# EDGAR Filing Document

**Accession Number:** 0001637147
**File Stem:** 0001104659-25-111329
**Filing Date:** 2025-11
**Character Count:** 218319
**Document Hash:** e9cf683c12da5004f878820b3d7f5e88
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-25-111329.hdr.sgml**: 20251113

**ACCESSION NUMBER**: 0001104659-25-111329

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 89

**CONFORMED PERIOD OF REPORT**: 20250930

**FILED AS OF DATE**: 20251113

**DATE AS OF CHANGE**: 20251113

**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-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-42431
- **FILM NUMBER:** 251478757

**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._September 30, 2025

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

------

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

**(Mark One)**

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

**For the quarterly period ended September 30, 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;&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 or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| **55 Nicholson Lane San Jose, CA** | **95134** |
| (Address of principal executive offices) | (Zip code) |

---

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

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

---

| | | |
|:---|:---|:---|
| **Title of Each Class** | **Trading symbol** | **Name of Each Exchange on which registered** |
| **Common Stock, par value $0.00001 per share** | **ZSPC** | **The Nasdaq Stock Market LLC** |

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒&nbsp;&nbsp;&nbsp;&nbsp;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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒&nbsp;&nbsp;&nbsp;&nbsp;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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐&nbsp;&nbsp;&nbsp;&nbsp;No ☒

As of November 10, 2025, there were 29,050,067 of the registrant's common stock outstanding.

------

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

#### **TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
|  |  | **Page** |
| [**Part I**](#PartIFinancialInformation) | [**Financial Information**](#PartIFinancialInformation) | 4 |
| [Item 1.](#Item1FinancialStatements) | [Financial Statements](#Item1FinancialStatements) | 4 |
|  | [Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 (Unaudited)](#CONDENSEDCONSOLIDATEDBALANCESHEETS_29591) | 4 |
|  | [Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2025 and 2024 (Unaudited)](#CONDENSEDCONSOLIDATEDSTATEMENTSOFOPERATI) | 5 |
|  | [Condensed Consolidated Statements of Temporary Redeemable Preferred Stock and Stockholders' Deficit for the three and nine months ended September 30, 2025 and 2024 (Unaudited)](#STOCKHOLDERSDEFICIT_401511) | 6 |
|  | [Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (Unaudited)](#CONDENSEDCONSOLIDATEDSTATEMENTSOFCASHFLO) | 7 |
|  | [Notes to Condensed Consolidated Financial Statements (Unaudited)](#NOTESTOCONDENSEDCONSOLIDATEDFINANCIALSTA) | 8 |
| [Item 2.](#Item2ManagementsDiscussionandAnalysisofF) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#Item2ManagementsDiscussionandAnalysisofF) | 30 |
| [Item 3.](#Item3QuantitativeandQualitativeDisclosur) | [Quantitative and Qualitative Disclosures about Market Risk](#Item3QuantitativeandQualitativeDisclosur) | 51 |
| [Item 4.](#Item4ControlsandProcedures_927864) | [Controls and Procedures](#Item4ControlsandProcedures_927864) | 51 |
| [**Part II**](#PARTIIOTHERINFORMATION_887119) | [**Other Information**](#PARTIIOTHERINFORMATION_887119) | 52 |
| [Item 1.](#Item1LegalProceedings_649552) | [Legal Proceedings](#Item1LegalProceedings_649552) | 52 |
| [Item 1A.](#Item1ARiskFactors_827386) | [Risk Factors](#Item1ARiskFactors_827386) | 52 |
| [Item 2.](#Item2UnregisteredSalesofEquitySecurities) | [Unregistered Sales of Equity Securities and Use of Proceeds](#Item2UnregisteredSalesofEquitySecurities) | 53 |
| [Item 3.](#Item3DefaultsUponSeniorSecurities_533936) | [Defaults Upon Senior Securities](#Item3DefaultsUponSeniorSecurities_533936) | 53 |
| [Item 4.](#Item4MineSafetyDisclosures_386345) | [Mine Safety Disclosures](#Item4MineSafetyDisclosures_386345) | 53 |
| [Item 5.](#Item5OtherInformation_373231) | [Other Information](#Item5OtherInformation_373231) | 53 |
| [Item 6.](#Item6Exhibits_809099) | [Exhibits](#Item6Exhibits_809099) | 54 |
| [Exhibit Index](#EXHIBITINDEX_255925) | [Exhibit Index](#EXHIBITINDEX_255925) | 54 |
| [Signatures](#SIGNATURES_69607) | [Signatures](#SIGNATURES_69607) | 56 |

---

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

**ZSpace, Inc.**

**Quarterly Report on Form 10-Q**

**For the quarterly period ended September 30, 2025**

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

***Cautionary Note on Forward-Looking Statements***

This Quarterly Report on Form 10-Q 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 the Company's Annual Report for the fiscal year ended December 31, 2024 on Form 10-K, as filed with the SEC on March 28, 2025. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future developments or otherwise.

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

**Part I. FINANCIAL INFORMATION**

**Item 1.** **Financial Statements (Unaudited)**

**zSpace, Inc.**

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

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025** | **December 31,** <br>**2024** |
| **ASSETS** |  |  |
| Current assets |  |  |
| &nbsp;&nbsp;Cash, cash equivalents and restricted cash | $4271 | $4864 |
| &nbsp;&nbsp;Accounts receivable, net of allowance for credit losses of $34 and $44 | 3617 | 3176 |
| &nbsp;&nbsp;Inventory, net | 2346 | 3238 |
| &nbsp;&nbsp;Prepaid expenses and other current assets | 3106 | 2233 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total current assets** | 13340 | 13511 |
| Property and equipment, net | 35 | 21 |
| Other assets | 83 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total assets** | $13458 | $13532 |
| **LIABILITIES AND STOCKHOLDERS' DEFICIT** |  |  |
| Current liabilities |  |  |
| &nbsp;&nbsp;Accounts payable | $3965 | $5656 |
| &nbsp;&nbsp;Accrued expenses and other current liabilities | 5304 | 5365 |
| &nbsp;&nbsp;Convertible debt | 6199 |  |
| &nbsp;&nbsp;Other current debt | 1402 | 5764 |
| &nbsp;&nbsp;Current accrued interest | 14 | 783 |
| &nbsp;&nbsp;Deferred revenue, current portion | 2681 | 3324 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total current liabilities** | 19565 | 20892 |
| &nbsp;&nbsp;Convertible debt, noncurrent | 3361 |  |
| &nbsp;&nbsp;Other noncurrent debt | 7711 | 6191 |
| &nbsp;&nbsp;Noncurrent accrued interest | 2186 | 819 |
| &nbsp;&nbsp;Deferred revenue, net of current portion | 320 | 318 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities** | 33143 | 28220 |
| **Commitments and contingencies (Note 11)** |  |  |
| **Stockholders' deficit:** |  |  |
| &nbsp;&nbsp;Common stock, $0.00001 par value; 100,000,000 shares authorized as of September 30, 2025; 26,482,448 and 22,849,378 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively |  |  |
| &nbsp;&nbsp;Additional paid-in capital | 288634 | 275383 |
| &nbsp;&nbsp;Accumulated other comprehensive income | 184 | 329 |
| &nbsp;&nbsp;Accumulated deficit | (308503) | (290400) |
| &nbsp;&nbsp;Total stockholders' deficit | (19685) | (14688) |
| **Total liabilities and stockholders' deficit** | $13458 | $13532 |

---

*See accompanying notes to condensed consolidated financial statements.*

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

**zSpace, Inc,**

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

**(Unaudited)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| Revenue | $8793 | $14219 | $23011 | $29563 |
| Cost of goods sold | 4294 | 7857 | 12132 | 17466 |
| Gross profit | 4499 | 6362 | 10879 | 12097 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;Research and development | 1568 | 1040 | 3937 | 4088 |
| &nbsp;&nbsp;Selling and marketing | 4340 | 3265 | 12290 | 12132 |
| &nbsp;&nbsp;General and administrative | 3385 | 2033 | 11159 | 10771 |
| Total operating expenses | 9293 | 6338 | 27386 | 26991 |
| (Loss) income from operations | (4794) | 24 | (16507) | (14894) |
| Other (expense) income: |  |  |  |  |
| &nbsp;&nbsp;Interest expense | (306) | (596) | (1109) | (2235) |
| &nbsp;&nbsp;Other income, net | 78 | 368 | 148 | 18 |
| &nbsp;&nbsp;Loss on extinguishment of debt |  |  |  | (52) |
| &nbsp;&nbsp;Loss on change in fair value of convertible debt | (1148) |  | (623) |  |
| Loss before income taxes | (6170) | (204) | (18091) | (17163) |
| Income tax (benefit) expense  | (1) |  | 12 | 34 |
| **Net loss** | **(6169)** | **(204)** | **(18103)** | **(17197)** |
| Other comprehensive loss, net of tax: |  |  |  |  |
| &nbsp;&nbsp;Foreign currency translation adjustment | (14) | (146) | (145) | (35) |
| **Comprehensive loss** | $**(6183)** | $**(350)** | $**(18248)** | $**(17232)** |
| Net (loss) income available to common shareholders used in basic earnings per share | $(6169) | $43370 | $(18103) | $26212 |
| Net (loss) income available to common shareholders used in diluted earnings per share | $(6169) | $43452 | $(18103) | $26459 |
| Net (loss) income per common share – basic | $(0.26) | $235.81 | $(0.78) | $147.77 |
| Net (loss) income per common share – diluted | $(0.26) | $6.92 | $(0.78) | $4.27 |
| Weighted-average common shares outstanding – basic | 24020175 | 183917 | 23283602 | 177381 |
| Weighted-average common shares outstanding – diluted | 24020175 | 6274679 | 23283602 | 6196769 |

---

*See accompanying notes to condensed consolidated financial statements.*

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

**zSpace, Inc.**

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

**(Unaudited)**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Temporary Redeemable** | **Temporary Redeemable** |  |  | | | | |
|  | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | | | | |
| **Three Months Ended September 30, 2024:** | **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, July 1, 2024** | **3984088** | $**112142** | **174077** | $**—** | $**146228** | $**339** | $**(286570)** | $**(140003)** |
| Stock based compensation |  |  |  |  | 51 |  |  | 51 |
| Issuance of common stock from options exercised |  |  |  |  | 34 |  |  | 34 |
| Reduction of the original issue price from $1,000 to $600 per share |  | (43656) |  |  | 43656 |  |  | 43656 |
| Net loss |  |  |  |  |  |  | (204) | (204) |
| Foreign currency translation adjustments |  |  |  |  |  | (146) |  | (146) |
| **Balance, September 30, 2024** | **3984088** | $**68486** | **174077** | $**—** | $**189969** | $**193** | $**(286774)** | $**(96612)** |
| **Three Months Ended September 30, 2025:** |  |  |  |  |  |  |  |  |
| **Balance, July 1, 2025** | **—** | **—** | **23220141** | **—** | **279840** | **198** | **(302334)** | **(22296)** |
| Stock based compensation |  |  |  |  | 2364 |  |  | 2364 |
| Issuance of common stock from options exercised |  |  | 15514 |  | 72 |  |  | 72 |
| Issuance of common stock for note conversions |  |  | 1139204 |  | 2375 |  |  | 2375 |
| Issuance of restricted stock units |  |  | 170448 |  | 378 |  |  | 378 |
| Issuance of common stock under equity line of credit |  |  | 1937141 |  | 3605 |  |  | 3605 |
| Net loss |  |  |  |  |  |  | (6169) | (6169) |
| Foreign currency translation adjustments |  |  |  |  |  | (14) |  | (14) |
| **Balance, September 30, 2025** | **—** | $**—** | **26482448** | $**—** | $**288634** | $**184** | $**(308503)** | $**(19685)** |
| **Nine Months Ended September 30, 2024:** |  |  |  |  |  |  |  |  |
| **Balance, January 1, 2024** | **3978898** | $**106952** | **174077** | $**—** | $**138878** | **228** | $**(269577)** | $**(130471)** |
| Stock based compensation |  |  |  |  | 7401 |  |  | 7401 |
| Cancellation of NCNV 1 preferred stock | (562) | (562) |  |  |  |  |  |  |
| Issuance of common stock from options exercised |  |  |  |  | 34 |  |  | 34 |
| Reduction of the original issue price from $1,000 to $600 per share |  | (43656) |  |  | 43656 |  |  | 43656 |
| Issuance of NCNV 2 preferred stock | 5752 | 5752 |  |  |  |  |  |  |
| Net loss |  |  |  |  |  |  | (17197) | (17197) |
| Foreign currency translation adjustments |  |  |  |  |  | (35) |  | (35) |
| **Balance, September 30, 2024** | **3984088** | $**68486** | **174077** | $**—** | $**189969** | **193** | $**(286774)** | $**(96612)** |
| **Nine Months Ended September 30, 2025:** |  |  |  |  |  |  |  |  |
| **Balance, January 1, 2025** | **—** | $**—** | **22849378** | $**—** | $**275383** | **329** | $**(290400)** | $**(14688)** |
| Stock based compensation |  |  |  |  | 5192 |  |  | 5192 |
| Issuance of common stock from options exercised |  |  | 100274 |  | 157 |  |  | 157 |
| Issuance of common stock for note conversions |  |  | 1421874 |  | 3907 |  |  | 3907 |
| Issuance of common stock under equity line of credit |  |  | 1937141 |  | 3605 |  |  | 3605 |
| Issuance of restricted stock units |  |  | 173781 |  | 390 |  |  | 390 |
| Net loss |  |  |  |  |  |  | (18103) | (18103) |
| Foreign currency translation adjustments |  |  |  |  |  | (145) |  | (145) |
| **Balance, September 30, 2025** | **—** | $**—** | **26482448** | $**—** | $**288634** | **184** | $**(308503)** | $**(19685)** |

---

*See accompanying notes to condensed consolidated financial statements.*

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

**zSpace, Inc.**

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

**(Unaudited)**

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  |
|  | **2025** | **2024** |
| **Cash flows from operating activities:** |  |  |
| Net loss | $(18103) | $(17197) |
| *Adjustments to reconcile net loss to net cash used in operating activities:* |  |  |
| &nbsp;&nbsp;Change in fair value of convertible debt | 623 |  |
| &nbsp;&nbsp;Non-cash amortization of other debt discount | 56 | 48 |
| &nbsp;&nbsp;Change in fair value of embedded derivative |  | 16 |
| &nbsp;&nbsp;Provision for excess and obsolete inventory | 227 |  |
| &nbsp;&nbsp;Stock-based compensation expense | 5192 | 7401 |
| &nbsp;&nbsp;Issuance of restricted stock units | 390 |  |
| &nbsp;&nbsp;Depreciation | 7 | 9 |
| &nbsp;&nbsp;Bad debt expense | 31 |  |
| &nbsp;&nbsp;Loss on extinguishment of debt |  | 52 |
| *Changes in operating assets and liabilities:* |  |  |
| &nbsp;&nbsp;Accounts receivable | (472) | 631 |
| &nbsp;&nbsp;Inventory | 710 | 1022 |
| &nbsp;&nbsp;Prepaid expenses and other assets | (1002) | (306) |
| &nbsp;&nbsp;Accounts payable | (1691) | 1880 |
| &nbsp;&nbsp;Accrued expenses | 50 | 160 |
| &nbsp;&nbsp;Deferred revenue | (641) | 1147 |
| &nbsp;&nbsp;Accrued interest | 598 | 1287 |
| &nbsp;&nbsp;**Net cash used in operating activities** | **(14025)** | **(3850)** |
| **Cash flows from investing activities:** |  |  |
| Capital expenditures | (21) | (8) |
| &nbsp;&nbsp;**Net cash used in investing activities** | **(21)** | **(8)** |
| **Cash flows from financing activities:** |  |  |
| Proceeds from convertible debt | 13000 | 5000 |
| Repayments of convertible debt | (156) |  |
| Proceeds from other debt issuances | 4000 | 3500 |
| Fees paid for debt issuance | (61) |  |
| Fees paid for other term loan issuances |  | (18) |
| Repayment of other debt issuances | (6836) | (3948) |
| Proceeds from issuance of common stock from equity line-of-credit | 3605 |  |
| Fees paid for deferred offering costs |  | (541) |
| Proceeds from exercise of common stock options | 157 | 34 |
| &nbsp;&nbsp;**Net cash provided by financing activities** | **13709** | **4027** |
| Effects of exchange rate changes on cash and cash equivalents | (256) | (93) |
| Net decrease in cash, cash equivalents and restricted cash | (593) | 76 |
| Cash, cash equivalents and restricted cash, beginning of period | 4864 | 3128 |
| **Cash, cash equivalents and restricted cash, end of period** | $**4271** | $**3204** |
| **Supplemental disclosure of cash flow information:** |  |  |
| &nbsp;&nbsp;Cash paid for interest | $387 | 1307 |
| &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;Unpaid deferred offering costs | $— | $1256 |
| &nbsp;&nbsp;Conversion of convertible debt principal and interest payments into common stock | $3907 | $— |

---

*See accompanying notes to condensed consolidated financial statements.*

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

#### ZSPACE, INC.

#### Notes to Condensed Consolidated Financial Statements

#### September 30, 2025
**(Unaudited)**

&nbsp;&nbsp;&nbsp;&nbsp;1.  **DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION** 

#### Description of Business
zSpace, Inc. ("zSpace" 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. The Company's customer base includes federal, state, and local governments who are making large investments in education technology.

#### Basis of Presentation
The accompanying unaudited condensed 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.

The Company has prepared its unaudited condensed consolidated financial statements in accordance with GAAP in the United States of America ("GAAP") and the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the "SEC"). Certain information or note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and notes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

All intercompany accounts and transactions have been eliminated in consolidation.

#### Liquidity Risk and Going Concern
For the three and nine months ended September 30, 2025, the Company incurred net losses of approximately $6.2 million and $18.1 million, respectively. For the three and nine months ended September 30, 2024, the Company incurred net losses of $0.2 million and $17.2 million, respectively. For the nine months ended September 30, 2025 and 2024, the Company incurred negative cash flows from operations of $14.0 million and $3.9 million, respectively. The Company had combined cash, cash equivalents and restricted cash balance of $4.3 million and $4.9 million as of September 30, 2025 and December 31, 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, expanding its partnerships with resellers, 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 proceeds of its Initial Public Offering (the "IPO") in

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

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 condensed consolidated financial statements.

The unaudited condensed 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.

#### 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. Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of AOCI. Income and expense accounts are translated at average exchange rates during the periods presented.

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

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements are disclosed in the notes to financial statements for the fiscal year ended December 31, 2024 and have not changed significantly since those financial statements were issued.

#### 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.

#### 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 condensed consolidated balance sheet as of September 30, 2025 and 2024, and December 31, 2024, to the amounts reported on the condensed consolidated statement of cash flows (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **September 30,** <br>**2025** | **December 31,** <br>**2024** | **September 30,** <br>**2024** |
| Cash  | $3800 | $1329 | $2898 |
| Cash equivalents | 162 | 3228 |  |
| Restricted cash | 309 | 307 | 306 |
| **Total cash, cash equivalents and restricted cash** | $**4271** | $**4864** | $**3204** |

---

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

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 loss 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 September 30, 2025 and December 31, 2024, the Company reported an allowance for credit losses balance of $34,000 and $44,000, respectively.

**Convertible Debt**

We have issued convertible promissory notes and evaluate embedded features for potential bifurcation as derivatives.

For the recent convertible note 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.

#### Fair Value of Financial Instruments
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):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of September 30, 2025** | **As of September 30, 2025** | **As of September 30, 2025** | **As of September 30, 2025** |
| **(in thousands)** | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Money market funds | $162 | $— | $— | $162 |
| **Total financial assets** | $**162** | $**—** | $**—** | $**162** |
| Convertible debt subject to credit risk analysis | $— | $9560 | $— | $9560 |
| **Total financial liabilities** | $**—** | $**9560** | $**—** | $**9560** |
|  | **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** |

---

The Company measures its convertible debt at fair value on a quarterly basis. The fair value of the Company's debt approximates book value as of September 30, 2025 utilizing a Monte Carlo simulation using observable market conditions for items such as interest free rates, discount rates and volatility assumptions. The fair value of the convertible debt has been categorized as a Level 2 item as of September 30, 2025.

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

**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 Standalone Selling Price ("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.

***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 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 condensed consolidated statements of operations and comprehensive (loss) income.

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

***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.

#### New Accounting Pronouncements
As of September 30, 2025 there are no new accounting pronouncements affecting the Company other than those discussed in the financial statements in the Company's Annual Report on Form 10-K filed with the SEC on March 28, 2025.

&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.

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

The following table disaggregates revenue by recognition method for the three and nine months ended September 30, 2025 and 2024 (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| Point in time | $8480 | $13784 | $21958 | $28220 |
| Over time | 313 | 435 | 1053 | 1343 |
| Total | $**8793** | $**14219** | $**23011** | $**29563** |

---

The following table disaggregates revenue by type of products and services for the three and nine months ended September 30, 2025 and 2024 (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| Hardware | $3768 | $7713 | $11908 | $17115 |
| Software | 4319 | 5612 | 8667 | 10222 |
| Services | 706 | 894 | 2436 | 2226 |
| Total | $**8793** | $**14219** | $**23011** | $**29563** |

---

The following table disaggregates revenue by geographic area for the three and nine months ended September 30, 2025 and 2024 (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| United States | $7361 | $13711 | $19692 | $26662 |
| International | 1432 | 508 | 3319 | 2901 |
| Total | $**8793** | $**14219** | $**23011** | $**29563** |

---

China made up $0.2 million and $7,700 of international sales for the three months ended September 30, 2025 and 2024, respectively, and $0.2 million and $0.6 million of international sales for the nine months ended September 30, 2025 and 2024, respectively.

The amount of deferred revenue as of September 30, 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.

As of September 30, 2025 and December 31, 2024, the Company has $3.0 million and $3.6 million in deferred revenue. As of September 30, 2025 approximately $2.7 million of the balance is expected to be earned within the next 12 months, with $0.3 million to be earned within the next 13 to 60 months.

As of December 31, 2024 approximately $3.3 million of the balance 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 within the next 25 to 60 months.

As of September 30, 2025 and December 31, 2024, the Company had no contract assets.

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

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

#### Inventory, net
As of September 30, 2025 and December 31, 2024, inventory, net of reserve, consisted of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025** | **December 31,** <br>**2024** |
| Finished goods | $2016 | $2970 |
| Raw materials | 366 | 303 |
| Allowance for excess and obsolete inventory | (35) | (35) |
| **Total inventory** | $**2346** | $**3238** |

---

#### Prepaid and other current assets
Prepaid expenses and other current assets consisted of the following at September 30, 2025 and December 31, 2024 (in thousands):

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025** | **December 31,** <br>**2024** |
| Advances to suppliers | $1185 | $669 |
| Deferred software costs | 346 | 471 |
| Prepaid operating expense | 1574 | 1093 |
| **Total prepaid expenses and other current assets** | $**3106** | $**2233** |

---

#### Accrued expenses and other liabilities
Accrued expenses and other current liabilities consisted of the following at September 30, 2025 and December 31, 2024 (in thousands):

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025** | **December 31,** <br>**2024** |
| Accrued purchases | $685 | $685 |
| Accrued compensation | 2400 | 2074 |
| Other current liabilities | 2219 | 2606 |
| **Total accrued expenses and other current liabilities** | $**5304** | $**5365** |

---

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

&nbsp;&nbsp;&nbsp;&nbsp;

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

As of September 30, 2025 and December 31, 2024, debt and related party debt is comprised of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025** | **December 31,** <br>**2024** |
| **Short-term debt:** |  |  |
| Fiza Investments Limited Loans, term debt  | $— | $2202 |
| Other term loans | 1402 | 3562 |
| Total other current debt | 1402 | 5764 |
| Convertible debt | 6199 |  |
| **Total short-term debt** | $**7601** | $**5764** |
| **Other noncurrent debt:** |  |  |
| Convertible debt | $9560 | $— |
| Other term loans | 9142 | 9780 |
| Less: debt issuance costs | (29) | (27) |
| Less: current portion | (7601) | (3562) |
| **Total other noncurrent debt** | $**11072** | $**6191** |

---

All issuance costs related to the convertible debt issued during the nine months ended September 30, 2025 were expensed as incurred. There were no outstanding convertible debt instruments as of December 31, 2024.

As of September 30, 2025, future principal payments for long-term debt, including the current portion, are summarized as follows (in thousands):

---

| | |
|:---|:---|
| **Year Ending December 31,** | **Amount** |
| 2025 | $2491 |
| 2026 | 9768 |
| 2027 | 9404 |
| Less adjustment to fair value of Senior Secured Convertible Debt | (2990) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $**18673** |

---

During the three and nine months ended September 30, 2025, the Company capitalized $31,000 and $0.1 million, respectively, 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 three and nine months ended September 30, 2024.

**Term Debt**

The Company has three outstanding loans as of September 30, 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 September 30, 2025 and December 31, 2024, gross principal amounts due on the Fiza term debt is $7.2 million and have been classified as non-current other term loans on the 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,

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

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.

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 1 Agreement over twelve monthly installments.

On April 11, 2025, the Company and Fiza entered into an intercreditor agreement (the "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.

In addition to the prepayment of Term Loans 8 and 9 above, all other outstanding term loans (including accrued interest) with Itria were prepaid on April 11, 2025, including: (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 ("Term Loans 10 and 11") with Itria for an aggregate total of $2,000,000 (less fees payable to Itria). One of the Term Loans 10 and 11 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. The second Term Loans 10 and 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 September 30, 2025 and December 31, 2024 is $1.9 million and $4.8 million, respectively and are recorded in the Other Current and Non-Current Debt line items in the condensed consolidated balance sheet.

**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, a senior secured convertible note issued by the Company (the "Senior Secured Convertible Note," and 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

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

stock, par value $0.00001 per share ("Common Stock"). The Senior Secured Convertible Note Financing closed on April 11, 2025.

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 intends to use 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 (for more information regarding the amendment, see Note 15 – Subsequent Events).

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

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

"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.

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 September 30, 2025, the Company reduced its obligations under the Note by $4.0 million, consisting of (i) $3.9 million of principal and interest converted into 1,421,874 shares of Common Stock at conversion prices ranging between $1.98 per share to $7.74 per share, and (ii) $0.1 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 three and nine months ended September 30, 2025 was a loss of approximately $1.1 million and $0.6 million, respectively

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

The Company has shares reserved and available for future issuance of common stock as follows as of September 30, 2025:

---

| | |
|:---|:---|
|  | **September 30,** <br>**2025** |
| Warrants | 107813 |
| Awards outstanding under the 2017 and 2007 Equity Incentive Plans | 5856563 |
| Awards outstanding under the 2024 Equity Plan | 1315430 |
| Shares available for future issuance under the convertible debt note | 6477174 |
| Shares available for future issuance under equity line-of-credit agreement | 4562859 |
| Shares available for future issuance under the 2024 Equity Incentive Plan | 1218964 |
| Shares authorized and available for future issuance | 53978749 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total shares reserved and available for future issuance of common stock** | **73517552** |

---

On December 6, 2024, the Company completed its 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, the Company 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.

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

**Common Stock Purchase Agreement**

On July 8, 2025, the Company entered into a Common Stock Purchase Agreement (the "ELOC Agreement") and a Registration Rights Agreement (the "RRA") with Tumim Stone Capital LLC ("Tumim"). Pursuant to the ELOC Agreement, the Company has the right to sell to Tumim up to the lesser of (i) $30,000,000 worth of newly issued shares (the "ELOC Shares") of the Company's Common Stock and (ii) the Exchange Cap (as defined below) (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.

Upon the satisfaction of the conditions in the ELOC Agreement, including that a registration statement that the Company agreed to file with the SEC pursuant to the RRA is declared effective by the SEC and a final prospectus in connection therewith is filed with the SEC (such event, the "Commencement"), which occurred on August 3, 2025, the Company will have the right, but not the obligation, from time to time at its sole discretion during the term of the ELOC Agreement, to direct Tumim to purchase amounts of our Common Stock as set forth in the Purchase Agreement (each, a "Share Purchase").

The Company will control 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.

Under the applicable rules of The Nasdaq Stock Market LLC ("Nasdaq"), in no event may the Company issue to Tumim under the ELOC Agreement more than 19.99% of the shares of the Common Stock outstanding immediately prior to the execution of the ELOC Agreement (the "Exchange Cap"), unless the Company obtains stockholder approval to issue shares of Common Stock in excess of the Exchange Cap. Stockholder approval was subsequently obtained on October 15, 2025.

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, if any, under the ELOC Agreement, will 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.

Pursuant to the terms of the RRA, the Company agreed to file with the SEC one or more registration statements on Form S-1 to register for resale under the Securities Act of 1933, as amended, the shares of our Common Stock that may be issued to Tumim under the ELOC Agreement. The ELOC Agreement and the RRA contain customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.

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

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. Neither the Company nor Tumim may assign or transfer its rights and obligations under the ELOC Agreement or the RRA, and no provision of the ELOC Agreement or the RRA may be modified or waived by the parties.

As of September 30, 2025, the total shares issued under the ELOC Agreement are 1,937,141 for total proceeds of $3.6 million.

#### Preferred Stock
As of September 30, 2025 and December 31, 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 January 1 and September 30, 2024, 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 stock.

As 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.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **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 January 1, 2024** | **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)** |
| **Balance at September 30, 2024:** | **54750** | $**32850** | **5752** | $**3451** | **48640** | $**29185** |

---

**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 718 to be classified as equity. The fair market value of the warrants were valued at $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:

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

*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.

*Redemption Rights (Liquidation)*

In the event of certain capital transactions deemed to be a liquidation transaction, the holders of the Series A preferred stock are 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 stock 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 share of Common Stock was 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 Kuwait Investment Authority.

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 were 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.

*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.

[**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.

As of September 30, 2025, a total of 8,692,379 shares were authorized for issuance under the Stock Plans. As of September 30, 2025, 7,473,415 shares have been granted or issued under the Stock Plans, leaving 1,218,964 shares available for future awards. As of December 31, 2024, there were 5,980,204 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**

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 nine months ended September 30, 2025:

---

| | | |
|:---|:---|:---|
|  | **RSUs** | **RSUs** |
|  | **Number of Shares** | **Weighted Average Grant Date Fair Value** |
| **Non-vested as of January 1, 2025** | **-** | $**-** |
| &nbsp;&nbsp;&nbsp;&nbsp;Granted | 1528030 | 7.18 |
| &nbsp;&nbsp;&nbsp;&nbsp;Vested | (173781) | 7.46 |
| &nbsp;&nbsp;&nbsp;&nbsp;Forfeited | (38819) | 7.46 |
| **Non-vested as of September 30, 2025** | **1315430** | $**7.13** |

---

As of September 30, 2025, total unrecognized stock-based compensation cost for RSUs was approximately $13.4 million which is expected to be recognized on a straight-line basis over a weighted average period of 1.7 years. The intrinsic value of RSUs as of September 30, 2025 was $1.3 million.

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

#### Determination of fair value of stock options
As of September 30, 2025 and December 31, 2024, the Company had approximately 5.9 million and 6.0 million options outstanding, respectively, under the 2007 Plan and the 2017 Plan. As of September 30, 2025 and December 31, 2024, all options outstanding were granted solely with time-based vesting requirements.

There were no options granted during the three and nine months ended September 30, 2025. The fair value of the stock options outstanding during the nine months ended September 30, 2024 was estimated on the grant date using the Black-Scholes valuation model with the following assumptions:

---

| | |
|:---|:---|
|  | **September 30,** <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% |

---

A summary of the Company's stock option plan and the changes during the period ended September 30, 2025 is 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, 2025** | **5984204** | $**3.04** |  | **8.00** | $**81519660** |
| &nbsp;&nbsp;Expired | (1742) | 330.95 |  |  |  |
| &nbsp;&nbsp;Forfeited | (25625) | 4.49 |  |  |  |
| &nbsp;&nbsp;Exercised | (100274) | 1.56 |  |  |  |
| **Balance, September 30, 2025** | **5856563** | $**2.98** |  | **7.25** | $**5739432** |
| **Vested and Exercisable, September 30, 2025** | **5502559** | $**3.07** |  | **7.16** | $**5392508** |
| **Vested and Expected to Vest, September 30, 2025** | **5856563** | $**2.98** |  | **7.25** | $**5739432** |

---

Stock-based compensation included in the condensed consolidated statements of operations was as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| Cost of goods sold | $26 | $— | $58 | $115 |
| Research and development | 141 | 18 | 318 | 729 |
| Sales and marketing | 773 | 29 | 1582 | 2597 |
| General and administrative | 1424 | 4 | 3234 | 3960 |
| **Total stock-based compensation expense** | $**2364** | $**51** | $**5192** | $**7401** |

---

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

The Company estimates an annual effective tax rate of (0.09)% for the year ending December 31, 2025 as the Company incurred losses for the nine months ended September 30, 2025 and expects to continue to incur losses through the remainder of the fiscal year ending December 31, 2025, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2025. Therefore, no federal or state income taxes are expected outside of state minimum tax payments. The effective rate during this period includes income tax benefits and exclusions associated with convertible debt interest and changes in valuation allowances related to future deductible temporary differences.

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

Due to the Company's history of losses since inception, there is not enough evidence at this time to support that the Company will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company does not currently believe that realization of its deferred tax assets is more likely than not. As of September 30, 2025, the Company has no uncertain tax positions that require the establishment of a reserve.

On July 4, 2025, the One Big Beautiful Act ("OBBBA") was signed into law. The OBBBA makes significant changes to U.S. tax law, including allowing for an immediate deduction for domestic research and development expenses, among other changes. The financial impact of the OBBBA is still being evaluated by the Company and an estimate of the financial impact is not yet practicable at the time of issuance of these financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;9.  **NET LOSS PER SHARE** 

Net loss 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 and convertible securities. The dilutive effect of such equity awards 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 income (loss) 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 income (loss) in arriving at the net income (loss) available to common shareholders.

[**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 for the three months ended September 30, 2025 and 2024:

---

| | | |
|:---|:---|:---|
| | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  |
| <br>**(in thousands, except per share data)** | **2025** | **2024** |
| Net loss | $(6169) | $(204) |
| Reduction of the original issue price of NCNV preferred share value from $1,000 to $600 per share |  | 43656 |
| Cumulative preferred stock dividends |  | (82) |
| Net loss available to common shareholders used in basic earnings per share | (6169) | 43370 |
| Add back cumulative preferred stock dividends |  | 82 |
| Net (loss) income available to common shareholders used in diluted earnings per share | $(6169) | $43452 |
| Weighted average number of common shares used in basic earnings per share | 24020175 | 183917 |
| Adjustments to weighted average shares for shares used in diluted earnings per share: |  |  |
| Weighted average number of common shares for assumed options exercised |  | 905552 |
| Weighted average number of common shares for assumed conversion of Series A shares |  | 5185210 |
| Weighted average number of common shares used in diluted earnings per share | 24020175 | 6274679 |
| **Net (loss) income per common share – basic**  | $**(0.26)** | $**235.81** |
| **Net (loss) income per common share – diluted** | $**(0.26)** | $**6.92** |

---

The following data show the amounts used in computing EPS and the effect on income and the weighted average number of shares for the nine months ended September 30, 2025 and 2024:

---

| | | |
|:---|:---|:---|
| | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  |
| <br>**(in thousands, except share and per share data)** | **2025** | **2024** |
| Net loss | $(18103) | $(17197) |
| Accretion of NCNV preferred stock |  |  |
| Reduction of the original issue price of NCNV preferred share value from $1,000 to $600 per share |  | 43656 |
| Cumulative preferred stock dividends |  |  |
| Cumulative preferred stock dividends |  | (247) |
| Net (loss) income available to common shareholders used in basic earnings per share | (18103) | $26212 |
| Add back cumulative preferred stock dividends | - | 247 |
| Net (loss) income available to common shareholders used in diluted earnings per share | $(18103) | $26459 |
| Weighted average number of common shares used in basic earnings per share | 23283602 | 177381 |
| Adjustments to weighted average shares for shares used in diluted earnings per share: |  |  |
| Weighted average number of common shares for assumed options exercised |  | 834178 |
| Weighted average number of common shares for assumed conversion of Series A shares |  | 5185210 |
| Weighted average number of common shares used in diluted earnings per share | 23283602 | 6196769 |
| **Net (loss) income per common share – basic**  | $**(0.78)** | $**147.77** |
| **Net (loss) income per common share – diluted** | $**(0.78)** | $**4.27** |

---

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

For the three and nine months ended September 30, 2025 and 2024, the following items have been excluded from the computation of diluted net loss per share because the effect of including these would have been anti-dilutive:

---

| | | |
|:---|:---|:---|
| **Nine Months Ended September 30:** | **2025** | **2024** |
| Incentive stock options | 5856563 | 5997539 |
| Restricted stock units | 1315430 |  |
| Warrants | 107813 |  |
| Shares available for future issuance under the convertible debt note | 6477174 |  |
| Shares available for future issuance under equity line-of-credit agreement | 4562859 |  |
| Temporary redeemable preferred stock |  | 3984088 |
| **Total** | **18319839** | **9981627** |

---

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

#### Gulf Islamic Investments Holding, LLC ("GII")
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 September 30, 2025 with a related party, GII, for recruitment fees paid on the Company's behalf by GII.

#### 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.

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 5,750 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 September 30, 2025 and December 31, 2024, there were no matters pending that required provision.

#### Purchase Obligations
The Company has agreements with hardware suppliers to purchase inventory. As of September 30, 2025, the Company had $11.2 million in purchase obligations outstanding.

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

**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 three months ended September 30, 2025, there were no individual customers which represented 10% or more of the Company's total revenue. For the three months ended September 30, 2024, one individual customer represented 33% of the Company's total revenue.

For the nine months ended September 30, 2025, there were no individual customers which represented 10% or more of the Company's total revenue. For the nine months ended September 30, 2024, one individual customer represented 16% of the Company's total revenue.

As of September 30, 2025, one customer accounted for approximately 14% 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.  **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 $15,000 and $13,000 for the three months ended September 30, 2025 and 2024, respectively. The matching contributions to the 401(k) Plan totaled approximately $0.2 and $0.1 million for the nine months ended September 30, 2025 and 2024, respectively.

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

&nbsp;&nbsp;&nbsp;&nbsp;**14.** **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 balance sheet as total consolidated assets.

The following table presents selected financial information about revenues, expenses and net loss for the three and nine months ended September 30, 2025 and 2024 for the Company's one reportable segment:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| Revenues: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $3768 | $7713 | $11908 | $17115 |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 4319 | 5612 | 8667 | 10222 |
| &nbsp;&nbsp;&nbsp;&nbsp;Services | 706 | 894 | 2436 | 2226 |
| Total revenues | 8793 | 14219 | 23011 | 29563 |
| Cost of goods sold |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | 2665 | 5545 | 8010 | 12563 |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 1081 | 1665 | 2520 | 3509 |
| &nbsp;&nbsp;&nbsp;&nbsp;Services | 501 | 329 | 1375 | 1072 |
| &nbsp;&nbsp;&nbsp;&nbsp;Excess and obsolete | 47 | 318 | 227 | 322 |
| Total cost of goods sold | 4294 | 7857 | 12132 | 17466 |
| Gross profit | 4499 | 6362 | 10879 | 12097 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;Research and development | 266 | 165 | 580 | 915 |
| &nbsp;&nbsp;Software engineering | 452 | 288 | 1156 | 916 |
| &nbsp;&nbsp;Platform engineering | 850 | 586 | 2201 | 2256 |
| &nbsp;&nbsp;Sales | 2110 | 1681 | 5954 | 6086 |
| &nbsp;&nbsp;General and administrative | 3385 | 2035 | 11159 | 10772 |
| &nbsp;&nbsp;Marketing and business development | 2104 | 1449 | 5938 | 5325 |
| &nbsp;&nbsp;International sales | 126 | 134 | 398 | 721 |
| Total operating expenses | 9293 | 6338 | 27386 | 26991 |
| Loss from operations | (4794) | 24 | (16507) | (14894) |
| Other (expense) income: |  |  |  |  |
| &nbsp;&nbsp;Interest expense | (306) | (596) | (1109) | (2235) |
| &nbsp;&nbsp;Other income (expense), net | 78 | 368 | 148 | 18 |
| &nbsp;&nbsp;Gain on change in fair value of convertible debt | (1148) |  | (623) |  |
| &nbsp;&nbsp;Loss on extinguishment of debt |  |  |  | (52) |
| Loss before income taxes | (6170) | (204) | (18091) | (17163) |
| Income tax expense (benefit) | (1) |  | 12 | 34 |
| Segment net loss | $(6169) | $(204) | $(18103) | $(17197) |

---

&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 September 30, 2025, except as follows.

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

**Notice of Minimum Market Value Deficiency and Subsequent Resolution**

On October 1, 2025, the Company received a written notice (the "Notice") from the Listing Qualifications Department (the "Staff") of Nasdaq indicating that the Company was not in compliance with the continued listing requirement set forth in Nasdaq Listing Rule 5450(b)(2)(C), which requires listed companies to maintain a minimum market value of publicly held shares ("MVPHS") of at least $15,000,000. Based on the Staff's review of the Company's MVPHS, the Company's MVPHS was below $15 million for the previous 30 consecutive business days.

On October 9, 2025, the Company submitted an application to transfer its listing from the Nasdaq Global Market to the Nasdaq Capital Market. The continued listing requirement for MVPHS on the Nasdaq Capital Market is $1,000,000.

Effective at the beginning of trading on October 16, 2025, the listing of the Company's Common Stock was transferred to the Nasdaq Capital Market. On October 15, 2025, the Company received confirmation from the Staff that the Nasdaq Non-Compliance Matter was closed because of the transfer of the listing of the Company's Common Stock from the Nasdaq Global Market to the Nasdaq Capital Market, and that any future non-compliance will be measured from the date of such transfer.

**Amendment of Senior Secured Convertible Note** 

On October 15, 2025, the Company entered into an Amendment to 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 $1.98 per share of the Company's common stock, par value $0.00001 per share ("Common Stock") to $0.60 per share, subject to adjustment for reverse and forward stock splits, recapitalizations and similar transactions.

In addition, the Note Amendment revises 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 $1.98 to $0.75 and to reduce the required minimum average daily trading volume of the Common Stock during the 20 trading days prior to the applicable date from $300,000 to $200,000.

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.

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

#### Item 2. 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 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 solutions. We believe that we are a recognized brand in the education market with a current focus on both United States K-12 schools and the Career and Technical Education ("CTE") markets.

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. We hope to accomplish this through a range of proprietary innovations in hardware and software that comprise the foundation of our educational platform. We believe that these innovations help to eliminate a barrier between digital content and students so that students can be immersed in content: manipulate it, experience it, and interact with it as if it were real. We sell our platform directly to United States school districts, both as a primary educational tool in K-12 classrooms and as a career training solution for higher grade levels, 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. Our CTE solutions have also been deployed in approximately 2% of United States community and technical colleges. In addition, we have partnered with over 25 resellers and have expanded our customer network into over 50 countries.

Since 2014, we have been developing and delivering hardware and software technology focused on improving education in K-12 and CTE classrooms. 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 believe that we have significant growth potential and that we have demonstrated a repeatable value proposition and the ability to scale our sales growth model. With a mature and tested go-to-market playbook and team in place, we are focused on scaling execution across a carefully selected set of growth vectors, including scaling in the United States, expanding internationally, investing in research and development ("R&D"), and acquiring software, both specific software applications and third party software developers, 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 revenues.

We estimate using data from national government sources specifying the number of schools within their regions that our total addressable market (TAM) for the K-12 market is approximately $21.4 billion in the United States, $29.0 billion in Europe, Middle East and Africa region (EMEA) and $5.6 billion in the Asia Pacific region (APAC) and that our TAM

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

for the CTE market is approximately $6.2 billion in the United States, $5.4 billion in EMEA and $0.8 billion in APAC, with an overall global TAM of greater than $68 billion. Our TAM for the K-12 market is an estimate of the revenue that we would receive over a five year period assuming that each public school in the applicable region purchases one "lab" (consisting of 25 laptops and one cart) at our current prices. Such estimates include recurring annual revenue per laptop based on the average software subscription revenue we receive per unit per year from K-12 customers and assumes an 80% renewal rate. Our TAM for the CTE market is an estimate of the revenue that we would receive over a five year period assuming that each school that offers vocational/CTE programs (including community colleges) in the applicable region purchases one "lab" (consisting of 27 laptops and one cart) at our current prices. Such estimates include recurring annual revenue based on the average software subscription revenue we receive per unit per year from CTE customers in such region and assumes an 80% renewal rate. We have estimated the number of schools in the K-12 market and the CTE market in the US/Canada region, EMEA region and APAC region based on data sourced from third parties, including the Institute of Education Science, the British Educational Suppliers Association, Statista, various governmental instrumentalities, articles and published papers.

#### Our Business Model
We generate revenue by selling hardware, software and services to customers, who are primarily K-12 schools, as well as community colleges, technical colleges and trade colleges. Our hardware product includes our flagship product, the Inspire laptop which works together with our patented stylus product to create an interactive AR/VR experience. Our software consists of a series of educational applications that run on our hardware to provide interactive experiences. Our services consist of support services 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.

#### 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 the Inspire line of products, our latest laptop product built in partnership with a major PC OEM. It is our first product offering 3D stereo visualization without the need to utilize glasses/eyewear. Our initial original edition product offerings (OE) used a proprietary passive circular polarized display to create comfortable 3D stereo using lightweight eyewear. We are no longer producing our OE products, although we continue to sell existing inventory outside of the US. Product revenue accounted for 52% and 58% of our total revenue for the nine months ended September 30, 2025 and 2024, respectively.

#### Software Applications Revenue
Our platform allows for immersive experiential learning experiences across science, math technology, engineering and career training applications. 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 38% and 35% of our total revenue for the nine months ended September 30, 2025 and 2024, respectively. 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 on a straight-line basis.

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

#### 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 11% and 8% of our total revenue for the nine months ended September 30, 2025 and 2024, respectively.

#### 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:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months ended September 30,** | **Three Months ended September 30,** | **Nine months ended September 30,**  | **Nine months ended September 30,**  |
| **(in thousands)** | **2025** | **2024** | **2025** | **2024** |
| Bookings | $7436 | $11736 | $22746 | $35173 |

---

*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 49% and 41% for the three months ended September 30, 2025 and 2024, respectively, while K-12 bookings accounted for approximately 51% and 59%, for the three months ended September 30, 2025 and 2024, respectively. CTE bookings accounted for approximately 38% and 34% for the nine months ended September 30, 2025 and 2024, respectively, while K-12 bookings accounted for approximately 62% and 66%, for the nine months ended September 30, 2025 and 2024, respectively.

Subsequent to September 30, 2024, we experienced significant cancellations ("debooks") of previously reported customer commitments that affect full year bookings performance. These debooks totaled $1.8 million for the nine months ended September 30, 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 Quarterly Report on Form 10-Q.

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

*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 17% and 27% for the three months ended September 30, 2025 and 2024, respectively. International bookings accounted for approximately 14% and 16% for the nine months ended September 30, 2025 and 2024, respectively.

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

&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;(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.

#### 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 annualized contract value of active software licenses, with particular attention to customers with at least $50,000 in annualized contract value ("ACV"). Our ACV for the nine months ended September 30, 2025 and 2024 was approximately $10.2 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 trailing twelve-month period ended September 30, 2025 and 2024, our NDRR on customers with at least $50,000 of ACV was 77% and 102%, respectively.

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

#### 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, 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.

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

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  |
|  | **2025** | **2024** | **2025** | **2024** |
| **GAAP Net Loss** | $(6169) | $(204) | $(18103) | $(17197) |
| *Add back (deduct):* |  |  |  |  |
| &nbsp;&nbsp;Interest expense  | 306 | 596 | 1109 | 2235 |
| &nbsp;&nbsp;Depreciation and amortization  | 6 | 2 | 7 | 9 |
| &nbsp;&nbsp;Income tax (benefit) expense  | (1) |  | 12 | 34 |
| &nbsp;&nbsp;Stock-based and equity related compensation  | 2754 | 51 | 5582 | 7401 |
| &nbsp;&nbsp;Loss on change in fair value of convertible debt | 1148 |  | 623 |  |
| &nbsp;&nbsp;Loss on extinguishment of debt  |  |  |  | 52 |
| **Adjusted EBITDA**  | $(1956) | $445 | $(10770) | $(7466) |

---

**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.

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

#### 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 September 30, 2025, approximately 21,600 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.

#### 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.

Beginning in the first quarter of 2025, new tariffs were announced on imports to the U.S. ("U.S. Tariffs"), including tariffs on imports from China, where the Company manufactures its products, and multiple nations have announced tariffs and other actions in response. Trade negotiations are ongoing, but overall the global trade environment remains fluid and highly uncertain. Modifications and delays to the U.S. Tariffs have been announced and further changes are expected to be made in the future. Tariffs and other measures that are applied to the Company's products or their components can have a material adverse impact on the Company's business, results of operations and financial condition, including impacting the Company's supply chain, pricing and gross margin. The ultimate impact remains uncertain and will depend on several factors, including whether additional or incremental U.S. Tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, and the overall magnitude and duration of these measures. Trade and other international disputes can have an adverse impact on the overall macroeconomic environment and result in shifts and reductions in spending for the Company's products and services, all of which can further adversely affect the Company's business and results of operations.

#### 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

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

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. 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.

*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.

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

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.

*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.

*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.

*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.

#### 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 (Benefit)
Income tax expense (benefit) consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business.

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

#### Results of Operations
*The following table sets forth our results of operations for the three and nine months ended September 30, 2025 and 2024*:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Change** | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Change** |
| **(in thousands)** | **2025** | **2024** | $**%** | **2025** | **2024** | $**%** |
| **Revenues:** |  |  |  |  |  |  |
| &nbsp;&nbsp;*Hardware* | 3768 | $7713 | (51)% | 11908 | $17115 | (30)% |
| &nbsp;&nbsp;*Software* | 4319 | 5612 | (23)% | 8667 | 10222 | (15)% |
| &nbsp;&nbsp;*Services* | 706 | 894 | (21)% | 2436 | 2226 | 9% |
| **Total Revenues** | **8793** | **14219** | **(38)%**  | **23011** | **29563** | **(22)%**  |
| **Cost of goods sold**<sup>(1)</sup> | **4294** | **7857** | **(45)%**  | **12132** | **17466** | **(31)%**  |
| **Gross profit** | **4499** | **6362** | **(29)%**  | **10879** | **12097** | **(10)%**  |
| **Operating expenses:** |  |  |  |  |  |  |
| &nbsp;&nbsp;*Research and development*<sup>(1)</sup> | 1568 | 1040 | 51% | 3937 | 4088 | (4)% |
| &nbsp;&nbsp;*Selling and marketing*<sup>(1)</sup> | 4340 | 3265 | 33% | 12290 | 12132 | 1% |
| &nbsp;&nbsp;*General and administrative*<sup>(1)</sup> | 3385 | 2033 | 67% | 11159 | 10771 | 4% |
| **Total operating expenses** | **9293** | **6338** | **47%** | **27386** | **26991** | **1%** |
| **Loss from operations** | **(4794)** | **24** | **(20075)%**  | **(16507)** | **(14894)** | **11%**  |
| **Other (expense) income:** |  |  |  |  |  |  |
| &nbsp;&nbsp;*Interest expense* | (306) | (596) | (49)% | (1109) | (2235) | (50)% |
| &nbsp;&nbsp;*Other income (expense), net* | 78 | 368 | (79)% | 148 | 18 | 719% |
| &nbsp;&nbsp;*Loss on extinguishment of debt* |  |  | N/A |  | (52) | (100)% |
| &nbsp;&nbsp;*Loss on change in fair value of convertible debt* | (1148) |  |  | (623) |  |  |
| **Loss before income taxes** | **(6170)** | **(204)** | **2925%**  | **(18091)** | **(17163)** | **5%**  |
| &nbsp;&nbsp;*Income tax (benefit) expense*  | (1) |  | N/A% | 12 | 34 | (67)% |
| **Net loss** | $**(6169)** | $**(204)** | **2924%**  | $**(18103)** | $**(17197)** | **5%**  |

---

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

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  |
| **(in thousands)** | **2025** | **2024** | **2025** | **2024** |
|  | **(unaudited)** | **(unaudited)** |  |  |
| Cost of goods sold | $26 | $— | $58 | $115 |
| Research and development | 141 | 18 | 318 | 729 |
| Sales and marketing | 773 | 29 | 1582 | 2597 |
| General and administrative | 1424 | 4 | 3234 | 3960 |
| &nbsp;&nbsp;Total stock-based compensation expense | $2364 | $51 | $5192 | $7401 |

---

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

**Comparison of financial results for the three months ended September 30, 2025 and 2024**

***Revenue***

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Change** | **Change** |
| **(in thousands)** | **2025** | **2024** | **$** | **%** |
| **Revenues:** |  |  |  |  |
| &nbsp;&nbsp;*Hardware* | $3768 | $7713 | $(3945) | (51)% |
| &nbsp;&nbsp;*Software* | 4319 | 5612 | (1293) | (23)% |
| &nbsp;&nbsp;*Services* | 706 | 894 | (188) | (21)% |
| **Total Revenues** | $**8793** | $**14219** | $**(5426)** | **(38)%** |
| ***Retention and Expansion Metrics***  |  |  |  |  |
| &nbsp;&nbsp;*Annualized Contract Value (ACV)* | $10172 | $11304 | $(1132) | (10)% |
| &nbsp;&nbsp;*Net Dollar Retention Rate (NDRR)* | 77% | 102% | (25)% |  |

---

Total revenue decreased by $5.4 million, or 38%, for the three months ended September 30, 2025 to $8.8 million as compared to the three months ended September 30, 2024. This decrease in revenue is primarily attributable to lower hardware and software revenues attributable to uncertainty in our K-12 end-user markets where funding sources have been disrupted, 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.

Hardware revenue decreased by $3.9 million or 51%, to $3.8 million for the three months ended September 30, 2025, from $7.7 million for the three months ended September 30, 2024. The decrease in hardware revenue was primarily attributable to a decrease in units shipped. For the three months ended September 30, 2025 and 2024, hardware revenue as a percentage of total revenue was 43% and 54%, respectively.

Software revenue decreased by $1.3 million or 23%, to $4.3 million for the three months ended September 30, 2025, from $5.6 million for the three months ended September 30, 2024. Software content purchased on new unit deployments and retention of existing software licenses revenue were disproportionately affected by customer funding disruptions in the three months ended September 30, 2025. For the three months ended September 30, 2025 and 2024, software revenue as a percentage of total revenue is 49% and 39%, respectively.

Our key software retention metrics are as follows: (1) ACV as of September 30, 2025 decreased to $10.2 million as compared to September 30, 2024 of $11.3 million and (2) NDRR for the trailing twelve-month period ended September 30, 2025 was 77%, as compared to 102% for the trailing twelve-month period ended September 30, 2024.

Service revenue decreased by $0.2 million or 21%, to $0.7 million for the three months ended September 30, 2025, from $0.9 million for the three months ended September 30, 2024. The decrease in revenue was primarily attributable to decreased sales of extended warranty and technology support services. For the three months ended September 30, 2025 and 2024, services revenue as a percentage of total revenue was 8% and 6%, respectively.

---

| | | | |
|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Change** |
| **(in thousands)** | **2025** | **2024** | $**%** |
| **Cost of goods sold:** |  |  |  |
| &nbsp;&nbsp;*Hardware* | $2665 | $5545 | (52)% |
| &nbsp;&nbsp;*Software* | 1081 | 1665 | (35)% |
| &nbsp;&nbsp;*Services*  | 501 | 329 | 52% |
| &nbsp;&nbsp;*Excess and obsolete* | 47 | 318 | (85)% |
| **Total cost of goods sold**  | $**4294** | $**7857** | **(45)%** |

---

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

For the three months ended September 30, 2025, total cost of goods sold decreased by $3.6 million, or 45%, to $4.3 million compared to $7.9 million for the three months ended September 30, 2024. This decrease was primarily attributable to reduced hardware costs of $2.9 million due to fewer units sold partially and the lower cost of Inspire units. For the three months ended September 30, 2025 and 2024, gross margin was 51% and 45%, respectively.

Cost of hardware sold decreased by $2.9 million, or 52%, to $2.7 million for the three months ended September 30, 2025, from $5.5 million for the three months ended September 30, 2024. The decrease in cost of hardware sold was primarily attributable to a decrease in the volumes shipped of Inspire laptops and reductions in the bill of materials costs of the new Inspire 2 laptop, relative to the Inspire 1 model which was sold during the three months ended September 30, 2024.

The Company's hardware costs include shipping and handling fees paid to the primary logistics agent for tariffs, custom duties and related logistics expenses. For the three months ended September 30, 2025, these costs were approximately $0.1 million, as compared to $0 for the three months ended September 30, 2024.

For the three months ended September 30, 2025 and 2024, hardware gross margin was 36% and 28%, respectively.

Cost of software sold decreased by $0.6 million or 35%, to $1.1 million for the three months ended September 30, 2025, from $1.7 million for the three months ended September 30, 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 three months ended September 30, 2025 and 2024, software gross margin was 68% and 70%, respectively.

***Cost of services sold increased by $0.2 million or 52%, to $0.5 million for the three months ended September 30, 2025, from $0.3 million for the three months ended September 30, 2024. For the three months ended September 30, 2025 and 2024, services gross margin was 25% and 63%, respectively.***

***Excess and obsolete expense decreased by $0.3 million or 85%, to $47,000 for the three months ended September 30, 2025, from $0.3 million in the three months ended September 30, 2024. The decrease was attributable to the write-off of inventory in the three months ending September 30, 2024.***

***Excluding the $0.1 million of shipping costs paid to the primary logistics agent and the write-off of excess and obsolete charges in the three months ended September 30, 2025, gross margin for the three months ended September 30, 2025 would have been 52% compared to the actual gross margin of 51%.***

#### Operating Expenses

---

| | | | |
|:---|:---|:---|:---|
|  | **Three Months Ended September 30,**  | **Three Months Ended September 30,**  | **Change** |
| **(in thousands)** | **2025** | **2024** | $**%** |
|  | **(unaudited)** | **(unaudited)** |  |
| **Operating Expenses:** |  |  |  |
| &nbsp;&nbsp;*Research and development* | $1568 | $1040 | 51% |
| &nbsp;&nbsp;*Selling and marketing* | 4340 | 3265 | 33% |
| &nbsp;&nbsp;*General and administrative* | 3385 | 2033 | 67% |
| **Total operating expenses** | $**9293** | $**6338** | **47%** |

---

For the three months ended September 30, 2025, operating expenses increased by $3.0 million, or 47%, to $9.3 million from $6.3 million for the three months ended September 30, 2024. The increase in expenses was primarily attributable to an increase of $2.3 million of stock-based compensation expense due to annual grants of 1.3 million RSUs to members of the Board of Directors, named executive officers and employees in February and March 2025 at a grant date fair value of $17.5 million. After removing the stock-based compensation and RSU expense from the totals, for the three months ended September 30, 2025, the adjusted operating expenses totaled $6.6 million and resulted in an increase of $0.3 million or

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

4%, from the $6.3 million total operating expenses for the three months ended September 30, 2024. This net increase was primarily due to increased costs in personnel and professional expenses through the three months ended September 30, 2025 and additional selling and marketing activities.

Research and development expenses increased by $0.5 million or 51%, to $1.6 million for the three months ended September 30, 2025, from $1.0 million for the three months ended September 30, 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 $1.1 million or 33%, to $4.3 million for the three months ended September 30, 2025, from $3.3 million for the three months ended September 30, 2024. The increase in expenses was mainly due to higher compensation and commission expenses associated with the expanded sales team, reflecting increased pay levels and performance-based incentives.

General and administrative expenses increased by $1.4 million or 67%, to $3.4 million for the three months ended September 30, 2025, from $2.0 million for the three months ended September 30, 2024. The increase in expenses was primarily attributable to the increase in stock-based compensation expense of $1.4 million.

#### Interest Expense

---

| | | | |
|:---|:---|:---|:---|
|  | **Three Months Ended**  | **Three Months Ended**  | |
|  | **September 30,**  | **September 30,**  | <br>**Change** |
| **(in thousands)** | **2025** | **2024** | $**%**  |
| *Interest expense* | $(306) | $(596) | (49)% |

---

For the three months ended September 30, 2025, interest expense decreased by $0.3 million, or 49%, to $0.3 million, from $0.6 million for the three months ended September 30, 2024. The decrease in interest expense was primarily attributable to the convertible loans converting into 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.

#### Income Tax Expense
Income tax expense for each of the three months ended September 30, 2025 and 2024 was immaterial. We estimate an annual effective tax rate for the year ending December 31, 2025 of (0.09)% as we incurred losses for the three months ended September 30, 2025 and expect to continue to incur losses through the remainder of our fiscal year, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2025. The United States federal statutory rate is 21% while our effective tax rate for the years ended December 31, 2024 and 2023 was 0.1% and zero, respectively. No federal or state income taxes are expected outside of immaterial state tax payments.

**Comparison of financial results for the nine months ended September 30, 2025 and 2024**

***Revenue***

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Change** | **Change** |
| **(in thousands)** | **2025** | **2024** | **$** | **%** |
| **Revenues:** |  |  |  |  |
| &nbsp;&nbsp;*Hardware* | $11908 | $17115 | $(5207) | (30)% |
| &nbsp;&nbsp;*Software* | 8667 | 10222 | (1555) | (15)% |
| &nbsp;&nbsp;*Services* | 2436 | 2226 | 210 | 9% |
| **Total Revenues** | $**23011** | $**29563** | $**(6552)** | **(22)%** |
| ***Retention and Expansion Metrics***  |  |  |  |  |
| *Annualized Contract Value (ACV)* | $*10172* | $*11304* | $*(1132)* | *(10)%* |
| *Net Dollar Retention Rate (NDRR)* | *77*<br>*%*  | *102*<br>*%*  | *(25)*<br>*%*  |  |

---

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

Total revenue decreased by $6.6 million, or 22%, for the nine months ended September 30, 2025 to $23.0 million as compared to $29.6 million for the nine months ended September 30, 2024. This decrease in revenue was primarily attributable to lower hardware revenues and attributable to 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.

Hardware revenue decreased by $5.2 million or 30%, to $11.9 million for the nine months ended September 30, 2025, from $17.1 million for the nine months ended September 30, 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 nine months ended September 30, 2025. For the nine months ended September 30, 2025 and 2024, hardware revenue as a percentage of total revenue was 52% and 58%, respectively.

Software revenue decreased by $1.6 million or 15%, to $8.7 million for the nine months ended September 30, 2025 from $10.2 million for the nine months ended September 30, 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. For the nine months ended September 30, 2025 and 2024, software revenue as a percentage of total revenue was 38% and 35%, respectively.

Our key software retention metrics are as follows: (1) ACV as of September 30, 2025 decreased to $10.2 million as compared to September 30, 2024 of $11.3 million and (2) NDRR for the trailing twelve-month period ended September 30, 2025 was 77%, as compared to 102% for the trailing twelve-month period ended September 30, 2024.

Service revenue increased by $0.2 million or 9%, to $2.4 million for the nine months ended September 30, 2025, from $2.2 million for the nine months ended September 30, 2024. The increase in service revenue was primarily attributable to increased sales of extended warranty and technology support services. For the nine months ended September 30, 2025 and 2024, services revenue as a percentage of total revenue was 11% and 8%, respectively.

---

| | | | |
|:---|:---|:---|:---|
|  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Change** |
| **(in thousands)** | **2025** | **2024** | $**%** |
| **Cost of goods sold:** |  |  |  |
| &nbsp;&nbsp;*Hardware* | $8010 | $12563 | (36)% |
| &nbsp;&nbsp;*Software* | 2520 | 3509 | (28)% |
| &nbsp;&nbsp;*Services*  | 1375 | 1072 | 28% |
| &nbsp;&nbsp;*Excess and obsolete* | 227 | 322 | (30)% |
| **Total cost of goods sold**  | $**12132** | $**17466** | **(31)%** |

---

For the nine months ended September 30, 2025, total cost of goods sold decreased by $5.3 million, or 31%, to $12.1 million compared to $17.5 million for the nine months ended September 30, 2024. This decrease was primarily attributable to reduced hardware costs of $4.6 million due to fewer shipments of Inspire units, a decrease in software costs of $1.0 million and a decrease in excess and obsolete of $0.1 million, partially offset by an increase in service cost of $0.3 million. For the nine months ended September 30, 2025 and 2024, gross margin was 47% and 41%, respectively.

Cost of hardware sold decreased by $4.6 million, or 36%, to $8.0 million for the nine months ended September 30, 2025, from $12.6 million for the nine months ended September 30, 2024. The decrease in cost of hardware sold was primarily attributable to the 30% decrease in hardware revenue driven primarily by 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 nine months ended September 30, 2024.

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

The Company's hardware costs include shipping and handling fees paid to the primary logistics agent for tariffs, custom duties and related logistics expenses. For the nine months ended September 30, 2025, these costs were approximately $0.1 million, as compared to $0 for the nine months ended September 30, 2024.

For the nine months ended September 30, 2025 and 2024, hardware gross margin was 35% and 27%, respectively.

Cost of software sold decreased by $1.0 million or 28%, to $2.5 million for the nine months ended September 30, 2025, from $3.5 million for the nine months ended September 30, 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 nine months ended September 30, 2025 and 2024, software gross margin was 68% and 66%, respectively.

***Cost of services sold increased by $0.3 million or 28%, to $1.4 million for the nine months ended September 30, 2025, from $1.1 million for the nine months ended September 30, 2024. The increase in cost of services sold was primarily attributable to increased sales of technology support services. For the nine months ended September 30, 2025 and 2024, services gross margin was 42% and 52%, respectively.***

***Excess and obsolete expense decreased $0.1 million or 30%, to $0.2 million for the nine months ended September 30, 2025, from $0.3 million in the nine months ended September 30, 2024. The decrease was attributable to the write-off of inventory costs in the nine months ending September 30, 2024.***

***Excluding the $0.1 million of shipping costs paid to the primary logistics agent and the write-off of $0.2 million of excess and obsolete costs in the nine months ended September 30, 2025, gross margin for the nine months ended September 30, 2025 would have been 49% compared to the actual gross margin of 47%.***

#### Operating Expenses

---

| | | | |
|:---|:---|:---|:---|
|  | **Nine Months Ended September 30,**  | **Nine Months Ended September 30,**  | **Change** |
| **(in thousands)** | **2025** | **2024** | $**%** |
|  | **(unaudited)** | **(unaudited)** |  |
| **Operating Expenses:** |  |  |  |
| &nbsp;&nbsp;*Research and development* | $3937 | $4088 | (4)% |
| &nbsp;&nbsp;*Selling and marketing* | 12290 | 12132 | 1% |
| &nbsp;&nbsp;*General and administrative* | 11159 | 10771 | 4% |
| **Total operating expenses** | $**27386** | $**26991** | **1%** |

---

For the nine months ended September 30, 2025, operating expenses increased by $0.4 million, or 1%, to $27.4 million from $27.0 million for the nine months ended September 30, 2024. The increase in expenses was primarily attributable to increased costs in personnel.

Research and development expenses decreased by $0.2 million or 4%, to $3.9 million for the nine months ended September 30, 2025, from $4.1 million for the nine months ended September 30, 2024. The decrease in expenses was primarily attributable to a decrease in stock-based compensation expense of $0.4 million due to grants to employees in March 2024.

Selling and marketing expenses increased by $0.2 million or 1%, to $12.3 million for the nine months ended September 30, 2025, from $12.1 million for the nine months ended September 30, 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 $1.0 million due to grants to employees in March 2024.

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

General and administrative expenses increased by $0.4 million or 4%, to $11.2 million for the nine months ended September 30, 2025, from $10.8 million for the nine months ended September 30, 2024. The increase in expenses was primarily attributable to increased costs in personnel and professional expenses in 2025 related to being a public Company partially offset by a $0.7 million decrease in stock compensation expenses due to grants to employees in March 2024.

#### Interest Expense

---

| | | | |
|:---|:---|:---|:---|
|  | **Nine Months Ended**  | **Nine Months Ended**  | |
|  | **September 30,**  | **September 30,**  | <br>**Change** |
| **(in thousands)** | **2025** | **2024** | $**%** |
| *Interest expense* | $(1109) | $(2235) | (50)<br>*%* |

---

For the nine months ended September 30, 2025, interest expense decreased by $1.1 million, or 50%, to $1.1 million, from $2.2 million for the nine months ended September 30, 2024. The decrease in interest expense was attributable to the convertible loans converted into 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.

#### Income Tax Expense
Income tax expense for each of the nine months ended September 30, 2025 and 2024 was immaterial. We estimate an annual effective tax rate for the year ending December 31, 2025 of (0.09)% as we incurred losses for the nine months ended September 30, 2025 and expect to continue to incur losses through the reminder of our fiscal year, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2025. The United States federal statutory rate is 21% while our effective tax rate for the years ended December 31, 2024 and 2023 was 0.1% and zero, 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:

---

| | | |
|:---|:---|:---|
|  | **Nine Months September 30,** | **Nine Months September 30,** |
| **(in thousands)** | **2025** | **2024** |
| Net cash used in operating activities | $(14025) | $(3850) |
| Net cash used in investing activities | $(21) | $(8) |
| Net cash provided by financing activities | $13709 | $4027 |

---

*Operating Activities*

For the nine months ended September 30, 2025, our operating activities used cash of $14.0 million, primarily due to our net loss of $18.1 million and the changes in our operating assets and liabilities of $2.4 million, partially offset by adjustments for non-cash charges, including stock-based compensation expense of $5.2 million, the change in fair value of convertible debt of $0.6 million, issuance of restricted stock units of $0.4 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 accounts receivable of $0.5 million and prepaid and other assets of $1.0 million and a decrease in accounts payable of $1.7 million and deferred revenue of $0.6 million, partially offset by a decrease in inventory of $0.7 million and an increase in accrued expenses of $0.1 million and accrued interest of $0.7 million.

For the nine months ended September 30, 2024, our operating activities used cash of $3.9 million, primarily due to our net loss of $17.2 million partially offset by changes in our operating assets and liabilities of $5.8 million, an adjustment for non-cash charge of stock-based compensation expense of $7.4 million, and loss on extinguishment of debt of $0.1 million. The change in our operating assets and liabilities was primarily the result of a decrease in accounts receivable of $0.6 million and inventory of $1.0 million, and an increase in accounts payable of $1.9 million, accrued expenses of $0.2

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

million, deferred revenue of $1.1 million, and accrued interest of $1.3 million partially offset by an increase in prepaid expenses and other assets of $0.3 million.

*Investing Activities*

For the nine months ended September 30, 2025 and 2024, net cash used in investing activities was immaterial due to our low capital equipment requirements.

*Financing Activities*

For the nine months ended September 30, 2025, net cash provided by financing activities was $13.7 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 $3.6 million, and proceeds from exercise of stock options of $0.2 million partially offset by repayment of other debt issuances of $6.8 million, and fees paid for debt issuance of $0.1 million.

For the nine months ended September 30, 2024, net cash provided by financing activities was $4.0 million primarily due to proceeds from convertible notes of $5.0 million and proceeds from other term loan issuances of $3.5 million partially offset by repayment of other debt issuances of $3.9 million and fees paid for deferred offering costs of $0.5 million.

#### Liquidity and Capital Resources
As of September 30, 2025 and December 31, 2024, we had an accumulated deficit of $308.5 million and $290.4 million, respectively. Our net losses were $18.1 million and $17.2 million for the nine months ended September 30, 2025 and 2024, respectively. A portion of our net losses in the nine months ended September 30, 2024 related to $7.4 million in stock compensation expense from options issued during the period.

As of September 30, 2025 and December 31, 2024, we had cash and cash equivalents of $4.3 million and $4.9 million, respectively. In April 2025, we raised $14.0 million in a Senior Secured Convertible Note Financing. See Note 5 to our condensed consolidated financial statements for the nine months ended September 30, 2025 elsewhere in this report for additional information. In the nine months ended September 30, 2025 and the years ended December 31, 2024 and 2023, we raised $20.6 million, $18.5 million and $11.4 million, respectively, for an aggregate of $50.5 million through debt and financing arrangements, including the $13.0 million of convertible debt, $7.5 million of net proceeds from the IPO, $9.3 million under loan and security agreements with Fiza, $5.0 million in convertible notes and $5.6 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 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, uncertainties frequently encountered by companies in the technology industry and the dependency on closing this offering 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 to our condensed consolidated financial statements for the three and nine months ended September 30, 2025 included elsewhere in this report for additional information on our assessment.

During the nine months ended September 30, 2025, we incurred a net loss of $18.1 million and had Adjusted EBITDA of ($10.7) million and negative cash flows from operations of $14.0 million. For the years ended December 31, 2024 and 2023, we incurred net losses of $20.8 million and $13.0 million, respectively, and incurred negative cash flows from operations of $8.9 million and $6.4 million, respectively. We had combined cash and cash equivalents of $4.3 million and $4.9 million as of September 30, 2025 and December 31, 2024, respectively. We have incurred operating losses and negative cash flows from operations since inception. Our 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 our products, availability of additional financing, gaining customer acceptance and uncertainty

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

of achieving future profitability among other factors discussed under "Cautionary Note Regarding Forward - Looking Statements". Our success depends on the outcome of our research and development activities, scale-up and successful partnering and commercialization of our products and product candidates. In February 2025, we entered into two Loan and Security agreements that provided us with $2.0 million in financing. In April 2025, we entered into a convertible debt agreement that may provide us with up to $20.0 million in financing. In July 2025, we entered into an equity line-of-credit agreement that may provide us with up to $30.0 million in equity. In August 2025, we entered into new debt loans that provided us with $2.0 million in financing.

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 in December 2024, and debt financing. Our accompanying condensed consolidated 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, uncertainties frequently encountered by companies in the technology industry and the dependency on closing this offering 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 condensed consolidated financial statements do not contain any adjustments that might result if we are unable to continue as a going concern.

*Issuance of Common Stock*

On December 6, 2024, we completed an 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 Notes 6 (Temporary Redeemable Preferred Stock and Stockholders' Equity) for more information.

*Debt and Financing Arrangements*

**Fiza Term Debt**.

The Company has three outstanding loans as of September 30, 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 in Note 5 to the to the condensed consolidated financial statements, 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 in Note 5 to the to the condensed consolidated financial statements). As of September 30, 2025 and December 31, 2024, gross principal amounts due on the Fiza term debt is $7.2 million and have been classified as non-current other term loans on the balance sheet.

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

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.

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 1 Agreement over twelve monthly installments.

On April 11, 2025, the Company and Fiza entered into an intercreditor agreement (the "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.

***Itria Other 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 ("Term Loans 8 and 9") with Itria Ventures LLC ("Itria"). The Term Loans 8 and 9 bear interest at a rate of 18.00% per year (subject to increases upon an event of default) and are payable on a monthly basis in 12 equal installments, maturing on February 26, 2026. The Company may prepay the Term Loans 8 and 9 in full at any time during the term, subject to a prepayment fee equal to 1.5% of the unpaid principal balance. In connection with the Senior Secured Convertible Note financing on April 10, 2025, Term Loans 8 and 9 were prepaid. See Note 5 – Debt and Related Party Debt for more information.

On August 20, 2025, the Company entered into two Loan and Security Agreements in the principal amounts of $1,000,000 each ("Term Loans 10 and 11") for an aggregate total of $2,000,000. One of the Term Loans 10 and 11 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. The second Term Loans 10 and 11bears 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 Term Loans 10 and 11Loans 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 11are prepaid within the first 12 months of the term. See Note 5 – Debt and Related Party Debt for more information.

The outstanding balance of all Itria loans as of September 30, 2025 and December 31, 2024 is $1.9 million and $4.8 million, 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, a senior secured convertible note issued by the Company (the "Senior Secured Convertible Note," and 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.

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

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

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 intends to use the net proceeds from the Senior Secured Convertible Note Financing to repay existing debt and for working capital and general corporate purposes.

*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 (for more information regarding the amendment, see Note 15 – Subsequent Events).

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 Senior Secured Convertible 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 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 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.

In connection with a "Change of Control" (as defined in the Senior Secured Convertible Note), the Note Investor will 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

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

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.

#### 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 September 30, 2025, we had approximately $11.2 million in purchase obligations outstanding under such agreements, all of which are scheduled to come due on or before December 31, 2025.

**Critical Accounting Estimates**

As discussed in our Form 10-K for the fiscal year ended December 31, 2024, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those consolidated financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies and estimates relate to revenue recognition, including Standalone Selling Price ("SSP") and the allocation of the transaction price; leases; impairment of intangible assets; impairment of long-lived assets; valuation of accounts receivable; valuation of inventory; valuation of debt and embedded features; stock compensation; and income taxes (including uncertain tax positions). There have been no significant changes to the Company's accounting policies subsequent to December 31, 2024.

**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.

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 promissory notes and evaluate embedded features for potential bifurcation as derivatives.

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

For the recent convertible note described in Note 5, we elected the fair value option under 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 and aligns with the principles outlined in 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.

#### 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 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 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.

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

#### Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this item.

#### Item 4. Controls and Procedures
**Internal Control Over Financial Reporting**

**Evaluation of disclosure controls and procedures**

As required by Rule 13a-15(e) and 15d-15(e) 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 Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2025, our disclosure controls and procedures were ineffective to provide reasonable assurance that information required to be disclosed in our Exchange Act filings is recorded, processed, summarized, and reported within the time periods 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.

The Company has identified material weaknesses in our internal control over financial reporting as of December 31, 2024, relating to: (i) the lack of segregation of duties; (ii) ineffective IT General Controls; (iii) account reconciliation and cutoff; (iv) analysis of significant and unusual transactions, and (v) the lack of a formal risk assessment policy for entity level controls. As such, management determined that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of December 31, 2024.

To respond to these material weaknesses, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our disclosure controls and procedures. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementing the complex accounting standards that apply to our financial statements. Our plans at this time include: (i) hiring additional financial personnel with accounting and financial reporting expertise; (ii) implementing user access policies, reviews and procedures; (iii) improving our ongoing account reconciliation and variance analyses; (iv) reviewing significant and unusual financing transactions; and (v) establishing a formal and documented risk assessment policy.

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 three and nine months ended September 30, 2025 included in this Quarterly Report on Form 10-Q were fairly stated in accordance with GAAP. Accordingly, management believes that despite our material weaknesses, our financial statements for the quarter ended September 30, 2025 are fairly stated, in all material respects, in accordance with GAAP.

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

**Changes in Internal Control Over Financial Reporting**

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**Limitations on Effectiveness of Controls and Procedures**

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, the effectiveness of any internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

#### PART II — OTHER INFORMATION

#### Item 1. Legal Proceedings
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. 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. A trial date has been set for January 20, 2027. The Company believes this lawsuit is without merit and intends to vigorously defend itself against these allegations.

#### Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in "Part I, Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which could materially affect our business, financial condition, or future operating results and cash flows. We do not believe that there have been any material changes to the risk factors disclosed in "Part I, Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The risks described in "Part I, Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may materially adversely affect our business, financial condition, operating results and/or cash flows.

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

#### Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There have been no unregistered sales of securities by the Company during the period covered by this report that have not been previously reported in a Current Report on Form 8-K.

#### Item 3. Defaults Upon Senior Securities
Not applicable.

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

#### Item 5. Other Information
**Trading Arrangements**

During the three months ended September 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) informed us of the adoption or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" (as defined in Item 408 of Regulation S-K).

**Amendment to Certificate of Incorporation**

The information set forth below is included herewith for the purpose of providing the disclosures required under "Item 5.03 - Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year" of Form 8-K.

On October 15, 2025, at the Company's 2025 annual meeting of stockholders, the Company's stockholders approved an amendment to the Company's Second Amended and Restated Certificate of Incorporation to allow for stockholder action by written consent (the "COI Amendment"). All other provisions of the Company's Second Amended and Restated Certificate of Incorporation remain unchanged. The COI Amendment was filed with the Secretary of State of the State of Delaware on November 10, 2025, to become effective immediately upon filing.

The foregoing description of the COI Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the COI Amendment, which is filed herewith as Exhibit 3.2, and incorporated herein by reference.

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

#### Item 6. Exhibits
The documents listed in the Index to Exhibits of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

#### EXHIBIT INDEX

---

| | |
|:---|:---|
| **ExhibitNo.** | **Description** |
| 3.1 | [Form of Second Amended and Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed 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 Certificate of Incorporation of Registrant, filed with the Secretary of State of the State of Delaware on November 10, 2025.](zspc-20250930xex3d2.htm) |
| 3.3 | [Form of Amended and Restated Bylaws of Registrant (incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K filed on December 9, 2024).](https://www.sec.gov/Archives/edgar/data/1637147/000110465924126545/tm244059d41_ex3-2.htm) |
| 4.1 | [Form of Registrant's 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 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 Current Report on Form 8-K filed on April 11, 2025)](https://www.sec.gov/Archives/edgar/data/1637147/000110465925034265/tm2512150d1_ex4-1.htm) |
| 10.1 | [Common Stock Purchase Agreement, dated July 8, 2025, with Tumim Stone Capital LLC (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on July 8, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925066464/tm2520105d1_ex10-1.htm) |
| 10.2 | [Registration Rights Agreement, dated July 8, 2025, with Tumim Stone Capital LLC (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed on July 8, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925066464/tm2520105d1_ex10-2.htm) |
| 10.3 | [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 on August 22, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925081940/tm2524137d1_ex10-1.htm) |
| 10.4 | [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 on August 22, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925081940/tm2524137d1_ex10-2.htm) |
| 10.5 | [Intercreditor Agreement among Itria Ventures LLC, zSpace 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 on August 22, 2025).](https://www.sec.gov/Archives/edgar/data/1637147/000110465925081940/tm2524137d1_ex10-3.htm) |
| 31.1\* | [Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](zspc-20250930xex31d1.htm) |
| 31.2\* | [Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](zspc-20250930xex31d2.htm) |
| 32.1\*\* | [Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](zspc-20250930xex32d1.htm) |
| 32.2\*\* | [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-20250930xex32d2.htm) |

---

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

---

| | |
|:---|:---|
| **ExhibitNo.** | **Description** |
| 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 |
| 101.CAL\* | 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 Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |

---

\* Filed herewith.

\*\* Furnished herewith.

† Schedules and exhibits to this Exhibit omitted pursuant to Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.

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

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

Date: November 13, 2025

---

| | |
|:---|:---|
| **ZSPACE, INC.** | **ZSPACE, INC.** |
| By: | /s/ **Paul Kellenberger** |
| Name: | Paul Kellenberger |
| Title: | Chief Executive Officer and Director |
|  | (Principal Executive Officer) |
| By: | /s/ **Erick DeOliveira** |
| Name: | Erick DeOliveira |
| Title: | Chief Financial Officer |
|  | (Principal Financial Officer and Principal Accounting Officer) |

---

## Exhibit 3.2

**Exhibit 3.2**

**CERTIFICATE OF AMENDMENT**

**OF AMENDED AND RESTATED**

**CERTIFICATE OF INCORPORATION**

**OF**

**ZSPACE, INC.**

zSpace, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the "**General Corporation Law**"),

**DOES HEREBY CERTIFY:**

FIRST: The name of the Corporation is zSpace, Inc., and the name under which the Corporation was originally incorporated is Infinite Z, Inc.

SECOND: The date on which the Certificate of Incorporation of the Corporation was originally filed with the Secretary of State of the State of Delaware is October 26, 2006 and was amended and restated by that certain Amended and Restated Certificate of Incorporation, filed with the Secretary of State of the state of Delaware on December 29, 2023, and was further amended by that certain Certificate of Amendment filed with the Secretary of State of the state of Delaware on July 12, 2024, and was further amended by that certain Certificate of Amendment filed with the Secretary of State of the state of Delaware on October 25, 2024 and was further amended and restated by that certain Amended and Restated Certificate of Incorporation, filed with the Secretary of State of the state of Delaware on December 6, 2024.

THIRD: The Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware, adopted resolutions amending its Certificate of Incorporation as follows:

Paragraph A of Article VII is hereby amended and restated to read in its entirety as follows:

"Any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation in accordance with the General Corporation Law of the State of Delaware."

FOURTH: Thereafter pursuant to a resolution of the Board of Directors of the Corporation, this Certificate of Amendment was submitted to the stockholders of the Corporation for their approval, and the Corporations stockholders approved this Certificate of Amendment.

zSpace, Inc. has caused this certificate to be signed on <u>November 7, 2025</u>.

------

---

| | |
|:---|:---|
| By: | /s/ Paul Kellenberger |
| Authorized Officer | Authorized Officer |
| Title: Chief Executive Officer | Title: Chief Executive Officer |
| Name: | Paul Kellenberger |
|  | (Print or Type) |

---

------

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER<br>PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Paul Kellenberger certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this quarterly report on Form 10-Q 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 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 (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&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;&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.

---

| | | | |
|:---|:---|:---|:---|
| Dated: November 13, 2025 | By: | /s/ **Paul Kellenberger** | /s/ **Paul Kellenberger** |
|  |  | Name: | Paul Kellenberger |
|  |  | Title: | Chief Executive Officer |
|  |  |  | (Principal Executive Officer) |

---

------

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION OF CHIEF FINANCIAL OFFICER<br>PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Erick DeOliveira, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this quarterly report on Form 10-Q 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 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 (or persons performing the equivalent functions):

&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.

---

| | | | |
|:---|:---|:---|:---|
| Dated: November 13, 2025 | By: | /s/ **Erick DeOliveira** | /s/ **Erick DeOliveira** |
|  |  | Name: | Erick DeOliveira |
|  |  | Title: | Chief Financial Officer |
|  |  |  | (Principal Financial Officer) |

---

------

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the accompanying Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 2025 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | | | |
|:---|:---|:---|:---|
| Dated: November 13, 2025 | By: | /s/ **Paul Kellenberger** | /s/ **Paul Kellenberger** |
|  |  | Name: | Paul Kellenberger |
|  |  | Title: | Chief Executive Officer |
|  |  |  | (Principal Executive Officer) |

---

------

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION OF CHIEF FINANCIAL OFFICER**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the accompanying Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 2025 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | | | |
|:---|:---|:---|:---|
| Dated: November 13, 2025 | By: | /s/ **Erick DeOliveira** | /s/ **Erick DeOliveira** |
|  |  | Name: | Erick DeOliveira |
|  |  | Title: | Chief Financial Officer |
|  |  |  | (Principal Financial Officer) |

---

------