025, we paid out previously accrued but unused vacation time to our NEOs.

**Retirement Benefits**

We maintain a 401(k) plan that provides eligible United States employees with an opportunity to save for retirement on a tax advantaged basis. Eligible employees are able to defer eligible compensation up to certain I.R.S. Code limits, which are updated annually. Contributions are allocated to each participant's individual account and are then invested in selected investment alternatives according to the participants' directions. Employees are immediately and fully vested in their own contributions. We may elect to make matching or other contributions into participants' individual accounts. We currently match pretax and Roth employee contributions up to $2,000 per participant annually and all matching contributions vest immediately. The 401(k) plan is intended to be qualified under Section 401(a) of the Code, with the related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan are deductible by us when made, and contributions and earnings on those amounts are not taxable to the employees until withdrawn or distributed from the 401(k) plan.

**Equity Compensation**

We have previously granted, and we intend to, from time to time, grant equity awards to our NEOs which grants are generally subject to vesting based on each NEO's continued service. Each of our NEOs currently holds outstanding

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options to purchase shares of our common stock that were granted under either our 2007 Stock Plan or the 2017 Stock Plan, as set forth in the table below entitled "2024 Outstanding Equity Awards at Fiscal Year-End."

**2025 Outstanding Equity Awards at Fiscal Year-End**

The following table presents, for each of our NEOs, information regarding outstanding stock options as of December 31, 2025.

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Option Awards**<sup>(1)</sup> | **Option Awards**<sup>(1)</sup> | **Option Awards**<sup>(1)</sup> | **Option Awards**<sup>(1)</sup> |
| | **Number of** <br>**Securities** <br>**Underlying** <br>**Unexercised** <br>**Options** | **Number of** <br>**Securities** <br>**Underlying** <br>**Unexercised** <br>**Options** | | |
| <br>**Name** | **Exercisable** <br>**(#)** | **Unexercisable** <br>**(#)** | <br>**Option Exercise Price**<br>**($)** | <br>**Option Expiration** <br>**Date** |
| Paul Kellenberger\* | 233<br><sup>(2)</sup> |  | $720.00 | 10/23/2027 |
|  | 266<br><sup>(3)</sup> |  | $720.00 | 10/23/2027 |
|  | 3000<br><sup>(3)</sup> |  | $720.00 | 02/27/2028 |
|  | 433760<br><sup>(3)</sup> |  | $0.53 | 04/13/2031 |
|  | 1864990<br><sup>(3)</sup> |  | $2.57 | 03/04/2034 |
| Erick DeOliveira | 42303 | 14102<br><sup>(4)</sup> | $2.57 | 03/04/2034 |
| Mike Harper | 71<br><sup>(3)</sup> |  | $720.00 | 10/23/2027 |
|  | 333<br><sup>(3)</sup> |  | $720.00 | 02/27/2028 |
|  | 97173<br><sup>(3)</sup> |  | $0.53 | 04/13/2031 |
|  | 420309<br><sup>(3)</sup> |  | $2.57 | 03/04/2034 |

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&nbsp;&nbsp;&nbsp;&nbsp;(1) All of the outstanding equity awards were granted under our 2007 Stock Plan or our 2017 Stock Plan, as footnoted below.

&nbsp;&nbsp;&nbsp;&nbsp;(2) Option issued under the 2007 Plan. The option is fully vested and exercisable.

&nbsp;&nbsp;&nbsp;&nbsp;(3) Option issued under the 2017 Plan. The option is fully vested and exercisable.

&nbsp;&nbsp;&nbsp;&nbsp;(4) Option issued under the 2017 Plan and vests with respect to one-third (1/3rd) of the total number of shares subject to the option on the vesting commencement date, which was September 18, 2023, and the remainder vests in 36 equal monthly installments thereafter.

\* Employee Director

**Equity Plans**

**2007 Stock Plan**

The 2007 Equity Incentive Plan (the "2007 Stock Plan") provides for the grant of options, restricted stock and other stock option awards to our directors, employees and consultants and to directors and employees of our subsidiaries or affiliates. As of December 31, 2025, there are a total of 16,587 shares authorized for issuance and a total of 2,089 shares of our common stock are subject to outstanding option awards under the 2007 Stock Plan. Since 2017, we have not granted and do not intend to grant any further awards under the 2007 Stock Plan.

**2017 Stock Plan**

The 2017 Equity Incentive Plan (the "2017 Stock Plan") provides for the grant of options, stock appreciation rights, restricted stock and other stock option awards to our directors and employees, and to directors and employees of any of our subsidiaries or affiliates. As of December 31, 2025, the maximum number of shares available for issuance to participants pursuant to awards under the 2017 Plan is 5,982,115. The shares available for issuance under the 2017 Stock Plan may consist, in whole or in part, of authorized and unissued shares or reacquired shares. As of December 31, 2025,

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a total of 5,978,727 shares of our common stock are subject to outstanding option awards under the 2017 Stock Plan. Since December 6, 2024, we have not granted and do not intend to grant any further awards under the 2017 Stock Plan.

**2024 Stock Plan**

In December 2024, we adopted the 2024 Equity Incentive Plan (the "2024 Stock Plan") to provide for the grant of stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units and other stock or cash-based awards to our directors, employees, non-employee directors and service providers. As of December 31, 2025, the number of shares available for issuance under the 2024 Plan is 1,481,354. The shares available for issuance under the 2024 Stock Plan may consist, in whole or in part, of authorized and unissued shares or reacquired shares. As of December 31, 2025, there were 895,434 shares of our common stock still subject to outstanding awards under the 2024 Plan. The following is a summary of certain provisions of the 2024 Stock Plan, and is qualified in its entirety by the full text of the 2024 Stock Plan, which is filed as an exhibit to this Annual Report on Form 10-K.

*Purpose*

The purpose of the 2024 Stock Plan is to enhance our ability to attract, retain and motivate persons who make (or are expected to make) important contributions to our company by providing these individuals with equity ownership opportunities and/or equity-linked compensatory opportunities.

*Administration*

The 2024 Stock Plan is administered by the compensation committee of our board of directors. The plan administrator has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the 2024 Stock Plan. The plan administrator may delegate to one or more of our officers the authority to grant awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act.

*Share Reserve*

An aggregate of 2,708,175 shares of common stock may be issued under the 2024 Stock Plan. Shares underlying any awards under the 2024 Stock Plan that are forfeited, cancelled, held back to cover the exercise price or tax withholding, satisfied without the issuance of stock or otherwise terminated (other than by exercise) will be added back to the shares available for issuance under the 2024 Stock Plan. The payment of dividend equivalents in cash shall not count against the share reserve.

*Annual Limitation on Awards to Non-Employee Directors*

The 2024 Stock Plan contains a limitation whereby the grant date value of all awards under the 2024 Stock Plan and all other cash compensation paid by us to any non-employee director may not exceed $250,000 in any calendar year, although our board of directors may, in its discretion, make exceptions to the limit in extraordinary circumstances.

*Stock Options*

The 2024 Stock Plan permits both options to purchase shares of common stock intended to qualify as incentive stock options under Section 422 of the Code and options that do not so qualify. Options granted under the 2024 Stock Plan will be nonqualified options if they fail to qualify as incentive stock options or exceed the annual limit on incentive stock options. Incentive stock options may only be granted to our employees. Nonqualified options may be granted to any persons eligible to receive awards under the 2024 Stock Plan.

The exercise price of each option will be determined by the plan administrator but generally may not be less than 100% of the fair market value of our common stock on the date of grant or, in the case of an incentive stock option granted to a 10% stockholder, 110% of such share's fair market value. The term of each option will be fixed by the plan administrator and may not exceed ten years from the date of grant (or five years for an incentive stock option granted to

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a 10% stockholder). The plan administrator will determine at what time or times each option may be exercised, including the ability to accelerate the vesting of such options.

*Stock Appreciation Rights*

The plan administrator may award stock appreciation rights subject to such conditions and restrictions as it may determine. Stock appreciation rights entitle the recipient to shares of common stock, or cash, equal to the value of the appreciation in our stock price over the exercise price. The exercise price generally may not be less than 100% of the fair market value of common stock on the date of grant. The term of each stock appreciation right will be fixed by the plan administrator and may not exceed ten years from the date of grant. The plan administrator will determine at what time or times each stock appreciation right may be exercised, including the ability to accelerate the vesting of such stock appreciation rights.

*Restricted Stock*

The plan administrator may award restricted shares of common stock subject to such conditions and restrictions as it may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified vesting period. Unless otherwise provided in the applicable award agreement, the participant generally will have the rights and privileges of a stockholder as to such restricted shares, including without limitation the right to vote such restricted shares and the right to receive dividends, if applicable.

*Restricted Stock Units and Dividend Equivalents*

The plan administrator may award restricted stock units which represent the right to receive common stock at a future date in accordance with the terms of such grant upon the attainment of certain conditions specified by the plan administrator. Restrictions or conditions could include, but are not limited to, the attainment of performance goals, continuous service with us, the passage of time or other restrictions or conditions. The plan administrator determines the persons to whom grants of restricted stock units are made, the number of restricted stock units to be awarded, the time or times within which awards of restricted stock units may be subject to forfeiture, the vesting schedule, and rights to acceleration thereof, and all other terms and conditions of the restricted stock unit awards. The value of the restricted stock units may be paid in common stock, cash, other securities, other property, or a combination of the foregoing, as determined by the plan administrator.

*Other Stock or Cash Based Awards*

Other stock or cash based may be granted either alone, in addition to, or in tandem with, other awards granted under the 2024 Stock Plan and/or cash awards made outside of the 2024 Stock Plan. The plan administrator shall have authority to determine the persons to whom and the time or times at which such awards will be made, the amount of such awards, and all other conditions, including any dividend and/or voting rights.

*Change in Control*

Except as set forth in an award agreement issued under the 2024 Stock Plan, in the event of a change in control (as defined in the 2024 Stock Plan), each outstanding stock award (vested or unvested) will be treated as the plan administrator determines, which may include (i) our continuation of such outstanding stock awards (if we are the surviving corporation); (ii) the assumption of such outstanding stock awards by the surviving corporation or its parent; (iii) the substitution by the surviving corporation or its parent of new stock options or other equity awards for such stock awards; (iv) the cancellation of such stock awards in exchange for a payment to the participants equal to the excess of (A) the fair market value of the shares subject to such stock awards as of the closing date of such corporate transaction over (B) the exercise price or purchase price paid or to be paid (if any) for the shares subject to the stock awards (which payment may be subject to the same conditions that apply to the consideration that will be paid to holders of shares in connection with the transaction, subject to applicable law); (v) provide that such award shall vest and, to the extent applicable, be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the 2024 Stock Plan or the provisions of such Award; or (vi) provide that the award will terminate and cannot vest, be exercised or become payable after the applicable event.

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The 2024 Stock Plan provides that a stock award may be subject to additional acceleration of vesting and exercisability upon a change in control as may be provided in the award agreement for such stock award, but in the absence of such provision, no such acceleration will occur.

*Tax Withholding*

Participants in the 2024 Stock Plan are responsible for the payment of any federal, state or local taxes that we are required by law to withhold upon the exercise of options or stock appreciation rights or vesting of other awards. The plan administrator may cause any tax withholding obligation of ours to be satisfied, in whole or in part, by the applicable entity withholding from shares of common stock to be issued pursuant to an award a number of shares with an aggregate fair market value that would satisfy the withholding amount due. The plan administrator may also require any tax withholding obligation of ours to be satisfied, in whole or in part, by an arrangement whereby a certain number of shares issued pursuant to any award are immediately sold and proceeds from such sale are remitted to us in an amount that would satisfy the withholding amount due.

*Transferability of Awards*

The 2024 Stock Plan generally does not allow for the transfer or assignment of awards, other than by will or by the laws of descent and distribution; however, the plan administrator has the discretion to permit awards (other than incentive stock options) to be transferred by a participant.

*Amendment and Termination*

Our board of directors and the plan administrator may each amend, suspend, or terminate the 2024 Stock Plan and the plan administrator may amend or cancel outstanding awards, but no such action may materially and adversely affect rights under an award without the holder's consent. Certain amendments to the 2024 Stock Plan will require the approval of our stockholders. Generally, without stockholder approval, (i) no amendment or modification of the 2024 Stock Plan may reduce the exercise price of any stock option or stock appreciation right, (ii) the plan administrator may not cancel any outstanding stock option or stock appreciation right where the fair market value of the common stock underlying such stock option or stock appreciation right is less than its exercise price and replace it with a new option or stock appreciation right, another award or cash and (iii) the plan administrator may not take any other action that is considered a "repricing" for purposes of the stockholder approval rules of the applicable securities exchange.

All stock awards granted under the 2024 Stock Plan will be subject to recoupment in accordance with our Clawback Policy.

**Executive Employment Agreements**

**Paul Kellenberger Employment Agreement**

Effective June 1, 2024, we entered into an employment agreement with Paul Kellenberger, our Chief Executive Officer (the "Kellenberger Agreement"). Under the Kellenberger Agreement, Mr. Kellenberger is entitled to an annual base salary of $400,000, and is also eligible for a discretionary bonus based on our performance. In addition, Mr. Kellenberger is entitled, subject to the approval of our board of directors, to equity awards, in an amount to be determined by our board of directors and at an exercise price equal to the fair market value per share of our common stock on the date of grant, as determined by our board of directors. In February 2025, the board of directors increased Mr. Kellenberger's annual base salary to $500,000 effective March 1, 2025.

The Kellenberger Agreement also provides that if Mr. Kellenberger's employment is terminated without Cause or if Mr. Kellenberger terminates his employment for Good Reason, each as defined in the Kellenberger Agreement, subject to Mr. Kellenberger's execution and non-revocation of a release of claims in favor of us then Mr. Kellenberger shall be entitled to (i) salary continuation at his then base salary rate, from the termination date through the twelve month anniversary of the termination date; plus (ii) a pro-rated bonus for the year of termination as determined by our board of directors equal to: (a) the discretionary bonus Mr. Kellenberger would have received for the year of termination, had he remained employed through the payment date of such discretionary bonus, multiplied by (b) a fraction, the numerator of which is the number of days Mr. Kellenberger was employed by us in the year of termination and the denominator being

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365. Mr. Kellenberger may also elect to continue to receive group health insurance coverage under our group health plan pursuant to COBRA, and we will reimburse Mr. Kellenberger for such monthly COBRA premiums for twelve months. The Kellenberger Agreement also contains certain restrictions related to confidentiality, non-disparagement and intellectual property assignment that are applicable during or after the time that Mr. Kellenberger is employed by us.

**Erick DeOliveira Employment Agreement**

Effective June 1, 2024, we entered into an employment agreement with Erick DeOliveira, our Chief Financial Officer (the "DeOliveira Agreement"). Under the DeOliveira Agreement, Mr. DeOliveira is entitled to an annual base salary of $300,000, and is also eligible for a discretionary bonus based on our performance. In addition, Mr. DeOliveira is entitled, subject to the approval of our board of directors, to equity awards in an amount to be determined by our board of directors and at an exercise price equal to the fair market value per share of our common stock on the date of grant, as determined by our board of directors. In February 2025, the board of directors increased Mr. DeOliveira's annual base salary to $400,000 effective March 1, 2025.

The DeOliveira Agreement also provides that if Mr. DeOliveira's employment is terminated without Cause or if Mr. DeOliveira terminates his employment for Good Reason, each as defined in the DeOliveira Agreement, subject to Mr. DeOliveira's execution and non-revocation of a release of claims in favor of us, then Mr. DeOliveira shall be entitled to (i) salary continuation at his then base salary rate, from the termination date through the twelve month anniversary of the termination date; plus (ii) a pro-rated bonus for the year of termination as determined by our board of directors equal to: (a) the discretionary bonus Mr. DeOliveira would have received for the year of termination, had he remained employed through the payment date of such discretionary bonus, multiplied by (b) a fraction, the numerator of which is the number of days Mr. DeOliveira was employed by us in the year of termination and the denominator being 365. Mr. DeOliveira may also elect to continue to receive group health insurance coverage under our group health plan pursuant to COBRA, and we will reimburse Mr. DeOliveira for such monthly COBRA premiums for twelve months. The DeOliveira Agreement also contains certain restrictions related to confidentiality, non-disparagement and intellectual property assignment that are applicable during or after the time that Mr. DeOliveira is employed by us.

**Michael Harper Employment Agreement**

Effective June 1, 2024, we entered into an employment agreement with Michael Harper, our Head of Product, Engineering, and Marketing (the "Harper Agreement"). Under the Harper Agreement, Mr. Harper is entitled to an annual base salary of $325,000 and is also eligible for a discretionary bonus based on our performance. In addition, Mr. Harper is entitled, subject to the approval of our board of directors, to equity awards in an amount to be determined by our board of directors and at an exercise price equal to the fair market value per share of our common stock on the date of grant, as determined by our board of directors. In February 2025, the board of directors raised Mr. Harper's annual base salary to $400,000 effective March 1, 2025.

The Harper Agreement also provides that if Mr. Harper's employment is terminated without Cause or if Mr. Harper terminates his employment for Good Reason, each as defined in the Harper Agreement, subject to Mr. Harper's execution and non-revocation of a release of claims in favor of us, then Mr. Harper shall be entitled to (i) salary continuation at his then base salary rate, from the termination date through the twelve month anniversary of the termination date; plus (ii) a pro-rated bonus for the year of termination as determined by our board of directors equal to: (a) the discretionary bonus Mr. Harper would have received for the year of termination, had he remained employed through the payment date of such discretionary bonus, multiplied by (b) a fraction, the numerator of which is the number of days Mr. Harper was employed by us in the year of termination and the denominator being 365. Mr. Harper may also elect to continue to receive group health insurance coverage under our group health plan pursuant to COBRA, and we will reimburse Mr. Harper for such monthly COBRA premiums for twelve months. The Harper Agreement also contains certain restrictions related to confidentiality, non-disparagement and intellectual property assignment that are applicable during or after the time that Mr. Harper is employed by us.

[**Table of Contents**](#TOC)

**Non-Employee Director Compensation**

The following table sets forth information concerning our non-employee directors compensation for services during the year ended December 31, 2025. All compensation that we paid to our employee directors is set forth in the table in "*Executive Compensation — Summary Compensation Table*.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name**  | **Fees Earned or Paid in Cash ($)** | **Stock Awards ($)** | **Option Awards ($)** | **All Other Compensation** <sup>($)</sup> | **Total** |
| Amit Jain <sup>(1)</sup> | $30000 | $150000 | $- | $- | $180000 |
| Joanna Morris <sup>(2)</sup> | $30000 | $150000 | $- | $- | $180000 |
| Abhay Pande <sup>(3)</sup> | $30000 | $150000 | $- | $- | $180000 |
| Jane Swift <sup>(4)</sup> | $30000 | $150000 | $- | $- | $180000 |
| Angela Prince <sup>(5)</sup> | $30000 | $150000 | $- | $- | $180000 |
| Pankaj Gupta <sup>(6)</sup> | $30000 | $150000 | $- | $- | $180000 |
| **Total** | $180000 | $900000 | $- | $- | $1080000 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Mr. Jain has served as a member of our board of directors since April 2021.

&nbsp;&nbsp;&nbsp;&nbsp;(2) Dr. Morris has served as a member of our board of directors since December 2024.

&nbsp;&nbsp;&nbsp;&nbsp;(3) Mr. Pande has served as a member of our board of directors since December 2024.

&nbsp;&nbsp;&nbsp;&nbsp;(4) Ms. Swift has served as a member of our board of directors since December 2024.

&nbsp;&nbsp;&nbsp;&nbsp;(5) Ms. Prince served as a member of our board of directors from December 2024 until December 9, 2025, when she stepped down from the board of directors.

&nbsp;&nbsp;&nbsp;&nbsp;(6) Mr. Gupta served as a member of our board of directors from January 2021 until December 9, 2025, when he stepped down from the board of directors.

Beginning in 2025, we paid our non-employee directors an annual cash retention fee of $30,000 and $150,000 in common stock for his or her services.

#### Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
**Securities authorized for issuance under equity compensation plans**

The following table summarizes our equity compensation plan information as of January 31, 2026, which consists of our 2007 Equity Incentive Plan (the "2007 Plan"), our 2017 Equity Incentive Plan (the "2017 Plan"), and our 2024 Equity Incentive Plan (the "2024 Plan"). Information is included for equity compensation plans approved by our stockholders.

---

| | | | |
|:---|:---|:---|:---|
| **Plan Category** | **Number of securities to be issued upon exercise of outstanding options, warrants and rights** | **Weighted-average exercise price of outstanding options, warrants and rights** | **Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))** |
| Equity compensation plans approved by security holders | 5853656 | $3.00 | 1481815 |
| Equity compensation plans not approved by security holders | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 5853656 | $3.00 | 1481815 |

---

[**Table of Contents**](#TOC)

**Security ownership of certain beneficial owners and management**

The following table sets forth certain information regarding the ownership of zSpace's common stock as of January 31, 2026, by: (i) each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock; (ii) each of our named executive officers; (iii) each of our directors; and (iv) all of our executive officers and directors as a group. Information with respect to beneficial ownership has been furnished by each director, executive officer or beneficial owner of more than five percent of the shares of our common stock.

Beneficial ownership is determined in accordance with SEC rules, which generally attribute beneficial ownership of securities to each person who possesses, either solely or shared with others, the power to vote or dispose of those securities. These rules also treat as outstanding all shares of capital stock that a person would receive upon exercise of stock options held by that person that are immediately exercisable or exercisable within 60 days of January 31, 2026. These shares are deemed to be outstanding and to be beneficially owned by the person holding those options for the purpose of computing the number of shares beneficially owned and the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated and to the extent known, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

---

| | | |
|:---|:---|:---|
| **Name of Beneficial Owner** | **Number of Shares Beneficially Owned** | **Percent of Shares (1)** |
| &nbsp;&nbsp;**Greater than 5% Stockholders** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;bSpace Investments Limited (2) | 5506800 | 16.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;dSpace Investments Limited (3) | 11580670 | 34.8% |
| &nbsp;&nbsp;**Named Executive Officers and Directors** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Erick DeOliveira (4) | 107016 | \* |
| &nbsp;&nbsp;&nbsp;&nbsp;Michael Harper (5) | 573283 | 1.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;Paul Kellenberger (6) | 2400534 | 6.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;Amit Jain | 13441 | \* |
| &nbsp;&nbsp;&nbsp;&nbsp;Joanna Morris | 13441 | \* |
| &nbsp;&nbsp;&nbsp;&nbsp;Abhay Pande (7) | 40529 | \* |
| &nbsp;&nbsp;&nbsp;&nbsp;Jane Swift | 13441 | \* |
| All Directors and Executive Officers as a Group (7 persons) | 3161685 | 8.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;\* Less than 1% |  |  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Based on 33,302,983 shares of common stock outstanding as of January 31, 2026.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Based on a review of the records of the Company's transfer agent as of January 31, 2026, and information provided in a Schedule 13G filed on February 14, 2025 by bSpace Investments Ltd and Mohammed Al Hassan. The shares are held of record by bSpace Investments Ltd. Mohammed Al Hassan holds 100% of the equity interest in bSpace Investments Ltd in his personal capacity. The address for bSpace Investments Ltd is Emaar Square, Building 4, Office 701, Downtown Dubai, PO Box 215931, United Arab Emirates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Based on a review of the records of the Company's transfer agent as of January 31, 2026, and information provided in a Schedule 13G filed on February 14, 2025 by dSpace Investments Ltd and Pankaj Gupta. The shares are held of record by dSpace Investments Ltd. Pankaj Gupta holds 100% of the equity interest in dSpace Investments Ltd and therefore may be deemed to be the beneficial owner of the securities held by dSpace Investments Ltd. Pankaj Gupta disclaims beneficial ownership of all such securities. The address for dSpace Investments Ltd is Emaar Square, Building 4, Office 701, Downtown Dubai, PO Box 215931, United Arab Emirates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Includes (i) 45,436 shares of common stock issuable to Mr. DeOliveira upon the exercise of options that are exercisable within 60 days after January 31, 2026, and (ii) 21,083 shares of common stock issuable upon the vesting of restricted stock units ("RSUs") within 60 days after January 31, 2026.

[**Table of Contents**](#TOC)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Includes 517,886 shares of common stock issuable to Mr. Harper upon the exercise of options that are exercisable within 60 days after January 31, 2026, and (ii) 17,000 shares of common stock issuable upon the vesting of RSUs within 60 days after January 31, 2026.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) Includes 2,302,249 shares of common stock issuable to Mr. Kellenberger upon the exercise of options that are exercisable within 60 days after January 31, 2026, and (ii) 33,500 shares of common stock issuable upon the vesting of RSUs within 60 days after January 31, 2026.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) Includes 27,088 shares of common stock issuable to Mr. Pande upon the exercise of options that are exercisable within 60 days after January 31, 2026.

#### Item 13. Certain Relationships and Related Transactions, and Director Independence
A "related party transaction" is any actual or proposed transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to which we or our subsidiaries were or are a party, or in which we or our subsidiaries were or are a participant, in which the amount involved exceeded or exceeds the lesser of (i) $120,000 or (ii) one percent of the average of our total assets at year-end for the last two completed fiscal years and in which any related party had or will have a direct or indirect material interest. A "related party" includes:

● any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors;

● any person who beneficially owns more than 5% of our common stock;

● any immediate family member of any of the foregoing; or

● any entity in which any of the foregoing is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.

Historically, certain of our insiders and other related parties have been part of the funding groups that have provided funding to us via loans, convertible loans, preferred equity and direct equity investments into us as further described in this report and below.

Other than the transactions described below and the compensation arrangements for our named executive officers, which we describe above, there were no related party transactions to which we were a party since January 1, 2024.

**bSpace Investments Limited**

bSpace Investments Limited ("bSpace") owns 5,506,800 common shares, or 16.5%, of our common stock as of January 31, 2026. Mohammed Al Hassan, the Co-CEO of Gulf Islamic Investments, LLC ("GII"), personally holds 100% of the equity interest in bSpace. As such, although GII does not own any securities of bSpace, GII may be deemed to be an affiliate of bSpace.

**dSpace Investments Limited**

dSpace Investments Limited ("dSpace") owns 11,580,670 common shares stock, which is 34.8% of our common stock as of January 31, 2026. Pankaj Gupta, one of our directors until his resignation in December 2025 and the Co-CEO of GII, holds 100% of the equity interest in dSpace in his personal capacity. As such, although GII does not own any securities of dSpace, GII may be deemed to be an affiliate of dSpace.

[**Table of Contents**](#TOC)

**Director Independence**

In August 2025, our board of directors determined that each of the directors on our board of directors, other than Paul Kellenberger and Amit Jain qualifies as an independent director under the rules of Nasdaq, and SEC rules and regulations. Under the rules of Nasdaq, unless an explicit exemption exists, independent directors must comprise a majority of a listed company's board of directors. In addition, the rules of Nasdaq require that, subject to specified exceptions, each member of a listed company's audit, compensation, and nominating and corporate governance committees be independent. Under the rules of Nasdaq, a director will only qualify as an "independent director" if, in the opinion of that company's board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the board of directors reviewed and discussed information provided by our directors and by us with regard to each director's business and personal activities and relationships as they may relate to us and our management, including the beneficial ownership of capital stock by each non-employee director and the transactions involving them described in this section.

**Related Person Transactions Policy**

Our board of directors has adopted a written policy relating to the approval of related person transactions. A "related person transaction" is any transaction or series of transactions in which we are a participant, the amount involved exceeds $120,000, and a Related Person (as defined in the policy) has a direct or indirect material interest resulting in a potential transaction with a Related Person.

Our audit committee of the board of directors is responsible for the oversight of the policy and as such, will be entitled to rely upon determinations made and reported by our management. Our management will be responsible for determining whether a transaction is a Related Person Transaction subject to the policy, including whether the Related Person has a material interest, based on a review of all facts and circumstances. Upon a determination by our management that a transaction is a Related Person Transaction subject to the policy, the material facts concerning the transaction and the Related Person's interest in the transaction must be reported to our audit committee.

The policy will apply to the members of our board of directors, our executive officers (as defined under the regulations of the Securities and Exchange Commission), including, in any case, but not limited to, our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions, and all of our employees. It is the responsibility of all directors, officers, employees to comply with the policy. Members of the families of our directors, officers and employees and others living with them and all holding companies and other related entities and all persons or companies acting on behalf of or at the request of any of the foregoing also are expected to comply with the policy, as if they themselves were our directors, officers or employees.

**Indemnification of Directors and Officers**

We have entered into indemnification agreements with each of our directors and executive officers and expect to enter into a similar agreement with any new director or executive officer. The indemnification agreements, together with our bylaws, will provide that we will jointly and severally indemnify each indemnitee to the fullest extent permitted by the DGCL from and against all loss and liability suffered and expenses, judgments, fines, and amounts paid in settlement actually and reasonably incurred by or on behalf of the indemnitee in connection with any threatened, pending, or completed action, suit or proceeding. Additionally, we will agree to advance to the indemnitee all out-of-pocket costs of any type or nature whatsoever incurred in connection therewith. See "*Description of Capital Stock — Limitation on Liability and Indemnification of Directors and Officers*.

#### Item 14. Principal Accountant Fees and Services
We have appointed UHY LLP ("UHY") to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2025. UHY has served as our independent registered public accounting firm since 2025.

[**Table of Contents**](#TOC)

**Fees Billed to the Company in fiscal year 2025 and 2024**

The following table sets forth the fees billed to us by UHY for the fiscal year ended December 31, 2025, and our prior auditor, BDO USA P.C., for professional services rendered during the fiscal year ended December 31, 2024:

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2025** | **2024** |
| Audit Fees<sup>(1)</sup> | $236 | $1396 |
| Audit Related Fees |  |  |
| Tax Fees |  |  |
| All Other Fees |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Fees | $236 | $1396 |
| <sup>(1)</sup>Audit Fees - Audit fees consist of fees billed for professional services rendered for the audit of our consolidated financial statements. | <sup>(1)</sup>Audit Fees - Audit fees consist of fees billed for professional services rendered for the audit of our consolidated financial statements. | <sup>(1)</sup>Audit Fees - Audit fees consist of fees billed for professional services rendered for the audit of our consolidated financial statements. |

---

**Pre-Approval Policies and Procedures** 

The Audit Committee has the authority to appoint or replace our independent registered public accounting firm (subject, if applicable, to stockholder ratification). The Audit Committee is also responsible for the compensation and oversight of the work of the independent registered public accounting firm (including resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent registered public accounting firm was engaged by, and reports directly to, the Audit Committee.

The Audit Committee pre-approves all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for us by our independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act and Rule 2-01(c)(7)(i)(C) of Regulation S-X, provided that all such excepted services are subsequently approved prior to the completion of the audit. We have complied with the procedures set forth above, and the Audit Committee has otherwise complied with the provisions of its charter.

#### PART IV

#### Item 15. Exhibits and Financial Statement Schedules
(a)(1)Financial statements.

See "Index to Consolidated Financial Statements and Financial Statement Schedule" page F-1.

(a)(2)Financial Statement Schedules.

See "Index to Consolidated Financial Statements and Financial Statement Schedule" page F-1.

(a)(3)Exhibits.

---

| | |
|:---|:---|
| **ExhibitNumber.** | **Description** |
| 3.1 | [Amended and Restated Certificate of Incorporation of zSpace, Inc. (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed with the SEC on December 9, 2024).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924126545/tm244059d41_ex3-1.htm) |
| 3.2 | [Amendment to Second Amended and Restated Bylaws of zSpace, Inc., filed with the Secretary of State of the State of Delaware on November 10, 2025 (incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 10-Q filed with the SEC on November 13, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925111329/zspc-20250930xex3d2.htm) |

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[**Table of Contents**](#TOC)

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| | |
|:---|:---|
| 3.3 | [Certificate of Designations of Series P Convertible Preferred Stock as filed with the Secretary of State of the State of Delaware on January 27, 2026 (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed with the SEC on January 29, 2026).](https://www.sec.gov/Archives/edgar/data/1637147/000110465926007978/tm264035d1_ex3-1.htm) |
| 3.4 | [Second Amended and Restated Bylaws of the zSpace, Inc. (incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K filed with the SEC on December 9, 2024).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924126545/tm244059d41_ex3-2.htm) |
| 4.1 | [Form of common stock certificate (incorporated by reference to Exhibit 4.1 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924081543/tm244059d15_ex4-1.htm) |
| 4.2 | [Form of Representative's Warrant (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed with the SEC on December 9, 2024).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924126545/tm244059d41_ex4-1.htm) |
| 4.3 | [Form of Senior Secured Convertible Note dated April 11, 2025 in the amount of $13,978,495 (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed with the SEC on April 11, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925034265/tm2512150d1_ex4-1.htm)  |
| 4.4 | [Amendment to Senior Secured Convertible Note dated October 15, 2025 by and between the Company and the holder set forth on the signature page thereto (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on October 17, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925100452/tm2528843d1_ex10-1.htm) |
| 4.5 | [Amendment to Senior Secured Convertible Note dated January 8, 2026 by and between the Company and the holder set forth on the signature page thereto (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on January 9, 2026).](https://www.sec.gov/Archives/edgar/data/1637147/000110465926002478/tm262702d1_ex10-1.htm) |
| 4.6\* | [Form of Senior Secured Convertible Note dated March 16, 2026 in the amount of $4,301,075.](zspc-20251231xex4d6.htm) |
| 4.7 | [Form of Warrant (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed with the SEC on January 29, 2026).](https://www.sec.gov/Archives/edgar/data/1637147/000110465926007978/tm264035d1_ex4-1.htm) |
| 4.8\* | [Description of Securities](zspc-20251231xex4d8.htm) |
| 10.1# | [2007 Stock Plan (incorporated by reference to Exhibit 10.1 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924074045/tm244059d11_ex10-2.htm) |
| 10.2# | [2017 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.2 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924074045/tm244059d11_ex10-3.htm) |
| 10.3# | [2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924074045/tm244059d11_ex10-4.htm) |
| 10.4# | [Form of RSU Grant Agreement under 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to zSpace, Inc.'s registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924081543/tm244059d15_ex10-4.htm) |
| 10.5# | [Form of Incentive Option Grant Agreement under 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to zSpace, Inc.'s registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924081543/tm244059d15_ex10-5.htm) |
| 10.6# | [Form of Non-Qualified Stock Option Grant Agreement under 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 to zSpace, Inc.'s registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924081543/tm244059d15_ex10-6.htm) |
| 10.7# | [Employment Agreement between the Company and Paul Kellenberger, dated May 30, 2024 (incorporated by reference to Exhibit 10.7 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924074045/tm244059d11_ex10-5.htm) |

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[**Table of Contents**](#TOC)

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| | |
|:---|:---|
| 10.8# | [Employment Agreement between the Company and Erick DeOliveira, dated May 28, 2024 (incorporated by reference to Exhibit 10.8 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924074045/tm244059d11_ex10-6.htm) |
| 10.9# | [Employment Agreement between the Registrant and Mike Harper, dated May 28, 2024 (incorporated by reference to Exhibit 10.10 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924074045/tm244059d11_ex10-8.htm) |
| 10.10 | [Loan and Security Agreement, by and between Fiza Investments Limited and the Company, dated November 3, 2022 (incorporated by reference to Exhibit 10.17 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924074045/tm244059d11_ex10-16.htm) |
| 10.11 | [Amendment No. 1 to Loan and Security Agreement dated November 3, 2022, by and between Fiza Investments Limited and the Company, dated July 11, 2024 (incorporated by reference to Exhibit 10.18 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924081543/tm244059d15_ex10-17.htm) |
| 10.12 | [Amendment No. 2 to Loan and Security Agreement dated November 3, 2022, by and between Fiza Investments Limited and the Company, dated October 23, 2024 (incorporated by reference to Exhibit 10.19 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924111524/tm244059d27_ex10-19.htm) |
| 10.13 | [Amendment No.3 to Loan and Security Agreement dated November 3, 2022, by and between Fiza Investments Limited and the Company, dated November 7, 2024 (incorporated by reference to Exhibit 10.20 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924122584/tm244059d37_ex10-20.htm) |
| 10.14 | [Amendment No. 4 to Loan and Security Agreement dated April 11, 2025, by and between Fiza Investments Limited and the Company, dated November 7, 2024 (incorporated by reference to Exhibit 10.7 of the Company's Current Report on Form 8-K filed with the SEC on April 11, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925034265/tm2512150d1_ex10-7.htm) |
| 10.15 | [Loan Agreement, by and between Fiza Investments Limited and the Company, dated July 11, 2024 by and between Fiza Investments Limited and the Company (incorporated by reference to Exhibit 10.41 of the Company's registration statement on Form S-1 File No. 333-280427)).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924081543/tm244059d15_ex10-38.htm) |
| 10.16 | [Amendment No. 1 to Loan and Security Agreement dated July 11, 2024, by and between Fiza Investments Limited and the Company, dated October 23, 2024 (incorporated by reference to Exhibit 10.41 of the Company's registration statement on Form S-1 File No. 333-280427)).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924111524/tm244059d27_ex10-41.htm) |
| 10.17 | [Amendment No. 2 to Loan and Security Agreement dated July 11, 2024, by and between Fiza Investments Limited and the Company, dated November 7, 2024 (incorporated by reference to Exhibit 10.43 of the Company's registration statement on Form S-1 File No. 333-280427)).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924122584/tm244059d37_ex10-43.htm) |
| 10.18 | [Amendment No. 3 to Loan and Security Agreement dated April 11, 2025, by and between Fiza Investments Limited and the Company, dated July 11, 2024 (incorporated by reference to Exhibit 10.8 of the Company's Current Report on Form 8-K filed with the SEC on April 11, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925034265/tm2512150d1_ex10-8.htm) |
| 10.19 | [Form of Security Agreement, dated April 11, 2025 (incorporated by reference to Exhibit 10.4 of the Company's Current Report on Form 8-K filed with the SEC on April 11, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925034265/tm2512150d1_ex10-4.htm) |
| 10.20 | [Form of Intellectual Property Security Agreement (incorporated by reference to Exhibit 10.5 of the Company's Current Report on Form 8-K filed with the SEC on April 11, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925034265/tm2512150d1_ex10-5.htm) |
| 10.21 | [Form of Intercreditor Agreement (incorporated by reference to Exhibit 10.6 of the Company's Current Report on Form 8-K filed with the SEC on April 11, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925034265/tm2512150d1_ex10-6.htm) |

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[**Table of Contents**](#TOC)

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| | |
|:---|:---|
| 10.22 | [Business Loan and Security Agreement by and between Itria Ventures LLC and zSpace, Inc. in the amount of $1,000,000 dated August 20, 2025 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on August 22, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925081940/tm2524137d1_ex10-1.htm) |
| 10.23 | [Business Loan and Security Agreement by and between Itria Ventures LLC and zSpace, Inc. in the amount of $1,000,000 dated August 20, 2025 (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed with the SEC on August 22, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925081940/tm2524137d1_ex10-2.htm) |
| 10.24 | [Intercreditor Agreement among Itria Ventures LLC, zSpace, Inc. and 3i LP, dated August 20, 2025 (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed with the SEC on August 22, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925081940/tm2524137d1_ex10-3.htm) |
| 10.25 | [Common Stock Purchase Agreement, dated July 8, 2025, between the Company and Tumim Stone Capital LLC (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on July 8, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925066464/tm2520105d1_ex10-1.htm) |
| 10.26 | [Securities Purchase Agreement dated January 23, 2026 by and between the Company and the holder set forth on the signature page thereto (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the SEC on January 29, 2026).](https://www.sec.gov/Archives/edgar/data/1637147/000110465926007978/tm264035d1_ex10-1.htm) |
| 10.27† | [License Agreement, by and between Supplier and the Company, dated November 10, 2023 (incorporated by reference to Exhibit 10.37 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924081543/tm244059d15_ex10-34.htm) |
| 10.28† | [Master Supply Agreement, by and between Supplier and the Company, dated August 20, 2021 (incorporated by reference to Exhibit 10.38 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924081543/tm244059d15_ex10-35.htm) |
| 10.29† | [Amendment to Master Supply Agreement, by and between Supplier and the Company, dated March 11, 2024 (incorporated by reference to Exhibit 10.39 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924081543/tm244059d15_ex10-36.htm) |
| 10.30 | [Supply Agreement, by and between Supplier and the Company, dated July 14, 2023 (incorporated by reference to Exhibit 10.40 of the Company's registration statement on Form S-1 File No. 333-280427).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924081543/tm244059d15_ex10-37.htm) |
| 10.31\* | [Form of Indemnification Agreement entered into with Directors and Officers of the Company.](zspc-20251231xex10d31.htm) |
| 14.1 | [Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 of the Company's Annual Report on Form 10-K filed with the SEC on March 28, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000155837025003867/zspc-20241231xex14d1.htm) |
| 19.1 | [Insider Trading Policy (incorporated by reference to Exhibit 19.1 of the Company's Annual Report on Form 10-K filed with the SEC on March 28, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000155837025003867/zspc-20241231xex19d1.htm) |
| 21.1\* | [List of Subsidiaries](zspc-20251231xex21d1.htm). |
| 23.1\* | [Consent of UHY LLP, Independent Registered Public Accounting Firm.](zspc-20251231xex23d1.htm) |
| 23.2\* | [Consent of BDO USA, P.C., Independent Registered Public Accounting Firm.](zspc-20251231xex23d2.htm) |
| 31.1\* | [Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](zspc-20251231xex31d1.htm). |
| 31.2\* | [Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](zspc-20251231xex31d2.htm). |

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[**Table of Contents**](#TOC)

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| | |
|:---|:---|
| 32\*\* | [Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](zspc-20251231xex32.htm). |
| 97.1 | [Clawback Policy (incorporated by reference to Exhibit 97.1 of the Company's Annual Report on Form 10-K filed with the SEC on March 28, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000155837025003867/zspc-20241231xex97d1.htm) |
| 101.INS\* | 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\* | XBRL Taxonomy Extension Schema Document |
| 101CAL\* | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF\* | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB\* | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE\* | XBRL Taxonomy Extension Presentation Document |
| 104\* | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
| \* | Filed with this Annual Report on Form 10-K. |
| \*\* | Furnished with this Annual Report on Form 10-K. |
| # | Indicates a management contract or compensatory plan or arrangement. |
| † | Pursuant to Item 601(a)(10) of Regulation S-K, certain exhibits and schedules to this agreement have been omitted. We agree to furnish supplementally to the Securities and Exchange Commission, upon its request, any or all of such omitted exhibits and/or schedules. |

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#### Item 16. Form 10-K Summary
Not applicable.

[**Table of Contents**](#TOC)

#### SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 30, 2026.

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| | |
|:---|:---|
| zSPACE, INC. | zSPACE, INC. |
| By: | /s/ **Paul Kellenberger** |
|  | Paul Kellenberger |
|  | *Chairman of the Board of Directors, and* |
|  | *Chief Executive Officer* |

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Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant on March 30, 2026 and in the capacities and on the dates indicated:

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| | |
|:---|:---|
| **Signature** | **Title** |
| /s/ **Paul Kellenberger** | Chief Executive Officer and Chairman |
| Paul Kellenberger | (Principal Executive Officer)  |
| /s/ **Erick DeOliveira** | Chief Financial Officer  |
| Erick DeOliveira | (Principal Financial and Accounting Officer)  |
| /s/ **Amit Jain** | Director |
| Amit Jain |  |
| /s/ **Joanna Morris** | Director |
| Joanna Morris |  |
| /s/ **Abhay Pande** | Director |
| Abhay Pande |  |
| /s/ **Jane Swift** | Director |
| Jane Swift |  |

---

## Exhibit 4.6

**Exhibit 4.6**

**NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR ALL OF THE SECURITIES INTO WHICH THIS NOTE MAY BE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS. TO THE EXTENT NOT SO REGISTERED, THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (A) IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR (II) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT, OR (B) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER THE SECURITIES ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTION 3(c)(iii) AND SECTION 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.**

**THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT. PURSUANT TO TREASURY REGULATION §1.1275-3(b)(1), A REPRESENTATIVE OF THE COMPANY, SHALL, BEGINNING NO LATER THAN TEN (10) DAYS AFTER THE ISSUANCE DATE OF THIS NOTE, PROMPTLY MAKE AVAILABLE TO THE HOLDERS UPON REQUEST THE INFORMATION DESCRIBED IN TREASURY REGULATION §1.1275-3(b)(1)(i).** 

**ZSPACE, INC.**

**SENIOR SECURED CONVERTIBLE NOTE**

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Issuance Date**: March 16, 2026 | &nbsp;&nbsp;**Original Principal Amount**: $4,301,075 |

---

**FOR VALUE RECEIVED**, zSpace, Inc., a Delaware corporation (the "**Company**"), hereby promises to pay to the order of 3i, LP, a Delaware limited partnership, or its registered assigns (the "**Holder**") the amount set forth above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the "**Principal**") and all interest accrued hereunder ("**Interest**") at the Interest Rate (as defined below) when due, whether upon the Maturity Date (as defined below), on any Installment Date (as defined below) with respect to the Installment Amount (as defined below) due on such Installment Date, or upon acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof) and, upon the occurrence of an Event of Default (as defined below), to pay Interest on any outstanding Principal at the Default Rate (as defined below), from the date set forth above as the Issuance Date (the "**Issuance Date**") until the same becomes due and payable, whether upon the Maturity Date, on any Installment Date with respect to the Installment Amount due on such Installment Date, or upon acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Senior Convertible Note (including all Senior Convertible Notes issued in exchange, transfer or replacement hereof, this "**Note**") is one of several Senior Convertible Notes issued pursuant to that certain Securities Purchase Agreement, dated (the "**Securities Purchase Agreement**"), as of April 10, 2025 (the "**Subscription Date**"), by and among the Company and the investors referred to therein, as amended from time to time (collectively, the "**Notes**," and such other Convertible Notes, the "**Other Notes**"). This Note is secured to the extent and in the manner set forth in the Transaction Documents (including, without limitation, the Security Agreement). Certain capitalized terms used herein are defined in <u>Section 31</u> and capitalized terms not otherwise defined herein shall have the meanings set forth in the Securities Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.PAYMENT OF PRINCIPAL**. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest (including Default Interest, if applicable), accrued and unpaid Late Charges on such Principal and Interest and the Make-Whole Amount. Other than as

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specifically permitted by this Note, the Company may not prepay any portion of the outstanding Principal, accrued and unpaid Interest, accrued and unpaid Late Charges on Principal and Interest, if any, or Make-Whole Amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.INTEREST; INTEREST RATE**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)This Note was issued with a seven percent (7%) original issue discount as described in the Securities Purchase Agreement. This Note shall bear interest at the rate of six percent (6.0%) per annum (the "**Interest Rate**") except upon the occurrence (and during the continuance) of an Event of Default, in which case this Note shall bear interest at a rate of eleven percent (11%) per annum (the "**Default Rate**" and all such Interest accrued at the Default Rate, the "**Default Interest**") of the then-outstanding Principal. In the event that such Event of Default is subsequently cured or waived in accordance with the terms of this Note (and no other Event of Default then exists (including, without limitation, as a result of the Company's failure to pay Interest at the Default Rate on the applicable Interest Date in connection with such Event of Default)), Interest hereunder at the Default Rate shall cease to accrue as of the calendar day immediately following the date on which such Event of Default is cured or waived (and shall instead revert to the Interest Rate); <u>provided</u> that the Interest as calculated and unpaid during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure or waiver of such Event of Default.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Interest on this Note shall commence accruing on the Issuance Date. Interest shall be computed on the basis of a 360-day year and twelve 30-day months. Interest shall be due and payable upon the entire Original Principal Amount through and including the Maturity Date (including any extensions thereof).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.CONVERSION OF NOTES**. This Note shall be convertible into shares of Common Stock on the terms and subject to the conditions set forth in this <u>Section 3</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Conversion Right</u>. Subject to the provisions of <u>Section 3(d)</u>, at any time or times on or after the Issuance Date, the Holder shall be entitled to convert all or any portion of the outstanding and unpaid Conversion Amount (as defined below) into validly issued, fully paid, and non-assessable shares of Common Stock in accordance with <u>Section 3(c)</u>, at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent (as defined below)) that may be payable with respect to the issuance and delivery of shares of Common Stock upon conversion of any Conversion Amount. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to <u>Section 3(a)</u> shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the "**Conversion Rate**"). "**Conversion Amount**" means the sum of (x) the portion of the Principal to be converted, redeemed or otherwise with respect to which this determination is being made, (y) the Make-Whole Amount, if any (and without duplication of the Interest set forth in subsection (z) of this provision) and (z) all accrued and unpaid Interest with respect to such portion of such Principal, and accrued and unpaid Late Charges with respect to such portion of such Principal and such Make-Whole Amount and Interest, if any. "**Conversion Price**" means, as of any Conversion Date (as defined below) or other date of determination, $0.28, subject to adjustment as provided herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Alternative Conversion</u>. Subject to the provisions of <u>Section 3(d)</u>, at any time or times on or after the effective date of the Initial Registration Statement (as defined in the Registration Rights Agreement) and prior to the Initial Installment Date, the Holder shall be entitled to convert all or any portion of the outstanding and unpaid Conversion Amount not exceeding $750,000 (or a higher amount as mutually agreed upon by the Holder and the Company) per calendar month into validly issued, fully paid, and non-assessable shares of Common Stock in accordance with <u>Section 3(c)</u>, at the Alternative Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent (as defined below)) that may be payable with respect to the issuance and delivery of shares of Common Stock upon conversion of any Conversion Amount. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this <u>Section 3(b)</u> shall be determined by dividing (x) such Conversion Amount by (y) the Alternative Conversion Price (the

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"**Alternative Conversion Rate**"). "**Alternative Conversion Price**" means 97% of the lowest VWAP of the shares of Common Stock during the ten (10) consecutive Trading Day period ending and including the Trading Day immediately prior to the Conversion Date (as defined below), all such determinations to be appropriately adjusted for any share split, share dividend, share combination or other similar transaction during any such measuring period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Mechanics of Conversion</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Conversion Notice</u>. To convert any Conversion Amount into shares of Common Stock on any date (a "**Conversion Date**"), the Holder shall deliver (whether via electronic mail or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed conversion notice in the form attached hereto as <u>Exhibit I</u> (the "**Conversion Notice**") to the Company. If required by <u>Section 3(c)(iii)</u>, within two (2) Trading Days following a conversion of this Note, the Holder shall surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction as contemplated by <u>Section 18(b)</u>). On or before the first (1<sup>st</sup>) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit via electronic mail an acknowledgment of receipt of such Conversion Notice to the Holder and the Company's transfer agent (the "**Transfer Agent**"), and instruct the Transfer Agent to process such Conversion Notice in accordance with the terms herein and provide confirmation as to whether such shares of Common Stock may then be resold pursuant to Rule 144 under the Securities Act ("**Rule 144**") or an effective registration statement. On or before the second (2<sup>nd</sup>) Trading Day following the date on which the Company has received a Conversion Notice (or such earlier date as required pursuant to the Exchange Act or other applicable law, rule or regulation for the settlement of a trade initiated on the applicable Conversion Date of such shares of Common Stock issuable pursuant to such Conversion Notice) (the "**Share Delivery Deadline**"), the Company shall (I) if the Transfer Agent is participating in The Depository Trust Company's ("**DTC**") Fast Automated Securities Transfer Program ("**FAST**"), credit such aggregate number of shares of Common Stock to which the Holder shall be entitled pursuant to such conversion to the Holder's (or its designee's) account with DTC through its Deposit/Withdrawal at Custodian system, or (II) if the Transfer Agent is not participating in FAST, upon the request of the Holder, issue and deliver (via nationally recognized overnight delivery service) to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder (or its designee), evidencing the number of shares of Common Stock to which the Holder shall be entitled pursuant to such conversion. If this Note is physically surrendered for conversion pursuant to <u>Section 3(c)(iii)</u> and the outstanding Principal is greater than the Principal portion of the Conversion Amount being converted, then the Company shall, as soon as practicable, and in no event later than two (2) Business Days after receipt of this Note and at its own expense, issue and deliver to the Holder (or its designee) a new Note (in accordance with <u>Section 18(d)</u>) representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. Notwithstanding anything to the contrary contained in this Note or the Registration Rights Agreement (as defined in the Securities Purchase Agreement), within five (5) days after the effective date of the Registration Statement (as defined in the Registration Rights Agreement), the Company shall cause the Transfer Agent to deliver unlegended shares of Common Stock to the Holder (or its designee) in connection with any sale of Registrable Securities (as defined in the Registration Rights Agreement) with respect to which the Holder has entered into a contract for sale, and delivered a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, and for which the Holder has not yet settled.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)<u>Company's Failure to Timely Convert</u>. If the Company shall fail, for any reason or for no reason, on or prior to the applicable Share Delivery Deadline, either (I)(1) if the Transfer Agent is not participating in FAST, to issue and deliver to the Holder (or its designee) a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company's share register or, (2) if the Transfer Agent is participating in FAST, to credit the account of the Holder (or its designee) with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder's conversion of this Note, as the case may be, or (II) if the Registration Statement covering the resale of the shares of Common Stock that are the subject of the Conversion Notice (the "**Unavailable Conversion Shares**") is not available for the resale of such Unavailable Conversion Shares and the Company fails to promptly, but in no event later than as required pursuant to the Registration Rights

------

Agreement (x) so notify the Holder and (y) deliver the shares of Common Stock electronically without any restrictive legend by crediting such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such conversion to the Holder's (or its designee's) account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred to as a "**Notice Failure**" and together with the event described in clause (I) above, a "**Conversion Failure**"), then, in addition to all other remedies available to the Holder, (1) the Company shall pay in cash to the Holder on each day after such Share Delivery Deadline that the issuance of such shares of Common Stock is not timely effected an amount equal to 0.05% of the product of (x) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Deadline and to which the Holder is entitled, multiplied by (y) any trading price of the shares of Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Conversion Date and ending on the applicable Share Delivery Deadline, and (2) the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned (as the case may be) any portion of this Note that has not been converted pursuant to such Conversion Notice, provided that the voiding of a Conversion Notice shall not affect the Company's obligations to make any payments which have accrued prior to the date of such notice pursuant to this <u>Section 3(c)(ii)</u> or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Deadline either (A)(1) if the Transfer Agent is not participating in FAST, the Company shall fail to issue and deliver to the Holder (or its designee) a certificate and register such shares of Common Stock on the Company's share register or, (2) if the Transfer Agent is participating in FAST, the Transfer Agent shall fail to credit the account of the Holder (or its designee) with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder's conversion hereunder or pursuant to the Company's obligation pursuant to clause (II) below, or (B) a Notice Failure occurs, and if on or after such Share Delivery Deadline the Holder purchases (in an open market transaction or otherwise) shares of Common Stock corresponding to all or any portion of the number of shares of Common Stock issuable upon such conversion that the Holder is entitled to receive from the Company and has not received from the Company in connection with, or as a result of, such Conversion Failure or Notice Failure, as applicable (a "**Buy-In**"), then, in addition to all other remedies available to the Holder, the Company shall, within two (2) Business Days after receipt of the Holder's request and in the Holder's sole discretion, either: (I) pay cash to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the "**Buy-In Price**"), at which point the Company's obligation to so issue and deliver such certificate (and to issue such shares of Common Stock), or credit the account of such Holder (or its designee) with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder's conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (II) promptly honor its obligation to so issue and deliver to the Holder a certificate representing such shares of Common Stock or credit the account of such Holder (or its designee) with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder's conversion hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares of Common Stock multiplied by (y) the lowest Closing Sale Price of the shares of Common Stock on any Trading Day during the period commencing on the date of the applicable Conversion Notice and ending on the date of such issuance and payment under this clause (II) (the "**Buy-In Payment Amount**"). Nothing in this <u>Section 3(c)(ii)</u> shall limit the Holder's right to pursue any other remedies available to it hereunder, whether at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company's failure to timely deliver a certificate representing shares of Common Stock, or to electronically deliver such shares of Common Stock, upon the conversion of this Note as required pursuant to the terms hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)<u>Registration; Book-Entry</u>. The Company shall maintain a register (the "**Register**") for the recordation of the names and addresses of the holders of each Note and the principal amount of the Notes held by such holders (the "**Registered Notes**"). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes (including, without limitation, the right to receive payments of Principal, Make-Whole Amount and Interest hereunder) notwithstanding notice to the contrary. A Registered Note may be assigned, transferred or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign, transfer

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or sell all or part of any Registered Note by the holder thereof, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to <u>Section 18</u>, provided that if the Company does not so record an assignment, transfer or sale (as the case may be) of all or part of any Registered Note within two (2) Business Days of such a request, then the Register shall be automatically deemed updated to reflect such assignment, transfer or sale (as the case may be). Notwithstanding anything to the contrary set forth in this <u>Section 3</u>, following conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted (in which event this Note shall be delivered to the Company following conversion thereof as contemplated by <u>Section 3(c)(i)</u>), or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records confirming the Principal, Make-Whole Amount, Interest and Late Charges converted and/or paid (as the case may be) and the dates of such conversions, and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. If the Company does not update the Register to record such Principal, Make-Whole Amount, Interest and Late Charges converted and/or paid (as the case may be) and the dates of such conversions, and/or payments (as the case may be) within two (2) Business Days of such occurrence, then the Register shall be automatically deemed updated to reflect such occurrence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)<u>Pro Rata Conversion; Disputes</u>. In the event that the Company receives a Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company, subject to <u>Section 3(d)</u>, shall convert from each holder of Notes electing to have Notes converted on such date a pro rata amount of such holder's portion of its Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with <u>Section 23</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Limitations on Conversions (Maximum Percentage)</u>. The Company shall not effect the conversion of any portion of this Note, and the Holder shall not have the right to convert any portion of this Note pursuant to the terms and conditions of this Note and any such conversion shall be null and void and treated as if never made, to the extent that after giving effect to such conversion, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the "**Maximum Percentage**") of the shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any convertible notes, convertible preferred stock or warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this <u>Section 3(d)</u>. For purposes of this <u>Section 3(d)</u>, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. For purposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the conversion of this Note without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company's most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, Current Report on Form 8-K, or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Company, or (z) any other more recent written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the "**Reported Outstanding Share Number**"). If the Company receives a Conversion Notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall notify the Holder in writing of the number of shares of Common Stock then outstanding

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and, to the extent that such Conversion Notice would otherwise cause the Holder's beneficial ownership, as determined pursuant to this <u>Section 3(d)</u>, to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of shares Common Stock to be purchased pursuant to such Conversion Notice. For any reason at any time, upon the written request of the Holder, the Company shall, within one (1) Business Day of such request, via electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon conversion of this Note results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the Exchange Act), the number of shares so issued by which the Holder's and the other Attribution Parties' aggregate beneficial ownership exceeds the Maximum Percentage (the "**Excess Shares**") shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or transfer the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage shall not be effective until the sixty-first (61<sup>st</sup>) day after such notice is delivered to the Company and (ii) any such increase or decrease shall apply only to the Holder and the other Attribution Parties and not to any other holder of Notes that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Note in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act. No prior inability to convert this Note pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this <u>Section 3(d)</u> to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained in this <u>Section 3(d)</u> or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Limitation on Conversions (Exchange Rules)</u>. The Company shall not issue any shares of Common Stock upon the conversion of any portion of this Note if the issuance of such shares of Common Stock (and the conversion of the Other Notes or otherwise pursuant to the terms of the Notes) would exceed the aggregate number of shares of Common Stock which the Company may issue upon conversion of the Notes or otherwise pursuant to the terms of the Note and without breaching the Company's obligations under the rules or regulations of the Principal Market, except that such limitation shall not apply in the event that the Company (A) obtains Stockholder Approval (as defined in the Securities Purchase Agreement) as required by the applicable rules of the Principal Market for issuances of shares of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.RIGHTS UPON EVENT OF DEFAULT**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Event of Default</u>. Each of the following events shall constitute an "**Event of Default**" and each of the events in clauses (vii), (viii) and (ix) shall constitute a "**Bankruptcy Event of Default**":

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)the suspension from trading or the failure of the shares of Common Stock to be listed for trading on an Eligible Market for a period of five (5) consecutive Trading Days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)the Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within five (5) Trading Days after the applicable Conversion Date or exercise date (as the case may be) or (B) notice, written or oral, to any holder of the Notes, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of any Notes into shares of Common Stock that is requested in accordance with the provisions of the Notes, other than pursuant to <u>Section 3(d)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)except to the extent the Company is in compliance with <u>Section 10(b)</u> below, at any time following the fifteenth (15<sup>th</sup>) consecutive day that the Holder's Authorized Share Allocation (as defined in

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<u>Section 10(a)</u> below) is less than the sum of the number of shares of Common Stock that the Holder would be entitled to receive upon a conversion of the full Conversion Amount of this Note (without regard to any limitations on conversion set forth in <u>Section 3(d)</u> or otherwise);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)the Company's or any Subsidiary's failure to pay to the Holder any amount of Principal, Make-Whole Amount, Interest, Late Charges or other amounts when and as due under this Note (including, without limitation, the Company's or any Subsidiary's failure to pay any redemption payments or amounts hereunder) or any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby, except, in the case of a failure to pay the Make-Whole Amount, Interest and Late Charges when and as due, in which case only if such failure remains uncured for a period of at least ten (10) Trading Days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)the Company fails to remove any restrictive legend on any certificate, or any shares of Common Stock issued to the Holder upon conversion of any Notes acquired by the Holder under the Securities Purchase Agreement as and when required by such Notes or the Securities Purchase Agreement, and any such failure remains uncured for at least ten (10) days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)the occurrence of any default under, redemption of or acceleration prior to maturity of at least an aggregate of $500,000 of Indebtedness of the Company or any of its Subsidiaries, other than with respect to any Other Notes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, shall not be dismissed within forty-five (45) days of their initiation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under federal, state or foreign law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)the entry by a court of (A) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law, (B) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law, or (C) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a forty-five (45) consecutive days;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)a final judgment or judgments for the payment of money aggregating in excess of $500,000 are rendered against the Company and/or any of its Subsidiaries and which judgments are not, within forty-five (45) days after the entry thereof, bonded, discharged, settled or stayed pending appeal, or are not discharged within forty-five (45) days after the expiration of such stay;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)the Company and/or any Subsidiary, individually or in the aggregate, either (i) fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $500,000 due to any third party or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of 500,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time or the giving of notice, result in a default or event of default under any agreement binding the Company or any Subsidiary, which default or event of default would or is likely to have a material adverse effect on the business, assets, operations (including results thereof), liabilities, properties, condition (including financial condition) or prospects of the Company or any of its Subsidiaries, individually or in the aggregate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii)the failure of the applicable Registration Statement to be filed with the SEC on or prior to the date that is five (5) Trading Days after the applicable Filing Deadline (as defined in the Registration Rights Agreement) or the failure of the applicable Registration Statement to be declared effective by the SEC on or prior to the date that is five (5) Trading Days after the Effectiveness Deadline (as defined in the Registration Rights Agreement);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiii)other than as specifically set forth in another clause of this <u>Section 4(a)</u>, the Company or any Subsidiary breaches any representation or warranty, or any covenant or other term or condition of any Transaction Document, subject to any applicable grace period set forth therein where any such breach would result in a Material Adverse Effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiv)(xiv) a false or inaccurate representation or certification by the Company as to whether any Event of Default has occurred;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xv)any breach by the Company or any Subsidiary of, or failure to comply with, any provision of <u>Section 13</u> of this Note;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xvi)any Material Adverse Effect (as defined in the Securities Purchase Agreement) occurs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xvii)any provision of any Transaction Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company or any Subsidiary shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xviii)any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Event of Default Notice; Redemption or Conversion Upon Event of Default</u>. Upon the occurrence of an Event of Default with respect to this Note (or any Other Note), the Company shall, within one (1) Business Day deliver written notice thereof via electronic mail and overnight courier to the Holder (an "**Event of Default Notice**"). At any time after the earlier of the Holder's receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default until the end of the five (5) Trading Day period after such time as such Event of Default is subsequently cured or waived in accordance with the terms of this Note (and no other Event of Default then exists) the Holder may (i) either require the Company to redeem all or any portion of this Note by delivering written notice thereof (the "**Event of Default Redemption Notice**") to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem, (ii) or convert all or any portion of this Note

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by delivering a Conversion Notice to the Company pursuant to the procedure set forth in <u>Section 3(c)(i)</u>, at a price equal to the Event of Default Conversion Price. Each portion of this Note subject to redemption or conversion by the Company pursuant to this <u>Section 4(b)</u> shall be redeemed or converted by the Company at a price equal to the greater of (i) the product of (A) the Conversion Amount to be redeemed multiplied by (B) the Redemption Premium and (ii) the product of (X) the quotient of (a) the Conversion Amount to be redeemed divided by (b) the Event of Default Conversion Price multiplied by (Y) the product of (1) the Redemption Premium multiplied by (2) the greatest Closing Sale Price of the shares of Common Stock on any Trading Day during the period commencing on the date immediately preceding such Event of Default and ending on the date the Company makes the entire payment required to be made under this <u>Section 4(b)</u> (the "**Event of Default Redemption Price**"). "**Event of Default Conversion Price**" means, with respect to any Event of Default, that price which shall be the lowest of (i) the applicable Conversion Price in effect on the date of Event of Default, and (ii) the lesser of (A) eighty percent (80%) of the VWAP of the shares of Common Stock as of the Trading Day immediately preceding the delivery or deemed delivery of the applicable Event of Default Redemption Notice, and (B) eighty percent (80%) of the price computed as the quotient of (I) the sum of the VWAP of the shares of Common Stock for each of the five (5) Trading Days with the lowest VWAP of the shares of Common Stock during the ten (10) consecutive Trading Day period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable Event of Default Redemption Notice, divided by (II) five (5) (the "**Event of Default Measuring Period**"). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the shares of Common Stock during such Event of Default Measuring Period. Redemptions required by this <u>Section 4(b)</u> shall be made in accordance with the provisions of <u>Section 11</u>. Conversions required to be made by this <u>Section 4(b)</u> shall be made in accordance with the provisions of <u>Section 3</u>. To the extent redemptions required by this <u>Section 4(b)</u> are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this <u>Section 4(b)</u>, but subject to the beneficial ownership limitation in <u>Section 3(d)</u>, until the Event of Default Redemption Price (together with any Late Charges thereon and Make-Whole Amount) is paid in full, the Conversion Amount submitted for redemption under this <u>Section 4(b)</u> (together with any Late Charges thereon and Make-Whole Amount) may be converted, in whole or in part, by the Holder into shares of Common Stock pursuant to the terms of this Note. In the event of the Company's redemption of any portion of this Note under this <u>Section 4(b)</u>, the Holder's damages would be uncertain and difficult to estimate because of the parties' inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this <u>Section 4(b)</u> is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder's actual loss of its investment opportunity and not as a penalty. Any redemption of this Note upon an Event of Default shall not constitute an election of remedies by the Holder, and all other rights and remedies of the Holder shall be preserved.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Mandatory Redemption Upon Bankruptcy Event of Default</u>. Notwithstanding anything to the contrary herein, and notwithstanding any conversion that is then required or in process, upon any Bankruptcy Event of Default, whether occurring prior to or following the Maturity Date, the Company shall immediately pay to the Holder an amount in cash representing (i) all outstanding Principal, accrued and unpaid Interest (including Default Interest, as applicable), Make-Whole Amount and accrued and unpaid Late Charges on such Principal, Make-Whole Amount and Interest, multiplied by (ii) the Redemption Premium, in addition to any and all other amounts due hereunder, without the requirement for any notice or demand or other action by the Holder or any other person or entity, provided that the Holder may, in its sole discretion, waive such right to receive payment upon a Bankruptcy Event of Default, in whole or in part, and any such waiver shall not affect any other rights of the Holder hereunder, including any other rights in respect of such Bankruptcy Event of Default, any right to conversion, and any right to payment of the Event of Default Redemption Price or any other Redemption Price, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.RIGHTS UPON FUNDAMENTAL TRANSACTION**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Assumption</u>. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this <u>Section 5(a)</u> pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to each Holder, in exchange for such Notes, a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the Principal then outstanding and the Interest Rate of the Notes held by the Holder,

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having similar conversion rights as the Notes and having similar ranking and security to the Notes, and satisfactory to the Holder, and (ii) the Successor Entity (or its Parent Entity, as applicable) is a publicly traded corporation whose shares of common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the "Company" shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except for such items issuable under <u>Sections 6</u> and <u>15</u>, which shall continue to be receivable thereafter)) issuable upon the conversion or redemption of the Notes prior to such Fundamental Transaction, such shares of the publicly traded shares of common stock (or their equivalent) of the Successor Entity (or its Parent Entity, as applicable) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this <u>Section 5(a)</u> to permit the Fundamental Transaction without the assumption of this Note. The provisions of this <u>Section 5</u> shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Notice of a Change of Control; Redemption Right</u>. No later than ten (10) Trading Days prior to the consummation of a Change of Control (the "**Change of Control Date**"), but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via electronic mail and overnight courier to the Holder (a "**Change of Control Notice**"). At any time during the period beginning after the Holder's receipt of a Change of Control Notice or the Holder becoming aware of a Change of Control if a Change of Control Notice is not delivered to the Holder in accordance with the immediately preceding sentence (as applicable) and ending ten (10) Trading Days after the later of (A) the date of consummation of such Change of Control, (B) the date of receipt of such Change of Control Notice or (C) the date of the announcement of such Change of Control, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof ("**Change of Control Redemption Notice**") to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this <u>Section 5</u> shall be redeemed by the Company in cash at a price equal to the product of (x) the Change of Control Redemption Premium multiplied by (y) the Conversion Amount being redeemed (the "**Change of Control Redemption Price**"). Redemptions required by this <u>Section 5</u> shall be made in accordance with the provisions of <u>Section 11</u> and shall have priority to payments to stockholders in connection with such Change of Control. To the extent redemptions required by this <u>Section 5(b)</u> are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this <u>Section 5</u>, but subject to <u>Section 3(d)</u>, until the Change of Control Redemption Price (together with any Late Charges thereon and Make-Whole Amount) is paid in full, the Conversion Amount submitted for redemption under this <u>Section 5(b)</u> (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder into shares of Common Stock pursuant to <u>Section 3</u>. In the event of the Company's redemption of any portion of this Note under this <u>Section 5(b)</u>, the Holder's damages would be uncertain and difficult to estimate because of the parties' inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this <u>Section 5(b)</u> is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder's actual loss of its investment opportunity and not as a penalty.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Purchase Rights</u>. In addition to any adjustments pursuant to <u>Section 7</u> below, if at any time the Company grants, issues, or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of shares of Common Stock (the "**Purchase Rights**"), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or

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restrictions on the convertibility of this Note (pursuant to <u>Section 3(d)</u> or otherwise)) immediately prior to the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights, <u>provided</u>, <u>however</u>, that to the extent the Holder's right to participate in any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, the Holder shall not be entitled to participate in such Purchase Right to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (and beneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance (and, if such Purchase Right has an expiration date, maturity date or other similar provision, such term shall be extended by such number of days held in abeyance, if applicable) for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance (and, if such Purchase Right has an expiration date, maturity date or other similar provision, such term shall be extended by such number of days held in abeyance, if applicable)) to the same extent as if there had been no such limitation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Other Corporate Events</u>. In addition to, and not in substitution for, any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a "**Corporate Event**"), the Company shall make appropriate provision to ensure that the Holder shall thereafter have the right to receive, upon a conversion of this Note, at the Holder's option (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note pursuant to <u>Section 3(d)</u> or otherwise), or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this <u>Section 6</u> shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.RIGHTS UPON ISSUANCE OF OTHER SECURITIES**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Record Date</u>. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or Convertible Securities, or (B) to subscribe for or purchase shares of Common Stock, preferred stock of the Company, Options, or Convertible Securities, then such record date shall be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Adjustment of Conversion Price upon Subdivision or Combination of Common Stock</u>. Without limiting any provision of <u>Section 6</u>, <u>Section 7(a)</u> or <u>Section 15</u>, if the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced. Without limiting any provision of <u>Section 6</u>, <u>Section 7(a)</u> or <u>Section 15</u>, if the Company at any time on or after the Subscription Date combines (by any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. Any adjustment pursuant to this <u>Section 7(b)</u> shall become effective immediately after the effective date of such stock split, stock dividend, stock combination or similar transaction. If any event requiring an adjustment under this <u>Section 7(b)</u> occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect the occurrence of such event.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Subsequent Equity Sales</u>. If, at any time while this Note is outstanding, the Company or any Subsidiary, as applicable, sells or grants any Option to purchase, or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any Option to purchase or other disposition), any shares of Common Stock or Common Stock Equivalents (as defined in the Securities Purchase Agreement) entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the Conversion Price (such lower price, the "**Base Conversion Price**" and such issuances, collectively, a "**Dilutive Issuance**") (if the holder of the shares of Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, Options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance, the Conversion Price shall be reduced to equal the Base Conversion Price (subject to adjustment for reverse and forward stock splits, recapitalizations and similar transactions following the date of the Securities Purchase Agreement). The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any shares of Common Stock or Common Stock Equivalents subject to this <u>Section 7(c)</u> indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the "**Dilutive Issuance Notice**"). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this <u>Section 7(c)</u> upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Conversion Notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Reserved</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Calculations</u>. All calculations under this <u>Section 7</u> shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of shares of Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Voluntary Adjustment by Company</u>. Subject to the rules and regulations of the Principal Market, the Company may at any time during the term of this Note, with the prior written consent of the Required Holders (as defined in the Securities Purchase Agreement), reduce (but not increase) the then current Conversion Price of each of the Notes to any amount and for any period of time deemed appropriate by the board of directors of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.INSTALLMENT CONVERSION OR REDEMPTION**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>General</u>. On each applicable Installment Date, provided there has been no Equity Conditions Failure, the Company shall pay to the Holder of this Note the applicable Installment Amount due on such date by converting such Installment Amount in accordance with this <u>Section 8</u> (an "**Installment Conversion**"); provided, however, that the Company may, at its option following notice to the Holder as set forth below, pay the Installment Amount by redeeming such Installment Amount in cash (a "**Installment Redemption**") or by any combination of an Installment Conversion and an Installment Redemption so long as all of the outstanding applicable Installment Amount due on any Installment Date shall be converted and/or redeemed by the Company on the applicable Installment Date, subject to the provisions of this <u>Section 8</u>. On the date which is the eleventh (11<sup>th</sup>) Trading Day prior to each Installment Date, the Company shall deliver written notice (each, an "**Installment Notice**" and the date the Holder receives such notice is referred to as the "**Installment Notice Date**"), to the Holder and such Installment Notice shall (i) either (A) confirm that the applicable Installment Amount of such Holder's Note shall be converted in whole pursuant to an Installment Conversion or (B) (1) state that the Company elects to redeem for cash, or is required to redeem for cash in accordance with the provisions of the Note, in whole or in part, the applicable Installment Amount pursuant to an Installment Redemption and (2) specify the portion of such Installment Amount which the Company elects or is required to redeem pursuant to an Installment Redemption (such amount to be redeemed in cash, the "**Installment Redemption Amount**") and the portion of the applicable Installment Amount, if any, with respect to which the Company will, and is permitted to, effect an Installment Conversion (such amount of the applicable Installment Amount so specified to be so converted pursuant to this <u>Section 8</u> is referred to herein as the "**Installment Conversion Amount**"), which amounts when added together, must at least equal the entire applicable Installment Amount and (ii) if the applicable Installment Amount is to be paid, in whole or in part, pursuant to an Installment Conversion, certify that there is not

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then an Equity Conditions Failure as of the applicable Installment Notice Date. Each Installment Notice shall be irrevocable. If the Company does not timely deliver an Installment Notice in accordance with this <u>Section 8</u> with respect to a particular Installment Date, then the Company shall be deemed to have delivered an irrevocable Installment Notice confirming an Installment Conversion of the entire Installment Amount and shall be deemed to have certified that there is not then an Equity Conditions Failure in connection with such Installment Conversion. Except as expressly provided in this <u>Section 8</u>, an Installment Notice shall apply to each outstanding Note and the Company shall convert and/or redeem the applicable Installment Amount of each outstanding Note pursuant to this <u>Section 8</u> in the same ratio of cash and shares. The applicable Installment Conversion Amount (whether set forth in the applicable Installment Notice or by operation of this <u>Section 8</u>) shall be converted in accordance with <u>Section 8(b)</u> and the applicable Installment Redemption Amount shall be redeemed in accordance with <u>Section 8(c)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Mechanics of Installment Conversion</u>. Subject to <u>Section 3(d)</u>, if the Company delivers an Installment Notice or is deemed to have delivered an Installment Notice certifying that such Installment Amount is being paid, in whole or in part, in an Installment Conversion in accordance with <u>Section 8(a)</u>, then the Holder may, at any time thereafter, convert such Installment Conversion Amount, in whole or in part, at the Installment Conversion Price in accordance with the conversion procedures set forth in <u>Section 3</u> hereunder (with "Installment Conversion Price" replacing "Conversion Price" for all purposes therein), *mutatis mutandis*; provided, however, that the Equity Conditions are then satisfied (or waived in writing by the Holder) on the applicable Installment Date and an Installment Conversion is not otherwise prohibited under any other provision of this Note. If the Company confirmed (or is deemed to have confirmed by operation of <u>Section 8(a)</u>) the conversion of the applicable Installment Conversion Amount, in whole or in part, and there was no Equity Conditions Failure as of the applicable Installment Notice Date (or is deemed to have certified that the Equity Conditions in connection with any such conversion have been satisfied by operation of <u>Section 8(a)</u>) but an Equity Conditions Failure occurred between the applicable Installment Notice Date and any time through the applicable Installment Date or Conversion Date, as applicable (the "**Interim Installment Period**"), the Company shall provide the Holder a subsequent notice to that effect. If there is an Equity Conditions Failure (which is not waived in writing by the Holder) during such Interim Installment Period or an Installment Conversion is not otherwise permitted under any other provision of this Note (other than to the extent that the Maximum Percentage has been or would be exceeded), then, at the option of the Holder designated in writing to the Company, the Holder may require the Company to do any one or more of the following: (i) the Company shall redeem all or any part designated by the Holder of the unconverted Installment Conversion Amount (such designated amount is referred to as the "**Designated Redemption Amount**") and the Company shall pay to the Holder within two (2) Business Days of such Installment Date, by wire transfer of immediately available funds, an amount in cash equal to 110% of such Designated Redemption Amount and/or (ii) the Installment Conversion shall be null and void with respect to all or any part designated by the Holder of the unconverted Installment Conversion Amount and the Holder shall be entitled to all the rights of a holder of this Note with respect to such designated part of the Installment Conversion Amount; provided, however, the Conversion Price for such designated part of such unconverted Installment Conversion Amount shall thereafter be adjusted to equal the lesser of (A) the Installment Conversion Price as in effect on the date on which the Holder voided the Installment Conversion and (B) the Installment Conversion Price that would be in effect on the date on which the Holder delivers a Conversion Notice relating thereto. If the Company fails to redeem any Designated Redemption Amount by the second (2nd) Business Day following the applicable Installment Date by payment of such amount by such date, then the Holder shall have the rights set forth in <u>Section 4(b)</u> and <u>Section 4(c)</u> as if the Company failed to pay the applicable Installment Redemption Price (as defined below) and all other rights under this Note (including, without limitation, such failure constituting an Event of Default described in <u>Section 4(a)</u>). The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of any shares of Common Stock in any Installment Conversion hereunder. Each Installment Conversion Amount shall be applied first to the Installment Amount due on the Installment Date nearest to the Maturity Date. Notwithstanding anything to the contrary contained in this <u>Section 8(b)</u>, if the Installment Conversion Price is less than the Floor Price, then in addition to the issuance of Conversion Shares (which issuance shall be at the Floor Price), the Company shall pay to the Holder cash as a true-up (the "**Cash True-Up Amount**"). The Cash True-Up Amount means an amount in cash, to be delivered by wire transfer of immediately available funds pursuant to wire instructions delivered to the Company by the Holder in writing, equal to the product obtained by multiplying (A) the higher of (I) the highest price that the Common Stock trades at on the Principal Market on the Trading Day immediately preceding the relevant Conversion Date and (II) the applicable Conversion Price and (B) the difference obtained by subtracting (I) the number of shares of Common Stock delivered (or to be delivered) to the Holder on the applicable Share Delivery Deadline with respect to such Conversion from (II) the quotient obtained by dividing (x) the applicable Conversion Amount that the Holder has elected to be the subject of the applicable Conversion, by (y) the applicable Conversion Price without giving effect

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to the Floor Price. The intent of the Cash True-Up Amount is to compensate the Holder for its loss in value due to the condition that a Conversion Amount cannot be converted into shares of Common Stock at a Conversion Price less than the Floor Price. Any such adjustment must be approved by the Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Mechanics of Installment Redemption</u>. If the Company elects or is required to effect an Installment Redemption, in whole or in part, in accordance with <u>Section 8(a)</u>, then the Installment Redemption Amount, if any, shall be redeemed by the Company in cash on the applicable Installment Date by wire transfer to the Holder of immediately available funds in an amount equal to 100% of the applicable Installment Redemption Amount (the "**Installment Redemption Price**"). If the Company fails to redeem such Installment Redemption Amount on such Installment Date by payment of the Installment Redemption Price, then, at the option of the Holder designated in writing to the Company (any such designation shall be a "**Conversion Notice**" for purposes of this Note), the Holder may require the Company to convert all or any part of the Installment Redemption Amount at the Installment Conversion Price (determined as of the date of such designation). Conversions required by this <u>Section 8(c)</u> shall be made in accordance with the provisions of <u>Section 3(c)</u>. Notwithstanding anything to the contrary in this <u>Section 8(c)</u>, but subject to <u>Section 3(d)</u>, until the Installment Redemption Price (together with any Late Charges thereon and Make-Whole Amount) is paid in full, the Installment Redemption Amount (together with any Late Charges thereon) may be converted, in whole or in part, by the Holder into shares of Common Stock pursuant to <u>Section 3</u>. In the event the Holder elects to convert all or any portion of the Installment Redemption Amount prior to the applicable Installment Date as set forth in the immediately preceding sentence, the Installment Redemption Amount so converted shall be deducted from the Installment Amounts relating to the applicable Installment Date(s) as set forth in the applicable Conversion Notice. Redemptions required by this <u>Section 8(c)</u> shall be made in accordance with the provisions of <u>Section 11</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Acceleration of Installment Amounts</u>. Notwithstanding anything herein to the contrary, during any period commencing on an Installment Date (a "**Current Installment Date**") and ending on the Trading Day immediately prior to the next Installment Date, at the option of the Holder, at one or more times during any calendar month, but not exceeding an amount equal to three (3) aggregate payments of the Installment Amount (unless otherwise agreed to between the Holder and the Company), the Holder may convert an additional Installment Amount (each, an "**Acceleration**", and each such amount, an "**Acceleration Amount**", and the Conversion Date of any such Acceleration, each an "**Acceleration Date**"), in whole or in part, at the Acceleration Conversion Price of such Acceleration Date in accordance with the conversion procedures set forth in <u>Section 3</u> hereunder (with "Acceleration Conversion Price" replacing "Conversion Price" for all purposes therein), *mutatis mutandis*. Each Acceleration Amount shall be applied first to the Installment Amount due on the Installment Date nearest to the Maturity Date. Notwithstanding anything to the contrary contained in this <u>Section 8(d)</u>, if the Acceleration Conversion Price is less than the Floor Price, then in addition to the issuance of Conversion Shares (which issuance shall be at the Floor Price), the Company shall pay to the Holder the Cash True-Up Amount. Any such adjustment must be approved by the Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Deferred Installment Amount</u>. Notwithstanding any provision of this <u>Section 8</u> to the contrary, the Holder may, at its option and in its sole discretion, during any period commencing on a Current Installment Date and ending on the Trading Day immediately prior to the next Installment Date, at one or more times during any calendar month, but not exceeding an amount equal to six (6) aggregate payments of the Installment Amount, deliver a written notice to the Company no later than the Trading Day immediately prior to the applicable Installment Date electing to have the payment of all or any portion of an Installment Amount payable on such Installment Date deferred (such amount deferred, the "**Deferral Amount**", and such deferral, each a "**Deferral**") until any subsequent Installment Date selected by the Holder, in its sole discretion, in which case, the Deferral Amount shall be added to, and become part of, such subsequent Installment Amount and such Deferral Amount shall continue to accrue Interest hereunder. Any notice delivered by the Holder pursuant to this <u>Section 8(e)</u> shall set forth (i) the Deferral Amount and (ii) the date that such Deferral Amount shall now be payable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Holder Optional Redemption; Subsequent Placement</u>. Subject to the provisions of this <u>Section 8(f)</u>, if, at any time while this Note is outstanding, the Company shall carry out one or more Subsequent Placements, the Holder shall have the right to require the Company to first use up to the lower of (i) 20% of the net proceeds of such Subsequent Placement and (ii) 50% of the then principal amount of this Note to redeem all or a portion of this Note at a price in cash (such price, the "**Holder Optional Redemption Price**") to equal to 100% multiplied by the sum of the principal amount subject to the Holder Optional Redemption, plus accrued but unpaid Interest, plus, the Make-Whole

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Amount, plus Late Charges, if any, plus liquidated damages, if any, and any other amounts, if any, then owing to the Holder in respect of this Note (a "**Holder Optional Redemption**"). The Company shall deliver notice to the Holder of the Subsequent Placement at least ten (10) Trading Days prior to the closing of the Subsequent Placement ("**Pre-Notice**"), which Pre-Notice shall ask such Holder if it wants to review the details of such financing (such additional notice, a "**Holder Optional Redemption Notice**" and the date such Holder Optional Redemption Notice is deemed delivered hereunder, the "**Holder Optional Redemption Notice Date**"). If the Holder exercises its right herein to require a Holder Optional Redemption by delivering written notice to the Company within ten (10) Trading Days of the Holder Optional Redemption Notice Date, the Company shall effect the Holder Optional Redemption and pay the Holder Optional Redemption Price to the Holder on or prior to the tenth (10th) Trading Day following the consummation of the Subsequent Placement (the "**Holder Optional Redemption Date**"). Notwithstanding the foregoing, this <u>Section 8(f)</u> shall not apply with respect to Excluded Securities, except that no securities issued in a Variable Rate Transaction (as defined in the Securities Purchase Agreement) shall be Excluded Securities unless otherwise expressly stated in the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)<u>Company Optional Redemption</u>. At any time the Company shall have the right to redeem all or any portion of the Conversion Amount then remaining under this Note (the "**Company Optional Redemption Amount**") on the Company Optional Redemption Date (defined below) (a "**Company Optional Redemption**"). The portion of this Note subject to redemption pursuant to this <u>Section 8(g)</u> shall be redeemed by the Company in cash at a price (the "**Company Optional Redemption Price**") equal to the greater of (i) 100% of the Conversion Amount being redeemed as of the Company Optional Redemption Date and (ii) the product of (1) the quotient of (a) the Conversion Amount to be redeemed divided by (b) the Redemption Conversion Price multiplied by (2) the average Closing Sale Price of the shares of Common Stock during the period commencing on the date immediately preceding such Company Optional Redemption Notice Date and ending on the Trading Day immediately prior to the date the Company makes the entire payment required to be made under this <u>Section 8(g)</u>. The Company may exercise its right to require redemption under this <u>Section 8(g)</u> by delivering a written notice thereof by electronic mail and overnight courier to the Holder (the "**Company Optional Redemption Notice**" and the date the Holder receives such notice is referred to as the "**Company Optional Redemption Notice Date**"). The Company may deliver only one Company Optional Redemption Notice in any twenty (20) Trading Day period and any such Company Optional Redemption Notice shall be irrevocable. The Company Optional Redemption Notice shall (x) state the date on which the Company Optional Redemption shall occur (the "**Company Optional Redemption Date**") which date shall be at least ten (10) Trading Days following the Company Optional Redemption Notice Date, and (y) state the Conversion Amount of the Note which is being redeemed in such Company Optional Redemption Amount on the Company Optional Redemption Date. All Conversion Amounts converted by the Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of this Note required to be redeemed on the Company Optional Redemption Date. Redemptions made pursuant to this <u>Section 8(g)</u> shall be made in accordance with <u>Section 11</u>. In the event of the Company's redemption of any portion of this Note under this <u>Section 8(g)</u>, the Holder's damages would be uncertain and difficult to estimate because of the parties' inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this <u>Section 8(g)</u> is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder's actual loss of its investment opportunity and not as a penalty. For the avoidance of doubt, the Company shall have no right to effect a Company Optional Redemption if any Event of Default has occurred and continuing, but any Event of Default shall have no effect upon the Holder's right to convert this Note in its discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.NONCIRCUMVENTION**. The Company hereby covenants and agrees that the Company shall not, by amendment of its Charter (as defined in the Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and shall at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. Without limiting the generality of the foregoing or any other provision of this Note or the other Transaction Documents, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon conversion of this Note above the Conversion Price then in effect, and (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of shares of Common Stock upon the conversion of this Note. Notwithstanding anything herein to the contrary, if after sixty (60) days following the Issuance Date, the Holder is not permitted to convert this Note in full for any reason (other than pursuant to restrictions set forth

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in <u>Section 3(d)</u> hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining such consents or approvals as necessary to permit such conversion into shares of Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.RESERVATION OF AUTHORIZED SHARES**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Reservation</u>. So long as any Notes remain outstanding, the Company shall at all times reserve at least 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding (without regard to any limitations on conversions and assuming such Notes remain outstanding until the Maturity Date) at the Floor Price (the "**Required Reserve Amount**"). The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among the holders of the Notes based on the Original Principal Amount of the Notes held by each Holder on the Issuance Date or increase in the number of reserved shares, as the case may be (the "**Authorized Share Allocation**"). In the event that a Holder shall sell or otherwise transfer any of such holder's Notes, each transferee shall be allocated a pro rata portion of such Holder's Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by such holders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Insufficient Authorized Shares</u>. If, notwithstanding <u>Section 10(a)</u>, and not in limitation thereof, at any time while any of the Notes remain outstanding, the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an "**Authorized Share Failure**"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders' approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. In the event that the Company is prohibited from issuing shares of Common Stock pursuant to the terms of this Note due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the "**Authorized Failure Shares**"), in lieu of delivering such Authorized Failure Shares to the Holder, the Company shall pay cash in exchange for the redemption of such portion of the Conversion Amount convertible into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorized Failure Shares and (y) the greatest Closing Sale Price of the shares of Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Conversion Notice with respect to such Authorized Failure Shares to the Company and ending on the Trading Day immediately prior to the date the Company makes the entire payment required to be made under this <u>Section 10(b)</u>; and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorized Failure Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained in this <u>Section 10</u> shall limit any obligations of the Company under any provision of the Securities Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.REDEMPTIONS**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Mechanics</u>. The Company shall deliver the applicable Event of Default Redemption Price to the Holder in cash within five (5) Business Days after the Company's receipt of the Holder's Event of Default Redemption Notice in accordance with <u>Section 4(b)</u>. If the Holder has submitted a Change of Control Redemption Notice in accordance with <u>Section 5(b)</u>, the Company shall deliver the applicable Change of Control Redemption Price to the Holder in cash concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control, and within five (5) Business Days after the Company's receipt of such notice otherwise. The Company shall deliver the applicable Company Optional Redemption Price to the Holder in cash on the applicable Company Optional Redemption Date in accordance with <u>Section 8(g)</u>. If the Holder has elected optional redemption pursuant to <u>Section 8(f)</u> in response to its receipt of the Holder Optional Redemption Notice, the Company shall deliver the applicable Holder Optional Redemption Price to the Holder in cash on the applicable Holder

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Optional Redemption Date. Notwithstanding anything herein to the contrary, in connection with any redemption hereunder at a time the Holder is entitled to receive a cash payment under any of the other Transaction Documents, at the option of the Holder delivered in writing to the Company, the applicable Redemption Price hereunder shall be increased by the amount of such cash payment owed to the Holder under such other Transaction Document and, upon payment in full or conversion in accordance herewith, shall satisfy the Company's payment obligation under such other Transaction Document. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with <u>Section 18(d)</u>) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the applicable Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption (or for which the Company elected optional redemption) and for which the applicable Redemption Price (together with any Late Charges thereon and Make-Whole Amount) has not been paid. Upon the Company's receipt of such notice, (x) the applicable Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with <u>Section 18(d)</u>), to the Holder, and in each case the principal amount of this Note or such new Note (as the case may be) shall be increased by an amount equal to the difference between (1) the applicable Redemption Price (as the case may be, and as adjusted pursuant to this <u>Section 11</u>, if applicable) minus (2) the Principal portion of the Conversion Amount submitted for redemption and (z) the Conversion Price of this Note or such new Notes (as the case may be) shall be automatically adjusted with respect to each conversion effected thereafter by the Holder to the lowest of (A) the Conversion Price as in effect on the date on which the applicable Redemption Notice is voided, (B) seventy-five percent (75%) of the lowest Closing Bid Price of the shares of Common Stock during the period beginning on and including the date on which the applicable Redemption Notice is delivered to the Company and ending on and including the date on which the applicable Redemption Notice is voided and (C) seventy-five percent (75%) of the quotient of (I) the sum of the two (2) lowest VWAPs of the shares of Common Stock during the ten (10) consecutive Trading Day period ending and including the applicable Conversion Date divided by (II) two (2) (it being understood and agreed that all such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period). The Holder's delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company's obligations to make any payments of Late Charges and Make-Whole Amount, which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Redemption by Other Holders</u>. Upon the Company's receipt of notice from any of the holders of the Other Notes for redemption or repayment (each, an "**Other Redemption Notice**"), the Company shall immediately, but no later than one (1) Business Day of its receipt thereof, forward to the Holder via electronic mail a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is two (2) Business Days prior to the Company's receipt of the Holder's applicable Redemption Notice and ending on and including the date which is two (2) Business Days after the Company's receipt of the Holder's applicable Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes (including the Holder) based on the principal amount of the Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven (7) Business Day period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.VOTING RIGHTS.** The Holder shall have no voting rights as the holder of this Note, except as required by law and as expressly provided in this Note**.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.COVENANTS**. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Rank</u>. All payments due under this Note shall (i) rank *pari passu* with all Other Notes and (ii) be senior to all other Indebtedness of the Company and its Subsidiaries except for such debt that is set forth in Schedule 3(q) to the Securities Purchase Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Incurrence of Indebtedness</u>. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, (i) incur or guarantee, assume or suffer to exist any Indebtedness that is senior to Indebtedness under the Notes other than Permitted Indebtedness, or (ii) increase the amount owed under any existing Indebtedness, as set forth in Schedule 3(q) to the Securities Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Existence of Liens</u>. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, "**Liens**") other than Permitted Liens.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Restricted Payments</u>. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than the Notes) whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, (i) an event constituting an Event of Default has occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute an Event of Default has occurred and is continuing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Restriction on Redemption and Cash Dividends</u>. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on any of its capital stock if at the time such payment is due or is otherwise made or, after giving effect to such payment, (i) an event constituting an Event of Default has occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute an Event of Default has occurred and is continuing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<u>Restriction on Transfer of Assets</u>. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, sell, lease, license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of any assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by the Company and its Subsidiaries in the ordinary course of business consistent with its past practice and (ii) sales of inventory and product in the ordinary course of business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)<u>Maturity of Indebtedness</u>. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, permit any Indebtedness of the Company or any of its Subsidiaries owed to Fiza Investments Limited ("**Fiza**") or its affiliates to mature or accelerate prior to the date that is ninety (90) calendar days after the Maturity Date regardless of anything to the contrary contained in the terms of such Indebtedness.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)<u>Change in Nature of Business</u>. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by or publicly contemplated to be conducted by the Company and each of its Subsidiaries on the Subscription Date or any business substantially related or incidental thereto. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure or purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Preservation of Existence, Etc</u>. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)<u>Maintenance of Properties, Etc</u>. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)<u>Maintenance of Intellectual Property</u>. The Company shall, and shall cause each of its Subsidiaries to, take all action necessary or advisable to maintain all of the Intellectual Property (as defined in the Securities Purchase Agreement) of the Company and/or any of its Subsidiaries that are necessary or material to the conduct of its business in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)<u>Maintenance of Insurance</u>. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)<u>Transactions with Affiliates</u>. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any affiliate, except transactions in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable arm's length transaction with a Person that is not an affiliate thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)<u>Restricted Issuances</u>. The Company shall not, directly or indirectly, without the prior written consent of the holders of a majority in aggregate principal amount of the Notes then outstanding, (i) issue any Notes (other than as contemplated by the Securities Purchase Agreement and the Notes) or (ii) issue any other securities that would cause a breach or default under the Notes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)<u>Independent Investigation</u>. At the request of the Holder either (x) at any time when an Event of Default has occurred and is continuing, (y) upon the occurrence of an event that with the passage of time or giving of notice would constitute an Event of Default or (z) at any time the Holder reasonably believes an Event of Default may have occurred or be continuing, the Company shall hire an independent, reputable investment bank selected by the Company and approved by the Holder to investigate as to whether any breach of this Note has occurred (the "**Independent Investigator**"). If the Independent Investigator determines that such breach of this Note has occurred, the Independent Investigator shall notify the Company of such breach and the Company shall deliver written notice to each holder of a Note regarding such breach. In connection with such investigation, the Independent Investigator may, during normal business hours, inspect all contracts, books, records, personnel, offices and other facilities and properties of the Company and its Subsidiaries and, to the extent available to the Company after the Company uses reasonable efforts to obtain them, the records of its legal advisors and accountants (including the accountants' work papers) and any books of account, records, reports and other papers not contractually required of the Company to be confidential or secret, or subject to attorney-client or other evidentiary privilege, and the Independent Investigator may make such copies and inspections thereof as the Independent Investigator may reasonably request. The Company shall furnish the Independent Investigator with such financial and operating data and other information with respect to the business and properties of the Company as the Independent Investigator may reasonably request. The Company shall permit the Independent Investigator to discuss the affairs, finances and accounts of the Company with, and to make proposals and furnish advice with respect thereto to, the Company's officers, directors, key employees and independent public accountants or any of them (and by this provision the Company authorizes said accountants to discuss with such Independent Investigator the finances and affairs of the Company and any Subsidiaries), all at such reasonable times, upon reasonable notice, and as often as may be reasonably requested.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.INTENTIONALLY OMITTED**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.DISTRIBUTION OF ASSETS**. In addition to any adjustments pursuant to <u>Section 7</u>, if the Company shall declare or make any dividend or other distributions of its assets (or rights to acquire its assets) to any or all holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (the "Distributions"), then the Holder shall be entitled to such Distributions as if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility

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of this Note) immediately prior to the date on which a record is taken for such Distribution or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for such Distributions (provided, however, that to the extent that the Holder's right to participate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time or times, if ever, as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.AMENDING THE TERMS OF THIS NOTE**. Except for <u>Section 3(d)</u>, which may not be amended, modified or waived by the parties hereto, the prior written consent of the Holder shall be required for any change, waiver or amendment to this Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17.TRANSFER.** This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of <u>Section 2(g)</u> of the Securities Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.REISSUANCE OF THIS NOTE**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Transfer</u>. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company shall forthwith issue and deliver upon the order of the Holder a new Note to the transferee (in accordance with <u>Section 18(d)</u>), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred, a new Note (in accordance with <u>Section 18(d)</u>) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of <u>Section 3(c)(iii)</u> following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Lost, Stolen or Mutilated Note</u>. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with <u>Section 18(d)</u>) representing the outstanding Principal.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Note Exchangeable for Different Denominations</u>. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with <u>Section 18(d)</u> and in principal amounts of at least $1,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note shall represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Issuance of New Notes</u>. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to <u>Section 18(a)</u> or <u>Section 18(c)</u>, the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Make-Whole Amount, Interest and Late Charges on the Principal, Interest and Make-Whole Amount of this Note, from the Issuance Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF**. The remedies provided in this Note shall be cumulative and in addition to all other remedies

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available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder's right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. No failure on the part of the Holder to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Holder of any right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. In addition, the exercise of any right or remedy of the Holder at law or equity or under this Note or any of the documents shall not be deemed to be an election of Holder's rights or remedies under such documents or at law or equity. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder shall cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company's compliance with the terms and conditions of this Note (including, without limitation, compliance with <u>Section 7</u>).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**20.PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS**. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors' rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys' fees and disbursements. The Company expressly acknowledges and agrees that no amounts due under this Note shall be affected, or limited, by the fact that the purchase price paid for this Note was less than the original Principal amount hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**21.CONSTRUCTION; HEADINGS**. This Note shall be deemed to be jointly drafted by the Company and the initial Holder and shall not be construed against any such Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms "including," "includes," "include" and words of like import shall be construed broadly as if followed by the words "without limitation." The terms "herein," "hereunder," "hereof" and words of like import refer to this entire Note instead of just the provision in which they are found. Unless expressly indicated otherwise, all section references are to sections of this Note. Terms used in this Note and not otherwise defined herein, but defined in the other Transaction Documents, shall have the meanings ascribed to such terms on the Closing Date in such other Transaction Documents unless otherwise consented to in writing by the Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.FAILURE OR INDULGENCE NOT WAIVER**. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. Notwithstanding the foregoing, nothing contained in this <u>Section 22</u> shall permit any waiver of any provision of <u>Section 3(d)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**23.DISPUTE RESOLUTION**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Submission to Dispute Resolution</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price, a VWAP or a fair market value or the arithmetic calculation of an Alternative Conversion Rate, or the applicable Redemption Price (as the case may be) (including, without limitation, a dispute relating to the

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determination of any of the foregoing), the Company or the Holder (as the case may be) shall submit the dispute to the other party via electronic mail (A) if by the Company, within two (2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by the Holder at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to promptly resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price, such VWAP or such fair market value, or the arithmetic calculation of such Alternative Conversion Rate or such applicable Redemption Price (as the case may be), at any time after the second (2nd) Business Day following such initial notice by the Company or the Holder (as the case may be) of such dispute to the Company or the Holder (as the case may be), then the Holder may, at its sole option, select an independent, reputable investment bank to resolve such dispute.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)The Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this <u>Section 23</u> and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5<sup>th</sup>) Business Day immediately following the date on which the Holder selected such investment bank (the "**Dispute Submission Deadline**") (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the "**Required Dispute Documentation**") (it being understood and agreed that if either the Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and the Holder or otherwise requested by such investment bank, neither the Company nor the Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)The Company and the Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and the Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank's resolution of such dispute shall be final and binding upon all parties absent manifest error.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Miscellaneous</u>. The Company expressly acknowledges and agrees that (i) this <u>Section 23</u> constitutes an agreement to arbitrate between the Company and the Holder (and constitutes an arbitration agreement) under § 7501, et seq. of the New York Civil Practice Law and Rules ("**CPLR**") and that the Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 23, (ii) a dispute relating to a Conversion Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of shares of Common Stock occurred under <u>Section 7(a)</u>, (B) the consideration per share at which an issuance or deemed issuance of shares of Common Stock occurred, and (C) whether an agreement, instrument, security or the like constitutes and Option or Convertible Security, (iii) the terms of this Note and each other applicable Transaction Document shall serve as the basis for the selected investment bank's resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Note and any other applicable Transaction Documents, (iv) the Holder (and only the Holder), in its sole discretion, shall have the right to submit any dispute described in this <u>Section 23</u> to any state or federal court sitting in The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this <u>Section 23</u> and (v) nothing in this <u>Section 23</u> shall limit the Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this <u>Section 23</u>).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24.NOTICES; CURRENCY; PAYMENTS**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Notices</u>. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall

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provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company shall give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grant, issuances, or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Currency</u>. All dollar amounts referred to in this Note are in United States Dollars ("**U.S. Dollars**"), and all amounts owing under this Note shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. "**Exchange Rate**" means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Note, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation (it being understood and agreed that where an amount is calculated with reference to, or over, a period of time, the date of calculation shall be the final date of such period of time).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Payments</u>. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by a certified check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Holders, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement), provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder's wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day. Any amount of Principal or other amounts due under the Transaction Documents which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of eighteen percent (18%) per annum from the date such amount was due until the same is paid in full ("**Late Charge**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**25.CANCELLATION**. After all Principal, accrued Interest, Late Charges, Make-Whole Amount and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**26.WAIVER OF NOTICE**. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**27.GOVERNING LAW**. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Except as otherwise required by <u>Section 23</u>, the Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein (i) shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company's obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder or (ii) shall limit, or shall be deemed or construed to limit, any provision of <u>Section 23</u>. **THE** 

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**COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.** The choice of the laws of the State of New York as the governing law of this Note is a valid choice of law and would be recognized and given effect to in any action brought before a court of competent jurisdiction under New York law except for those laws (i) which such court considers to be procedural in nature, (ii) which are revenue or penal laws or (iii) the application of which would be inconsistent with public policy, as such term is interpreted under the laws of the State of New York. The Company or any of their respective properties, assets or revenues does not have any right of immunity under New York law, from any legal action, suit or proceeding, from the giving of any relief in any such legal action, suit or proceeding, from set-off or counterclaim, from the jurisdiction of New York or United States federal court, from service of process, attachment upon or prior to judgment, or attachment in aid of execution of judgment, or from execution of a judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of a judgment, in any such court, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Note; and, to the extent that the Company, or any of its properties, assets or revenues may have or may hereafter become entitled to any such right of immunity in any such court in which proceedings may at any time be commenced, the Company hereby waives such right to the extent permitted by law and hereby consents to such relief and enforcement as provided in this Note and the other Transaction Documents

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**28.JUDGMENT CURRENCY**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)If for the purpose of obtaining or enforcing judgment against the Company in any court in any jurisdiction it becomes necessary to convert into any other currency (such other currency being hereinafter in this <u>Section 28</u> referred to as the "**Judgment Currency**") an amount due in U.S. dollars under this Note, the conversion shall be made at the Exchange Rate prevailing on the Trading Day immediately preceding:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)the date actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction that shall give effect to such conversion being made on such date; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this <u>Section 28(a)(ii)</u> being hereinafter referred to as the "**Judgment Conversion Date**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)If in the case of any proceeding in the court of any jurisdiction referred to in <u>Section 28(a)(ii)</u> above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, shall produce the amount of US dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Any amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.SEVERABILITY**. If any provision of this Note is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Note so long as this Note as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties shall endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**30.MAXIMUM PAYMENTS**. Without limiting <u>Section 9(d)</u> of the Securities Purchase Agreement, nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**31.CERTAIN DEFINITIONS**. For purposes of this Note, the following terms shall have the following meanings:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)"**Acceleration Conversion Price**" means, with respect to any given Acceleration Date, the lower of (i) the Installment Conversion Price for such Current Installment Date related to such Acceleration Date and (ii) 95% of the lowest VWAP of the shares of Common Stock during the ten (10) consecutive Trading Day period ending and including the Trading Day immediately prior to such Acceleration Date, all such determinations to be appropriately adjusted for any share split, share dividend, share combination or other similar transaction during any such measuring period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)"**Affiliate**" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that "control" of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)"**Approved Stock Plan**" means any stock incentive plan or other benefit plan which has been approved by the board of directors of the Company prior to or subsequent to the Subscription Date, which provides for the grant of equity awards to any employee, officer or director for services provided to the Company in their capacity as such.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)"**Attribution Parties**" means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by the Holder's investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company's shares of Common Stock would or could be aggregated with the Holder's and the other Attribution Parties for purposes of Section 13(d) of the Exchange Act. For clarity, the purpose of the foregoing is to collectively subject the Holder and all other Attribution Parties to the Maximum Percentage.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)"**Bloomberg**" means Bloomberg, L.P.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)"**Business Day**" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)"**Change of Control**" means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of Common Stock in which holders of the Company's voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification, or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or any of its Subsidiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)"**Change of Control Redemption Premium**" means one hundred and ten percent (110%).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)"**Closing Bid Price**" and "**Closing Sale Price**" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by

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Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported by OTC Markets Group Inc. If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in <u>Section 23</u>. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)"**Closing Date**" shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued Notes pursuant to the terms of the Securities Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)"**Convertible Securities**" means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)"**Common Stock**" means (i) the Company's shares of common stock, $0.0001 par value per share, and (ii) any capital stock into which such shares of common stock shall have been changed or any share capital resulting from a reclassification of such shares of common stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)"**Current Subsidiary**" means any Person in which the Company, as of the Subscription Date, directly or indirectly, (i) owns any of the outstanding capital stock or holds any equity or similar interest of such Person, or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing, collectively, "**Current Subsidiaries**."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)"**Eligible Market**" means the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, The New York Stock Exchange or the NYSE American, or any successor to any of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)"**Equity Conditions**" means, during the period in question, (a) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Conversion Notices of the Holder, if any, (b) the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect of this Note, if any, (c)(i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future, except for the filing of post-effective amendment) or (ii) all of the shares of Common Stock issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash payments of interest) may be resold pursuant to Rule 144 by a person that is not an affiliate (as defined in Rule 144 as in effect on the Issuance Date) of the Company, and that has not been an affiliate (as defined in Rule 144 as in effect on the Issuance Date) of the Company during the three months immediately preceding such date, without volume or manner-of-sale restrictions or current public information requirements as determined by the counsel to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the Holder, (d) the shares of Common Stock are trading on the Principal Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such Principal Market (and the Company believes, in good faith, that trading of the shares of Common Stock on the Principal Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Transaction Documents, (f) there is no existing Event of Default and no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default, (g) the issuance of the shares in question (or, in the case of a Company Optional Redemption or Installment Redemption, the shares issuable upon conversion in full of the Company Optional Redemption Amount or Installment Redemption

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Amount) to the Holder would not violate the limitations set forth in <u>Section 3(d)</u> herein, (h) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control that has not been consummated, (i) the Holder is not in possession of any information provided by the Company, any of its Subsidiaries, or any of their officers, directors, employees, agents or Affiliates, that constitutes, or may constitute, material non-public information, (j) the Company has timely filed all SEC Documents required to be filed with or furnished to the Commission under the Securities Act or the Exchange Act, including those required to be filed with or furnished to the Commission under Section 13(a) or Section 15(d) of the Exchange Act, (k) the daily VWAP of the shares of Common Stock exceeds $0.05 (subject to adjustment for any share split, share dividend, share combination or other similar transactions) on the Principal Market during each Trading Day for the twenty (20) Trading Days prior to the applicable date in question, and (l) the average daily trading volume of the shares of Common Stock on the Principal Market during the twenty (20) Trading Days prior to the applicable date in question exceeds $200,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)"**Equity Conditions Failure**" means that on any day (but for clause (l) of the definition of Equity Conditions, which shall be measured over the entire twenty (20) Trading Day period) during the period commencing twenty (20) Trading Days prior to the applicable Installment Date through the applicable Installment Date and the date on which the applicable shares of Common Stock are actually delivered to the Holder, the Equity Conditions have not been satisfied (or waived in writing by the Holder).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)"**Event Market Price**" means, with respect to any Share Combination Event Date, the quotient determined by dividing (x) the sum of the VWAP of the shares of Common Stock for each of the five (5) Trading Days with the lowest VWAP of the shares of Common Stock during the fifteen (15) consecutive Trading Day period ending and including the Trading Day immediately preceding the sixteenth (16th) Trading Day after such Share Combination Event Date, divided by (y) five (5).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)"**Excluded Securities**" means (i) shares of Common Stock or standard Options to purchase shares of Common Stock to directors, officers or employees of the Company in their capacity as such pursuant to an Approved Stock Plan (as defined below), provided that (A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such Options) after the Subscription Date pursuant to this clause do not, in the aggregate, exceed ten percent (10%) of the shares of Common Stock issued and outstanding immediately prior to the Subscription Date, and (B) the exercise price of any such Options is not lowered, none of such Options are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such Options are otherwise materially changed in any manner that adversely affects any of the Buyers (as defined in the Securities Purchase Agreement); (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities (as defined in the Securities Purchase Agreement) or Options (other than standard Options to purchase shares of Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversion, exercise, or other method of issuance (as the case may be) of any such Convertible Security or Option is made solely pursuant to the conversion, exercise, or other method of issuance (as the case may be) provisions of such Convertible Security or Option that were in effect on the date immediately prior to the Subscription Date, the conversion, exercise, or issuance price of any such Convertible Securities or Options (other than standard Options to purchase shares of Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) is not lowered, none of such Convertible Securities or Options (other than standard Options to purchase shares of Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder, and none of the terms or conditions of any such Convertible Securities or Options (other than standard Options to purchase shares of Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner that adversely affects any of the Buyers; (iii) the Conversion Shares; and (iv) securities issued pursuant to acquisitions, divestitures, licenses, partnerships, collaborations, or strategic transactions approved by the Company's board of directors or a majority of the members of a committee of directors established for such purpose, provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)"**Floor Price**" means $0.05, subject to adjustment for reverse and forward stock splits, recapitalizations and similar transactions.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)"**Fundamental Transaction**" means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its "significant subsidiaries" (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its shares of Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its shares of Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock not held by all such Subject Entities as of the date of this Note calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their shares of Common Stock without approval of the stockholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)"**Group**" means a "group" as that term is used in Section 13(d) of the Exchange Act and as defined in Rule 13d-5 thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)"**Indebtedness**" shall have the meaning ascribed to such term in the Securities Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)"**Initial Installment Date**" means the date that is 90 days from the Issuance Date of this Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)"**Installment Amount**" means the sum of (A) (i) with respect to any Installment Date other than the Maturity Date, the lesser of (x) 1/21<sup>st</sup> of the Original Principal Amount and (y) the Principal amount then outstanding under this Note as of such Installment Date, and (ii) with respect to the Installment Date that is the Maturity Date, the Principal amount then outstanding under this Note as of such Installment Date (in each case, as any such Installment Amount may be reduced pursuant to the terms of this Note, whether upon conversion or redemption), (B) any Acceleration Amount accelerated pursuant to Section 8(d) and included in such Installment Amount in accordance therewith, (C) any Deferral Amount deferred pursuant to <u>Section 8(e)</u> and included in such Installment Amount in accordance therewith and (D) in each case of clauses (A) through (C) above, the sum of any accrued and unpaid

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Interest as of such Installment Date under this Note, if any, accrued and unpaid Late Charges, if any, and Make-Whole Amount under this Note as of such Installment Date. In the event the Holder shall sell or otherwise transfer any portion of this Note, the transferee shall be allocated a pro rata portion of the each unpaid Installment Amount hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)"**Installment Conversion Price**" means the lower of (i) the Conversion Price and (ii) 95% of the lowest VWAP in the ten (10) Trading Days immediately prior to each Installment Date or Conversion Date, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)"**Installment Date**" means (A) with respect to the first such date, the Initial Installment Date, and (B) with respect to all such dates subsequent to the Initial Installment Date, the same day of each calendar month subsequent to the Initial Installment Date until the Maturity Date. In the event of that the Initial Installment Date is the 31<sup>st</sup> day of a calendar month, each subsequent Installment Date shall be the last day of the calendar month.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa)"**Interest Date**" means, with respect to any given calendar month ending after the Issuance Date and prior to the Maturity Date, the first Trading Day of such calendar month.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb)"**Make-Whole Amount**" means, as of any given date and in connection with any conversion, redemption or other repayment hereunder, an amount equal to the amount of additional Interest that would accrue under this Note at the Interest Rate then in effect assuming for calculation purposes that the Principal of this Note as of the Issuance Date remained outstanding through and including the Maturity Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc)"**Maturity Date**" means the date that is 24 months from the Issuance Date; <u>provided</u>, <u>however</u>, the Maturity Date may be extended at the option of the Holder (i) in the event that, and for so long as, an Event of Default shall have occurred and be continuing or any event shall have occurred and be continuing that with the passage of time and the failure to cure would result in an Event of Default or (ii) through the date that is twenty (20) Business Days after the consummation of a Fundamental Transaction in the event that a Fundamental Transaction is publicly announced or a Change of Control Notice is delivered prior to the Maturity Date, provided further that if a Holder elects to convert some or all of this Note pursuant to <u>Section 3</u> hereof, and the Conversion Amount would be limited pursuant to <u>Section 3(d)</u> hereunder, the Maturity Date shall automatically be extended until such time as such provision shall not limit the conversion of this Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd)"**New Subsidiary**" means, as of any date of determination, any Person in which the Company, following the Subscription Date, directly or indirectly, (i) owns or acquires any of the outstanding capital stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person, and all of the foregoing, collectively, "**New Subsidiaries**."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee)"**Options**" means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff)"**Parent Entity**" of a Person means an entity that, directly or indirectly, controls the applicable Person and whose shares of common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg)"**Permitted Indebtedness**" means (i) Indebtedness evidenced by this Note and the Other Notes, (ii) Indebtedness secured by Permitted Liens or unsecured but as described in clauses (iv) and (v) of the definition of Permitted Liens, and (iii) Indebtedness described in the SEC Documents (as defined in the Securities Purchase Agreement) and otherwise disclosed on Schedule 3(q) to the Securities Purchase Agreement.

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proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or Indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, in either case, with respect to Indebtedness in an aggregate amount not to exceed $100,000, (v) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods, (vii) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under <u>Section 4(a)(x)</u> and <u>(viii)</u> any Liens in respect of Permitted Indebtedness.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)"**Person**" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity, or a government or any department or agency thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj)"**Principal Market**" means The Nasdaq Stock Market LLC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk)"**Redemption Conversion Price**" means, with respect to any given Company Optional Redemption Date, the lower of (i) the Conversion Price as in effect on such Company Optional Redemption Date and (ii) 95% of the lowest VWAP of the shares of Common Stock during the ten (10) consecutive Trading Day period ending and including the Trading Day immediately prior to such Company Optional Redemption Date, all such determinations to be appropriately adjusted for any share split, share dividend, share combination or other similar transaction during any such measuring period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll)"**Redemption Notices**" means, collectively, the Change of Control Redemption Notices, the Company Optional Redemption Notices, the Event of Default Redemption Notices, and the Holder Optional Redemption Notices, and each of the foregoing, individually, a "**Redemption Notice**."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(mm)"**Redemption Premium**" means one hundred and ten percent (110%).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(nn)"**Redemption Prices**" means, collectively, the Change of Control Redemption Prices, the Company Optional Redemption Prices, the Event of Default Redemption Prices, and the Holder Optional Redemption Prices, and each of the foregoing, individually, a "**Redemption Price**."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(oo)"**SEC**" means the United States Securities and Exchange Commission or the successor thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(pp)"**Securities Act**" means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(qq)"**Securities Purchase Agreement**" means that certain Securities Purchase Agreement, dated as of the Subscription Date, by and among the Company and the initial Holders pursuant to which the Company issued the Notes, as may be amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(rr)"**Subsidiaries**" means, as of any date of determination, collectively, all Current Subsidiaries and all New Subsidiaries, and each of the foregoing, individually, a "**Subsidiary**."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ss)"**Subject Entity**" means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(tt)"**Subsequent Placement**" means any issuance by the Company or any of its Subsidiaries of shares of Common Stock or Common Stock Equivalents for cash consideration, Indebtedness or a combination of units thereof from the date hereof until this Note is no longer outstanding, in a bona fide capital raise.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(uu)"**Successor Entity**" means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vv)"**Trading Day**" means, as applicable, (x) with respect to all price or trading volume determinations relating to the shares of Common Stock, any day on which the shares of Common Stock are traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock are then traded, provided that "Trading Day" shall not include any day on which the shares of Common Stock are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the shares of Common Stock are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the shares of Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ww)"**Transaction Documents**" shall have the meaning ascribed to such term in the Securities Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xx)"**VWAP**" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded), during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg through its "VAP" function (set to 09:30 start time and 16:00 end time) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in <u>Section 23</u>. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**32.DISCLOSURE**. Upon delivery by the Company to the Holder (or receipt by the Company from the Holder) of any notice in accordance with the terms of this Note, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries, the Company shall on or prior to 9:30 am, New York city time on the Business Day immediately following such notice delivery date, publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate to the Holder explicitly in writing in such notice (or immediately upon receipt of notice from the Holder, as applicable), and in the absence of any such written indication in such notice (or notification from the Company immediately upon receipt of notice from the Holder), the Holder shall be entitled to presume that information contained in the notice does not constitute material, non-public information relating to the Company or any of its Subsidiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**33.ABSENCE OF TRADING AND DISCLOSURE RESTRICTIONS**. The Company acknowledges and agrees that the Holder is not a fiduciary or agent of the Company and that the Holder shall have no obligation to (a) maintain the confidentiality of any information provided by the Company or (b) refrain from trading any securities while in possession of such information in the absence of a written non-disclosure agreement signed by an officer of the Holder that explicitly provides for such confidentiality and trading restrictions. In the absence of such an executed, written non-disclosure agreement, the Company acknowledges that the Holder may freely trade in any securities issued by the Company, may possess and use any information provided by the Company in connection with such trading activity, and may disclose any such information to any third party.

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[*Signature Page Follows*]

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IN WITNESS WHEREOF, the Company has caused this Convertible Note to be duly executed as of the Issuance Date set out above.

**ZSPACE, INC.**

By:_____________________________

Name:Paul Kellenberger

Title:Chairman and CEO

[*Signature Page to Senior Convertible Note*]

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**EXHIBIT I**

**ZSPACE, INC.**

**CONVERSION NOTICE**

Reference is made to the Convertible Note (the "**Note**") issued to the undersigned by zSpace, Inc., a company incorporated under the laws of the Cayman Islands (the "**Company**"). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, $0.0001 par value per share (the "**Common Stock**"), of the Company, as of the date specified below. Capitalized terms not defined herein shall have the meaning as set forth in the Note.

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| |
|:---|
| &nbsp;&nbsp;Date of Conversion: |
| &nbsp;&nbsp;Aggregate Principal to be converted: |
| &nbsp;&nbsp;Aggregate accrued and unpaid Interest (including Default Interest, if applicable), Make-Whole Amount and accrued and unpaid Late Charges with respect to such portion of the Aggregate Principal and such Aggregate Interest and Aggregate Make-Whole Amount to be converted: |
| &nbsp;&nbsp;Aggregate Conversion Amount to be Converted: |
| &nbsp;&nbsp;<u>Please confirm the following information</u>: |
| &nbsp;&nbsp;Conversion Price: |
| &nbsp;&nbsp;Number of shares of Common Stock to be issued: |

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Please issue the shares of Common Stock into which the Note is being converted to Holder, or for its benefit, as follows:

[ ]Check here if requesting delivery as a certificate to the following name and to the following address:

Issue to:

[ ]Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:

DTC Participant:

DTC Number:

Account Number:

Date: __________ __, ____

[Name of Registered Holder]

By:

Name:

Title:

Tax ID:

E-Mail Address:

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## Exhibit 4.8

**Exhibit 4.8** 

**DESCRIPTION OF THE REGISTRANT'S SECURITIES**

**REGISTERED PURSUANT TO SECTION 12 OF THE**

**SECURITIES EXCHANGE ACT OF 1934, AS AMENDED**

zSpace, Inc. ("us", "our," "we" or the "Company") has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"): our common stock, par value $0.00001 per share ("common stock").

The following descriptions of our capital stock and certain provisions of Certificate of Incorporation, as amended (the "Charter"), our Amended and Restated Bylaws (the "Bylaws") and Delaware law are summaries. You should also refer to the text of our Charter and our Bylaws, which are filed as exhibits to this Annual Report.

**Authorized and Outstanding Capital Stock**

The Charter, as amended, authorizes the issuance of up 105,000,000 shares, consisting of two classes of stock: (i) 100,000,000 shares of common stock, and (ii) 5,000,000 shares of preferred stock, $0.00001 par value per share (the "Preferred Stock").

**Common Stock**

***Voting Rights***

Holders of shares of our common stock will be entitled to one vote for each share of our common stock held of record by such holder on all matters voted upon by our stockholders; provided, however, that, except as otherwise required in the Charter or by applicable law, the holders of our common stock will not be entitled to vote on any amendment to our Charter that relates solely to the terms of one or more outstanding series of our Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to our Charter or pursuant to Delaware law.

We have not provided for cumulative voting for the election of directors in our Charter. Accordingly, holders of a majority of the shares of our common stock will be able to elect all of our directors.

***No Preemptive or Similar Rights***

Our common stock is not entitled to preemptive rights and is not subject to redemption or sinking fund provisions.

***Dividend Rights***

Subject to preferences that may apply to any shares of convertible Preferred Stock outstanding at the time, the holders of shares of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine. No such dividends are expected to be issued in the near future.

***Right to Receive Liquidation Distributions***

Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of Preferred Stock.

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**Preferred Stock**

Our board of directors is authorized, subject to limitations prescribed by the Delaware General Corporation La ("DGCL"), to issue up to 5,000,000 shares of Preferred Stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by the Company's stockholders. As of March 12, 2026, our board of directors designated all 5,000,000 shares of Preferred Stock as Series P Convertible Preferred Stock (the "Series P Preferred Stock") pursuant to a Certificate of Designations of Series P Convertible Preferred Stock (the "Certificate of Designations") filed with the Secretary of State of the State of Delaware on January 27, 2026.

***Series P Preferred Stock***

The Series P Preferred Stock has the following rights and preferences:

<u>Stated Value</u>: Each share of Series P Preferred Stock has a stated value of $2.00, subject to adjustment as set forth in the Certificate of Designations (the "Stated Value").

<u>Dividends</u>: Holders of Series P Preferred Stock are entitled to receive cumulative dividends at a rate of eighteen percent (18%) per annum, payable annually. Dividends accrue and compound annually and are payable solely in additional shares of Series P Preferred Stock.

<u>Liquidation Preference</u>: In the event of any liquidation, dissolution, or winding-up of the Company, or a Change of Control Transaction (as defined in the Certificate of Designations) holders of Series P Preferred Stock are entitled to receive, prior to any distribution to holders of junior securities, an amount per share equal to the Stated Value plus any accrued and unpaid dividends.

<u>Voting Rights</u>: The Series P Preferred Stock votes together with the common stock on an as-converted basis. Additionally, as long as any shares of Series P Preferred Stock remain outstanding, the Company cannot take certain actions without the affirmative vote of the holders of a majority of the outstanding Series P Preferred Stock. These actions include, among others: (a) adversely altering the powers, preferences or rights of the Series P Preferred Stock; (b) creating any class of stock senior to or pari passu with the Series P Preferred Stock; (c) amending the Company's Charter in a manner that adversely affects the holders; or (d) increasing the number of authorized shares of Series P Preferred Stock.

<u>Conversion</u>: Beginning on the third anniversary of the Original Issue Date (as defined in the Certificate of Designations), holders may opt to convert their shares of Series P Preferred Stock into shares of common stock. The conversion rate is determined by dividing the Stated Value (plus accrued unpaid dividends) by the "Conversion Price." The initial "Conversion Price" is the Stated Value ($2.00) and is subject to adjustment for stock splits, stock dividends, and similar events. All outstanding shares of Series P Preferred Stock will automatically convert into shares of common stock on the fifth anniversary of the Original Issue Date. For the automatic conversion occurring on the fifth anniversary of the Original Issue Date, the conversion rate is the lower of (y) the Conversion Price and (z) 80% of the 90-Day VWAP of the Company's common stock.

<u>Rank</u>: The Series P Preferred ranks senior to the common stock.

**Anti-Takeover Effects of Certain Provisions of Our Charter, Our Bylaws, and Delaware Law**

The provisions of the DGCL, the Charter, and the Bylaws could have the effect of delaying, deferring or discouraging another person from acquiring control of us. These provisions, which are summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages

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of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.

***Delaware Law***

We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:

● before the stockholder became interested, our board of directors approved either the business combination or the transaction, which resulted in the stockholder becoming an interested stockholder;

● upon consummation of the transaction, which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans in some instances, but not the outstanding voting stock owned by the interested stockholder; or

● at or after the time the stockholder became interested, the business combination was approved by our board of directors and authorized at an annual or Extraordinary General Meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock, which is not owned by the interested stockholder.

Section 203 defines a business combination to include:

● any merger or consolidation involving the corporation and the interested stockholder;

● any sale, transfer, lease, pledge, or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

● subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

● subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and

● the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges, or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.

***Dissenters' Rights of Appraisal and Payment***

Under the DGCL, with certain exceptions, our stockholders will have appraisal rights in connection with a merger or consolidation in which we are a constituent entity. Pursuant to the DGCL, stockholders who properly demand and perfect appraisal rights in connection with such merger or consolidation will have the right to receive payment of the fair value of their shares as determined by the Delaware Court of Chancery, if any, on the amount determined to be the fair value, from the effective time of the merger or consolidation through the date of payment of the judgment.

***Stockholders' Derivative Actions***

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Under the DGCL, any of our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the stockholder bringing the action is a holder of our shares at the time of the transaction to which the action relates or such stockholder's stock thereafter devolved by operation of law. To bring such an action, the stockholder must otherwise comply with Delaware law regarding derivative actions.

***Provisions of our Charter and Bylaws***

Our Charter and Bylaws include a number of provisions that may have the effect of deterring hostile takeovers, or delaying or preventing changes in control of our management team or changes in our board of directors or our governance or policy, including the following:

● *Directors Removed Only for Cause*. The Charter provides that stockholders may remove directors only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the then-outstanding common stock entitled to vote at an election of directors.

● *Classified Board of Directors*. The Charter provides for a classified board of directors. The initial term of our independent directors expired at our first annual meeting of stockholders and such directors were re-elected in October 2025 for a subsequent term. The initial term of our non- independent directors will expire at our next annual meeting of stockholders. Thereafter, directors in each class are expected to serve 2-year terms.

● *Stockholder Nomination of Directors*. The Bylaws provide that stockholders representing more than 35% of our voting securities will be entitled to nominate two persons for election to our board of directors and stockholders representing 35% or less but more than 25% of our voting securities will be entitled to nominate one person for election to our board of directors. dSpace Investments Limited owns more than 35% of our voting securities and is entitled to nominate two persons for election to our board of directors.

● *Supermajority Requirements for Amendments of the Charter and Bylaws*. The Charter further provides that the affirmative vote of holders of at least two-thirds of the voting power of all of the then outstanding shares of capital stock entitled to vote are required to amend or repeal any provision of the Charter, provided that if two-thirds of our board of directors has approved such amendment only the affirmative vote of a majority of the voting power of all of the then outstanding shares of capital stock shall be required to amend the Charter. The affirmative vote of holders of at least two-thirds of the voting power of all of the then outstanding shares of common stock entitled to vote will be required to amend or repeal the Bylaws, although the Bylaws may be amended by a simple majority vote of our board of directors. Additionally, in the case of any proposed adoption, amendment, or repeal of any provisions of the Bylaws that is approved by our board of directors and submitted to the stockholders for adoption, if two-thirds of our board of directors has approved such adoption, amendment, or repeal of any provisions of the Bylaws, then only the affirmative vote of a majority of the voting power of all of the then outstanding shares of common stock entitled to vote shall be required to adopt, amend, or repeal any provision of the Bylaws.

● *Calling Special Meetings of Stockholders*. The Charter and the Bylaws provide that special meetings of our stockholders may be called only by a majority of our board of directors, the chairman of the board of directors, our chief executive officer, our President or stockholders collectively holding more than 30% of our voting securities, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders to take any action, including the removal of directors.

● *Advance Notice Requirements for Stockholder Proposals and Director Nominations*. The Bylaws provide advance notice procedures for stockholders seeking to bring business before the annual meeting of stockholders or to nominate candidates for election as directors at the annual meeting of stockholders. The Bylaws also specify certain requirements regarding the form and content of a stockholder's notice. These

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provisions may preclude our stockholders from bringing matters before the annual meeting of stockholders or from making nominations for directors at the annual meeting of stockholders. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of us.

● *No Cumulative Voting*. The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation's certificate of incorporation provides otherwise. The Charter and Bylaws do not provide for cumulative voting. **  

**Our Transfer Agent and Warrant Agent**

The transfer agent and registrar for our common stock is Odyssey Transfer and Trust Company. The address for the transfer agent is 2155 Woodlane Drive, Suite 100, Woodbury, Minnesota 55125.

**Listing of our Securities**

Our shares of common stock are currently traded on The Nasdaq Capital Market® under the symbol "ZSPC".

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## Exhibit 10.31

#### Exhibit 10.31

#### INDEMNIFICATION AGREEMENT
This Agreement, made and entered into as of [insert date] ("***Agreement***"), by and between zSpace, Inc., a Delaware corporation ("***Company***"), and [insert name] ("***Indemnitee***"):

**WHEREAS**, highly competent persons may be reluctant to serve as directors, officers, employees, fiduciaries and other agents ("***Representatives***") of corporations unless they are provided with adequate protection through insurance or adequate indemnification against risks of claims and actions against them arising out of their service to and activities on behalf of such corporations; and

**WHEREAS**, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons as set forth herein so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and

**WHEREAS,** the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; and

**WHEREAS,** this Agreement is a supplement to and in furtherance of the Charter and Bylaws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

**WHEREAS**, Indemnitee is willing to serve, continue to serve and/or to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified.

**NOW, THEREFORE**, in consideration of the promises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

#### Article I <br>DEFINITIONS
For purposes of this Agreement the following terms shall have the meaning given here:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.01"***Board***" shall mean the Board of Directors of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.02"***Change of Control***" shall mean the first of the following events to occur:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) there is consummated a merger or consolidation to which the Company or any direct or indirect subsidiary of the Company is a party if the merger or consolidation would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) less than fifty

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percent (50%) of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "  ***Exchange Act*** ")) in the aggregate of securities of the Company representing fifty percent (50%) or more of the total combined voting power of the Company's then issued and outstanding securities is acquired by any person or entity, or group of associated persons or entities acting in concert; provided, however, that for purposes hereof, the following acquisitions shall not constitute a Change of Control: (A) any acquisition by the Company; (B) any acquisition by any employee benefit plan (or related trust or fiduciary) sponsored or maintained by the Company or any corporation controlled by the Company; (C) any acquisition by an underwriter temporarily holding securities pursuant to an offering of such securities; (D) any acquisition by a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; and (E) any acquisition in connection with a merger or consolidation which, pursuant to Section 1.02(a) above, does not constitute a Change of Control;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) there is consummated a transaction contemplated by an agreement for the sale or disposition by the Company of all or a substantial portion of the Company's assets, other than a sale or disposition by the Company of all or a substantial portion of the Company's assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the stockholders of the Company approve any plan or proposal for the liquidation of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) a change in the composition of the Board such that the "Continuity Directors" cease for any reason to constitute at least a majority of the Board. For purposes of this clause, "Continuity Directors" means (A) those members of the Board who were directors on the date hereof and (B) those members of the Board (other than a director whose initial assumption of office was in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) who were elected or appointed by, or on the nomination or recommendation of, at least a majority of the then-existing directors who either were directors on the date hereof or were previously so elected or appointed; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) such other event or transaction as the Board shall determine constitutes a Change of Control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.03"***Company***" has the meaning set forth in the introductory paragraph above. For purposes of this Agreement, references to the "Company" shall include, in addition to the resulting Company, any constituent Company (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its Representatives, so that any person who is or was a Representative of such constituent Company, or is or was serving at the request of such constituent Company as a Representative of another Company, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Agreement with respect to the resulting or surviving Company as he or she would have with respect to such constituent Company if its separate existence had continued.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.04"***Corporate Status***" describes the status of a person who is or was a Representative of the Company, or is or was serving at the request of the Company as a Representative of another Enterprise, including service with respect to an employee benefit plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.05"***Disinterested Director***" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.06"***Effective Date***" means the date set forth in the introductory paragraph above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.07"***Enterprise***" shall mean the Company and any other corporation, company, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a Representative, including, without limitation, any subsidiaries of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.08"***Expenses***" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements, costs, expenses and obligations paid or incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, responding to, or being or preparing to be a witness in a Proceeding (including attorneys' fees and related disbursements). Expenses also shall include, without limitation, (i) expenses incurred in connection with any appeal resulting from, incurred by Indemnitee in connection with, arising out of, in respect of or relating to, any Proceeding, including, without limitation, the premium, security for, and other costs relating to any cost bond, supersedes bond, or other appeal bond or its equivalent, (ii) for purposes of Section 8.06 of this Agreement only, expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee's rights under this Agreement, by litigation or otherwise, (iii) any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement and (iv) any interest, assessments or other charges in respect of the foregoing. Expenses do not include Losses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.09"***Good Faith***" shall mean Indemnitee having acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, in a manner in which Indemnitee would have had no

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reasonable cause to believe Indemnitee's conduct was unlawful. Notwithstanding the foregoing definition, the Indemnitee shall not be deemed to have acted in "Good Faith" in instances where the Indemnitee has been finally adjudicated by a court of competent jurisdiction to have acted not in good faith. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, have reasonable cause to believe that Indemnitee's conduct was unlawful.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10"***Independent Counsel***" means a law firm, or an attorney employed by or serving as a member of a law firm, that is experienced in matters of corporation law and/or limited liability company law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11"***Losses***" shall mean judgments, fines, penalties, excise taxes under the Employee Retirement Income Security Act of 1974, as amended from time to time, and amounts paid in settlement of any Proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12"***Proceeding***" includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other threatened, pending or completed proceeding whether civil, criminal, administrative or investigative, other than one initiated by Indemnitee. For purposes of the foregoing sentence, a "Proceeding" shall not be deemed to have been initiated by Indemnitee where (x) Indemnitee seeks to enforce Indemnitee's rights under this Agreement pursuant to Article VIII of this Agreement or (y) the Company has joined in or the Board has consented to the initiation of such Proceeding.

#### Article II <br>TERM OF AGREEMENT
This Agreement shall continue until and terminate upon the later of: (i) ten (10) years after the date that Indemnitee shall have ceased to serve as a Representative of the Company or of any other Enterprise which Indemnitee served at the request of the Company; (ii) the final termination of all pending Proceedings in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Article VIII of this Agreement relating thereto; or (iii) the expiration of the statute of limitations with respect to any claim that may be brought against Indemnitee with respect to which indemnification hereunder may be available (in whole or in part).

#### Article III <br>SERVICES BY INDEMNITEE, NOTICE OF PROCEEDINGS

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.01<u>Services</u>. Indemnitee agrees to serve as a Representative for so long as Indemnitee is duly elected, appointed or retained or until Indemnitee tenders his or her resignation, or is removed or dies. The duties and obligations of a Representative may be set forth in the Company's organizational documents or in such other agreements as may be entered into from time to time between the Company and Indemnitee. This Agreement, however, shall not impose any obligation on Indemnitee or the Company to continue Indemnitee's service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law). Indemnitee, by his or her current and continuing Corporate Status, shall be conclusively presumed to have relied on the rights to indemnity, advancement of Expenses and other rights contained in this Agreement in entering into or continuing such service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.02<u>Notice of Proceeding</u>. Indemnitee agrees to promptly notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, written communication or similar document relating to any Proceeding or matter which is reasonably likely to be subject to indemnification or advancement of Expenses covered hereunder; provided, that the failure of Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder, nor shall any such failure prejudice any of Indemnitee's rights under this Agreement, unless the Company's ability to participate in the defense of such claim was materially and adversely affected by such failure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.03<u>Duty of Cooperation and Disclosure</u>. In any Proceeding in which Company is advancing Expenses or providing indemnification to the Indemnitee, the Indemnitee shall use commercially reasonable efforts to cooperate with the person, persons, insurers or entities acting on the Company's or Indemnitee's behalf, including providing to such person, persons or entity upon reasonable advance request any documentation or information, or information relevant to the location of such information or documentation, which is not privileged or otherwise protected from disclosure and which is in the possession of Indemnitee, or persons or entities known to Indemnitee, and reasonably relates to the subject Proceeding and the Company's indemnification and advancement obligations hereunder shall at all times be subject to the Indemnitee's duty of cooperation.

#### Article IV <br>INDEMNIFICATION
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.01<u>In General</u>. Notwithstanding any amendment, modification or repeal of the indemnification provisions of the Delaware General Corporation Law, as amended, or other applicable law or the organizational documents of the Company after the date of this Agreement, and subject to the exceptions set forth in Section 4.05 herein, if Indemnitee was or is, or is threatened to be made, a party to any Proceeding by reason of Indemnitee's Corporate Status, the Company shall indemnify Indemnitee to the fullest extent permitted by this Agreement, applicable law in effect on the date hereof and to such greater extent as applicable law may thereafter from time to time permit if Indemnitee acted in Good Faith. The rights to indemnification and to the advancement of Expenses conferred in this Agreement shall apply to claims made against an Indemnitee arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof, but in any event not prior to the date on which Indemnitee became a

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Representative of the Company. The rights to indemnification and to the advancement of Expenses hereunder shall only apply to a Proceeding initiated by Indemnitee if (x) Indemnitee seeks to enforce Indemnitee's rights under this Agreement pursuant to Article VIII of this Agreement or (y) the Company has joined in or the Board has consented to the initiation of such Proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.02<u>Proceedings Other Than Proceedings by or in the Right of the Company</u>. If, by reason of Indemnitee's Corporate Status, Indemnitee is or was, or is threatened to be made, a party to or participant in any Proceeding other than a Proceeding by or in the right of the Company, the Company shall indemnify Indemnitee to the fullest extent permitted by law against all Expenses and Losses actually and reasonably incurred by Indemnitee in connection therewith, if Indemnitee acted in Good Faith (provided that this limitation shall not affect advancement under Article V).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.03<u>Proceedings by or in the Right of the Company</u>. If, by reason of Indemnitee's Corporate Status, Indemnitee is or was, or is threatened to be made, a party to or otherwise involved in any Proceeding by or in the right of the Company, the Company shall indemnify Indemnitee to the fullest extent permitted by DGCL §145(b) against all Expenses actually and reasonably incurred by Indemnitee in connection therewith, if Indemnitee acted in Good Faith. No indemnification shall be made under this Section 4.03 for any amount other than Expenses, and no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such Proceeding was brought shall determine that, despite such adjudication of liability and in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for Expenses which such court shall deem proper.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.04<u>Indemnification of a Party Who is Wholly or Partly Successful</u>. Subject to the exceptions set forth in Section 4.05 herein, to the extent that Indemnitee was or is, by reason of Indemnitee's Corporate Status, a party to and is successful, on the merits or otherwise, in defense of any Proceeding, Indemnitee shall be indemnified to the maximum extent permitted by law, against all Expenses, actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection with such Proceeding or any claim, issue or matter therein. Subject to the exceptions set forth in Section 4.05, if Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee to the maximum extent permitted by law, against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 4.04 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter, so long as there has been no finding (either adjudicated or pursuant to Article VI) that Indemnitee did not act in Good Faith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.05<u>Exceptions</u>. Notwithstanding anything to the contrary herein, the Company shall not be obligated to advance any amounts paid or to be paid by Indemnitee to third parties as damages, losses, liabilities, judgments, fines and penalties (whether civil, criminal, or other), and amounts paid or to be paid in settlement, in each case solely arising from a final and non-appealable

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decision of a court of competent jurisdiction, and to indemnify the Indemnitee pursuant to this Agreement with respect to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Indemnitee's reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by Indemnitee or payment of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Securities Exchange Act of 1934, as amended (the "  ***Exchange Act***") (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 or Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act in connection with an accounting restatement of the Company or the payment to the Company of profits arising from the purchase or sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Expenses incurred on account of any Proceeding in which final judgment of a court of competent jurisdiction is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section l6(b) of the Exchange Act, or similar provisions of any federal, state or local law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Expenses incurred on account of the Indemnitee's conduct which is finally adjudged by a court of competent jurisdiction to have been: (1) a breach of the duty of loyalty owed to the Company, (2) an act or omission which was not in Good Faith, (3) an act or omission which involved intentional misconduct or, with respect to any criminal Proceeding, a knowing violation of law, or (4) a transaction from which the Indemnitee derived an improper personal benefit; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) if a final decision by a court of competent jurisdiction in the matter shall determine that such indemnification is prohibited by applicable law or is not lawful as against public policy.

For the avoidance of doubt, and notwithstanding anything to the contrary set forth in this Section 4.05, the Company shall be obligated to advance to Indemnitee any and all Expenses with respect to the foregoing matters set forth in this Section 4.05 other than such payments as are specifically mentioned in the introductory clause of this Section 4.05.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.06<u>Indemnification for Expenses as a Witness</u>. To the extent that Indemnitee is, by reason of Indemnitee's Corporate Status, a witness in any Proceeding, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection therewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.07 <u>Contribution in the Event of Joint Liability</u>. (a) Except as set forth in Section 4.05, to the fullest extent permissible under applicable law, if the indemnification, hold harmless and/or exoneration rights provided for in this Agreement are unavailable to Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu of indemnifying, holding harmless or exonerating

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Indemnitee, shall pay, in the first instance, the entire amount incurred by Indemnitee, whether for judgments, liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against Indemnitee, (b) the Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee, and (c) except as set forth in Section 4.05, the Company hereby agrees to fully indemnify, hold harmless and exonerate Indemnitee from any claims for contribution which may be brought by officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

#### Article V <br>ADVANCEMENT OF EXPENSES
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.01<u>Statement of Expenses</u>. The Company shall advance all Expenses which, by reason of Indemnitee's Corporate Status, were incurred by or on behalf of Indemnitee in connection with any Proceeding (or are reasonably expected by Indemnitee to be incurred by or on behalf of Indemnitee within three months), within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances, whether prior to or after final disposition of such Proceeding. Indemnitee's right to such advancement is not subject to the satisfaction of any standard of conduct. Advances shall be unsecured and interest free. Advancement shall not be conditioned upon any determination of entitlement to indemnification, any cooperation finding, or any acknowledgment by the Company as to indemnity, and shall be required solely upon receipt of the undertaking described herein. Advances shall be made without regard to Indemnitee's ability to repay the Expenses and without regard to Indemnitee's ultimate entitlement to be indemnified, held harmless or exonerated under the other provisions of this Agreement. Such statement or statements shall include, or be preceded or accompanied by, an undertaking by or on behalf of Indemnitee to repay such amounts if it is ultimately determined (by final, non-appealable judgment or other final, non-appealable determination of a competent tribunal, or by a binding determination under Section 6.02) that Indemnitee is not entitled to indemnification under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.02<u>Assumption of Defense</u>. In the event the Company (i) shall be obligated to advance the Expenses for any Proceeding against Indemnitee by a third party and (ii) acknowledges the Company's obligation to indemnify the Indemnitee with respect to such Proceeding (subject to the terms of this Agreement), the Company shall be entitled to assume the defense of such Proceeding as provided herein. Such defense by the Company may include the representation of two or more parties by one attorney or law firm as permitted under the ethical rules and legal requirements related to joint representations, subject to exceptions set forth below in the event of a potential conflict of interest. Following delivery of written notice to Indemnitee of the Company's election to assume the defense of such Proceeding and the Company's acknowledgment of its indemnification obligation with respect to such Proceeding, the approval by Indemnitee (which approval shall not be unreasonably withheld) of counsel designated by the Company and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees and Expenses of separate counsel subsequently incurred by Indemnitee with respect to the same Proceeding so long as such Proceeding is diligently defended, as

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reasonably determined by Indemnitee. For the avoidance of doubt, but not by way of limitation, a potential conflict of interest shall be deemed a reasonable basis for the Indemnitee to withhold consent under this Section 5.02. If (i) the employment of counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee shall have notified the Board in writing that Indemnitee has reasonably concluded that there may be a conflict of interest between the Company (or any other co-clients as provided above) and Indemnitee in the conduct of any such defense, or that there may be one or more legal defenses available to Indemnitee that are different from or additional to those available to other persons, (iii) the Company fails to employ counsel to assume the defense of such Proceeding or (iv) a Change of Control has occurred, the fees and Expenses of Indemnitee's own counsel shall be subject to indemnification and/or advancement pursuant to the terms of this Agreement. Nothing herein shall prevent Indemnitee from employing counsel for any such Proceeding at Indemnitee's own expense. The Company shall not settle any Proceeding in any manner that would impose any expense, penalty or limitation on Indemnitee, or that would contain any language that could reasonably be viewed as an acknowledgment of wrongdoing on Indemnitee's part or otherwise detrimental to Indemnitee's reputation, without Indemnitee's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

#### Article VI <br>PROCEDURES FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.01<u>Initial Request</u>. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith a brief description of the matter with respect to which Indemnitee may be entitled to indemnification hereunder, including such documents as are reasonably available to Indemnitee and all relevant facts and circumstances within the Indemnitee's personal knowledge, in each case, relating to such matter. The Secretary or any other officer of the Company shall promptly advise the Board in writing that Indemnitee has requested indemnification.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.02<u>Method of Determination</u>. A determination (if required by applicable law) with respect to Indemnitee's entitlement to indemnification shall be made within forty-five (45) days of receipt by the Company of the request for indemnification, as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If a Change of Control has occurred, unless Indemnitee shall request in writing that such determination be made in accordance with clause (b) of this Section 6.02, the determination shall be made by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If a Change of Control has not occurred, and subject to Section 6.03, the determination shall be made by (i) a majority vote of the Disinterested Directors, even though less than a quorum; (ii) by a committee of Disinterested Directors designated by majority vote of such Disinterested Directors, even though less than a quorum; (iii) if there are no such Disinterested Directors, by the Independent Counsel in a written opinion to the Board, or (iv) by the Company's stockholders.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.03<u>Selection, Payment, Discharge, of Independent Counsel</u>. In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6.02 of this Agreement, the Independent Counsel shall be selected, paid and discharged in the following manner:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If a Change of Control has not occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected. Such Independent Counsel shall be approved by Indemnitee, which approval shall not be unreasonably withheld, conditioned or delayed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If a Change of Control has occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event clause (a) of this Section 6.03(b) shall apply) and approved by the Board, which approval shall not be unreasonably withheld, conditioned or delayed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Following the initial selection described in clauses (a) and (b) of this Section 6.03, Indemnitee or the Company, as the case may be, may, within seven (7) days after such written notice of selection has been given, deliver to the other party a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel does not meet the criteria set forth in Section 1.10 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction if the parties have been unable to agree on the selection of Independent Counsel within thirty (30) days after submission by Indemnitee of a written request for indemnification pursuant to Section 6.01 of this Agreement. Such petition may request a determination whether an objection to the party's selection is without merit and/or seek the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate. A person so appointed shall act as Independent Counsel under Section 6.02 of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Company shall pay any and all reasonable fees and Expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to this Agreement, and the Company shall pay all reasonable fees and Expenses incident to the procedures of this Section 6.03, regardless of the manner in which such Independent Counsel was selected or appointed.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.04<u>Company Response</u>. If a determination by the Company that Indemnitee is entitled to indemnification pursuant to this Agreement is required, and the Company fails to respond within forty-five (45) days to a written request for indemnity, the Company shall be deemed to have approved the request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.05<u>Cooperation</u>. Indemnitee shall cooperate with the person, persons or entity making the determination with respect to Indemnitee's entitlement to indemnification under this Agreement, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.06<u>Payment</u>. If it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within forty-five (45) days after such determination. Similarly, if the Company shall be deemed to have approved the request for indemnification in accordance with Section 6.04 of this Agreement, payment to Indemnitee shall be made within ninety (90) days after the date on which a written request for indemnification is delivered to the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.07<u>Reservation of Rights</u>. Notwithstanding anything to the contrary herein, the Company shall have the obligation to advance to the Indemnitee any Expenses incurred by Indemnitee in accordance with Article V of this Agreement; provided, however, that all amounts advanced in respect of such Expenses shall be repaid to the Company by Indemnitee to the extent it shall be determined in a final judgment of a court of competent jurisdiction that Indemnitee was not entitled to be indemnified for such Expenses.

#### Article VII <br>PRESUMPTIONS
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.01<u>Effect of Other Proceedings</u>. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) be conclusive as to the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in Good Faith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.02<u>Reliance as Safe Harbor</u>. For purposes of any determination of Good Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee's action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for or other professional advisors to the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or the expert selected with reasonable care by the Enterprise. The provisions of this Section 7.02 shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.03<u>Service for Subsidiaries</u>. If Indemnitee is serving as a director, officer, employee or agent of another Enterprise at least fifty percent (50%) of whose equity interests are owned by the Company, Indemnitee shall be conclusively presumed to be serving in such capacity at the request of the Company.

#### Article VIII <br>REMEDIES OF INDEMNITEE
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.01<u>Application</u>. This Article VIII shall apply in the event of a Dispute. For purposes of this Article, "Dispute" shall mean any of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) a determination is made pursuant to Article VI of this Agreement that Indemnitee is not entitled to indemnification under this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) advancement of Expenses is not timely made pursuant to Article V of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the determination of entitlement to be made pursuant to Section 6.02 of this Agreement has not been made within forty-five (45) days after receipt by the Company of the request for indemnification;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) payment of indemnification is not made pursuant to Section 4.06 of this Agreement within forty-five (45) days after receipt by the Company of a written request therefore; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) payment of indemnification is not made within forty-five (45) days after a determination has been made that Indemnitee is entitled to indemnification or, if the Company fails to respond to a written request for indemnification as set forth in Section 6.04 of this Agreement, payment of indemnification is not made within ninety (90) days after the date on which a written request for indemnification is delivered to the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.02<u>Adjudication</u>. In the event of a Dispute, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee's entitlement to such indemnification or advancement of Expenses. Indemnitee shall commence such proceeding seeking adjudication within one hundred and eighty (180) days following the date on which Indemnitee first has the right, or reasonably should have been aware that it has the right, to commence such proceeding pursuant to this Section 8.02.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.03<u>De Novo Review</u>. In the event that a determination shall have been made pursuant to Article VI of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Article VIII shall be conducted in all respects as a de novo trial on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.04<u>Burden of Proof</u>. In any suit brought by Indemnitee to enforce a right to indemnification or advancement of Expenses under this Agreement, or brought by the Company to recover an advancement of Expenses pursuant to the terms of an undertaking, the burden of proving that such person is not entitled to be indemnified, or to such advancement of Expenses,

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under this Agreement or otherwise shall be on the Company. The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Article VIII that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.05<u>Company Bound</u>. If a determination shall have been made or deemed to have been made pursuant to Article VI of the Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding absent (i) a material misstatement by Indemnitee of a material fact or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.06<u>Expenses of Adjudication</u>. In the event that Indemnitee, pursuant to this Article VIII, seeks a judicial adjudication to enforce Indemnitee's rights under, or to recover damages for breach of this Agreement, Indemnitee shall be entitled to (x) advancement of any and all Expenses actually and reasonably incurred by Indemnitee in such adjudication in accordance with Article V of this Agreement and (y) be indemnified by the Company against any and all Expenses actually and reasonably incurred by Indemnitee in such adjudication (but, with respect to indemnification and not advancement, only if Indemnitee prevails therein). If it shall be determined in such adjudication that Indemnitee is entitled to receive part but not all of the indemnification sought, the Expenses incurred by Indemnitee in connection with such adjudication shall not be prorated.

#### Article IX <br>NON-EXCLUSIVITY, INSURANCE, SUBROGATION
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.01<u>Non-Exclusivity</u>. Except as set forth in Section 4.05, the rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under the Company's organizational documents or under any agreement, vote of stockholders or disinterested directors or otherwise. No amendment, alteration, rescission or replacement of this Agreement or any provision hereof shall be effective as to Indemnitee with respect to any action taken or omitted by such Indemnitee in Indemnitee's Corporate Status prior to such amendment, alteration, rescission or replacement. The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of Expenses and/or insurance provided by a separate entity. The Company hereby acknowledges and agrees that (i) the Company shall be the indemnitor of first resort with respect to any Proceeding, Expense or matter that is the subject of this Agreement (i.e., the Company's obligations are primary and any obligation of any other entity with respect to any Proceeding, Expenses or matter that is the subject of this Agreement for the same Proceeding, Expenses or matters incurred by Indemnitee are secondary), (ii) any obligation of any other entity to indemnify Indemnitee and/or advance Expenses to Indemnitee in respect of any Proceeding shall be secondary to the obligations of the Company hereunder, and (iii) the Company shall be required to indemnify Indemnitee and advance Expenses to Indemnitee hereunder to the fullest extent provided herein without regard to any rights Indemnitee may have against any other entity or insurer of any such person.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.02<u>Insurance</u>. The Company shall maintain an insurance policy or policies against liability arising out of this Agreement or otherwise providing coverage that is at least substantially comparable in scope and amount to that provided by the Company's current policies of directors' and officers' liability insurance. In all such policies maintained by the Company, Indemnitee shall be an insured in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company's directors, if Indemnitee is a director, or of the Company's officers, if Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to Indemnitee copies of all directors' and officers' liability insurance applications, binders, policies, declarations, endorsements and other related materials. The Company shall promptly, and in any event within ten business days, provide Indemnitee written notice of its failure to maintain an insurance policy or policies meeting the requirements of this Section 9.02.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.03<u>Subrogation</u>. In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to any rights of recovery of Indemnitee, who shall execute all papers required and take all action reasonably necessary to secure such rights, including execution of such documents as are reasonably necessary to enable the Company to bring suit to enforce such rights; <u>provided</u>, that in the process of securing or enforcing such rights, the Company shall not take any action or make any statement, whether written or oral, that could reasonably be construed as an acknowledgment of wrongdoing on Indemnitee's part or that is otherwise detrimental to Indemnitee's reputation, as reasonably determined by Indemnitee, without Indemnitee's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed (and that, in the event that the Company takes any such action or makes any such statement without Indemnitee's prior written consent, Indemnitee's obligations under this Section 9.03 shall be of no further force and effect).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.04<u>No Duplicative Payment</u>. The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

#### Article X <br>GENERAL PROVISIONS
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.01<u>Binding Effect, Etc</u>. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, executors and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken

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place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or of any other enterprise at the Company's request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.02<u>Severability</u>. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, which is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.03<u>No Adequate Remedy</u>. The parties declare that it is impossible to measure in money the damages which will accrue to either party by reason of a failure to perform any of the obligations under this Agreement. Therefore, if either party shall institute any action or proceeding to enforce the provisions hereof, such party against whom such action or proceeding is brought hereby waives the claim or defense that such party has an adequate remedy at law, and such party shall not urge in any such action or proceeding the claim or defense that the other party has an adequate remedy at law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.04<u>Identical Counterparts</u>. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.05<u>Headings</u>. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.06<u>Modification and Waiver</u>. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions thereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.07<u>Notices</u>. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

If to Indemnitee, to:As shown with Indemnitee's Signature below.

If to the Company to:zSpace, Inc.

Attn: Legal Department

2050 Gateway Place, Suite 100-302

San Jose, CA 95110

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.08<u>Governing Law</u>. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the state of Delaware without application of the conflict of laws principles thereof. No amendment, repeal, adoption or modification of law, shall adversely affect any right or protection of any person granted pursuant hereto existing at, or arising out of or related to any event, act or omission that occurred prior to, the time of such amendment, repeal, adoption or modification (regardless of when any Proceeding relating to such event, act or omission arises or is first threatened, commenced or completed).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.09<u>Third-Party Beneficiaries</u>. Nothing in this Agreement is intended to confer any rights or remedies under or by reason of this Agreement on any other person or persons other than the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement is intended to relieve or discharge the obligations or liability of any third persons to the Company. Except as expressly set forth in this Agreement, no provision of this Agreement shall give any third parties any right of subrogation or action over or against the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.10<u>Entire Agreement</u>. This Agreement constitutes the entire agreement and understanding between the parties hereto in reference to all the matters herein agreed upon. This Agreement replaces in full all prior indemnification agreements or understandings between the Company, including any of its subsidiaries, and the Indemnitee, and any and all such prior agreements or understandings are hereby rescinded by mutual agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

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| | |
|:---|:---|
| &nbsp;&nbsp;COMPANY | &nbsp;&nbsp;ZSPACE, INC.<br>|
|  | &nbsp;&nbsp;<sup>By:</sup> |
|  | &nbsp;&nbsp;Name:  |
|  | &nbsp;&nbsp;Title:  |
| &nbsp;&nbsp;INDEMNITEE |  |
|  | &nbsp;&nbsp;Name: |
|  | &nbsp;&nbsp;Indemnitee's Address for Notices: |
|  | &nbsp;&nbsp;__________________<br>__________________<br>__________________<br>__________________ |

---

*Signature Page to*

*Indemnification Agreement*

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## Exhibit 21.1

**Exhibit 21.1**

Subsidiaries of zSpace, Inc.

<u>Entity</u> <u>Jurisdiction</u> <br> zSpace K.K. Japan <br> zSpace Technologies (Shanghai) Co. Ltd. China

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## Exhibit 23.1

![Graphic](zspc-20251231xex23d1001.jpg)

**EXHIBIT 23.1**

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S CONSENT

We consent to the incorporation by reference in the Registration Statements of zSpace, Inc. on Form S-1 (Nos. 333-286641 and 333-288978) and Form S-8 (No. 333-286006) of our report dated March 30, 2026, which includes an explanatory paragraph as to the Company's ability to continue as a going concern, with respect to our audit of the consolidated financial statements of zSpace, Inc. and Subsidiaries as of December 31, 2025 and for the year ended December 31, 2025, which report is included in this Annual Report on Form 10-K of zSpace, Inc. for the year ended December 31, 2025.

/s/ UHY LLP

Melville, NY

March 30, 2026

An independent member of UHY International

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## Exhibit 23.2

**Exhibit 23.2**

<u>Consent of Independent Registered Public Accounting Firm</u>

We hereby consent to the incorporation by reference in the Registration Statements on Form S-1 (Nos. 333-286641 and 333-288978) and Form S-8 (No. 333-286006) of zSpace, Inc. (the Company) of our report dated March 27, 2025, relating to the consolidated financial statements, which appears in this Annual Report on Form 10-K. Our report contains an explanatory paragraph regarding the Company's ability to continue as a going concern.

/s/ BDO USA, P.C.

Spokane, Washington

March 30, 2026

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## Exhibit 31.1

**Exhibit 31.1**

CERTIFICATIONS

I, Paul Kellenberger, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this annual report on Form 10-K of zSpace, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: March 30, 2026 | /s/ **Paul Kellenberger** |
|  | Paul Kellenberger |
|  | Chief Executive Officer, Chairman and Director |

---

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## Exhibit 31.2

**Exhibit 31.2**

CERTIFICATIONS

I, Erick DeOliveira, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this annual report on Form 10-K of zSpace, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

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| | |
|:---|:---|
| .<br>|  |
| Date: March 30, 2026 | /s/ **Erick DeOliveira** |
|  | Erick DeOliveira |
|  | Chief Financial Officer (Principal Financial Officer)  |

---

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## Ex-32

**Exhibit 32**

**STATEMENT PURSUANT TO**

**18 U.S.C. SECTION 1350**

**AS REQUIRED BY**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of zSpace, Inc. (the "Company") on Form 10-K for the period ending December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify that to the best of our knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

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| | | |
|:---|:---|:---|
| March 30, 2026 | /s/ **Paul Kellenberger** |  |
|  | Paul Kellenberger | Chief Executive Officer and Chairman (Principal Executive Officer) |
| <br>March 30, 2026 | <br>/s/ **Erick DeOliveiria** |  |
|  | Erick DeOiveira | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)<br>|

---

A signed original of this written statement required by Section 906 has been provided to zSpace, Inc. and will be retained by zSpace, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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## Exhibit 97.1

**Exhibit 97.1**

**ZSPACE, INC.**

**CLAWBACK POLICY**

**Adopted: June 18, 2024**

**I.Overview**

The Board of Directors (the "***Board***") of zSpace, Inc. (the "***Company***") believes that it is in the best interests of the Company and its stockholders to create and maintain a culture that emphasizes integrity and accountability. Accordingly, in accordance with the applicable rules of the Nasdaq Stock Market LLC (the ***"Nasdaq Rules"***), Section 10D and Rule 10D-1 ("***Rule 10D-1***") of the Securities Exchange Act of 1934, as amended (the "***Exchange Act***"), the Board has adopted this Policy (the "***Policy***") to provide for the recovery of erroneously awarded Incentive-based Compensation from Executive Officers. All capitalized terms used and not otherwise defined herein shall have the meanings set forth in Section H, below.

**II.** **Recovery of erroneously awarded compensation**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)In the event of an Accounting Restatement, the Company will promptly recover the Erroneously Awarded Compensation Received in accordance with the Nasdaq Rules and Rule 10D-1 as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) After an Accounting Restatement, the Compensation Committee of the Board (if composed entirely of independent directors, or in the absence of such a committee, a majority of independent directors serving on the Board) (the "  ***Committee***") shall determine the amount of any Erroneously Awarded Compensation Received by each Executive Officer and shall promptly notify each Executive Officer with a written notice containing the amount of any Erroneously Awarded Compensation and a demand for repayment or return of such compensation, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) For Incentive-based Compensation based on (or derived from) the Company's stock price or total stockholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in the applicable Accounting Restatement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. The amount to be repaid or returned shall be determined by the Committee based on a reasonable estimate of the effect of the Accounting Restatement on the Company's stock price or total stockholder return upon which the Incentive-based Compensation was Received; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. The Company shall maintain documentation of the determination of such reasonable estimate and provide the relevant documentation as required to Nasdaq.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Committee shall have discretion to determine the appropriate means of recovering Erroneously Awarded Compensation based on the particular facts and circumstances. Notwithstanding the foregoing, except as set forth in Section B(2) below, in no event may the Company accept an amount that is less than the amount of Erroneously Awarded Compensation in satisfaction of an Executive Officer's obligations hereunder.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) To the extent that the Executive Officer has already reimbursed the Company for any Erroneously Awarded Compensation Received under any duplicative recovery obligations established by the Company or applicable law, it shall be appropriate for any such reimbursed amount to be credited to the amount of Erroneously Awarded Compensation that is subject to recovery under this Policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) To the extent that an Executive Officer fails to repay all Erroneously Awarded Compensation to the Company when due, the Company shall take all actions reasonable and appropriate to recover such Erroneously Awarded Compensation from the applicable Executive Officer. The applicable Executive Officer shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering such Erroneously Awarded Compensation in accordance with the immediately preceding sentence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Notwithstanding anything herein to the contrary, the Company shall not be required to take the actions contemplated by Section B(1) above if the Committee (which, as specified above, is composed entirely of independent directors or in the absence of such a committee, a majority of the independent directors serving on the Board) determines that recovery would be impracticable *and* any of the following three (3) conditions are met:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Committee has determined that the direct expenses paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered. Before making this determination, the Company must make a reasonable attempt to recover the Erroneously Awarded Compensation, document such attempt(s) and provide such documentation to Nasdaq;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Recovery would violate home country law where that law was adopted prior to November 28, 2022, provided that, before determining that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on violation of home country law, the Company has obtained an opinion of home country counsel, acceptable to Nasdaq, that recovery would result in such a violation and a copy of the opinion is provided to Nasdaq; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code of 1986, as amended, and regulations thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)The Board may also cancel or recoup Incentive-based Compensation if the Executive Officer, without the consent of the Company, (A) has engaged in or engages in activity that is in conflict with or adverse to the interests of the Company or any affiliate thereof while employed by or providing services to the Company or any affiliate thereof, including fraud or conduct intentionally contributing to any material financial restatements or irregularities, or (B) violates in any material respect a non-competition, non-solicitation, non-disparagement or nondisclosure covenant or agreement with the Company or any affiliate thereof, as determined by the Board, and fails to cure such violation in all material respects within thirty (30) days of demand by the Company, or if the Executive Officer's employment or service is terminated for cause.

**III.** **Disclosure requirements**

The Company shall file all disclosures with respect to this Policy required by applicable U.S. Securities and Exchange Commission ("SEC") filings and rules, including without limitation, filing a copy of this Policy and any amendments thereto as an exhibit to the Company's annual report on Form 10-K.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**IV.** **Prohibition of indemnification**

The Company shall not be permitted to insure or indemnify any Executive Officer against (i) the loss of any Erroneously Awarded Compensation that is repaid, returned or recovered pursuant to the terms of this Policy, or (ii) any claims relating to the Company's enforcement of its rights under this Policy. Further, the Company shall not enter into any agreement that exempts any Incentive-based Compensation that is granted, paid or awarded to an Executive Officer from the application of this Policy or that waives the Company's right to recovery of any Erroneously Awarded Compensation, and this Policy shall supersede any such agreement (whether entered into before, on or after the Effective Date of this Policy).

**V.** **Administration and interpretation**

This Policy shall be administered by the Committee, and any determinations made by the Committee shall be final and binding on all affected individuals.

The Committee is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy and for the Company's compliance with Nasdaq Rules, Section 10D, Rule 10D-1 and any other applicable law, regulation, rule or interpretation of the SEC or Nasdaq promulgated or issued in connection therewith.

Each Executive Officer, upon being so designated or assuming such position, is required to execute and deliver a written acknowledgement of and agreement to abide by the Policy, provided that the failure to provide such notice or obtain such acknowledgement or agreement shall have no impact on the applicability or enforceability of the Policy.

**VI.** **Amendment; termination**

The Committee may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary. Notwithstanding anything in this Section F to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws, SEC rule or Nasdaq rule.

**VII.Other recovery rights**

This Policy shall be binding and enforceable against all Executive Officers and, to the extent required by applicable law or guidance from the SEC or Nasdaq, their beneficiaries, heirs, executors, administrators or other legal representatives. The Committee intends that this Policy will be applied to the fullest extent required by applicable law. Any employment agreement, equity award agreement, compensatory plan or any other agreement or arrangement with an Executive Officer shall be deemed to include, as a condition to the grant of any benefit thereunder, an agreement by the Executive Officer to abide by the terms of this Policy. Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery that may be available to the Company under applicable law, regulation or rule or pursuant to the terms of any policy of the Company or any provision in any employment agreement, equity award agreement, compensatory plan, agreement or other arrangement.

**VIII.Definitions**

For purposes of this Policy, the following capitalized terms shall have the meanings set forth below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)"***Accounting Restatement***" means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements (a "***Big R***" restatement),

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or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (a "***little r***" restatement).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)"***Clawback Eligible Incentive Compensation***" means all Incentive-based Compensation Received by an Executive Officer (i) on or after the effective date of the applicable Nasdaq Rules, (ii) after beginning service as an Executive Officer, (iii) who served as an Executive Officer at any time during the applicable performance period relating to any Incentive-based Compensation (whether or not such Executive Officer is serving at the time the Erroneously Awarded Compensation is required to be repaid to the Company), (iv) while the Company has a class of securities listed on a national securities exchange or a national securities association, and (v) during the applicable Clawback Period (as defined below).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)"***Clawback Period***" means, with respect to any Accounting Restatement, the three (3) completed fiscal years of the Company immediately preceding the Restatement Date (as defined below), and if the Company changes its fiscal year, any transition period of less than nine (9) months within or immediately following those three (3) completed fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)"***Erroneously Awarded Compensation***" means, with respect to each Executive Officer in connection with an Accounting Restatement, the amount of Clawback Eligible Incentive Compensation that exceeds the amount of Incentive-based Compensation that otherwise would have been Received had it been determined based on the restated amounts, computed without regard to any taxes paid.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)"***Executive Officer***" means each individual who is currently or was previously designated as an "officer" of the Company as defined in Rule 16a-1(f) under the Exchange Act. For the avoidance of doubt, the identification of an executive officer for purposes of this Policy shall include each executive officer who is or was identified pursuant to Item 401(b) of Regulation S-K, as well as the principal financial officer and principal accounting officer (or, if there is no principal accounting officer, the controller).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)"***Financial Reporting Measures***" means measures that are determined and presented in accordance with the accounting principles used in preparing the Company's financial statements, and all other measures that are derived wholly or in part from such measures. Stock price and total stockholder return (and any measures that are derived wholly or in part from stock price or total stockholder return) shall, for purposes of this Policy, be considered Financial Reporting Measures. For the avoidance of doubt, a Financial Reporting Measure need not be presented in the Company's financial statements or included in a filing with the SEC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7)"***Incentive-based Compensation***" means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial Reporting Measure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8)"***Nasdaq***" means the Nasdaq Stock Market LLC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9)"***Received***" means, with respect to any Incentive-based Compensation, actual or deemed receipt, and Incentive-based Compensation shall be deemed received in the Company's fiscal period during which the Financial Reporting Measure specified in the Incentive-based Compensation award is attained (even if the payment or grant of the Incentive-based Compensation to the Executive Officer occurs after the end of that period).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10)"***Restatement Date***" means the earlier to occur of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement, or (ii) the date a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement.

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|:---|:---|
| 2 | of 5 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**IX.Effective date**

This Policy shall be effective as of the date it is adopted by the Board.

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**Exhibit A**

**ZSPACE, INC.**

**ACKNOWLEDGMENT AND AGREEMENT CONCERNING CLAWBACK POLICY**

By my signature below, I acknowledge and agree that:

● I have received and read the attached Policy for the Recovery of Erroneously Awarded Compensation (this "**Policy** ").

● I hereby agree to abide by all of the terms of this Policy both during and after my employment with the Company, including, without limitation, by promptly repaying or returning any Erroneously Awarded Compensation to the Company as determined in accordance with this Policy.

Signature: <br>Printed Name:

Date:

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