CSAI 10-K & 10-Q changes, risk factors and insider trading

Data privacy remains an evolving landscape, with new regulations coming into effect at both the domestic and international level. For example, various states, such as California, Massachusetts, and others, have implemented similar privacy laws and regulations, such as the California Consumer Privacy Act, which took effect January 1, 2020Act (the “CCPA”), which and createscreated new data privacy rights for users. The CCPA requires covered businesses that process personal information of California residents to disclose their data collection, use and sharing practices. Further, the CCPA provides California residents with new data privacy rights (including the ability to opt out of certain disclosures of personal data), imposes new operational requirements for covered businesses, provides for civil penalties for violations as well as a private right of action for data breaches and statutory damages (which is expected to increase data breach class action litigation and result in significant exposure to costly legal judgements and settlements). Aspects of the CCPA and its interpretation and enforcement remain uncertain. In addition, the California Privacy Rights Act of 2020 (the “CPRA”), which took effect January 1, 2023, expanded the CCPA. The CPRA, among other things, gives California residents the ability to limit use of certain sensitive personal information, further restricts the use of cross-contextual advertising, establishes restrictions on the retention of personal information, expands the types of data breaches subject to the CCPA’s private right of action, provides for increased penalties for CPRA violations concerning California residents under the age of 16, and establishes a new California Privacy Protection Agency to implement and enforce the CPRA. The CCPA and other similar laws could impact our business activities depending on how they are interpreted. New legislation proposed or enacted in various other states will continue to shape the data privacy environment nationally. For example, Virginia recently passed its Consumer Data Protection Act, and Colorado recently passed the Colorado Privacy Act, both of which differ from the CPRA and became effective in 2023. Additional states have since also passed comprehensive privacy laws with additional obligations and requirements on businesses. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to confidential, sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts.

Volatility in the trading price of our Class A common stock may also affect our ability to attract and retain qualified personnel. Many of members of our management and other key personnel hold equity awards that have vested in part or are exercisable, which could adversely affect our ability to retain these personnel. PersonnelShares of our Class A common stock were first listed on the Nasdaq Capital Market in January 2025, mayand bethe moremarket likelyprice to leave us ifof the shares theyhas owndeclined orsignificantly since the sharesinitial underlying their vested options have significantly appreciated in value. In addition, many of our personnel may be able to receive significant proceeds from sales of our equity in the public markets, which may reduce their motivation to continue to work for us. Any of these factors could harm our business, financial condition and results of operations.listing.

Issues raised by the use of artificialAI intelligence (“AI”) (including machine learning) in our platforms may result in reputational harm or liability.

The level of competition in the security industry is high, with multiple exceptionally large, well-capitalized competitors holding a majority share of the market, such as Avigilon (a subsidiary of Motorola Solutions, Inc.), Tyco Integrated Security (a business unit of Johnson Controls International plc), Stealth Monitoring, GardaWorld Security Corporation (doing business as ECAMSECURE), EyeQ Monitoring and Watchtower. Many of the companies in the video surveillance market have longer operating histories, larger customer bases, significantly greater financial, technological, sales, marketing, and other resources than we do. At any point, these companies may decide to devote their resources to creating a competing solution which will impact our ability to maintain or gain market share in this industry. Further, such companies will be able to respond more quickly than we can to new or changing opportunities, technologies, standards, or client requirements, more quickly develop new products, or devote greater resources to the promotion and sale of their products and services than we can. Likewise, their greater capabilities in these areas may enable them to better withstand periodic downturns in the video surveillance industry and compete more effectively on the basis of price and production. In addition, new companies may enter the markets in which we compete, further increasing competition in the video surveillance industry.

Our business may be adversely impacted by additionalleverage leverage in connection with acquisitions.

As stated above, we may pursue strategic acquisitions as part of our business strategy. If we are able to identify acquisition candidates, such acquisitions may be financed with a substantial amount of additional indebtedness. Although the use of leverage presents opportunities to increase our profitability, it has the effect of potentially increasing losses as well. If income and appreciation from acquisitions acquired through debt are less than the cost of the debt, the total return will decrease. Accordingly, any event which adversely affects the value of an acquisition will be magnified to the extent we are leveraged and we could experience losses substantially greater than if we did not use leverage.

We will incur increased costs as a result of operating as a public company, and our management will beis required to devote substantial time to new compliance initiatives. We will beare subject to financial reporting and other requirements for which our accounting and other management systems and resources may not be adequately prepared.

As a public company,company since only January 2025, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the federal securities laws, including the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and rules and regulations subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies, including requirements to file annual, quarterly, and event driven reports with respect to their business and financial condition, and to establish and maintain effective disclosure and financial controls and corporate governance practices. These rules and regulations willhave increaseincreased our legal and financial compliance costs, makehave made certain activities more time-consuming and costly, and require our management and other personnel to devote a substantial amount of time to compliance initiatives. We also expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.

As a public company, we willare also be required to maintain maintain disclosure controls and procedures. Disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized summarized and reported, within the time periods specified in the rules and forms of the SEC. We do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. We believe a control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or 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 any design may not 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. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

Our Company was incorporated under the laws of the State of Delaware on March 28, 2003, as Connexed Technologies Inc. However, the Company was a development stage company until 2021. The likelihood of our creation of a successful business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the growth of a business, operation in a competitive industry, and the continued development of our technology and products. We anticipate that our operating expenses will increase for the near future, and there is no assurance that we will be profitable in the near future. You should consider our business, operations, and prospects in light of the risks, expenses and challenges faced as an emerging growth company.

For the fiscal years ended December 31, 20232025 and December 31, 2022,2024, we incurred net losses of approximately $7.04$8.5 million and approximately $11.4$6.5 million, respectively. There can be no assurance assurance that we will ever achieve profitability. Even if we do, there can be no assurance that we will be able to maintain or increase profitability profitability on a quarterly or annual basis. Failure to do so would continue to have a material adverse effect on our accumulated deficit, would affect our cash flows, would affect our efforts to raise capital and is likely to result in a decline in the value of your investment in our Company.

Our operations have consumed substantial amounts of cash since inception, and we expect our expenses to increase in connection with our ongoing activities.activities and growth. The Company will continue to invest in building out its sales and marketing teams as well as maintain a robust engineering and development team. General and administrative expenses will increase as we grow and because the cost of maintaining a public company is significantly higher than maintaining a privately held company. Accordingly, we will need to obtain substantial additional funding in order to maintain our continuing operations.

We may seek additional capital through a variety of means, including through equity, debt financings, or other sources. We may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. During 2025, we raised capital through the sale of our preferred stock, which is convertible into our Class A common stock. We also have financing facilities in place that may result in additional sales of our convertible preferred stock and/or Class A common stock. Please see Note 5, Share Capital below for more information. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences and anti-dilution protections that adversely affect your rights as a stockholder.

We have historically incurred losses from operationsoperations. and, forFor the fiscal year ended December 31, 2024 we had an accumulated deficit of approximately $40,856,000, and stockholders’ equity of approximately $503,000. Additionally, for the fiscal year ended December 31, 2024,2025, we incurred a net loss of approximately $6,535,000.$8.5 million and, as of December 31, 2025, we had an accumulated deficit of approximately $49.3 million. Our failure to generate sufficient revenues, effectively manage expenses or raise additional capital could adversely affect our ability to achieve our intended business objectives.

The Series 1 Equity Financing, Series 2 Equity Financing and Equity Line will provide us with, and allow us to maintain, stockholders’ equity well in excess of the required minimum under Nasdaq Listing Rule 5505(b) as well as enable us to fund our operations through at least the next twelve months. Notwithstanding, we may also raise additional capital pursuant to one or more registered offerings of equity or debt securities. However, we cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct business. If we are not able to raise additional capital when required or on acceptable terms, we may have to: (i) significantly delay, scale back or discontinue the development or commercialization of new products; (ii) seek collaborators for further development and commercialization of our products; or (iii) relinquish or otherwise dispose of some or all of our rights to technologies or the products that we would otherwise seek to develop or commercialize.

We derive a significant portion of our revenues from a few major customers. For the year ended December 31, 2025, Hasta Capital accounted for approximately 17%, RV Mobile Power accounted for approximately 17%, Federal Capitol Partners accounted for approximately 6%, and Greystar accounted for approximately 5% of our revenues, respectively. For the year ended December 31, 2024, SunRoad Enterprises accounted for approximately 18%, Avenue 5 accounted for approximately 11%, and Fairfield Residential accounted for approximately 9% of our total revenues, respectively. For the year ended December 31, 2023, SunRoad Enterprises accounted for approximately 18% and CONAM Management accounted for approximately 9% of our revenues, respectively. There are inherent risks whenever a large percentage of total revenue is derived from a limited number of customers. It is not possible for us to predict the future level of demand for our products and services that will be generated by these customers. If we experience declining or delayed sales from these customers due to market, economic or competitive conditions, we could be pressured to reduce our prices or our customers could decrease the purchase quantity of our products and services, which could have an adverse effect on our margins and financial position and could negatively affect our revenues and results of operations. If any one of our largest customers terminates the purchase of our products and services, such termination would materially negatively affect our revenues, results of operations and financial condition. Moreover, our reliance on a limited number of customers may limit our bargaining power and ability to negotiate favorable terms in future contracts. If we are unable to diversify our customer base and reduce our dependence on a small number of customers, our business, operating results, and financial condition could be adversely affected by any negative developments involving these key customers. To mitigate these risks, we are actively seeking to expand our customer base and reduce our reliance on a few significant customers. However, there can be no assurance that we will be successful in these efforts, and our financial performance may continue to be significantly influenced by our key customers.

Prior to the listing of our Class A common stock,stock in January 2025, there was no public market for shares of our Class A common stock. However, while our Class A common stock is now publicly traded, there can be no assurance that an active and liquid trading market for our Class A common stock will continue to develop or be sustained, which could depress the market price of shares of our Class A common stock and could affect the ability of our stockholders to sell our Class A common stock. In the absence of an active public trading market, investors may not be able to liquidate their investments in our Class A common stock. An inactive market may also impair our ability to raise capital by selling shares of our Class A common stock, our ability to motivate our employees through equity incentive awards and our ability to acquire other companies, products or technologies by using shares of our Class A common stock as consideration.

Sales of a substantial number of our Class A common stock in the public market could cause the price of our shares of Class A common stock to further decline, and a decline in the market price for our Class A common stockwhich could impair our ability to raise capital through the future sale of additional equity securities.

ASubstantial substantial salesales of our Class A common stock by one or more major stockholders, could result in an oversupply of our Class A common stock on Nasdaq and cause the public trading price of our Class A common stock to decline significantly. Even the perception that such sales may occur could depress the market price of our shares of Class A common stock and could impair our ability to raise capital through the future sale of additional equity securities. Since our Class A common stock was initially listed on Nasdaq in January 2025, our founder has sold over 1,300,000 shares of our Class A common stock and may continue to sell additional shares in the future. We cannot predict the effect that future sales of our common stock would have on the market price of our common stock.

As of theFebruary date28, of this Form 10-K,2026, we have 487,6775,638 shares of Class B common stock withoutstanding, which have super voting rights.

Our capitalcommon stock asconsists of the date hereof consists of Class A common stock and Class B common stock. Our Class B common stock is entitled to 20 votes per share. In addition to the dilutive effect on the voting power and value of our Class A common stock, the foregoing structure of our capital stock may render our Class A common stock ineligible for inclusion in certain securities market indices, and thus adversely affect the price and liquidity of, and public sentiment regarding, our Class A common stock or other securities. The existence of, and voting rights associated with, our Class B common stock, either alone or in conjunction with certain of the other provisions of our amendedcharter and restated certificate of incorporation could also have the effect of delaying, deterring or preventing a change in our control or make the removal of our management more difficult.

You may be diluted by future issuances of preferred stock or additional Class A common stock in connection with our financing arrangements, incentive plans, acquisitions or otherwise; future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price.

Our amendedcharter and restated certificate of incorporation authorizes us to issue shares of Class A common stock and options, rights, warrants and appreciation rights relating to our Class A common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion. We could issue a significant number of shares of Class A common stock in the future in connection with investments or acquisitions. Any of these issuances could dilute our existing stockholders, and such dilution could be significant. Moreover, such dilution could have a material adverse effect on the market price for the shares of our Class A common stock.

Our amended and restated certificate of incorporationcharter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America will be the exclusive forums for certain disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.

Our amendedcharter and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws; or (iv) any action asserting a claim governed by the internal affairs doctrine. This choice of forum provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or the Securities Act or any other claim for which the federal courts of the United States have exclusive jurisdiction.

Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporationcharter provides that the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act and the Exchange Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation,charter, but there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporationcharter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.

Our amendedcharter and restated certificate of incorporation provides that our directors and officers will be indemnified by us to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the Delaware General Corporation Law, in our amended and restated certificate of incorporation and any indemnification agreements that we enter into with our directors and officers:

We operated as a small Silicon Valley startup until early 2021 when we raised over $35 million in funding under Regulation A of the Securities Act of 1933, as amended (the “Securities Act”). With these fundsfunds, we quickly built a sales, marketing and support structure and achieved a degree of early success in the property management space. As of the date of this Form 10-K, we have contracts in place with five of the top 10 property management companies on the National Multifamily Housing Council’s (“NMHC’s”) 2024 NMCH 50 list (Greystar Real Estate Partners, Avenue5 Residential, LLC, Cushman & Wakefield, BH Management Services, LLC and FPI Management, Inc.). Our cloud-based solutions allow our customers to provide real-time safety and security solutions for their properties, as well as easily manage security across all of their locations. As of the date of this Form 10-K, we are focused on expanding into more of our existing top tier customer locations,locations and acquiring additional customers in the property management (“proptech”) space, and we anticipate entering into additional markets in 2025.2026.

The majority of ourOur net revenuerevenues forare theprimarily year ended December 31, 2024, and the year ended December 31, 2023 was comprised of subscription revenue generatedderived from subscriptions to our core business services (services, including cloud video surveillance and remoteRemote guarding)Guarding, as well as from hardware sales and hardware sales.installation services.

Cost of Goods Sold.Sold

Operating Expenses.Expenses

This Reportreport should be read in conjunction with Part I -– Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025.2025, as supplemented by the risk factors disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026. There have been no material changes changes in our risk factors from those setpreviously forth in our Annual Report on Form 10-K for the year ended December 31, 2025,disclosed, except as follows:set forth below, which update and supersede the corresponding risk factors in our prior filings.

As previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, and as further described in Part I, Item 4 of this Quarterly Report,report, we identified a material weakness in our internal control over financial reporting related to the accounting for complex equity-linked financial instruments. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We are implementing a remediation measure as described in Part I, Item 4; however, we cannot assure you that this measure will be sufficient to remediate the material weakness or prevent future material weaknesses. If we are unable to remediate the material weakness, or if we identify additional material weaknesses or significant deficiencies in our internal controls, our ability to produce timely and accurate financial statements may be impaired, which could adversely affect investor confidence, our stock price, and our ability to access the capital markets.

There is an increaseda risk that our Class A common stock may be delisted from Nasdaq, which would adversely affect the liquidity and market price of our Class A common stock and our ability to raise capital.

If our Class A common stock were to be delisted from Nasdaq, trading in our shares would likely be conducted in the over-the-counter market, which typically involves less liquidity, wider bid-ask spreads, and reduced analyst coverage. A delisting would also likely trigger events of default or trigger events under our outstanding Series 2 Shares and the Exchange Note (see Notes 5 and 9 to the financial statements), impair our ability to raise capital through equity or debt financings (including pursuant to our existing Equity Line and ATM Facility), adversely affect the market price of our Class A common stock, and reduce investor confidence.

Comparison of the three months ended MarchJune 30, 31, 2026 to the three months ended MarchJune 31,30, 2025

The majority of our net revenues for the three months months ended MarchJune 31,30, 2026 were comprised of subscription revenue generated from our core business services (cloud video surveillance and remote guarding) and hardware sales.

Total revenue increased by $578,000,$147,000, or 78%,14%, for for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. The Company increased the number of subscribing subscribing properties by 79%140% during the three months ended MarchJune 31,30, 2026 when compared to the same period in 2025. During the first second quarter of 2026, cloud video subscriptions increased by $222,000,$260,000, or 193%,172%, Remote Guarding increased by $196,000,$215,000, or 187%,156%, hardware sales decreased increased by $71,000,$218,000, or 23%,48%, and installation sales and other sales increaseddecreased by $89,000,$111,000, or 43%,32%, over the same period in 2025.

Our cost of goods sold increaseddecreased by $198,000,$64,000, or or 49%,9%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This increasedecrease was the result of increaseddecreased saleshardware activity and completion of morefewer installation projects inwhich carry a smaller margin profile than our services lines for the three months ended June March 31,30, 2026 compared to the same period in 2025. Hosting and data center bandwidth costs increased by $63,000, or 105%,91%, Remote Guarding costs increased by $21,000,$44,000, or 49%,96%, hardware costs decreased by $81,000,$177,000, or 47%,69%, and installation labor costs increased by $195,000,$5,000, or 148% 2% compared to the same period in 2025.

Our operating expenses for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 were as follows:

General and administrative expenses increaseddecreased by $301,000,$154,000, or 28%,16%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This change was primarily due to an increasedecrease of $117,000,$148,000, or 13%,22%, in Salaries and Benefits, a decrease in Professional Services of $49,000, or 37%, and offset by an increase of $111,000,$43,000, or 3,458%, in Professional Services, and an increase of $59,000, or 1,521%,388%, in Equipment.

Research and Development (“R&D”) expenses decreased by $64,000,$31,000, or 8%,6%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This change was primarily due to a decrease of $183,000,$30,000, or 32%, in Salaries and Benefits, offset by an increase of $110,000, or 62%,19%, in Consulting Fees.

OperationsSales and Marketing expenses increased by $209,000,$321,000, or or 203%,52%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This change was primarily due to an increase of $168,000,$194,000, or 287%,42%, in Salaries and BenefitsBenefits, relatedand toan increasedincrease headcountof $50,000, or 239%, in theConsulting department.Fees.

Change in fair value of derivative liabilities consists of non-cash gains and losses arising from the remeasurement of bifurcated derivative liabilities associated with the Company’s preferred stock at each reporting date and conversion date using a Monte Carlo simulation model. For the three months ended MarchJune 31,30, 2026, 2026,we experienced a gain on change in fair value of the derivative liability totaling $319,000. For the three months ended June 30, 2025, we experienced a loss on change in fair value of the derivative liability totaling $128,000. For the three months ended March 31, 2025, we experienced a gain on change in fair value of the derivative liability totaling $415,000.$334,000.

As a result of the foregoing, the Company had a net loss of $2.77$1.73 million for the three months ended MarchJune 31,30, 2026, compared to a net loss of $2.01$2.19 million for the three months ended MarchJune 31,30, 2025, a loss increasedecrease of 38%21% for the current period compared to the prior period. Gross profit increased by approximately 115%.53%. Gross profit was $710,000$610,000 for the three months ended MarchJune 31,30, 2026 and $330,000$400,000 for the three months ended MarchJune 31,30, 2025.

As described in Note 2 to the condensed consolidated interim financial statements, the comparative financial information for the three months ended MarchJune 31,30, 2025 has been revised to correct errors related to the accounting for the Company’s Series 1 Shares and Series 2 Shares. The errors related solely to the technical classification of the instrument on the balance sheet and to the measurement of the embedded derivative liability, and had no impact on the Company’s cash position, liquidity, revenue, or operating expenses. It was always the intent of both the Company and Streeterville that the Series 1 Shares and the Series 2 Shares be classified as permanent equity. As a result, as described in Note 9,5, subsequentduring tothe quarter Marchended 31,June 30, 2026, the Company amended and restated the Series 2 Certificate of Designations to eliminate the contractual provisions that that gave rise to the classification errors. Management believes these actions have effectively resolved the underlying accounting classification issues on a prospective basis.

Net cash used in operating activities for the threesix months ended MarchJune 31,30, 2026 was $2.51$4.46 million, which reflects our net loss of $2.77$4.51 million, increases in accounts receivable of $140,000, $43,000,deposits and prepaid expenses of $296,000,$334,000, deferred revenue of $102,000,$84,000, and accrued expenses of $41,000$89,000 and offset by decreases in inventory of $17,000,$22,000, accounts payable of $126,000,$294,000, $414,000$791,000 of stock compensation expense, and $24,000$55,000 of depreciation expense.expense, and an increase in the fair value of derivative liabilities of $191,000.

Our investing activities have consisted primarily of business combinations and the purchases of assets and equipment. We have invested in assets and equipment to support our headcount growth.

Net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 was $58,000,$48,000, which was attributable to asset additions to colocation equipment for our Montana data center center in the amount of $33,000, $21,000 for equipment for research$35,000 and development, and $3,000$13,000 of equipment in India.

Our net cash used in financing activities for the threesix months ended MarchJune 31,30, 2026 was $130,000$135,000 compared to $9.36$11.85 million of cash provided by financing activities for the same period in 2025. The cash used in financing activities during the threesix months ended MarchJune 31,30, 2026 was principally attributed to $145,000 $140,000 of issuance costcosts offset by $11,000$10,000 of proceeds from issuance of Class A common shares.

On JanuaryApril 5,3, 2026, pursuant to the terms of our Series 2 Shares, we issued Streeterville an additional 75120 Series 2 Shares as dividend payments.

As of MarchJune 31,30, 2026, we had approximately $5.75$3.81 million of cash on hand and approximately $4.76$4.52 million of working capital. We believe that our cash on hand, anticipated cash flows from operations, and financing available to us pursuant to the Equity Line and ATM Facility (subject to meeting the conditions of those financing arrangements) will be sufficient to meet our liquidity and capital resource requirements and continue operations for at least 12 months from the date of this Report.report. Our ability to draw on these facilities is subject to a number of conditions, many of which are outside of our control, including satisfaction of share price thresholds, beneficial ownership limitations, and other closing conditions. There is no assurance that such financing will be available when needed or on terms acceptable to us. If we are unable to access these facilities or raise alternative financing, it would be necessary to seek other sources of debt or equity capital, which may not be available or may only be available on terms that would have a material adverse effect on our results of operations and financial condition.

The interim condensed consolidated unaudited financial statements included within this Reportreport have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is dependent on our ability to further implement our business plan, raise capital, and generate revenues. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. We have incurred operating losses and negative cash flows from operations since inception. As of MarchJune 31,30, 2026, we had an accumulated deficit of approximately $53.8$55.8 million and cash and cash equivalents of approximately $3.81 million. Net cash used in operating activities was approximately $4.46 million for the six months ended June 30, 2026. Management expects to continue to incur operating losses and negative cash flows for the foreseeable future. In addition, as of the date of this report, the Exchange Note issued to Streeterville on June 30, 2026, in the original principal amount of $1,299,870, is subject to monthly redemptions of up to $108,332.50 (plus accrued interest), which will require cash payments or conversions of debt to equity that may be dilutive to existing stockholders. A delisting of our Class A common stock from Nasdaq would constitute an event of default under the Exchange Note, potentially accelerating the outstanding balance and increasing it by 10%, which would further strain our liquidity.

Our other significant accounting policies are described described in “Note 2 — Summary of Significant Accounting Policies.” Many of these accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our financial statements. On a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we believe to be reasonable under the circumstances. These estimates are subject to change in the future if underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates. The recent accounting changes that may potentially impact our business are described under “Recent Accounting Pronouncements” in “Note 2 — Summary of Significant Accounting Policies.”