Cloudastructure, Inc 10-K for FY2025
Cloudastructure, Inc. (CSAI)
About this 10-K
Cloudastructure, Inc filed this 10-K on March 31, 2026, covering the fiscal year ended December 31, 2025 (FY2025).
Headline figures
Fiscal year ended December 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.07M
- up 271.4% from $1.36M a year earlier
- Net loss
- $8.46M
- compared with a net loss of $6.54M a year earlier
- Diluted EPS
- -$0.55
- compared with -$0.45 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________
FORM
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| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED | |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ____________ |
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| ☒ | Smaller reporting company | |||
| Emerging growth company |
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| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | Yes ☐ | No |
The aggregate market value of the voting and non-voting common stock
held by non-affiliates of the registrant as of June 30, 2025, was $
As of February 28, 2026, the registrant had shares of Class A common stock, and shares of Class B common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
| i |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Form 10-K”) contains forward-looking statements that can involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Form 10-K, including statements regarding our future results of operations and financial position, business plan and strategy, future revenue, timing and likelihood of success, plans and objectives of management for future operations, future results of anticipated products and prospects, plans and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “can,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future”, “goal,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements contained in this Form 10-K include, but are not limited to, statements about:
| · | the implementation of our business model and our strategic plans for our business, product, services and technology; |
| · | our commercialization and marketing capabilities and strategy; |
| · | our ability to establish or maintain collaborations or strategic relationships or obtain additional funding; |
| · | our competitive position; |
| · | the scope of protection that we able to establish and maintain for intellectual property rights covering our products, services and technology; |
| · | developments and projections relating to our competitors and our industry; |
| · | our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; |
| · | the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements; and |
| · | the impact of new or existing laws and regulations on our business and strategy. |
We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this Form 10-K, whether as a result of any new information, future events or otherwise.
| ii |
There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-K, including, among others, the risks set forth in Item 1A. “Risk Factors” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as from time to time in our other filings with the U.S. Securities and Exchange Commission (“SEC”). A non-exhaustive summary of principal risk factors that make investing in our securities risky and may cause actual results to differ materially are set forth below:
| · | Pursuant to a notice received by Nasdaq, our Class A common stock may be delisted from the Nasdaq Capital Market, and if delisted, such event is likely to reduce the liquidity of our Class A common stock and may inhibit or preclude our ability to raise additional financing; | |
| · | Our technology continues to be developed, and it is unlikely that we will ever develop our technology to a point at which no further development is required; | |
| · | If our security measures are breached or unauthorized access to individually identifiable biometric or other personally identifiable information is otherwise obtained, our reputation may be harmed, and we may incur significant liabilities; | |
| · | Our collection, processing, use and disclosure of individually identifiable biometric or other personally identifiable information is subject to evolving and expanding privacy and security regulations; | |
| · | Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees; | |
| · | Privacy and data security laws and regulations could require us to make changes to our business, impose additional costs on us and reduce the demand for our software solutions; | |
| · | Issues raised by the use of artificial intelligence (including machine learning) in our platforms may result in reputational harm or liability or affect our ability to operate profitably and sustainably; | |
| · | We operate in a highly competitive industry that is dominated by multiple very large, well-capitalized market leaders and is constantly evolving; | |
| · | Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products; | |
| · | We rely on other companies to provide certain hardware and software solutions for our products; | |
| · | We incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives; | |
| · | Intellectual property rights do not necessarily address all potential threats to our competitive advantage; | |
| · | We have a limited operating history, which may make it difficult for you to evaluate our current business and predict our future success and viability; | |
| · | We have historically operated at a loss, which has resulted in an accumulated deficit; | |
| · | We anticipate sustaining operating losses for the foreseeable future; | |
| · | We will require substantial additional capital to finance our operations; |
| iii |
| · | Raising additional capital may cause dilution to our existing stockholders; | |
| · | We have a substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenue; | |
| · | An active trading market for our Class A common stock may not be sustained, and the market price of shares of our Class A common stock may be volatile; | |
| · | Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our Class A common stock; | |
| · | Our internal computer systems, or those of any of our manufacturers, contractors, consultants, collaborators or potential future collaborators, may fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data or personal data, which could result in additional costs, loss of revenue, significant liabilities, harm to our brand and material disruption of our operations; and | |
| · | Our operations are vulnerable to interruption by fire, severe weather conditions, power loss, telecommunications failure, terrorist activity, pandemics/epidemics and other events beyond our control, which could harm our business. |
| iv |
PART I
Item 1. Business.
Overview
Cloudastructure, Inc. (“Cloudastructure,” “we,” “our,” or “the Company”) is an award-winning innovator in cloud-native, AI-powered security solutions, delivering comprehensive, real-time situational awareness to enterprises to protect people, property, and brand reputation from threats such as theft, vandalism, false liability and violence. Headquartered in Palo Alto, California, Cloudastructure delivers a full-stack solution—cutting-edge cloud video surveillance, proprietary AI/ML analytics, and a seamless remote guarding platform with accompanying services—that transforms security from a reactive toolkit into a proactive system capable of stopping crime in real time.
Our mission is to empower businesses to see and respond to events as they happen, turning video data into actionable intelligence and deterrence into measurable results. By leveraging a cloud-based architecture, we provide organizations with unprecedented scalability, flexibility, and operational insight, without the limitations of traditional, on-premises systems. Every camera and alert is woven into a unified digital fabric, giving operators the power to act proactively, mitigate risks, and safeguard communities.
Cloudastructure’s solutions encompass a suite of integrated offerings:
Cloud Video Surveillance – AI-enhanced video capture and analytics that automate event detection, anomaly recognition, and real-time alerts to reduce loss, liability, and security blind spots.
Seamless Remote Guarding Software – Cloud-native orchestration that connects cameras, AI, and operators into one platform, enabling incident triage, standardized response playbooks, and auditable records that strengthen risk management and compliance.
Remote Guarding – 24/7 live response by trained security personnel, tightly integrated with AI monitoring for rapid intervention, risk mitigation, and documented response to support insurance and legal defense.
Operational Intelligence – Centralized dashboards, reporting, and alerts for property managers and enterprise security teams, driving informed decision-making, streamlined workflows, and better alignment between security operations and overall risk management strategy.
Our platform primarily serves multifamily residential and broader property management, with a growing presence in commercial real estate, construction, critical infrastructure, transportation and logistics. We focus on enterprises that value safety, liability reduction, and operational efficiency, helping them realize clear returns through fewer incidents, stronger compliance, and better protection of their tenants, assets, and brand.
| 1 |
Cloudastructure’s competitive advantage lies in its ability to centralize security operations, leveraging AI to monitor activity at scale while seamlessly connecting to a global network of trained security professionals. Unlike traditional hardware-bound systems, our platform eliminates on-site constraints, reduces total cost of ownership, and allows organizations to protect what matters most with precision and confidence.
Since our founding, Cloudastructure has maintained an entrepreneurial commitment to innovation, reliability, and customer-centric design, continually expanding its reach while reinforcing its reputation as a trusted partner for modern security challenges. By combining state-of-the-art technology, cloud-first infrastructure, and proactive security services, we redefine what it means to protect people and property in an increasingly complex world.
Cloudastructure was formed under the laws of the State of Delaware on March 28, 2003. 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. With these funds, we quickly built a sales, marketing, and support structure and achieved a degree of early success in the property management space. We went public on the Nasdaq under ticker symbol CSAI in January 2025. As of December 31, 2025, we have contracts with six of the top ten property management companies on the National Multifamily Housing Council’s (“NMHC’s”) 2025 NMHC 50 list—Greystar Real Estate Partners, Asset Living, Avenue5 Residential, LLC, Cushman & Wakefield, FPI Management, Inc., and Bozzuto. Our cloud-based solutions allow our customers to provide real-time safety and security across their properties, while efficiently managing operations across all locations. Beyond multifamily, we have seen growth in adjacent verticals, including construction and critical infrastructure, supported by strategic engagements with a leading national builder and a trucking and logistics partner. We are currently focused on expanding within our existing top-tier customer locations and acquiring additional customers in the property management (“proptech”) space, and we anticipate continuing to enter into additional new markets in 2026.
| 2 |
Our intelligent AI solution works by sorting motion-based footage and subsequently indexing the people, vehicles, and objects (license plates, animals, backpacks, guns, etc.) within that footage. Eliminating static footage enables rapid search, so that property managers can rapidly search for challenges brought to their attention by tenants. Simultaneously, our AI analytics create customizable alerts to anomalous behavior as it is occurring, such as unauthorized access, loitering, and vandalism, and forward that behavior in seconds to live remote guards for further review. Our Remote Guarding software enables guards to review the footage that created the alert with live view, and, should they determine unwanted activity is occurring, they can “voice down” the perpetrator on a speaker, as well as contact security or law enforcement, thereby providing a proactive response to crime. Based on internal data comparing the total number of actual threatening activity alerts received by our Remote Guards, against all potentially suspicious and threatening activity alerts received by our Remote Guards, our Remote Guarding services deterred an average of over 98% of all threatening activity for our customers in 2025. We believe AI security delivers multiple benefits for many property owners, including, without limitation:
| · | Deter crime and improve overall safety by leveraging AI-driven monitoring and rapid-response remote guarding; | |
| · | Improve occupancy and rental rates by creating a safer, more attractive environment for residents and tenants; and | |
| · | Reduce losses, lower onsite guard costs, and decrease insurance rates by streamlining security operations and mitigating incidents before they escalate. |
We believe that our full stack solution is more affordable, offers greater accountability, and is easier to use than the various solutions that our competitors offer. Our Remote Guarding service bridges the line between AI and human intelligence. AI has the ability to monitor all cameras at the same time and all of the time, a task from which humans would fatigue. By filtering out non-essential footage and only sending alerts for unusual or suspicious activity, our guards no longer need to watch every camera constantly. This focused monitoring allows a single Remote Guard to effectively oversee up to 50 cameras—roughly eight times more than the typical six cameras a guard can manage with traditional static surveillance—while maintaining the same level of vigilance and response accuracy. With real-time human intervention, our Remote Guarding service can turn video surveillance from a forensic tool, used after a crime has been committed, into a real time crime prevention tool.
How it Works
When an alert comes through, our Remote Guards follow a series of protocols, comparing the live view to the recorded footage and utilizing AI analytics to determine confidence levels regarding people and objects. If they determine there is a threat, they will hit the mic button on the computer screen and announce via a networked speaker “YOU ARE ON VIDEO SURVEILLANCE WITH A LIVE AGENT AND ARE BEING WATCHED AND RECORDED!” These “talk downs” are so effective that typically, the perpetrator will simply leave. Less than 1% of cases throughout 2025 were escalated to law enforcement.
| 3 |
History and Development of the Company
Cloudastructure has built its reputation as a pioneer in AI-driven security through innovation, adaptability, and a commitment to measurable results. In 2020 and 2021, we raised over $30 million through crowdfunding, providing the capital to scale our vision. A request from our first customer in the multifamily sector set us on a path to create the only seamless Remote Guarding software on the market—a solution that has become a defining differentiator for our platform. This innovation naturally led to the establishment of our in-house Remote Guarding services in 2025, including operations in India, enabling 24/7 human oversight integrated with our AI-driven system.
Today, our AI platform processes over 9 million video feeds per day, combining human oversight with intelligent automation to deliver actionable insights, operational efficiency, and risk mitigation across distributed sites.
Since our early days, we have earned the trust of six of the top ten property management companies represented by the National Multifamily Housing Council, demonstrating our ability to deliver enterprise-grade solutions that improve safety, operational efficiency, and liability management.
| 4 |
At the heart of our approach is hardware agnosticism. By designing a platform that works with a broad array of devices, we have embraced the philosophy of “Be the brains, not the robot,” layering our proprietary, patented computer vision AI atop mobile surveillance units and drone in 2025, and we aim to continue to layer our AI atop other security and risk management hardware in the coming years. This will allow us to partner with device innovators while maintaining intelligence and flexibility at the core of every solution.
Looking forward, Cloudastructure is also expanding into new verticals, including transportation and logistics, construction, and critical infrastructure. Across all markets, we aim to integrate emerging security technologies—from access control and sensors to robotic systems and electric security fences—always layering our AI to provide intelligent, responsive, and layered protection. Through this combination of innovation, strategic partnerships, and applied AI, Cloudastructure continues to define what modern, enterprise-scale security can achieve.
Overview of Our Business and Operations
Our solutions centralize the management of video surveillance in a collection of servers that host our software and infrastructure and can be accessed over the internet (the “Cloud”). Our Cloud-based model allows customers to scale geographically over multiple locations and standardize their security without complicated or potentially insecure network architectures.
We offer our services and support for a monthly subscription fee, requiring no upfront licensing costs or large capital expenditure budgets, although our customers frequently discover they would like to upgrade their networks and cameras when they enroll with our service. In 2025, we contracted with a financing partner who can enable these customers to do so. For Cloudastructure, the financing model reduces sales friction and provides a more scalable path for expansion across multifamily, commercial real estate, and enterprise markets. This model offers us the following benefits:
| · | Improves cash flow predictability; | |
| · | Shortens sales cycles by reducing capital expenditure objections; and | |
| · | Enhances attractiveness to customers with a capital-light, repeatable growth model. |
The partnership is expected to accelerate Cloudastructure’s market penetration at a pivotal time, as demand for AI-driven surveillance solutions continues to surge in response to mounting liability pressures and heightened tenant safety expectations.
We further believe that, as we add additional AI capabilities, we will be able to increase pricing power for our cloud-based solution.
Our Existing Products and Services
Set forth in the table below is a summary of our existing products and services, their key features and the current target markets that they serve:
| Product / Service | Description and Key Features |
| Cloud Service: Cloud Video Surveillance |
Video surveillance stored in the Cloud with AI Computer Vision built on Machine Learning. Key features include: Secure offsite Cloud storage. AI Computer Vision including face recognition, license plate reading, object detection and more. Multiplatform (e.g., web, phone, tablet) browser-based access. |
| Cloud Service: Remote Guarding |
Browser based Remote Guard call center software, allowing guards to work from any location or time zone. Key features include: customized AI alerts, real time Live View, other AI functions and more. |
| Guard Service: Remote Guards |
Our in-house live agents monitor incoming alerts from the AI, talk down to people onsite through networked speakers, and provide real time notifications to customers or authorities in response to any dangerous or suspicious activity. Customers can use their own guards if desired. |
| Product: Cloud Video Recorder (CVR) |
Our Cloud Video Recorder (“CVR”) is an internet of things (“IoT”) device that securely collects video from cameras and transmits it to our Cloud. The CVR is compatible with most existing or new cameras and stores data even if not connected to the internet. |
| Product: Cameras and Speakers |
We resell networked, IP-based, cameras and speakers. |
| Product: Mobile Surveillance Trailer |
Our Mobile Surveillance Trailer solution is a solar and battery powered video surveillance tower with wireless broadband that connects to our Cloud Video Surveillance and Remote Guarding services. |
|
New Product: Mobile Surveillance Trailer with Drone |
Our Mobile Surveillance Trailer with drone provides rapid, on-site security coverage by delivering real-time drone-enabled, wireless surveillance from a portable, self-contained trailer. |
|
New Product: Solar Powered Enclosure |
Our solar-powered enclosure delivers reliable surveillance in remote locations with limited power and no internet, powering and streaming securely through solar energy and edge-enabled connectivity. |
| 5 |
Select High-Level Product and Service Features
Select high-level features currently available with some of our products and services include:
Tagger
Our Tagger technology generates tags for every object it can identify in a surveillance video. For example, “animal” or “person” or “vehicle.” Enabling our customer search surveillance videos by tag. For example, a customer can search by “person” and see only surveillance videos with people in them.
| 6 |
License Plate Reading
Our License Plate Reading technology reads license plates and then we can search surveillance videos for those license plates.
Facial Recognition
Our premium feature Facial Recognition technology detects faces and then recognizes those faces. Customers can search for a known person in a database of faces (e.g., conducting a search for an employee named John Doe) or unknown person tagged by the system (e.g., Unknown123). Our system also employs “supervised learning” technologies, which allows our team and the end users to provide feedback on facial recognition accuracy. For example, the system can be taught “that’s not Dave, that’s John”, improving accuracy significantly over less advanced systems. Customers can also switch off this feature for jurisdictions that ban facial recognition technology.
| 7 |
Line Crossing
Our Line Crossing technology can “draw” a virtual line across a camera’s field of view, or a zone around any area (e.g. a door) where a customer wants to restrict access. This restriction can be set for specific time periods such as after hours. If the line is crossed or the zone is entered, an alert will be sent to the user and/or remote guards. The technology also possesses directional awareness, so for example, if a customer wishes to only receive an alert when someone enters the pool or enters a parking garage after hours, they can customize and reduce the number of alerts they receive.
Remote Guarding
Our cloud-based Remote Guarding solution is seamlessly integrated with our AI-driven surveillance platform to enhance the efficiency, scalability, and effectiveness of remote security monitoring.
| · | Our artificial intelligence continuously analyzes video feeds across all connected cameras in real time. | ||
| · | The platform combines automated detection with human oversight, enabling Remote Guards to focus only on events that require review or intervention rather than continuously monitoring static video feeds. | ||
| · | When the AI identifies activity that may require attention, it automatically alerts a Remote Guard and presents the relevant video and contextual information. | ||
| · | This event-driven monitoring approach enables a single Remote Guard to oversee significantly more cameras than is possible with traditional guard monitoring while maintaining effective situational awareness. | ||
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| · | The Remote Guard can then review the event in real time, determine whether intervention is necessary, and escalate the response as appropriate, including: | ||
| · | Communicating with individuals on-site through integrated speaker systems; | ||
| · | Notifying customer-designated on-site personnel when warranted; and | ||
| · | Contacting emergency services when required. | ||
This event-driven monitoring model allows customers to enhance security coverage while reducing reliance on costly traditional on-site guard staffing, which can result in lower operating costs and improved consistency of monitoring across multiple locations.
Advanced Video Processing Software
As part of our core service, Cloudastructure released a breakthrough video processing technology for our Cloud Video Recorders (CVRs), which dramatically reduces bandwidth requirements by eliminating the need for transcoding, while also lowering CPU utilization on the CVR itself. This advancement enables customers to support significantly more cameras per unit, resulting in lower deployment costs, simplified site operations, and an enhanced overall customer experience.
Other Specialized Features
Our products and services employ advanced technology, such as:
| · | AI and machine learning to simultaneously decrease false positives and false negatives, improving overall accuracy; | |
| · | Lower light, lower contrast and lower resolution computer vision abilities; | |
| · | Persistent computer vision, whereby previous and future frames provide context for the analysis of the current frame; | |
| · | Increased granularity in search sensitivity on a per object basis; and | |
| · | Reducing latency for real-time operation like alerts for our Remote Guarding services. |
Our Product and Service Installation and Delivery Processes
Our typical product and service installation and delivery process is as follows:
First, we install our custom, on-premises CVR, which integrates with a customer’s existing surveillance cameras, is network-secure, and only requires a power source and an Ethernet connection. The CVR replaces traditional network video recorders (NVRs) or other recording devices.
Our CVR then sends all motion viewed by a customer’s surveillance cameras to our Cloud-based systems. Once a customer’s video is on our Cloud, we have a unique advantage over most on-premises solutions in that we can run our customer’s surveillance video through powerful computational devices—e.g., NVIDIA ® GPU clusters—which would be impractical and cost-prohibitive for customers to deploy on site. We operate our services through both Cloudastructure-owned facilities and third-party facilities (e.g., Amazon Web Services and Google Cloud Platform). Our machine learning software can see across countless cameras more efficiently than humans ever could.
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Next, our Cloud-based system indexes objects and faces in a customer’s surveillance video. This means that the video can be searched by tag, for example: “person,” “animal,” “vehicle,” etc. and even by individual faces.
Once our Cloud-based system detects a person, it will attempt to match that person’s face to a face in our database, which allows us to potentially identify a specific person, name, and face.
As part of our product and service installation and delivery process, we also provide comprehensive customer onboarding and training to make sure that our customers know how to use our services most effectively.
For customers that also take advantage of our Remote Guarding services, we can set up alerts based on a variety of custom triggers, such as a perimeter being crossed (e.g., someone walking into a restricted area), or movement detection within a designated zone (e.g., tracking to see if anyone enters a swimming pool) with alarms set to any period of the day that our customer would like (e.g., alerts could be set to detect anyone in the pool between 10 PM and 6 AM). Our remote guards monitor customer alarms and warn off intruders in real time (if a speaker is installed) and notify the appropriate response group (law enforcement or otherwise, depending upon the situation) as appropriate. Our Remote Guarding services provide our customers with an opportunity for significant savings when compared to the cost of an on-site physical guard.
Our Reporting Segment
As of December 31, 2025, we have organized our operations into one reporting segment, focused on cloud-based AI video surveillance and remote guarding security services, based on the way we organize and evaluate our business internally.
Our Business Model
We operate under a Cloud services delivery model. We have found that we can compete most effectively with industry incumbents by pricing our products and services on a per camera per year basis. We believe that under this model, we can generate greater recurring revenue than our competitors while simultaneously providing a lower total cost of ownership to our customers. In addition, by leveraging our AI features, we are able to achieve security guard-level pricing for our Remote Guarding services, which can be 400% or more than we achieve with our surveillance service alone.
We deliver a one-stop security solution to our customers, which we believe provides greater quality control over the entire product and service installation and delivery processes. If an installer is required (typically for additional cameras, speakers and conduit/cable), we bundle these services using our trusted partners. In terms of hardware, in addition to our CVR, we also sell cameras and speakers, which are often required at each location.
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Our Market
Our market is growing. The global physical security market is expected to grow from approximately $182.5 billion in 2025 to approximately $366.2 billion by 2034, implying a healthy compound annual growth rate of just over 8% as organizations invest in systems, services, and infrastructure to protect people, property, and data. Within this broader security spend, perimeter and infrastructure-focused solutions are a major pillar, one reflecting sustained demand for video-centric solutions that harden facilities and critical assets. These data points underscore a large, expanding addressable market for companies like ours that provide integrated physical security, video surveillance, and related services.
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AI-enabled video surveillance is one of the fastest-growing segments of this ecosystem and is expected to significantly outpace growth in the broader monitoring market as analytics move from simple recording to automated understanding of scenes. Industry research forecasts that the AI in video surveillance industry will grow from approximately $3.9 billion dollars in 2024 to roughly $12.5 billion by 2030, a compound annual growth rate of 21.3% driven by computer-vision capabilities that our solution offers, including object detection, facial recognition, activity analysis, and anomaly detection. By processing the more than one billion cameras deployed globally and the trillions of minutes of video those devices generate, these AI systems transform video from a reactive forensic tool into a proactive detection and response layer that can flag suspicious behavior, automate routine monitoring, and enable intervention before incidents escalate.
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In parallel, remote monitoring and “remote guarding” are emerging as a structural growth vector as enterprises blend human and artificial intelligence and migrate workloads to the cloud. Industry sources project steady expansion of the global remote monitoring market, with enterprises increasingly shifting video storage and management to cloud-based video management systems. As organizations adopt cloud and hybrid deployment models for security and seek to reduce manned guarding hours while improving coverage, AI-driven remote monitoring is positioned to capture an increasing share of budgets that have historically gone to on-site guards, suggesting a long-term mix shift from traditional guarding to technology-enabled remote guarding and monitoring services within the overall security market.
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We are primarily focused on the multi-family and commercial property markets. Coherent Market Insights estimates that the global proptech market will be worth approximately $44.9 billion in 2025, marking an inflection point as real estate owners, operators, and investors accelerate adoption of digital tools across the property lifecycle with security at the most accelerated pace. According to the same study, the market is projected to grow at a 15% compound annual rate from 2025 to 2032, reaching approximately $119.5 billion by 2032 as software, data, and automation become embedded in core real estate workflows.
The report attributes this expansion to increasing digitization and automation of building systems, rising demand to enhance tenant experience and operational efficiency, and growing reliance on data-driven insights in real estate decision-making. It highlights especially strong adoption in commercial properties, which are expected to account for about 56% of proptech spending in 2025, and notes that cloud-based deployments will dominate due to their scalability, remote-management capabilities, and ability to integrate with IoT and AI technologies.
Cloudastructure contracts with both the ownership and asset management groups of large multi-family properties such as Greystar Real Estate Partners, Avenue5 Residential, LLC, Cushman & Wakefield, BH Management Services, LLC, FPI Management, Bozzuto, and more, each with portfolios of properties in the several hundreds, if not thousands. These groups are looking for cloud-based advanced AI and remote guarding services to increase the security of their properties and improve the overall tenant experience. Security is often one of the most frequently cited problems at multi-family properties as it can lead to higher costs from increased vacancy rates, poor reviews from residents, and rising insurance rates.
Although we are primarily focused on the multi-family real estate and commercial property markets, we think it is noteworthy that video surveillance systems can be used in nearly any environment. In our view, security and surveillance are necessary for nearly all organizations worldwide. Governments, enterprises, financial institutions and healthcare organizations are all expected or required to have a certain level of security and monitoring measures. As a result, there has been an increase in the demand for security applications, such as video surveillance to monitor and record borders, ports, transportation infrastructure, cities, corporate houses, educational institutes, public places, buildings and others, which is expected to drive the video surveillance market growth globally.
With a technological solution that uses AI, machine learning and digitization of data, Cloudastructure is capitalizing on this growing market need for an end-to-end centralized security system by expanding into vertical markets such as construction, transportation and logistics, and critical infrastructure.
Our Competition
Entities with competing solutions include: Avigilon (a subsidiary of Motorola Solutions, Inc.), Milestone Systems A/S (a Canon Inc. subsidiary), Verkada, Inc., Tyco Integrated Security LLC (a business unit of Johnson Controls International plc) and ECam (which recently purchased Stealth Monitoring, Inc.). The markets for our products and services are highly competitive, and we are confronted by aggressive competition in all areas of our business. These markets are characterized by frequent product introductions and rapid technological advances that have substantially increased the capabilities and use of AI security and cloud-based video surveillance.
Principal competitive factors important to us include price, product features, relative price/performance, product quality and reliability, design innovation, a strong third-party software and accessories ecosystem, marketing and distribution capability, service and support and corporate reputation.
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Our Customer Base
We focus on selling our products and services in the multi-family and commercial property management markets. In our experience, these markets are close-knit and relationship-based, with sales being highly reliant on word-of-mouth recommendations and customer testimonials. Larger property management firms in these markets are very protective of their reputations and often require a meaningful amount of diligence before selecting new, significant vendors. As part of that diligence process, property management firms almost always require references in the form of existing customer interviews and will likewise generally serve as references to other property management firms for services that they use and enjoy. In our experience, as a newer market entrant, establishing a strong customer list is a critical requirement to ramp up sales and an important metric used by property management firms when evaluating a prospective vendor. As of the date of this Form 10-K, we have been vetted through an extensive diligence process by, and signed contracts with, some of the largest property management and ownership groups in the markets in which we operate. Now that we have landed 6 of the top 10 property management firms (based on National Multifamily Housing Council’s 2025 NMCH 50 list) as clients, as well as many mid-tier property management firms, our strategy is to expand our relationships with these accounts with the goal of becoming the standardized AI security solution across their entire portfolios.
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. As of December 31, 2024, SunRoad Enterprises accounted for approximately 18%, Fairfield Properties accounted for approximately 9%, Wingate accounted for approximately 9%, and RV Mobile Power accounted for approximately 7% of our revenues, respectively. Other of our customers include the following, with the approximate percentage of revenue generated by each as of December 31, 2025, noted next to their names:
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● Greystar Real Estate Partners* – 5%
● Cushman & Wakefield* – 1%
● Avenue5 Residential, LLC* – 2%
● Federal Capital Partners – 6%
● CONAM Management – 4%
● The Wolff Company – 2%
● Wingate – 4% |
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● Fairfield Properties – 4%
● SunRoad Enterprises – 4%
● RVMP – 17%
● The Breeden Company – 2%
● Gold Crown Management, Inc. – 2% ● Maiker Housing Partners – 3% ● Amurcon – 2% ● Pacific Urban Investors – 2% |
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*Top 10 property management company on the National Multifamily Housing Council’s 2025 NMCH 50 list.
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Select Customer Accolades
“Our package thefts have disappeared
almost entirely, which is amazing!”
—Zahra Alhisnawi, CONAM
“We are able to stop a crime if it’s
in progress!”
—Britney Kalberer, VP Kalberer Properties
“...A gate was damaged multiple times.
With Cloudastructure, we were able to identify the responsible party and recover the funds.”
—Alex Allione, Asset Manager CONAM
“I was able to open the platform on
my laptop at home, see who was there [at the pool] ... and resolve the situation right away. I absolutely love it. Five stars on
the whole thing.”
—Morgan Kottowitz, American Landmark
Typically, our customers pay up front annually for services and sign our subscription and remote guarding agreements which govern the terms of service. Some of our larger customers require monthly billing arrangements. We allow cancellation of our services at any time unless a 3-year contract is signed, in which case penalties occur. Specifically, for CONAM, our agreement operates on a month-to-month basis and may be terminated by either party upon 30 days’ written notice. Immediate termination is possible under circumstances like non-payment or insolvency. For SunRoad, pricing is structured around an annual commitment, with services prepared and prepaid on an annual basis, and similarly, either party may terminate the agreement upon 30 days’ written notice without penalty. Additionally, we may terminate the agreement if SunRoad fails to pay fees or becomes insolvent. While these agreements are nominally annual contracts that auto-renew, they remain cancellable without penalty, as noted. We do not believe that we are substantially financially dependent on our relationship with any of our customers. Our remote guarding agreements focus on utilizing advanced technology, such as AI-driven surveillance and real-time monitoring, to actively protect property and escalate security incidents to law enforcement. In contrast, our subscription agreements are designed to give customers access to our broader suite of services, including video storage, real-time viewing, and account management features. While both agreements have similar legal structures, the remote guarding agreements are more specialized, emphasizing physical security and monitoring services. Our ideal customer for our solutions is an enterprise business with multiple locations in the multi-family real estate and commercial market space. The material terms of our remote guarding and subscription agreements are summarized below.
Remote Guarding Agreement
The remote guarding agreement includes strict confidentiality provisions, defining “Confidential Information” to encompass all business, financial, and personal details of the customer and related parties, including any recordings made during our services. We agree not to disclose this information without written consent, except as required by law. All intellectual property developed or used under the agreement remains the exclusive property of us and our subcontractors. Late payments incur interest at 1.5% per month, and the customer is responsible for collection costs, including legal fees. We reserve the right to suspend services for non-payment. The agreement operates on a month-to-month basis, terminable by either party with 30 days’ notice. Immediate termination may occur if the customer fails to pay, becomes insolvent, or enters bankruptcy. Liability is limited, with us and our affiliates not responsible for any indirect, incidental, punitive, special, or consequential damages, and total liability is capped at fees paid in the preceding 12 months. We make no warranties regarding the services provided, including any implied warranties of merchantability or fitness for a particular purpose. If the customer feels that the service is not meeting agreed-upon levels, they may notify us, and then we have 30 days to remedy the situation. If unresolved, the customer will not be responsible for fees from the time of notice until the issue is resolved. Disputes are resolved through arbitration in San Francisco under JAMS rules, though provisional remedies may be sought in court.
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Subscription Agreement
The terms of our subscription agreement stipulate that any disputes will be resolved through binding arbitration, with both parties waiving the right to a jury trial. Subscribers agree to a subscription service with automatic recurring payments and must ensure payment information is kept current. If a subscriber’s account is delinquent, we reserve the right to suspend access. We grant subscribers a non-transferable license to use our services, subject to compliance with applicable laws and our terms. All intellectual property remains ours, and subscribers are prohibited from unauthorized use or distribution of our materials. Third-party components may be integrated into the service, but we are not responsible for third-party content or software. Prohibited conduct includes unauthorized access, violation of intellectual property rights, and interference with security features. The agreement can be terminated by either party with 30 days’ notice, and we reserve the right to modify or discontinue services without liability for service changes. Subscribers are responsible for indemnifying us for any unauthorized use, while we indemnify subscribers for intellectual property infringement claims. The service is provided “as is,” and we disclaim all implied warranties, limiting our liability to the fees paid in the prior 12 months. We do not assume liability for indirect, consequential, or punitive damages. Additionally, the terms of sale specify that products are sold under FCA (Free Carrier) terms, with title passing upon delivery to the carrier. We retain a security interest in the products until payment is received in full. Subscribers are responsible for complying with U.S. export control laws, sanctions, and anti-corruption regulations, and must not sell or promote our products through unauthorized means, including illegal platforms. Any returns are subject to a 20% restocking charge, and late payments incur interest at a rate of 5% per month.
Our Employees
As of December 31, 2025, we had 52 full-time equivalent employees and 2 part-time employees. We also use a considerable number of globally-sourced contractors from high-value regions such as India, Brazil and Eastern Europe who are not included in our employee count. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider the relationship with our employees to be good. We generally enter into agreements with our employees that contain confidentiality provisions to control access to, and invention or work product assignment provisions to clarify ownership of, our proprietary information.
Outsourcing
We currently outsource a number of our key functions to third parties, including some software development, legal and payroll.
In addition, we host our services on cloud platforms provided by Google LLC and Amazon.com, Inc. There are a number of alternative cloud providers that we could also utilize if necessary. We have been moving more of our services to our own computers in co-location facilities to achieve the same result at lower costs.
Suppliers
We currently utilize third-party suppliers of standard, off-the-shelf computers onto which we install software to turn them into our cloud video recorders. To date, we have bought computers primarily through Amazon.com Inc., Exxact Corporation, and Newegg Commerce, Inc., but there are a large number of other suppliers from whom we could source these computers should we have to source from alternative providers for any reason. Similarly, we source cameras and speakers primarily from Shenzhen Sunell Technology Corporation, but there are a large number of suppliers from whom we could source for these cameras and speakers should we have to source from alternative providers for any reason.
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Strategic Acquisitions
Our core focus is to grow Cloudastructure organically. However, we may selectively evaluate strategic acquisition opportunities that would allow us to expand our footprint, broaden our client base and deepen our product and service offerings. We believe there can be meaningful synergies that result from acquiring small companies that provide unique solutions and opportunities for the Company and our clients. Integrating these solutions into our broader technology and client base and integrating acquisitions into our plan of operations may potentially result in revenues and cost synergies. In 2022, we completed acquisitions of two businesses: Visionful Holding Inc., a company that provided smart parking solutions for transit providers, and Infrastructure Proving Grounds, Inc., an internet-of-things cybersecurity company. However, we are not currently utilizing the assets we acquired from these businesses in our core operations. As of the date of this Form 10-K, we have not acquired any other businesses and are not currently pursuing any other acquisitions.
Regulatory Environment
We are subject to a number of U.S. federal and state and foreign laws and regulations that involve matters central to our business. These laws and regulations involve privacy, data protection, intellectual property, competition, consumer protection and other subjects. Although our business is not currently subject to licensing requirements in any of the jurisdictions in which we operate, this does not mean that licensing requirements may not be introduced in one or more jurisdiction in which we operate. Any such licensing requirements, if introduced, could be burdensome and expensive or even impose requirements that we are unable to meet.
In the ordinary course of business, we and customers using our solutions access, collect, store, analyze, transmit and otherwise process certain types of data, including personal information, which subjects us and our customers to certain privacy and information security laws in the United States and internationally, including, for example, the California Consumer Privacy Act (the “CCPA”), and the California Privacy Rights Act (the “CPRA”), which significantly amended the CCPA and imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data, and significant data privacy and potential statutory damages related to data protection for the data of California residents.
The CPRA also created a new California data protection agency specifically tasked to enforce the law, which will likely result in increased regulatory scrutiny of California businesses in the areas of data protection and security and may increase our compliance costs and potential liability. In addition to the CCPA, numerous other states’ legislatures have passed or are considering similar laws that will require ongoing compliance efforts and investment. For example, Virginia passed the Virginia Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which differ from the CPRA and became effective in 2023. Similar laws have been proposed in other states as well and at the federal level. Other international laws are also in place or pending, and such laws may have potentially conflicting requirements that would make compliance challenging.
Under these data protection and privacy laws, we and our customers are required to maintain appropriate technical and organizational measures to ensure the security and protection of personal data and information, and we must comply (either directly or indirectly in support of our customers’ compliance efforts, as may be provided for the agreements we enter into with our customers) with a number of requirements with respect to individuals whose personal data or information we collect and process. Many of these laws and regulations are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate.
Intellectual Property
We do not have any patents or trademarks on which our business relies. We have engaged intellectual property counsel and pursue intellectual property filings that we and our counsel deem appropriate.
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We rely on confidentiality procedures, contractual commitments, and other legal rights to establish and protect our intellectual property. We generally enter into agreements with our employees and consultants that contain confidentiality provisions to control access to, and invention or work product assignment provisions to clarify ownership of, our proprietary information.
Available Information
Holders of shares of our Class A common stock may obtain copies of our filings with the SEC, free of charge, from the SEC’s website, www.sec.gov, or from our website, www.cloudastructure.com.
The contents of our website are solely for informational purposes and the information on our website is not part of or incorporated by reference into this Form 10-K.
From time to time we may use our website as a distribution channel for material company information, accordingly investors should monitor our website in addition to following our press releases and SEC filings.
Item 1A. Risk Factors.
An investment in our Class A common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all of the other information contained in this Form 10-K, including our financial statements and related notes appearing elsewhere in this Form 10-K, before deciding whether to invest in our Class A common stock. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may have a material adverse effect on our business, reputation, revenue, financial condition, results of operations and future prospects, in which event you could lose all or part of your investment. The risks and uncertainties described below are not intended to be exhaustive and are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. This Report also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those described below.
Risks Related to Our Business
Our technology continues to be developed, and it is unlikely that we will ever develop our technology to a point at which no further development is required.
We are developing complex technology that requires significant technical and regulatory expertise to develop, commercialize and update to meet evolving market and regulatory requirements. If we are unable to successfully develop and commercialize our technology and products, it could have a material adverse effect on our business operations and financial condition.
If our security measures are breached or unauthorized access to individually identifiable biometric or other personally identifiable information is otherwise obtained, our reputation may be harmed, and we may incur significant liabilities.
In the ordinary course of our business, we may collect and store sensitive data, including personally identifiable information (“PII”), owned or controlled by ourselves or our customers, and other parties. We communicate sensitive data electronically, and through relationships with multiple third-party vendors and their subcontractors. These applications and data encompass a wide variety of business-critical information, including commercial information, and business and financial information. We face a number of risks relative to protecting this critical information, including loss of access risk, inappropriate use or disclosure, inappropriate modification, and the risk of our being unable to adequately monitor, audit, and modify our controls over our critical information. This risk extends to the third-party vendors and subcontractors we use to manage this sensitive data. As a custodian of this data, we therefore inherit responsibilities related to this data, exposing ourselves to potential threats. Data breaches occur at all levels of corporate sophistication (including at companies with significantly greater resources and security measures than our own) and the resulting fallout stemming from these breaches can be costly, time-consuming, and damaging to a company’s reputation. Further, data breaches need not occur from malicious attacks or phishing only. Often, employee carelessness can result in sharing PII with a much wider audience than intended. Consequences of such data breaches could result in fines, litigation expenses, costs of implementing better systems, and the damage of negative publicity, all of which could have a material adverse effect on our business operations and financial condition.
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Our collection, processing, use and disclosure of individually identifiable biometric or other personally identifiable information is subject to evolving and expanding privacy and security regulations.
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 (the “CCPA”), which created 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 passed its Consumer Data Protection Act, and Colorado 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.
Additionally, all U.S. states and the District of Columbia have enacted breach notification laws that may require that we notify customers, employees or regulators in the event of unauthorized access to or disclosure of personal or confidential information experienced by us or our service providers. These laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly. Moreover, states have been frequently amending existing laws, requiring attention to changing regulatory requirements. We also may be contractually required to notify customers of a security breach. Although we may have contractual protections with our service providers, any actual or perceived security breach could harm our reputation and brand, expose us to potential liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach. Any contractual protections we may have from our service providers may not be sufficient to adequately protect us from any such liabilities and losses, and we may be unable to enforce any such contractual protections. In addition to government regulation, privacy advocates and industry groups have and may in the future propose self-regulatory standards from time to time. These and other industry standards may legally or contractually apply to us, or we may elect to comply with such standards.
Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees.
To succeed, we must recruit, retain, manage and motivate qualified technical and management personnel, and we face significant competition for experienced personnel. We are highly dependent on the principal members of our management. If we do not succeed in attracting and retaining qualified personnel, particularly at the management level, it could adversely affect our ability to execute our business plan and harm our operating results. In particular, the loss of one or more of our executive officers could be detrimental to us if we cannot recruit suitable replacements in a timely manner. We could in the future have difficulty attracting experienced personnel to our company and may be required to expend significant financial resources in our employee recruitment and retention efforts.
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We face intense competition for qualified personnel. We may incur significant costs to attract and recruit skilled personnel, and we may lose new personnel to our competitors or other technology companies before we realize the benefit of our investment in recruiting and training them. Many of the other technology companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer operating history than we do. They also may provide more diverse opportunities and better prospects for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. Additionally, laws and regulations, such as restrictive immigration laws, may limit our ability to recruit outside of the United States. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we develop and commercialize our products and services could be limited and our potential for successfully growing our business could be harmed.
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. Shares of our Class A common stock were first listed on the Nasdaq Capital Market in January 2025, and the market price of the shares has declined significantly since the initial listing.
Privacy and data security laws and regulations could require us to make changes to our business, impose additional costs on us and reduce the demand for our software solutions.
Our business model contemplates that we will transmit a significant amount of PII through our platform. Privacy and data security have become significant issues in the United States and in other jurisdictions where we may offer our video surveillance solutions. The regulatory framework relating to privacy and data security issues worldwide is evolving rapidly and is likely to remain uncertain for the foreseeable future. Federal, state and foreign government bodies and agencies have in the past adopted, or may in the future adopt, laws and regulations regarding the collection, use, processing, storage and disclosure of personal or identifying information obtained from customers and other individuals. In addition to government regulation, privacy advocates and industry groups may propose various self-regulatory standards that may legally or contractually apply to our business. Because the interpretation and application of many privacy and data security laws, regulations and applicable industry standards are uncertain, it is possible that these laws, regulations and standards may be interpreted and applied in a manner inconsistent with our existing privacy and data management practices. As we expand into new jurisdictions or verticals, we will need to understand and comply with various new requirements applicable in those jurisdictions or verticals.
To the extent applicable to our business or the businesses of our customers, these laws, regulations and industry standards could have negative effects on our business, including by increasing our costs and operating expenses, and delaying or impeding our deployment of new core products or services. Compliance with these laws, regulations and industry standards requires significant management time and attention, and failure to comply could result in negative publicity, subject us to fines or penalties or result in demands that we modify or cease existing business practices. In addition, the costs of compliance with, and other burdens imposed by, such laws, regulations and industry standards may adversely affect our customers’ ability or desire to collect, use, process and store PII using our products and services, which could reduce overall demand for them. Even the perception of privacy and data security concerns, whether or not valid, may inhibit market acceptance of our products and services in certain verticals. In particular, some regulatory bodies have recently become more interested in technologies that we employ including artificial intelligence (“AI”) and face recognition. Any of these outcomes could adversely affect our business and operating results.
If our products and services do not achieve broad acceptance both domestically and internationally, we will not be able to achieve our anticipated level of growth. Our revenues are primarily derived from a cloud-based services model for our products and technology. We also receive some hardware revenue as well as revenue for remote guarding services. We cannot accurately predict the future growth rate or the size of the market for our products and services. The expansion of the market for our solutions depends on a number of factors, such as:
| · | the cost, performance and reliability of our products and services and the solutions offered by our competitors; |
| · | customers’ perceptions regarding the benefits of cloud-based video surveillance solutions; |
| · | public perceptions regarding the intrusiveness of these solutions and the manner in which organizations use biometric and other identity information collected; |
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| · | public perceptions regarding the confidentiality of private information; |
| · | proposed or enacted legislation related to privacy of information; |
| · | customers’ satisfaction regarding our cloud-based video surveillance system; and |
| · | marketing efforts and publicity regarding our video surveillance solutions. |
Even if our products and services gain wide market acceptance, our solutions may not adequately address market requirements and may not continue to gain market acceptance. If cloud-based video surveillance solutions generally or our solutions specifically do not gain wide market acceptance, we may not be able to achieve our anticipated level of growth and our revenues and results of operations would suffer.
Issues raised by the use of AI (including machine learning) in our platforms may result in reputational harm or liability.
AI is integrated into our surveillance systems and Remote Guarding services and is a significant element of our business. As with many developing technologies, AI presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. AI algorithms may be flawed. Datasets may be insufficient, of poor quality or contain biased information. Inappropriate or controversial data practices by, or practices reflecting inherent biases of, data scientists, engineers and end-users of our systems could impair the acceptance of AI solutions. If the recommendations, forecasts or analyses that AI applications assist in producing are deficient or inaccurate, we could be subjected to competitive harm, potential legal liability and brand or reputational harm. Some AI scenarios present ethical issues. If we enable or offer AI solutions that are controversial because of their purported or real impact on human rights, privacy, employment or other social issues, we may experience brand or reputational harm.
We operate in a highly competitive industry that is dominated by multiple very large, well-capitalized market leaders and is constantly evolving. New entrants to the market, existing competitor actions, or other changes in market dynamics could adversely impact us.
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.
We believe that our ability to compete successfully depends on a number of factors, including the type and quality of our products and services and the strength of our brand names, as well as many factors beyond our control. We may not be able to compete successfully against current or future competitors, and increased competition may result in price reductions, reduced profit margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand the development and marketing of new products or services, any of which would adversely impact our results of operations and financial condition.
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We may not be as successful as our competitors incorporating AI into our business or adapting to a rapidly changing marketplace.
Our competitors may be larger, more diversified, better funded and have access to more advanced technology, including AI. These competitive advantages may enable our competition to innovate better and more quickly and to compete more effectively on quality and price, causing us to lose business and profitability. Burgeoning interest in AI may increase our competition and disrupt our business model. AI may lower barriers to entry in our industry, and we may be unable to effectively compete with the products or services offered by new competitors. AI-related changes to the products and services we offer may affect our customers’ expectations, requirements or tastes in ways we cannot adequately anticipate or adapt to, causing our business to lose sales, market share or the ability to operate profitably and sustainably.
Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products.
We believe our products and services may be highly disruptive to a very large and growing market. Our competitors are well capitalized with significant intellectual property protection and resources, and they (or patent trolls) may initiate infringement lawsuits against us. Such litigation could be expensive, time-consuming and could prevent us from selling our products and services, which would significantly harm our ability to grow our business as planned.
We rely on other companies to provide certain hardware and software solutions for our products.
We depend on certain third-party suppliers and subcontractors to meet our contractual obligations to our customers and conduct our business. While we are not dependent on any one supplier for any of our hardware or software solutions, our ability to meet our obligations to our customers may be adversely affected if one or more suppliers or subcontractors does not provide the agreed-upon supplies or perform the agreed-upon services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our products and services may be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our products, or from whom we acquire such items, do not provide major components and subsystems which meet required specifications and perform to our and our customers’ expectations. If we encounter problems with one or more of these parties and they fail to perform to expectations, it could have a material adverse effect on our business operations and financial condition.
We plan to implement new lines of business or offer new products and services within existing lines of business.
We plan on introducing new computer vision algorithms, or improving existing ones, such as face recognition and object detection, that must be executed at sustainable computational costs. We also plan on introducing machine learning algorithms that combine information from our video surveillance system. There are substantial risks and uncertainties associated with these efforts, both in the development of these new products and services, as well as the execution and delivery of these products and services to our customers. We may invest significant time and resources into these endeavors, and there is no guarantee we will be successful in our development or launch of such products and services. Initial timetables for the introduction and development of such new products or services may not be achieved and price and profitability targets may not prove feasible. We may not be successful in introducing these new products and services in response to industry trends or developments in technology, or those new products may not achieve market acceptance. As a result, we could lose business, be forced to price products and services on less advantageous terms to retain or attract clients or be subject to cost increases. As a result, our business, financial condition or results of operations may be adversely affected.
Certain acquisitions could adversely affect our financial results.
We may pursue strategic acquisitions as part of our business strategy. There is no assurance that we will be able to find suitable acquisition candidates or be able to complete acquisitions on favorable terms, if at all. We may also discover liabilities or deficiencies associated with any companies acquired that were not identified in advance, which may result in unanticipated costs. The effectiveness of our due diligence review and ability to evaluate the results of such due diligence may depend upon the accuracy and completeness of statements and disclosures made or actions taken by the target companies or their representatives. As a result, we may not be able to accurately forecast the financial impact of an acquisition transaction, including tax and accounting charges. In addition, we may not be able to successfully integrate acquired businesses and may incur significant costs to integrate and support acquired companies. Any of these factors could adversely affect our financial results.
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Our business may be adversely impacted by 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 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.
Increased indebtedness could also make it more difficult for us to satisfy our obligations with respect to any other debt agreements, increase our vulnerability to general adverse economic and industry conditions and require that a greater portion of our cash flow be used to pay indebtedness, which would reduce the availability of cash available for other purposes, and limit our flexibility in planning for, or reacting to, changes in our business and our industry. Our failure to comply with any covenants under such indebtedness could result in an event of default that, if not cured or waived, could result in an acceleration of repayment of other existing indebtedness, which in turn could materially and adversely affect our business and results of operations.
We incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives. We are 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 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 have increased our legal and financial compliance costs, have 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.
Pursuant to Section 404 of the Sarbanes-Oxley Act, we will be required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm, beginning with the first full year after we become a public company. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 of the Sarbanes-Oxley Act, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. We will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we, nor our independent registered public accounting firm will be able to conclude within the prescribed time frame that our internal control over financial reporting is effective as required by Section 404 of the Sarbanes-Oxley Act. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. We could also become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
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As a public company, we are also required to 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 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.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:
| · | others may be able to develop products and services that are similar to our product candidates but that are not covered by the claims of the patents that we own or license; |
| · | we or our licensors or future collaborators might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or license; |
| · | we or our licensors or future collaborators might not have been the first to file patent applications covering certain of our inventions; |
| · | others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; |
| · | it is possible that our licensors’ pending patent applications will not lead to issued patents; |
| · | issued patents that we own or license may be held invalid or unenforceable, as a result of legal challenges by our competitors; |
| · | our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; |
| · | we may not develop additional proprietary technologies that are patentable; |
| · | we cannot predict the scope of protection of any patent issuing based on our patent applications, including whether the patent applications that we own or in-license will result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries; |
| · | the claims of any patent issuing based on our patent applications may not provide protection against competitors or any competitive advantages, or may be challenged by third parties; |
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| · | if enforced, a court may not hold that our patents are valid, enforceable and infringed; |
| · | we may need to initiate litigation or administrative proceedings to enforce and/or defend our patent rights which will be costly whether we win or lose; |
| · | we may choose not to file a patent application in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent application and obtain an issued patent covering such intellectual property; |
| · | we may fail to adequately protect and police our trademarks and trade secrets; and |
| · | the patents of others may have an adverse effect on our business, including if others obtain patents claiming subject matter similar to or improving that covered by our patents and patent applications. |
Should any of these events occur, they could significantly harm our business, results of operations and prospects.
Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the market price of our common shares to decline.
During the course of any intellectual property litigation, there could be public announcements of the initiation of the litigation as well as results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our existing product candidates, programs or intellectual property could be diminished. Such announcements could also harm our reputation or the market for our future product candidates, which could have a material adverse effect on our business.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to the protection afforded by other types of intellectual property, we rely on the protection of our trade secrets, including unpatented know-how, technology and other proprietary information to maintain our competitive position. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties (including, but not limited to, contractors, collaborators, and outside scientific advisors), and confidential information and inventions agreements with employees, consultants, licensors and advisors, we cannot provide any assurances that all such agreements have been duly executed, and any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. We require our employees to enter into written confidentiality agreements that assign to us any inventions, developments, creative works and useful ideas of any description that are conceived of, reduced to practice or developed in the course of their employment. In addition, we require our third-party contractors to enter into a written non-disclosure agreement that requires the third party to not disclose certain of our confidential information in any manner or for any purpose other than as necessary and/or appropriate in connection with their obligations for a defined period of time, subject to certain exclusions. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. We may need to share our proprietary information, including trade secrets, with our current and future business partners, collaborators, contractors and others located in countries at heightened risk of theft of trade secrets, including through direct intrusion by private parties or foreign actors, and those affiliated with or controlled by state actors.
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Moreover, third parties may still obtain this information or may come upon this or similar information independently, and we would have no right to prevent them from using that technology or information to compete with us. If any of these events occurs or if we otherwise lose protection for our trade secrets, the value of this information may be greatly reduced and our competitive position would be harmed. If we or our licensors do not apply for patent protection prior to such publication or if we cannot otherwise maintain the confidentiality of our proprietary technology and other confidential information, then our ability to obtain patent protection or to protect our trade secret information may be jeopardized.
We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully used or disclosed alleged confidential information or trade secrets of their former employers.
Risks Related to Our Financial Condition and Capital Requirements
We have a limited operating history, which may make it difficult for you to evaluate our current business and predict our future success and viability.
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.
We have historically operated at a loss, which has resulted in an accumulated deficit.
For the fiscal years ended December 31, 2025 and December 31, 2024, we incurred net losses of approximately $8.5 million and approximately $6.5 million, respectively. There can be no 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 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.
We anticipate sustaining operating losses for the foreseeable future.
It is anticipated that we will sustain operating losses for the foreseeable future as we expand our team, continue with research and development, and strive to gain customers and gain market share in our industry. Our ability to become profitable depends on our ability to expand our customer base. There can be no assurance that this will occur. Unanticipated problems and expenses are often encountered in offering new products which may impact whether the Company is successful. Furthermore, we may encounter substantial delays and unexpected expenses related to development, technological changes, marketing, regulatory requirements and changes to such requirements or other unforeseen difficulties. There can be no assurance that we will ever become profitable. If the Company sustains losses over an extended period of time, it may be unable to continue in business.
We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs or future commercialization efforts.
Our operations have consumed substantial amounts of cash since inception, and we expect our expenses to increase in connection with our ongoing 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.
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Our estimate as to how long we expect our existing capital to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.
| Our future funding requirements will depend on many factors, including, but not limited to: |
| · | the initiation, progress, timeline, cost and results of our products; |
| · | the cost and timing of manufacturing activities; |
| · | the effect of competing technological and market developments; |
| · | the payment of licensing fees, potential royalty payments and potential milestone payments; |
| · | the cost of general operating expenses; and |
| · | the costs of operating as a public company. |
Advancing the development of our product will require a significant amount of capital. In order to fund all of the activities that are necessary to complete the development of our product, we will be required to obtain further funding through equity offerings, debt financings, collaborations and licensing arrangements or other sources, which may dilute our stockholders or restrict our operating activities. Adequate additional funding may not be available to us on acceptable terms, or at all.
Our failure to raise capital as and when needed or on acceptable terms would have a negative impact on our financial condition and our ability to pursue our business strategy, and we may have to delay, reduce the scope of, suspend or eliminate one or more of our research-stage programs, clinical trials or future commercialization efforts, grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, obtain funds through arrangement with collaborators on terms unfavorable to us or pursue merger or acquisition strategies, all of which could adversely affect the holdings or the rights of our stockholders.
Raising additional capital may cause dilution to our existing stockholders.
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.
Such financing may also result in imposition of debt covenants, increased fixed payment obligations or other restrictions that may adversely affect our ability to conduct our business. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that are not favorable to us.
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We may need additional financing, and if such financing is not available to us or is not available on acceptable terms, we may be limited in our ability to grow our business.
We have historically incurred losses from operations. For the fiscal year ended December 31, 2025, we incurred a net loss of approximately $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.
Since inception we have relied primarily on financing activities to fund our operations, including raising over $35 million in funding in an offering under Regulation A of the Securities Act. During 2025, we raised additional capital through the sale of shares of our Series 1 Convertible Preferred Stock (the “Series 1 Preferred”) for gross proceeds of $6.3 million and the sale of shares of our Series 2 Convertible Preferred Stock (the “Series 2 Preferred”) for aggregate gross proceeds of $11.0 million. The Series 1 Preferred shares and Series 2 Preferred shares were sold to Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”). Pursuant to the agreement we have in place with Streeterville, we may sell additional shares of our Series 2 Preferred to Streeterville for aggregate gross proceeds of $29.0 million, subject to the terms and conditions of that agreement.
In addition, we have entered into an Equity Purchase Agreement with Atlas Sciences, LLC, a Utah limited liability company (“Atlas”), that gives us the right, subject to the terms and conditions of that agreement, to require that Atlas purchase up to an aggregate of $50.0 million of our Class A common stock. The Equity Purchase Agreement expires November 25, 2024. In February 2026, we entered into an Equity Distribution Agreement with Maxim Group, LLC, a Delaware limited liability company (“Maxim”), that allows us to sell shares of our Class A common stock in an “at-the-market” offering through Maxim, as sales agent, for aggregate gross proceeds of $9.0 million, subject to the terms and conditions of that agreement.
Please see Note 5, Share Capital below for more information regarding these various financing arrangements.
We believe our ability to sell additional shares of our Series 2 Preferred stock to Streeterville and our ability to sell shares of our Class A common stock to Atlas and through our agreement with Maxim, in each case subject to the respective terms and conditions of those agreements, will provide us with, and allow us to maintain, stockholders’ equity 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 12 months. Nasdaq Listing Rule 5505(b)(1) requires that we maintain stockholders' equity of at least $2.5 million for continued listing on the Nasdaq Capital Market. As of December 31, 2025, our stockholders' equity was approximately $8.9 million. However, we cannot be certain that additional funding will be available on acceptable terms, or at all. It is possible that we may not be able to satisfy all of the requirements and conditions to allow us to sell additional shares of our capital stock through the financing arrangements described above, including if we are unable to regain compliance with the minimum bid price requirement applicable under Nasdaq rules, as described below.
We do not currently have any debt financing, but we may pursue debt financing to raise capital necessary to fund our operations, particularly if we are unable to sell additional shares of capital stock through the financing arrangements described above. 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.
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We have a limited number of customers accounting for a substantial portion of our revenue, and such substantial customer concentration could adversely affect our business, operating results and financial condition.
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. 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.
Risks Related to the Ownership of Our Class A common stock
We received a notice from Nasdaq that our Class A common stock may be delisted from trading on the Nasdaq Capital Market if we fail to comply with the continued listing requirements, including the minimum bid price requirement. A delisting of our Class A common stock is likely to reduce the liquidity of our common stock and may inhibit or preclude our ability to raise additional financing.
We are required to comply with certain Nasdaq continued listing requirements, including a minimum bid price for our Class A common stock, as well as a series of financial tests relating to stockholder equity, market value of listed securities and number of market makers and stockholders. If we fail to maintain compliance with any of those requirements, our common shares could be delisted from Nasdaq.
On February 17, 2026, we received a letter (the “Notification Letter”) from the Listing Qualifications Staff of Nasdaq indicating that, based upon the closing bid price of our Class A common stock for the last 30 consecutive business days, we are not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).
The Notification Letter does not result in the immediate delisting of our Class A common stock from the Nasdaq Capital Market. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a compliance period of 180 calendar days, or until August 17, 2026, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our Class A common stock must be at least $1.00 per share for a minimum of 10 consecutive business days during the 180-day compliance period.
If we do not regain compliance by August 17, 2026, we may be eligible for an additional 180 calendar day compliance period. To qualify for the additional compliance period, we will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market (except for the bid price requirement) and must provide written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
If we do not regain compliance within the allotted compliance period(s), or if we are otherwise not eligible for an additional compliance period, Nasdaq will provide notice that our Class A common stock will be subject to delisting. At that time, we may appeal the delisting determination to a Nasdaq Hearings Panel.
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We intend to monitor the closing bid price of our Class A common stock and will consider available options to regain compliance with the minimum bid price requirement, which may include effecting a reverse stock split, if necessary and if approved by our stockholders. There can be no assurance that we will be able to regain compliance with the minimum bid price requirement.
If our Class A common stock is delisted from trading on Nasdaq, and we are unable to obtain listing on another national securities exchange or take action to restore our compliance with the Nasdaq continued listing requirements, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our stockholders:
| · | the liquidity of our Class A common stock; | |
| · | the market price of our Class A common stock; | |
| · | our ability to obtain financing for the continuation of our operations; | |
| · | the number of investors that will consider investing in our common stock; | |
| · | the availability of information concerning the trading prices and volume of our common stock; and | |
| · | the number of broker-dealers willing to execute trades in shares of our common stock. |
In addition, our failure to maintain the listing of our Class A common stock on the Nasdaq Capital Market may result in the loss of confidence in our company and could trigger defaults or penalties under existing or future agreements that include listing-based covenants, including the sales agreement with Maxim and the Series 2 Purchase Agreement and Equity Line of Credit described above. While companies that lose their Nasdaq listing may have their securities quoted on the over-the-counter market during any appeal period, trading on such venues is typically more limited, less transparent, and more volatile than on a national securities exchange, which could further depress the price and liquidity of our shares.
An active trading market for our Class A common stock may not be sustained, and the market price of shares of our Class A common stock may be volatile.
Prior to the listing of our Class A common 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.
The public price of our Class A common stock could be subject to wide fluctuations in response to the risk factors described in this Form 10-K and others beyond our control, including:
| · | changes in the industries in which we operate; |
| · | variations in our operating performance and the performance of our competitors in general; |
| · | actual or anticipated fluctuations in our quarterly or annual operating results; |
| · | publication of research reports by securities analysts about us or our competitors or our industry; |
| · | the public’s reaction to our press releases, our other public announcements and our filings with the SEC; |
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| · | our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; |
| · | additions and departures of key personnel; |
| · | changes in laws and regulations affecting our business; |
| · | commencement of, or involvement in, litigation involving us; |
| · | changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; |
| · | the volume of shares of our Class A common stock available for public sale; and |
| · | general economic and political conditions such as recessions, pandemics, interest rates, fuel prices, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism. |
In addition, securities exchanges have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner often unrelated to the operating performance of those companies. These fluctuations may be even more pronounced in the trading market for our Class A common stock shortly following the listing of our Class A common stock on Nasdaq as a result of the supply and demand forces described above. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and harm our business, results of operations and financial condition.
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, which could impair our ability to raise capital through the future sale of additional equity securities.
Substantial sales of our Class A common stock 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 described under Note 5, Share Capital below, we currently have three financing arrangements in place that may result in our sale of a substantial number of shares of Class A common stock or shares of our Series 2 Preferred stock, which is convertible into shares of our Class A common stock. Each of these three financing arrangements are likely to result in significant additional shares of our Class A common stock being issued and sold, which would likely cause further downward pressure on the price of our Class A common stock.
As of February 28, 2026, we have 5,638 shares of Class B common stock outstanding, which have super voting rights.
Our common stock 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 charter could also have the effect of delaying, deterring or preventing a change in our control or make the removal of our management more difficult.
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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 charter 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.
The future issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of shares of our Class A common stock, either by diluting the voting power of our Class A common stock if the preferred stock votes together with the Class A common stock as a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote, even if the action were approved by the holders of our shares of our Class A common stock.
To raise additional capital, we may in the future sell additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that are lower than the prices paid by existing stockholders, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders, which could result in substantial dilution to the interests of existing stockholders. In addition, to the extent that outstanding warrants or options are exercised, new options or other equity awards are issued under our Incentive Plan, or we issue additional shares in the future, stockholders may experience further dilution.
We may issue debt and equity securities or securities convertible into equity securities, any of which may be senior to our common stock as to distributions and in liquidation, which could negatively affect the value of our common stock.
In the future, we may attempt to increase our capital resources by entering into debt or debt-like financing that is unsecured or secured by up to all of our assets, or by issuing additional debt or equity securities, which could include issuances of secured or unsecured commercial paper, medium-term notes, senior notes, subordinated notes, guarantees, preferred stock, hybrid securities, or securities convertible into or exchangeable for equity securities. In the event of our liquidation, our lenders and holders of our debt and preferred securities would receive distributions of our available assets before distributions to the holders of our common stock. Because our decision to incur debt and issue securities in future offerings may be influenced by market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings or debt financings. Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future.
We do not intend to pay dividends on our common stock, so any returns will be substantially limited to the value of our common stock.
We have no current plans to pay any cash dividends on our common stock. The declaration, amount and payment of any future dividends on shares of our common stock will be at the sole discretion of our board of directors. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends from future earnings for the foreseeable future. Our board of directors may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on our payment of dividends to our stockholders and such other factors as our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any indebtedness we incur. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.
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The future issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our Class A common stock by making an investment in the Class A common stock less attractive. For example, investors in the Class A common stock may not wish to purchase Class A common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase Class A common stock at the lower conversion price, causing economic dilution to the holders of Class A common stock.
Because we have no current plans to pay cash dividends on our Class A common stock, you may not receive any return on investment unless you sell your Class A common stock for a price greater than that which you paid for it.
We currently intend to retain all available funds and any future earnings to fund the development, commercialization and growth of our business, and therefore we do not anticipate declaring or paying any cash dividends on our Class A common stock in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Our future ability to pay cash dividends on our Class A common stock may also be limited by the terms of any future debt securities or credit facility. As a result, capital appreciation, if any, of the Class A common stock you purchase in this offering will be your sole source of gain for the foreseeable future.
We are an emerging growth company and a smaller reporting company, and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our Class A common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (ii) having the option of delaying the adoption of certain new or revised financial accounting standards, (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (iv) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions until such time that we are no longer an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. Further, pursuant to Section 107 of the JOBS Act, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of our direct listing on Nasdaq, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Class A common stock held by non-affiliates was $700.0 million or more as of the last business day of the second fiscal quarter of such year or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting Class A common stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting Class A common stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter.
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It is possible that some investors will find our Class A common stock less attractive as a result of the foregoing, which may result in a less active trading market for our Class A common stock and higher volatility in our stock price.
Our charter 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 charter 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 charter 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 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 charter 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.
The uncertainty associated with the fact that few companies have undertaken direct listings to date may lead to increased volatility and pricing challenges for our Class A common stock.
On January 30, 2025, we completed a direct listing of our Class A common stock on Nasdaq. Few companies have conducted direct listings, making the direct listing process we undertook relatively novel. The absence of a traditional underwritten offering may contribute to a less orderly market for our Class A common stock, resulting in increased volatility in the trading price and potential difficulties in achieving a stable market price. Unlike a traditional initial public offering, there was no firm-commitment underwritten offering to help inform efficient and sufficient price discovery. Consequently, the public price of our Class A common stock may be more volatile than it would be if shares were initially listed in connection with a firm-commitment underwritten initial public offering. In addition, the trading volume and price of shares of our Class A common stock may be more volatile and subject to greater fluctuations due to the direct listing method.
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The direct listing process differs from an initial public offering underwritten on a firm-commitment basis and the impact of awareness of our brand and investor recognition of our Company on the demand for our Class A common stock is unpredictable and our marketing and brand development efforts may not be successful.
We did not conduct a traditional “roadshow” with underwriters prior to the opening of trading of our Class A common stock on Nasdaq. Instead, we engaged in certain investor presentations and educational meetings to enhance our brand awareness and investor recognition of our Company. These presentations were announced through financial news outlets, and any electronic presentation materials were made publicly available on our website without restriction.
There is no assurance that our investor presentations or other educational meetings had the same impact on awareness of our brand and investor recognition of our Company as a traditional “roadshow” conducted in connection with a firm-commitment underwritten initial public offering. As a result, the price discovery process for our Class A common stock may have been less efficient, and demand among investors may have been insufficient following our listing. This could contribute to increased volatility in the public price of our Class A common stock.
Claims for indemnification by our directors and officers may reduce the amount of money available to us.
Our charter 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 will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law; | |
| · | Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful; | |
| · | we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law; | |
| · | we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; | |
| · | we are authorized to enter into indemnification agreements with our directors, officers, employees, and agents and to obtain insurance to indemnify such persons; and | |
| · | we may not retroactively amend our amended and restated certificate of incorporation provisions to reduce our indemnification obligations to directors, officers, employees, and agents. |
While we have procured directors’ and officers’ liability insurance policies, such insurance policies may not be available to us in the future at a reasonable rate, may not cover all potential claims for indemnification, and may not be adequate to indemnify us for all liability. Large indemnity payments to our directors and officers in excess of any available insurance would materially adversely affect our business, financial condition, and results of operations.
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General Risks
Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our Class A common stock.
Securities research analysts may establish and publish their own periodic projections for our Company. These projections may vary widely and may not accurately predict the results we actually achieve. The price of our Class A common stock may decline if our actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our stock price or trading volume could decline.
Our internal computer systems, or those of any of our manufacturers, contractors, consultants, collaborators or potential future collaborators, may fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data or personal data, which could result in additional costs, loss of revenue, significant liabilities, harm to our brand and material disruption of our operations.
Despite the implementation of security measures, our internal computer systems and those of our current and any future manufacturers, contractors, consultants, collaborators and third-party service providers, are vulnerable to damage from computer viruses, cybersecurity threats, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failure. Because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. Some of the federal, state and foreign government requirements include obligations of companies to notify individuals of security breaches involving particular personally identifiable information, which could result from breaches experienced by us or by our vendors, contractors or organizations with which we have formed strategic relationships. Notifications and follow-up actions related to a security breach could impact our reputation, cause us to incur significant costs, including legal expenses and remediation costs. We also rely on third parties for certain portions of our manufacturing process, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data, or inappropriate disclosure of confidential or proprietary information, we could be exposed to litigation and governmental investigations, the further development and commercialization of our product candidates could be delayed, and we could be subject to significant fines or penalties for any noncompliance with certain state, federal and/or international privacy and security laws.
Our insurance policies may not be adequate to compensate us for the potential losses arising from any such disruption, failure or security breach. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert management attention.
Our operations are vulnerable to interruption by fire, severe weather conditions, power loss, telecommunications failure, terrorist activity, pandemics/epidemics and other events beyond our control, which could harm our business.
Our facility is located in a region which experiences severe weather from time to time. We have not undertaken a systematic analysis of the potential consequences to our business and financial results from a major tornado, flood, fire, earthquake, power loss, terrorist activity, pandemics/epidemics or other disasters, and we do not have a recovery plan for such disasters. In addition, we do not carry sufficient insurance to compensate us for actual losses from interruption of our business that may occur, and any losses or damages incurred by us could harm our business. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
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Item 1B. Unresolved Staff Comments.
Not applicable.
Item 1C. Cybersecurity.
All customer and user information is stored directly within our own data centers, or Google Cloud and Amazon Web Services platforms, which provides market-leading data security for their centralized servers. On occasion, limited amounts of customer information such as names and emails are exported from these systems solely for the purposes of accounting and filings and is never shared outside of the Company and its contracted accounting consultants, which are under confidentiality agreements. Highly sensitive customer payment information is generally never revealed to the Company in any capacity and is hidden by payment processors for security purposes, with the sole exception being accounts who provide written or digital copies of credit card information for payment processing on agreed upon terms. Such information is secured on Company computers and never distributed.
Item 2. Properties.
Our principal executive offices are located at 228 Hamilton Avenue, 3rd Floor, Palo Alto, California 94301, which is a shared office space. The space serves as the location of our corporate headquarters.
We also lease space in San Carlos, California, on a month-to-month basis for $7,368 per month, which serves as our development offices, and Kalispell, Montana, on a month-to-month basis for $1,800 per month, which provides space for an additional data center.
We believe that our facilities are adequate for our current and anticipated near-term needs and that suitable additional or substitute space would be available if needed.
Item 3. Legal Proceedings.
From time to time, we may be party to litigation arising in the ordinary course of business. As of December 31, 2025, we are not subject to any material legal proceedings nor, to the best of our knowledge, are any material legal proceedings pending or threatened against us.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our Class A common stock (our “Class A common stock”) began trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CSAI” on January 30, 2025. Prior to that date, there was no public trading market for our Class A common stock.
Holders of Record
As of February 28, 2026, there were 9,584 holders of record of our Class A common stock, and six holders of record of our Class B common stock. Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividend Policy
We have never declared or paid any cash dividends on our common equity. We currently intend to retain all available funds and any future earnings to fund the growth of our business, and therefore we do not anticipate declaring or paying any cash dividends in the foreseeable future.
Equity Compensation Plan Information
See the section titled “Executive Compensation” in Part III for information regarding our equity compensation plans.
Unregistered Sales of Equity Securities
All unregistered sales of our equity securities since January 1, 2025, have previously been reported by us in Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Issuer Purchases of Equity Securities
None.
Item 6. [Reserved].
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K (this “Form 10-K”). This discussion contains forward-looking statements that are subject to risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. The factors listed under “Risk Factors” and “Forward-Looking Statements” in this Form 10-K provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in any forward-looking statement.
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Overview and Recent Developments
We were formed under the laws of the State of Delaware on March 28, 2003. We provide an award-winning cloud-based artificial intelligence (“AI”) video surveillance and Remote Guarding (as described below) service built on AI and machine learning platforms.
Compliance with NASDAQ Listing Rule 5550(a)(2)
On February 17, 2026, we received a letter (the “Notification Letter”) from the Listing Qualifications Staff of Nasdaq indicating that, based upon the closing bid price of our Class A common stock for the last 30 consecutive business days, we are not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2). The Notification Letter does not result in the immediate delisting of our Class A common stock from the Nasdaq Capital Market. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a compliance period of 180 calendar days, or until August 17, 2026, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our Class A common stock must be at least $1.00 per share for a minimum of 10 consecutive business days during the 180-day compliance period.
If we do not regain compliance by August 17, 2026, we may be eligible for an additional 180 calendar day compliance period. To qualify for the additional compliance period, we will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market (except for the bid price requirement) and must provide written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If we do not regain compliance within the allotted compliance period(s), or if we are otherwise not eligible for an additional compliance period, Nasdaq will provide notice that our Class A common stock will be subject to delisting. At that time, we may appeal the delisting determination to a Nasdaq Hearings Panel.
We intend to monitor the closing bid price of our Class A common stock and will consider available options to regain compliance with the minimum bid price requirement, which may include effecting a reverse stock split, if necessary and if approved by our stockholders. There can be no assurance that we will be able to regain compliance with the minimum bid price requirement.
History of the Company and Overview of Our Business
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 funds, 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 and acquiring additional customers in the property management (“proptech”) space, and we anticipate entering into additional markets in 2026.
Our intelligent AI solution works by identifying objects (faces, license plates, animals, guns, etc.) in video footage so that property managers can quickly search for those objects. Additionally, our AI and Remote Guarding services provide a proactive response to crime. Remote guarding combines video surveillance, AI analytics, monitoring centers, and security agents (“Remote Guarding”). Based on internal data comparing the total number of actual threatening activity alerts received by our Remote Guards, against all potentially suspicious and threatening activity alerts received by our Remote Guards, on average, from 2023 to the date of this Form 10-K, our Remote Guarding services deterred over 97% of all threatening activity for our customers. We believe AI security delivers multiple benefits for many property owners, including, without limitation:
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| · | Deterring crime and improving overall safety; | |
| · | Improving occupancy rates and rental rates; and | |
| · | Reducing onsite guard costs and lowering insurance rates |
As of the date of this Form 10-K, we are the only seamless, cloud-based, AI surveillance and Remote Guarding solution on the market of which we are aware. We also believe that our solution is more affordable and easier to use than the various solutions that our competitors offer. Our Remote Guarding service bridges the line between AI and human intelligence. AI has the ability to monitor all cameras at the same time and all of the time, a task from which humans would fatigue. When the AI detects an event occurring, the Remote Guards are notified. The Remote Guards can then determine if escalation is required. With real-time human intervention, our Remote Guarding service can turn video surveillance from a forensic tool, used after a crime has been committed, into a real time crime prevention tool. This has the potential to greatly increase value for our customers.
Net Revenues
Our net revenues are primarily derived from subscriptions to our core business services, including cloud video surveillance and Remote Guarding, as well as from hardware sales and installation services.
Revenues from cloud video surveillance and Remote Guarding services are billed based on the number of camera views deployed by the customer. Hardware revenues consist primarily of sales of cloud video recorders, surveillance cameras, and horn and axis speakers held in inventory. Installation services represent labor associated with the deployment and configuration of hardware and related software.
Hardware revenues are recognized upon shipment of the related products to the customer, while installation service revenues are recognized based on the percentage of completion of the services performed. Subscription revenues are billed either monthly or annually and are recognized over the contractual service period in accordance with ASC 606, Revenue from Contracts with Customers.
Cost of Goods Sold
Our cost of goods sold primarily consists of hosting costs associated with the delivery of our cloud-based services, including data storage, bandwidth, and related infrastructure expenses. Cost of goods sold also includes the cost of equipment sold to customers, such as cloud video recorders, surveillance cameras, and related peripherals, as well as labor and third-party costs incurred in connection with installation services. In addition, cost of goods sold includes compensation, benefits, and other direct costs associated with personnel in our operations department who support the delivery, monitoring, and maintenance of our services.
Operating Expenses
Our operating expenses consist of general and administrative, research and development, and sales and marketing expenses, and include both cash and non-cash items.
General and administrative expenses primarily include salaries and benefits, professional fees, consulting costs, and other expenses related to the administrative and corporate functions of the Company. Research and development expenses consist primarily of product development costs, including employee compensation and related expenses. Sales and marketing expenses include public relations, advertising, and direct marketing costs, as well as personnel-related expenses associated with sales and marketing activities.
Total operating expenses also include non-cash expenses, primarily consisting of depreciation expense, bad debt expense, and stock-based compensation expense.
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Comparison of Year Ended December 31, 2025, to the Year Ended December 31, 2024
Net Revenues
Net revenues increased to $5,065,529 in 2025 from $1,364,293 in 2024, representing an increase of $3,701,236, or approximately 271%. The increase was driven by growth across all revenue categories, reflecting continued customer adoption of our services, expanded deployments, and increased sales activity.
Cloud Video Surveillance revenue increased to $767,026 in 2025 from $323,475 in 2024, an increase of $443,551, or approximately 137%. This increase was primarily attributable to a higher number of subscribed camera views resulting from new customer acquisitions and expansion of deployments with existing customers.
Remote Guarding revenue increased to $706,349 in 2025 from $282,849 in 2024, an increase of $423,500, or approximately 150%. The increase was driven by increased customer demand for remote monitoring services, as well as growth in the installed base of cameras eligible for remote guarding.
Hardware revenue increased to $1,464,603 in 2025 from $341,193 in 2024, an increase of $1,123,410, or approximately 329%. The increase was primarily due to higher volumes of hardware sold in connection with larger customer deployments and bundled service offerings compared to the prior year.
Other revenue, which includes installation services, door subscriptions, and other ancillary services, increased to $2,127,551 in 2025 from $416,776 in 2024, an increase of $1,710,775, or approximately 410%. This increase was largely attributable to higher installation activity associated with increased hardware sales, expanded customer deployments, and increased adoption of additional subscription-based services.
Overall, the increase in net revenues reflects continued execution of our growth strategy, expansion of our customer base, and increased penetration of our integrated hardware, installation, and subscription-based service offerings.
The following table summarizes our revenue by service line:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cloud Video Surveillance | $ | 767,026 | $ | 323,475 | ||||
| Remote Guarding | 706,349 | 282,849 | ||||||
| Hardware | 1,464,603 | 341,193 | ||||||
| Other (installation, door subscriptions, etc.) | 2,127,551 | 416,776 | ||||||
| $ | 5,065,529 | $ | 1,364,293 | |||||
The significant increase in hardware and installation revenue during fiscal year 2025 was primarily attributable to initial deployment activity associated with new customer acquisitions and the expansion of existing customer relationships. As new customer locations are onboarded, we typically experience an initial period of higher hardware and installation revenue, followed by a shift toward recurring subscription-based revenue as those locations transition to ongoing cloud video surveillance and Remote Guarding services. We expect the proportion of recurring subscription revenue to increase over time as our installed base matures, although the timing and pace of this shift will depend on the rate of new customer acquisitions and the scope of future deployment activity.
Of total net revenues of $5,065,529 for the year ended December 31, 2025, approximately $1,473,375, or 29%, was derived from recurring subscription services (Cloud Video Surveillance and Remote Guarding), while the remaining $3,592,154, or 71%, was derived from non-recurring hardware sales and installation services.
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Cost of Goods Sold
Cost of goods sold increased to $3,576,688 in 2025 from $984,447 in 2024, representing an increase of $2,592,241, or approximately 263%. The increase was primarily attributable to higher service delivery costs associated with significant revenue growth, increased customer deployments, and expanded installation activity during 2025.
Hosting and data center bandwidth costs increased to $331,546 in 2025 from $273,128 in 2024, an increase of $58,418, or approximately 21%. This increase was primarily driven by higher data storage, bandwidth usage, and infrastructure costs resulting from growth in cloud video surveillance subscriptions and increased camera deployments.
Remote Guarding costs increased to $261,956 in 2025 from $114,440 in 2024, an increase of $147,516, or approximately 129%. The increase was primarily attributable to higher labor and monitoring costs associated with the expansion of Remote Guarding services and increased customer utilization, as well as costs related to the establishment of our India-based subsidiary, which commenced operations in July 2025.
Hardware costs increased to $754,873 in 2025 from $218,025 in 2024, an increase of $536,848, or approximately 246%. This increase was driven by higher volumes of hardware sold in connection with larger customer deployments and increased overall sales activity.
Installation labor costs increased to $2,228,313 in 2025 from $378,853 in 2024, an increase of $1,849,460, or approximately 488%. The increase was primarily attributable to a substantial increase in installation activity related to hardware sales and customer deployments, as well as increased internal and third-party labor costs required to support this growth.
Overall, the increase in cost of goods sold reflects higher service delivery, hardware, and installation costs incurred to support the Company’s significant revenue growth and expanded operational scale during 2025.
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Hosting and Data Center Bandwidth | $ | 331,546 | $ | 273,128 | ||||
| Remote Guarding | 261,956 | 114,440 | ||||||
| Hardware | 754,873 | 218,025 | ||||||
| Installation Labor | 2,228,313 | 378,853 | ||||||
| $ | 3,576,688 | $ | 984,447 | |||||
Operating Expenses
The following table summarizes our operating expenses for the year ended December 31, 2025, and as compared to the same period in 2024:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| General and administrative | $ | 2,439,401 | $ | 1,240,930 | ||||
| Research and development | 1,883,461 | 1,266,229 | ||||||
| Sales and marketing | 2,882,042 | 1,812,751 | ||||||
| Non-cash expenses (stock comp, depreciation, bad debt, etc.) | 2,431,509 | 2,245,411 | ||||||
| $ | 9,636,413 | $ | 6,565,320 | |||||
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General and administrative expenses. General and administrative expenses increased to $2,439,401 in 2025 from $1,240,930 in 2024, an increase of $1,198,471, or approximately 97%. The increase was primarily driven by higher payroll and consulting expenses incurred to support the Company’s growth and expanded corporate infrastructure.
| · | Payroll expenses increased by $623,157 compared to the prior year, reflecting increased headcount, higher compensation levels, and the impact of personnel added during 2025. These hires were primarily related to administrative, finance, and operational support functions. The year-over-year increase also reflects the fact that all personnel experienced salary reductions during 2024, with a compensating bonus for the related shortfall paid out in 2025. | |
| · | Consulting expenses increased by $371,883 year over year, primarily due to increased use of third-party consultants for accounting, compliance, internal controls, and other strategic initiatives associated with scaling the business. | |
| · | Professional services expenses increased by $68,764, reflecting higher legal, audit, and advisory costs related to increased business activity and compliance requirements. | |
| · | The remaining increase in general and administrative expenses was attributable to higher equipment, facilities, and other general corporate costs and was not individually material. |
Overall, the increase in general and administrative expenses reflects investments made to support the Company’s growth, operational complexity, and corporate governance requirements.
Research and development expenses. Research and development expenses increased to $1,883,461 in 2025 from $1,266,229 in 2024, representing an increase of $617,232, or approximately 49%. The increase was primarily attributable to higher payroll and consulting expenses related to expanded product development efforts.
| · | Payroll expenses increased by $505,287 year over year, primarily reflecting higher compensation costs for existing personnel. The increase also reflects salary reductions implemented during 2024, with a compensating bonus for the related shortfall paid in 2025. These costs were incurred to support the ongoing development and enhancement of the Company’s technology platform and service offerings. | |
| · | Consulting expenses increased by $83,518 compared to the prior year, primarily due to continued use of third-party development resources and specialized technical consultants to accelerate product development initiatives. | |
| · | The remaining changes in research and development expenses, including equipment and other costs, were not individually material. |
Overall, the increase in research and development expenses reflects the Company’s continued investment in its technology platform and product innovation to support long-term growth.
Sales and marketing expenses. Sales and marketing expenses were the largest component of operating expenses in 2025 and increased to $2,882,042 from $1,812,751 in 2024, representing an increase of $1,069,291, or approximately 59%. The increase was primarily attributable to higher payroll and increased sales and marketing program costs incurred to support revenue growth and customer acquisition.
| · | Payroll expenses increased by $744,700 year over year, primarily reflecting the addition of sales and marketing personnel during 2025, as well as higher compensation levels associated with these hires. These personnel additions were made to expand sales coverage, support customer acquisition efforts, and drive increased demand for the Company’s products and services. The increase also includes the effect of salary reductions in 2024 and a compensating bonus paid in 2025. | |
| · | Sales and marketing program costs increased by $342,997 compared to the prior year, primarily due to increased spending on advertising, marketing campaigns, lead generation activities, and other customer acquisition initiatives. | |
| · | The remaining changes in sales and marketing expenses were attributable to routine fluctuations in travel, facilities, and other costs and were not individually material. |
Overall, the increase in sales and marketing expenses reflects the Company’s strategic investments in personnel and marketing initiatives to support continued revenue growth.
| 44 |
Non-cash expenses. Non-cash operating expenses increased to $2,429,509 in 2025 from $2,245,411 in 2024, representing an increase of $14,098, or approximately 8%. Non-cash expenses primarily consist of stock-based compensation, depreciation expense, and bad debt expense.
| · | Stock-based compensation expense increased by $293,942, or 14%, compared to the prior year. The increase was primarily attributable to equity awards granted to employees during 2025, including grants associated with increased headcount and retention initiatives. | |
| · | Depreciation expense increased by $17,304, or 24%, reflecting additional capitalized assets placed into service during the year. | |
| · | Bad debt expense decreased by $127,148, or approximately 92%, compared to the prior year. The decrease was primarily attributable to improved collections experience and lower levels of uncollectible accounts during 2025. |
Overall, the change in non-cash operating expenses reflects higher equity-based compensation and depreciation, partially offset by a reduction in bad debt expense.
Net Loss
As a result of the foregoing, net loss for the year ended December 31, 2025 was approximately $8,462,000, compared to $6,535,000 for the year ended December 31, 2024, representing an increase in net loss of approximately $1,927,000, or approximately 29%.
Revenue and cost of sales resulted in gross profit of approximately $1,489,000 for the year ended December 31, 2025, compared to gross profit of approximately $374,000 for the year ended December 31, 2024. Despite the significant improvement in gross profit, the increase in net loss was primarily attributable to higher operating expenses, including increased sales and marketing, general and administrative, and research and development expenses incurred to support revenue growth, expand operations, and invest in personnel, technology, and corporate infrastructure.
Overall, the increase in net loss reflects the Company’s continued investment in growth initiatives and operational scale, which exceeded the improvements in gross profit during the year.
Off-Balance Sheet Arrangements
As of the date of this Form 10-K, we have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Liquidity and Capital Resources
Overview
From inception we have funded our operations principally through the net proceeds from sales of our capital stock and to a lesser extent from cash flows generated from operating activities.
Summary of Cash Flows
The following table summarizes our cash flows for the years ended December 31, 2025 and 2024.
| Year Ended December 31, | ||||||||
| (in thousands) | 2025 | 2024 | ||||||
| Net cash (used in) operating activities | $ | (6,917 | ) | $ | (3,277 | ) | ||
| Net cash (used in) investing activities | (315 | ) | (27 | ) | ||||
| Net cash provided by financing activities | 15,633 | (685 | ) | |||||
| Cash and cash equivalents at end of period | $ | 8,453 | $ | 52 | ||||
| 45 |
Operating Activities
Net cash used in operating activities was $6,917,000 for the year ended December 31, 2025, compared to $3,277,000 for the year ended December 31, 2024. The increase in cash used in operating activities was primarily attributable to the Company’s increased net loss and higher operating expenses associated with expanded sales and marketing, research and development, and general and administrative activities. These increases were partially offset by changes in working capital, including timing of customer collections and vendor payments.
Investing Activities
Net cash used in investing activities was $315,000 for the year ended December 31, 2025, compared to $27,000 for the year ended December 31, 2024. Cash used in investing activities during 2025 primarily related to purchases of property and equipment to support the Company’s operational growth, including investments in technology infrastructure and office equipment.
Financing Activities
Since inception we have relied primarily on financing activities to fund our operations, including raising over $35 million in funding in an offering under Regulation A of the Securities Act, and through the sale of preferred stock. Please see Note 5, Share Capital below.
Net cash provided by financing activities was $15,633,000 for the year ended December 31, 2025, compared to net cash used in financing activities of $685,000 for the year ended December 31, 2024. The increase was primarily attributable to proceeds from financing transactions with Streeterville completed during 2025, which were used to fund operating losses, support growth initiatives, and strengthen the Company’s liquidity position.
The following table summarizes our financing activities for the years ended December 31, 2025, and 2024.
| Years Ended December 31, | ||||||||
| (in thousands) | 2025 | 2024 | ||||||
| Proceeds from issuance of Class A common stock | $ | 128 | $ | 7 | ||||
| Proceeds from issuance of Preferred stock | 17,250 | – | ||||||
| Preferred dividends payable | 512 | – | ||||||
| Registration Statement related costs | (2,257 | ) | (692 | ) | ||||
| $ | 15,633 | $ | (685 | ) | ||||
Funding Requirements
We anticipate incurring additional losses for the foreseeable future, and we may never become profitable. As described above, our operating expenses increased significantly from 2024 to 2025 as a result of our growth. We expect operating expenses to continue to increase in connection with our ongoing activities, particularly as we continue development of our existing and new products and services. In addition, we expect to continue to incur further costs and expenses associated with being a public company and working to maintain the listing of our Class A common stock on Nasdaq.
Our financial statements 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 December 31, 2025, we had an accumulated deficit of approximately $49,000,000. Management expects to continue to incur operating losses and negative cash flows for the foreseeable future.
| 46 |
As of December 31, 2025, we had approximately $8,453,000 of cash on hand and approximately $8,605,000 of net working capital (including cash on hand), and our anticipated operating requirements for the next 12 months, assuming the maintenance of our current operations, do not exceed our available capital resources. We believe that the Series 2 Equity Financing, the Equity Line, and the ATM Facility that we have in place, as described in Note 5, Share Capital below, will provide us with, and allow us to maintain, stockholders’ equity in excess of the required minimum under Nasdaq Listing Rule 5505(b) as well as enable us to fund our operations through at least June 30, 2027. Nasdaq Listing Rule 5505(b)(1) requires that we maintain stockholders' equity of at least $2.5 million for continued listing on the Nasdaq Capital Market. As of December 31, 2025, our stockholders' equity was approximately $8.9 million. Notwithstanding, we may also raise additional capital pursuant to one or more registered offerings of equity or debt securities.
However, if we are unable to raise additional capital or otherwise obtain funding as and when needed or on attractive terms, we could be forced to reduce operations or delay or eliminate new or existing products and services, which could raise substantial doubt about our ability to continue as a going concern. Our ability to raise additional capital or otherwise obtain necessary funding is likely to be significantly dependent on our ability to maintain the listing of our Class A common stock on Nasdaq.
We have based the foregoing estimates on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we expect. We have a planning and budgeting process in place to monitor our operating cash requirements, including amounts projected for capital expenditures, which are adjusted as our future funding requirements change. These funding requirements include, but are not limited to, our product and service development, our general and administrative requirements, and the costs of operating as a public company, and are offset by our ability to generate revenue from operations and the availability of equity or debt financing. Furthermore, our balance sheet is currently debt free, which we believe will provide us with additional flexibility in terms of our ability to tap into lines of credit and other types of debt instruments.
Contractual Obligations and Commitments
In addition to ongoing capital expenditures and working capital needs to fund operations over the next 12 months, our contractual obligations to make future payments primarily relate to our operating lease obligations, capital lease obligations and insurance obligations, all of which are governed by agreements with month-to-month terms, and which are generally terminable after a notice period at any time. We purchase equipment, software and inventory necessary to conduct our operations on an as-needed basis.
During the periods presented, we had an outstanding obligation to the SEC pursuant to the terms of a final settlement. See “Business—Legal Proceedings” for additional details regarding the settlement. Our obligation was paid in full on August 9, 2024. We do not have any other long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
Emerging Growth Company
We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). As an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not emerging growth companies, and we have elected to take advantage of those exemptions. For so long as we remain an emerging growth company, we will not be required to:
| · | have an auditor attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); | |
| · | submit certain executive compensation matters to Member advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding Member vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding Member vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; or | |
| · | disclose certain executive compensation related items, such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. |
In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means that an emerging growth company can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. We have elected to take advantage of the extended transition period. Since we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If we were to subsequently elect to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.
| 47 |
We will remain an emerging growth company for up to the last day of the fiscal year following the fifth anniversary of our direct listing on Nasdaq, or until the earliest of: (i) the last date of the fiscal year during which we had total annual gross revenues of $1.235 billion or more; (ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iii) the date on which we are deemed to be a “large accelerated filer” as defined under Rule 12b-2 under the Exchange Act.
We do not believe that being an emerging growth company will have a significant impact on our business. Also, even once we are no longer an emerging growth company, we still may not be subject to auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act unless we meet the definition of a large accelerated filer or an accelerated filer under Section 12b-2 of the Exchange Act.
Critical Accounting Estimates
Our audited financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
Our significant accounting policies are 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.”
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, and as a result are not required to provide the information required by this Item.
Item 8. Financial Statements and Supplementary Data.
| 48 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and the Stockholders of
Cloudastructure Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Cloudastructure Inc. (the “Company”) as of December 31, 2025, and the related statements of operations, stockholders’ equity, and cash flows for the years then ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the years then ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 2 to the financial statements, the entity has suffered loss from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the board of directors and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
We determined that there are no critical audit matters.
/s/
We have served as the Company’s auditor since 2024.
March 31, 2026
PCAOB ID Number
| F-1 |
Cloudastructure, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share numbers)
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Fixed assets, net | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Preferred Dividends Payable | ||||||||
| Total current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Stockholders’ equity: | ||||||||
| Class A common stock, $ par value; shares authorized; and shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively | ||||||||
| Class B common stock, $ par value; shares authorized; and shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively | ||||||||
| Preferred Stock, $ par value; shares authorized; and shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other Comprehensive Income | ( | ) | ||||||
| TOTAL STOCKHOLDERS’ EQUITY | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the financial statements.
| F-2 |
Cloudastructure, Inc.
Consolidated Statements of Operations
(in thousands, except for share and per share amounts)
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenues | $ | $ | ||||||
| Cost of goods sold | ( | ) | ( | ) | ||||
| Gross profit (loss) | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Sales and marketing | ||||||||
| Non-cash expenses | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income/(expenses), net: | ||||||||
| Interest income | ||||||||
| State & sales taxes | ( | ) | ( | ) | ||||
| Preferred dividends | ( | ) | ||||||
| SEC settlements | ( | ) | ||||||
| Realized gain/loss | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Deemed dividend for original issue discount on preferred shares | ( | ) | ||||||
| Net Loss Available to Common Stockholders | $ | ( | ) | $ | ( | ) | ||
| Net Loss per Common Share: | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Common Shares Outstanding | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
See accompanying notes to the financial statements.
| F-3 |
Consolidated Statements of Comprehensive Income
(in thousands, except for share and per share amounts)
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income (loss): | ||||||||
| Change in foreign currency translation adjustment, net of tax | ( | ) | ||||||
| Comprehensive Income | $ | ( | ) | $ | ( | ) | ||
See accompanying notes to the financial statements.
| F-4 |
Cloudastructure, Inc.
Consolidated Statements of Shareholders’ Equity (Deficit)
(in thousands, except share and per share numbers)
| Common Stock, Class A | Common Stock, Class B | Preferred Stock | Additional Paid-in | Accumulated | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuances of Class A and Class B shares, net of issuance costs | ( | ) | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Conversion of Class B to Class A shares | ( | ) | – | |||||||||||||||||||||||||||||||||
| Stock-based compensation | – | – | – | |||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Issuances of Class A and Class B shares, net of issuance costs | – | – | ||||||||||||||||||||||||||||||||||
| Conversion of Class B to Class A shares | ( | ) | – | |||||||||||||||||||||||||||||||||
| Issuance of Preferred Shares | – | – | ||||||||||||||||||||||||||||||||||
| Conversion of Preferred Shares to Class A Shares | – | – | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | – | – | – | |||||||||||||||||||||||||||||||||
| Deemed Dividend related to issuance of Preferred Shares | – | – | – | ( | ) | |||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
See accompanying notes to the financial statements.
| F-5 |
Cloudastructure, Inc.
Consolidated Statements of Cash Flows
(in thousands)
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) Decrease in accounts receivable | ( | ) | ||||||
| (Increase) Decrease in other current assets | ( | ) | ||||||
| Increase (Decrease) in accounts payable | ( | ) | ||||||
| Increase (Decrease) in accrued expenses | ( | ) | ||||||
| Increase (Decrease) in deferred revenue | ||||||||
| (Increase) Decrease in other assets | ( | ) | ||||||
| (Increase) Decrease in other current liabilities | ||||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from issuances of Class A shares | ||||||||
| Proceeds from issuance of Preferred Shares | ||||||||
| Preferred dividends payable | ||||||||
| S1 filing costs | ( | ) | ( | ) | ||||
| Net Cash Provided by Financing Activities | ( | ) | ||||||
| Net Change in Cash | ( | ) | ||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | $ | $ | ||||||
| Supplementary disclosure of non-cash financing activities | ||||||||
| Equity issued for non-cash consideration | $ | $ | ||||||
| Accrued preferred dividends | $ | $ | ||||||
| Equity issuance costs | $ | $ | ||||||
See accompanying notes to the financial statements.
| F-6 |
Cloudastructure, Inc.
Notes to the Financial Statements
Note 1 - Nature of Operations
Cloudastructure, Inc. (“Cloudastructure,” “we,” “us,” “our” or the “Company”) was formed on March 28, 2003, as a corporation organized under the laws of the State of Delaware and is headquartered in Palo Alto California. We are a technology service provider that that focuses on intelligent devices and software for physical security applications. Since inception, we have relied primarily on financing activities, including an offering under Regulation A of the Securities Act of 1933, as amended (the “Securities Act”), and the sale of preferred stock, to fund our operations.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accounting and reporting policies of the Company conform to generally accepted accounting principles in the United States of America (“U.S. GAAP”). In the opinion of management, all adjustments considered necessary for the fair presentation of the financial statements for the years presented have been included and are of a normal and recurring nature.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the footnotes thereto. Actual results could differ from those estimates.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). Under Section 107 of the JOBS Act, emerging growth companies are permitted to use an extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards that have different effective dates for public and private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act 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 we (i) are no longer an emerging growth company, or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates.
Risks and Uncertainties
We have a limited operating history. Our business and operations are sensitive to general business and economic conditions in the United States. A host of factors beyond our control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn or otherwise, inflation, changes in regulations or restrictions on imports, tariffs, competition or changes in consumer taste. These adverse conditions could affect our financial condition and our results of operations.
Cash and Cash Equivalents
We consider short-term, highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash consists of funds held in our checking account. We maintain our cash with a major financial institution located in the United States, which we believe to be creditworthy. The Federal Deposit Insurance Corporation insures balances up to $250,000, but at times we may maintain balances in excess of the federally insured limits.
| F-7 |
Receivables and Credit Policy
Trade receivables from customers are uncollateralized
customer obligations due under normal trade terms, Trade receivables are stated at the amount billed to the customer. Payments of trade
receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied
to the earliest unpaid invoice. We routinely assess our outstanding accounts receivable and recorded a reserve for estimated uncollectible
accounts of $
Inventory
Inventories are stated at the lower of weighted-average cost or net realizable value. Cost includes all expenditures incurred in bringing each product to its present location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
The Company maintains a reserve for obsolescence for estimated excess, slow-moving, or unmarketable inventory based on periodic reviews of inventory levels, historical usage, and future sales forecasts. When the carrying value exceeds net realizable value, a write-down is recorded as a charge to cost of sales, establishing a new, lower cost basis that is not subsequently increased for future recoveries in value.
Property and Equipment
Property and equipment are recorded at cost if the expenditure exceeds $2,500. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are expensed as incurred. When equipment is retired or sold, the cost and related accumulated depreciation are eliminated from the balance sheet accounts and the resultant gain or loss is reflected in income.
Depreciation is provided using the straight-line method, based on useful lives of the assets which range from two to five years depending on the asset type.
We review the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors.
Sales Taxes
Various states impose a sales tax on our sales to non-exempt customers. We collect the sales tax from customers and remit the entire amount to each respective state. Our accounting policy is to exclude the tax collected and remitted to the states from revenue and cost of sales.
Segment Reporting
Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker (the “CODM”) in deciding how to allocate resources and assess performance. We have reportable segment focused on cloud-based AI video surveillance and remote guarding security services. Our CODM, who is our Chief Executive Officer, manages operations on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. For additional information on our segment reporting, see Note 8, Segment Reporting.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. When fair value measurements are used, valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs.
| F-8 |
U.S. GAAP has established a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Level 1 inputs consist of quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the related asset or liability. Level 3 inputs are unobservable inputs related to the asset or liability.
Income Taxes
We determine deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
We have incurred taxable losses since inception but are current in our tax filing obligations. We are not presently subject to any income tax audit in any taxing jurisdiction.
Reverse Stock Split
On October 24, 2024, we effected a
Revenue Recognition
We recognize revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services, net of estimated sales volatility, such as returns or discounts.
To determine revenue recognition for arrangements that an entity determines are within the scope of Financial Accounting Standards Board (“Financial Accounting Standards Board” or “FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), we perform the following steps:
(i) identify the contract(s) with a customer,
(ii) identify the performance obligations in the contract,
(iii) determine the transaction price,
(iv) allocate the transaction price to the performance obligations in the contract, and
(v) recognize revenue when (or as) the entity satisfies a performance obligation.
At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
| · | Subscription Revenue: Recognized ratably over the contract term, as the customer simultaneously receives and consumes the benefits. | |
| · | Installation Labor: Recognized over time using an input method (measured by the ratio of costs incurred to date to total estimated costs), as this provides a faithful depiction of the transfer of services to the customer. | |
| · | Hardware: Recognized at a point in time, generally upon delivery, when title and risk of loss transfer to the customer. |
The Company generally acts as the principal in its arrangements and records revenue on a gross basis. Our contracts typically do not contain a significant financing component.
| F-9 |
Deferred Revenue
Deferred revenue consists of billings or payments received in advance of revenue recognition from the Company's contracts with customers. The Company primarily generates deferred revenue from annual service subscriptions.
These advance payments are recognized as revenue when control of the promised goods or services is transferred to the customer. Deferred revenue that is expected to be recognized as revenue within the next twelve months is classified as a current liability, while the remaining portion is classified as non-current.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation — Stock Compensation (“ASC 718”). Under ASC 718, the Company measures and recognizes compensation expense for all stock-based awards granted to employees and non-employee directors based on the estimated grant date fair value of those awards. The fair value of stock option awards is estimated on the date of grant using the Black-Scholes option pricing model. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of each award, which is generally the vesting period. Forfeitures are recognized as they occur in accordance with ASU 2016-09. Stock-based compensation expense is included in non-cash operating expenses on the consolidated statements of operations. For additional information regarding the Company's equity incentive plan, stock option activity, and related assumptions, see Note 5 — Share Capital.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the excess of purchase price over the fair value of identifiable net assets of businesses acquired. Our indefinite-lived intangible asset consists of assets acquired from Visionful Holding Inc. (“Visionful”) and in connection with our acquisition of Infrastructure Proving Grounds (“IPG”). We assess goodwill for impairment annually in the fourth quarter, or more frequently if events or circumstances indicate a potential impairment.
During the fourth quarter of 2023, following a
thorough assessment of goodwill for impairment, management determined that goodwill attributed to Visionful and IPG had become impaired
due to underutilization of the acquired assets in revenue generation and on December 31, 2023, a non-cash loss on impairment was recorded
reflecting goodwill impairment charges totaling $
Net loss per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares primarily consist of stock options and restricted stock units outstanding.
During the years ended December 31, 2025, and 2024, the calculation of the effect of dilutive stock options, warrants, conversion of preferred stock, and restricted stock units excluded all stock options, warrants, conversion of preferred stock, and restricted stock units outstanding during the period due to their anti-dilutive effect.
Foreign Currency Translation Adjustments
The Company’s wholly-owned subsidiary’s functional currency is not the United States dollar, which is the Company’s reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included in the accumulated other comprehensive income (loss).
| F-10 |
Liquidity
Our future needs for liquidity will depend on a variety of factors, including, without limitation, our ability to generate cash flows from operations and the timing and availability of net proceeds from any future financing activities that we may conduct. Economic uncertainty, fluctuating interest rates, market volatility, slowdowns in transaction volume, delays in financing from banks and other lenders and other negative trends may, in the future, adversely impact our ability to timely access potential sources of liquidity. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.
Between November 2024 and December 2025, the Company completed multiple equity financing transactions designed to strengthen liquidity and support ongoing operations. Please see Note 5, Share Capital below for more information. We believe the Series 2 Equity Financing, the Equity Line, and the ATM Facility described in Note 5, Share Capital, together with our cash on hand and anticipated cash flows from operations, will be sufficient to address any going concern uncertainties and will be sufficient to meet our liquidity and capital resource requirements to ensure that we are able to meet our obligations and continue operations for at least one year from the issuance date of these financial statements.
Our ability to continue as a going concern is dependent on our ability to further implement our business plan. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The 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 the uncertainties described above.
Consolidation and Foreign Currency Policies
The financial statements of the Company’s foreign subsidiary are translated into U.S. dollars for consolidation purposes. Assets and liabilities are translated using exchange rates in effect at the balance sheet date. Equity accounts are translated using historical exchange rates in effect at the dates of the related transactions. Income and expense accounts are translated using average exchange rates for the period, unless transaction-specific rates are more appropriate.
Translation adjustments resulting from the application of different exchange rates to assets and liabilities as compared to equity accounts are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity. These translation adjustments are referred to as cumulative translation adjustment (“CTA”). CTA does not affect net income and will remain in accumulated other comprehensive income unless and until the Company substantially liquidates or disposes of its foreign subsidiary, at which time the related CTA balance would be reclassified into earnings in accordance with ASC 830.
Intercompany balances and transactions between
the Company and its foreign subsidiary have been eliminated in consolidation. Foreign currency transaction gains and losses related to
intercompany balances that are not of a long-term investment nature are recognized in earnings; however,
The Company is exposed to foreign currency exchange rate risk primarily related to its operations in India. The Company does not currently use derivative instruments to hedge foreign currency exposure. Fluctuations in exchange rates may affect the Company’s consolidated financial position, results of operations, and accumulated other comprehensive income.
| F-11 |
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, and requires single reporting entities to comply with the expanded reportable segment disclosures outlined in the ASU. The expanded reportable segment disclosures are intended to enhance certain disclosures surrounding significant segment expenses.
This standard became effective for the Company for the annual reporting period ended December 31, 2024, using the retrospective method. The adoption of this standard resulted in additional disclosure but did not have a material impact on our financial position or results of operations. See Note 8, Segment Reporting, for our updated segment presentation.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosure” (“ASU 2023-09”). ASU 2023-09 is effective for public entities for fiscal years beginning after December 15, 2024, and interim periods in fiscal years beginning after December 15, 2025, and establishes new income tax requirements in addition to modifying and eliminating certain existing requirements. Under ASU 2023-09, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation and further disaggregate income taxes paid. The Company is currently evaluating the impact of the new standard on our financial statements.
In March 2024, the Securities and Exchange Commission (the “SEC”) adopted final rules under Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (the “Climate Rules”). The Climate Rules require quantitative and qualitative disclosure of certain climate-related information in registration statements and annual reports filed. These disclosures include financial statement footnote disclosure related to the effects of certain severe weather events and other natural conditions. In April 2024, the SEC issued an order staying the Climate Rules pending completion of a judicial review of certain petitions challenging their validity. If the stay is lifted, the effective dates remain unchanged and we remain a smaller reporting company, emerging growth company or non-accelerated filer, the Climate Rules will be effective for our fiscal year ending December 31, 2027. The Company is currently evaluating the impact of the Climate Rules on our financial statements.
Note 3 – Revenue from Contracts with Customers
The following table presents the Company’s revenue disaggregated by the nature of the goods or services and the timing of revenue recognition for the years ended December 31, 2025, and December 31, 2024, respectively:
| Disaggregated revenue | Year Ended December 31, | |||||||
| 2025 | 2024 | |||||||
| Service offerings | ||||||||
| Subscription services (Ratable) | $ | $ | ||||||
| Installation and other (Overtime) | ||||||||
| Product offerings | ||||||||
| Hardware sales (Point in time) | ||||||||
| Total Revenue | $ | $ | ||||||
| F-12 |
Preferred Dividends and Deemed Distributions
The Company calculates earnings per share (“EPS”)
by adjusting the net loss for the impact of preferred dividends and deemed distributions. During the year ended December 31, 2025, the
Company recognized a non-cash deemed dividend of $
Two-Class Method
The Series 1 and Series 2 Preferred Stock are non-participating securities as they do not possess the right to participate in dividends or other distributions with the Common Stock. Accordingly, the Company does not apply the two-class method, and all losses are allocated to common stockholders.
Weighted-Average Common Shares Tie-Out
The following table reconciles the Common Stock activity to the weighted-average shares used in the basic and diluted EPS calculations for the years ended December 31, 2025, and 2024:
| Reconciliation of weighted average shares outstanding | Year Ended December 31, | |||||||
| 2025 | 2024 | |||||||
| Opening Balance | ||||||||
| Conversion of Preferred Shares to Class A Shares | ||||||||
| Other Issuances | ||||||||
| Ending Balance | ||||||||
| Weighted-Average Shares Outstanding | ||||||||
The number of shares used to calculate basic and diluted loss per share for the year ended December 31, 2025, and 2024 were as follows:
| Schedule of calculate basic and diluted loss per share | ||||||||
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Class A common stock | ||||||||
| Class B common stock | ||||||||
| Total | ||||||||
For the year ended December 31, 2025 and 2024, approximately million and million shares, respectively, issuable upon the exercise or conversion of stock options, convertible notes, and warrants outstanding were excluded from the calculation of diluted loss per share because such amounts were antidilutive.
Note 5 – Share Capital
Regulation A Equity Financings
Beginning in 2020, the Company commenced a public offering of units pursuant to the exemption from registration provided by Tier 2 of Regulation A. Each unit consisted of two shares of the Company’s Class A common stock and one warrant to purchase shares of Class A common stock.
Through August 24, 2021, units were offered at a purchase price of $6.00 per unit, with each warrant exercisable at $4.50 per share. Effective August 25, 2021, the Company amended the terms of the Regulation A offering to increase the unit purchase price to $7.20 and the warrant exercise price to $5.40 per share. Issued warrants were immediately exercisable and had an 18-month term from the date of issuance.
| F-13 |
On May 19, 2022, the Company further amended the offering terms, increasing the unit purchase price to $12.00 per unit and the warrant exercise price to $9.00 per share.
As of December 31, 2024, an
aggregate of warrants had been exercised, warrants had expired, and
Through December 31, 2025,
the Company issued an aggregate of approximately million shares of Class A common stock and million warrants pursuant to the
Regulation A offering and received cumulative net proceeds of approximately $
The following table is a summary of the outstanding Class A common stock warrants at December 31, 2024 and 2025:
| Schedule of warrant activity | ||||||||||||||||
| Warrants at Exercise Price of $4.50 | Warrants at Exercise Price of $7.20 | Warrants at Exercise Price of $9.00 | Total Warrants | |||||||||||||
| Outstanding at December 31, 2023 | ||||||||||||||||
| Issued in 2024 | ||||||||||||||||
| Expired in 2024 | ||||||||||||||||
| Exercised in 2024 | ||||||||||||||||
| Outstanding at December 31, 2024 | ||||||||||||||||
| Outstanding at December 31, 2024 | ||||||||||||||||
| Issued 2025 | ||||||||||||||||
| Expired 2025 | ||||||||||||||||
| Exercised 2025 | ||||||||||||||||
| Outstanding at December 31, 2025 | ||||||||||||||||
Preferred Stock Financings
The Company is authorized to issue shares of preferred stock, par value $ per share. As of December 31, 2025, the Board of Directors has designated shares as Series 1 Convertible Preferred Stock (the “Series 1 Preferred”) and shares as Series 2 Convertible Preferred Stock (the “Series 2 Preferred”).
Series 1 Convertible Preferred Stock
On November 25, 2024, the Company entered into
a Securities Purchase Agreement, as subsequently amended, with Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”),
for the issuance and sale of $
Each share of Series 1 Preferred has a stated value of $1,111, subject to an automatic 10% increase upon the occurrence of (i) a Series 1 Trigger Event (defined below), (ii) if the Company fails to fully comply with any covenant, obligation, or agreement or fail to pay any amount when due and payable, and such failure is not cured within the applicable cure period, or (iii) upon the occurrence of any bankruptcy, insolvency, or similar event (each of (ii) and (iii) an “Event of Default”) (the “Series 1 Stated Value”).
Except as otherwise set forth in the Series 2 Certificate of Designations (defined below) or as required by applicable law, the Series 1 Preferred and the Series 2 Preferred rank equally (including with respect to dividends and distributions and upon any voluntary or involuntary liquidation, dissolution, or winding up of the Company (a “Liquidation Event”)) and are identical in all respects. Except to the extent that the holders of at least a majority of the outstanding Series 1 Preferred shares and the Series 2 Preferred shares, voting together as a single class, expressly consent to the creation of capital stock that is either senior or pari passu in rank with the Series 1 Preferred and the Series 2 Preferred, all other shares of capital stock of the Company will be junior in rank.
The Series 1 Preferred accrues a 10% per annum rate of return on the Series 1 Stated Value (the “Series 1 Preferred Return”) from the date of issuance. The Series 1 Preferred Return is payable on a quarterly basis, and is subject to quarterly compounding, either in cash or via the issuance of additional shares of Series 1 Preferred, at the Company’s discretion. Following the occurrence of an Event of Default, the preferred return will increase to 15% per annum until such Event of Default has been cured.
| F-14 |
In the event of a Liquidation Event or Deemed Liquidation Event (defined below), the Series 1 Preferred will be paid an amount equal to (i) the Series 1 Stated Value at such time, plus (ii) any accrued and unpaid Series 1 Preferred Return (the “Series 1 Preferred Liquidation Amount”), prior to any payments being made to the holders of the Company’s common stock. Following payment of the Series 1 Preferred Liquidation Amount, the Series 1 Preferred will not participate in the distribution of any remaining assets of the Company.
A “Deemed Liquidation Event” will occur (i) if the Company merges or consolidates with another entity and its stockholders immediately prior to such transaction do not continue to hold a majority of the voting power immediately after such transaction, or (ii) if the Company sells, leases, transfers, exclusively licenses, or otherwise disposes of all or substantially all of its assets.
The Series 1 Preferred is convertible at any time into (i) the number of shares of Series 1 Preferred being converted multiplied by their then Series 1 Stated Value (the “Series 1 Conversion Amount”), divided by (ii) the Series 1 Conversion Price (defined below).
Prior to a Series 1 Trigger Event (defined below) or an Event of Default, the conversion price (“Series 1 Conversion Price”) is $9.00 per share of Class A common stock or, if lower, the price at which the Company issues Class A common stock or rights to receive Class A common stock (the “Series 1 Fixed Conversion Price”). Following a Series 1 Trigger Event or Event of Default, the Series 1 Conversion Price is the lesser of the (i) Series 1 Fixed Conversion Price, and (ii) greater of (x) 85% multiplied by the lowest daily volume weighted average price (VWAP) of the Class A common stock during the ten business day period prior to the measurement date, and (y) $1.00.
A “Series 1 Trigger Event” will occur (i) upon the Company’s receipt of a letter of noncompliance from Nasdaq, (ii) upon the Company’s average market capitalization during any 10 business day period falling below $75,000,000, and (iii) in any quarter beginning with the first calendar quarter of 2025 where (x) the Company’s stockholder equity is less than $2,500,000, (y) the Company incurs a net loss greater than $1,000,000, or (z) the Company’s net sales are less than $500,000.
Notwithstanding the foregoing, the Company will not give effect to any conversion of Series 1 Preferred to the extent that, following such conversion, the holder individually (without aggregating with its affiliates) would beneficially own in excess of 4.99% of the outstanding Class A common stock (the “Maximum Percentage”); provided, that the Maximum Percentage for a holder of Series 1 Preferred together with such holder’s affiliates will be 9.99%. The Maximum Percentage is enforceable, unconditional, and non-waivable and shall apply to all affiliates and assigns of each holder of the Series 1 Preferred.
The Company has the right at any time after the date that is six months from the earlier of (i) the effective date of the registration statement registering the shares of Class A common stock into which the Series 1 Preferred shares are convertible, and (ii) the date that such shares of Class A common stock are eligible for resale pursuant to Rule 144 under the Securities Act, to elect, in the Company’s sole discretion, to redeem all or any portion of the Series 1 Preferred then outstanding by paying an amount in cash equal to the Series 1 Preferred Liquidation Amount multiplied by 115%. In addition, the Company may, at its election, use at least 25% of any funds that the Company raises through an equity financing to redeem outstanding shares of Series 1 Preferred.
The Series 1 Preferred are not entitled to participate in any dividends, distributions, or payments to the holders of the Company’s common stock. However, the Series 1 Preferred shares are entitled to the Series 1 Preferred Return described above.
The Series 1 Preferred shall vote together with holders of the Class A common stock and Class B common stock on an as-converted basis, and not as a separate class, at any annual or special meeting of stockholders, and may act by written consent in the same manner as holders of the Class A common stock and Class B common stock. In addition, for so long as any shares of Series 1 Preferred are outstanding, the affirmative vote of a majority of the Series 1 Preferred then outstanding shall be required to (i) alter or change adversely the powers, preferences or rights given to the Series 1 Preferred or alter or amend the Series 1 Certificate of Designations, or (ii) enter into any agreement with respect to any of the foregoing.
Notwithstanding the foregoing, in no event shall a holder of Series 1 Preferred (together with such holder’s affiliates, and any “persons” acting as a “group” (as such terms are defined under Sections 13(d) and 14(d) of the Exchange Act and the rules and regulations promulgated thereunder) together with such holder or such holder’s affiliates (such persons, “Attribution Parties”)) be entitled to vote, on an as-converted basis and in aggregate with respect to any other shares of the Class A common stock, Class B common stock, Series 2 Preferred or other preferred stock beneficially owned by such holder of Series 1 Preferred or any affiliates or Attribution Parties of such holder, more than 4.99% of the Company’s outstanding voting shares as of the applicable record date, as adjusted for any stock splits, reverse stock splits, stock dividends, reclassifications, reorganization, recapitalizations or other similar transaction.
| F-15 |
Pursuant to the Series 1 Certificate of Designations, for so long as any shares of Series 1 Preferred remain outstanding, the Company has agreed to comply with a number of covenants restricting its ability to take certain actions or engage in certain activities, which restrictions are typical for protecting holders of preferred shares such as the Series 1 Preferred. In particular, at any time that any shares of Series 1 Preferred are outstanding, the Company will not issue any preferred stock or other securities (except for certain limited issuances), will not enter into certain fundamental transactions (including, without limitation, mergers, business combinations or similar transactions), and will not incur any debt (other than trade payables incurred in the ordinary course of business) without, in each case, the prior written consent of the holders of a majority of the Series 1 Preferred shares then issued and outstanding.
Series 2 Convertible Preferred Stock
On March 21, 2025, the Company entered into a
second Securities Purchase Agreement with Streeterville for the issuance and sale of up to $40.0 million of shares of Series 2 Preferred
(the “Series 2 Equity Financing”). At the initial closing of the Series 2 Equity Financing on March 25, 2025, the Company
sold $
Each share of Series 2 Preferred has a stated value of $, subject to an automatic 10% increase upon the occurrence of an Event of Default (the “Series 2 Stated Value”).
Except as otherwise set forth in the Series 2 Certificate of Designations or as required by applicable law, the Series 1 Preferred and the Series 2 Preferred rank equally (including with respect to dividends and distributions and upon any Liquidation Event) and are identical in all respects. Except to the extent that the holders of at least a majority of the outstanding Series 1 Preferred shares and the Series 2 Preferred shares, voting together as a single class, expressly consent to the creation of capital stock that is either senior or pari passu in rank with the Series 1 Preferred and the Series 2 Preferred, all other shares of capital stock of the Company will be junior in rank.
The Series 2 Preferred accrues a 9.5% per annum rate of return on the Series 2 Stated Value (the “Series 2 Preferred Return”) from the date of issuance. The Series 2 Preferred Return is payable on a quarterly basis, and is subject to quarterly compounding, either in cash or via the issuance of additional shares of Series 2 Preferred, at the Company’s discretion. Following an Event of Default, the Series 2 Preferred Return increases to 15% per annum until such Event of Default has been cured.
In the event of a Liquidation Event or Deemed Liquidation Event, the Series 2 Preferred will be paid an amount equal to (i) the Series 2 Stated Value at such time, plus (ii) any accrued and unpaid Series 2 Preferred Return (the “Series 2 Preferred Liquidation Amount”), prior to any payments being made to the holders of the Company’s common stock. Following payment of the Series 2 Preferred Liquidation Amount, the Series 2 Preferred will not participate in the distribution of any remaining assets of the Company.
The Series 2 Preferred is convertible at any time into (i) the number of shares of Series 2 Preferred being converted multiplied by their then Series 2 Stated Value (the “Series 2 Conversion Amount”), divided by (ii) the Series 2 Conversion Price (defined below).
Prior to a Series 2 Trigger Event (defined below) or an Event of Default, the conversion price (“Series 2 Conversion Price”) is $10.00 per share of Class A common stock or, if lower, the price at which the Company issues Class A common stock or rights to receive Class A common stock (the “Series 2 Fixed Conversion Price”). Following a Series 2 Trigger Event or Event of Default, the Series 2 Conversion Price is the lesser of the (i) Series 2 Fixed Conversion Price, and (ii) greater of (x) 88% multiplied by the lowest daily VWAP of the Class A common stock during the eight business day period prior to the measurement date, and (y) the 20% of the “Minimum Price” as defined in Nasdaq Rule 5635 calculated as of the most recent date on which Series 2 Preferred has been issued.
A “Series 2 Trigger Event” will occur (i) upon the Company’s receipt of a letter of noncompliance from Nasdaq, (ii) upon the Company’s average market capitalization during any three business day period following April 1, 2025 falling below $125,000,000, and (iii) in any quarter beginning with the first calendar quarter of 2025 where (x) the Company’s stockholder equity is less than $2,500,000, (y) the Company incurs a net loss greater than $1,000,000, or (z) the Company’s net sales are less than $500,000.
On April 11, 2025, the Company entered into a Supplement Terms Agreement with Streeterville (the “First Series 2 Supplemental Terms”), in connection with the Company’s issuance and sale of 3,000 shares of Series 2 Preferred (the “Tranche 2 Shares”) to Streeterville. The First Series 2 Supplemental Terms provides that, irrespective of the terms of the Series 2 Certificate of Designations, Streeterville will not have the right to convert the Tranche 2 Shares into shares of the Company’s Class A common stock at a conversion price of less than $1.00 per share prior to 30 days following the occurrence of a First Supplemental Terms Trigger Event (defined below), at which time the Company may elect to pay the conversion amount in cash or by issuance of additional shares of Class A common stock, at the Company’s discretion. A “First Supplemental Terms Trigger Event” will occur when the daily VWAP of our Class A common stock is below $1.00 for five or more business days during any given 15-day period.
| F-16 |
In addition, on December 15, 2025, the Company entered into a second Supplement Terms Agreement with Streeterville (the “Second Series 2 Supplemental Terms”), in connection with its issuance and sale of 3,500 shares of Series 2 Preferred (the “Tranche 3 Shares”) to Streeterville. The Series 2 Supplemental Terms provides that, irrespective of the terms of the Series 2 Certificate of Designations, Streeterville will not have the right to convert the Tranche 3 Shares into shares of Class A common stock at a at a conversion price of less than $0.75 per share prior to 20 days following the date that the daily VWAP of the Class A Stock is below $0.75 (the “Cooling Off Period”). Following the Cooling Off Period, if Streeterville seeks to convert any of the Tranche 3 Shares with a conversion price below $0.75 per share, the Company may elect to pay the conversion amount in cash or by issuance of additional shares of Class A common stock, at the Company’s discretion. Only one Cooling Off Period may occur unless the daily VWAP of the Class A Stock is above $0.75 for 90 consecutive days, after which a subsequent Cooling Off Period may occur.
Notwithstanding the foregoing, the Company will not give effect to any conversion of Series 2 Preferred to the extent that, following such conversion, the holder individually (without aggregating with its affiliates) would beneficially own in excess of 4.99% of the outstanding Class A common stock (the Maximum Percentage); provided, that the Maximum Percentage for a holder of Series 2 Preferred together with such holder’s affiliates will be 9.99%. The Maximum Percentage is enforceable, unconditional, and non-waivable and shall apply to all affiliates and assigns of each holder of the Series 2 Preferred.
The Company has the right at any time after the date that is six months from the earlier of (i) the effective date of the registration statement registering the shares of Class A common stock into which the Series 2 Preferred shares are convertible, and (ii) the date that such shares of Class A common stock are eligible for resale pursuant to Rule 144 under the Securities Act, to elect, in the Company’s sole discretion, to redeem all or any portion of the Series 2 Preferred then outstanding by paying an amount in cash equal to the Series 2 Preferred Liquidation Amount multiplied by 115%. In addition, the Company may, at its election, use at least 25% of any funds that it raises through an equity financing to redeem outstanding shares of Series 2 Preferred.
The Series 2 Preferred are not entitled to participate in any dividends, distributions, or payments to the holders of the Company’s Class A common stock. However, the Series 2 Preferred shares are entitled to the Series 2 Preferred Return described above.
The Series 2 Preferred shall vote together with holders of Class A common stock and Class B common stock on an as-converted basis, and not as a separate class, at any annual or special meeting of stockholders, and may act by written consent in the same manner as holders of Class A common stock and Class B common stock. In addition, for so long as any shares of Series 2 Preferred are outstanding, the affirmative vote of a majority of the Series 2 Preferred then outstanding shall be required to (i) alter or change adversely the powers, preferences or rights given to the Series 2 Preferred or alter or amend the Series 2 Certificate of Designations, or (ii) enter into any agreement with respect to any of the foregoing.
Notwithstanding the foregoing, in no event shall a holder of Series 2 Preferred (together with such holder’s affiliates, and any “persons” acting as a “group” (as such terms are defined under Sections 13(d) and 14(d) of the Exchange Act and the rules and regulations promulgated thereunder) together with Attribution Parties) be entitled to vote, on an as-converted basis and in aggregate with respect to any other shares of our Class A common stock, Class B common stock, Series 1 Preferred or other preferred stock beneficially owned by such holder of Series 2 Preferred or any affiliates or Attribution Parties of such holder, more than 4.99% of the outstanding voting shares as of the applicable record date, as adjusted for any stock splits, reverse stock splits, stock dividends, reclassifications, reorganization, recapitalizations or other similar transaction.
Pursuant to the Series 2 Certificate of Designations, for so long as any shares of Series 2 Preferred remain outstanding, the Company has agreed to comply with a number of covenants restricting its ability to take certain actions or engage in certain activities, which covenants are substantially similar to the covenants in the Series 1 Certificate of Designations described above. In particular, at any time that any shares of Series 2 Preferred are outstanding, the Company will not issue any preferred stock or other securities (except for certain limited issuances), will not enter into certain fundamental transactions (including, without limitation, mergers, business combinations or similar transactions), and will not incur any debt (other than trade payables incurred in the ordinary course of our business) without, in each case, the prior written consent of the holders of a majority of the Series 2 Preferred shares then issued and outstanding.
Under the Series 2 Equity Financing, Streeterville initially had the right, but not the obligation, to reinvest up to an additional $4.0 million in one or more tranches, which was reduced to $3.0 million following the April 2025 issuance, and further reduced to $0 following the December 2025 issuance, as well as participation rights in up to 30% of future debt or equity financings, subject to specified time limitations. These arrangements superseded similar reinvestment and participation rights under the Series 1 Equity Financing and further enhanced the Company’s liquidity and financial flexibility.
For the year ended December 31, 2025, the Company elected to pay the return on the Series 2 Preferred by issuing additional shares of Series 2 Preferred.
| F-17 |
Equity Line Financing
On November 25, 2024, we also entered into an Equity Purchase Agreement (the “Equity Purchase Agreement” or “Equity Line”) with Atlas Sciences, LLC, a Utah limited liability company (“Atlas”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Atlas will purchase up to an aggregate of $50.0 million of our Class A common stock over the 24-month term of the Equity Line. In consideration of Altas’s commitment to purchase shares pursuant to the Equity Line, we issued shares of our Class A common stock to Atlas on February 6, 2025, and an additional shares of our Class A common stock on July 9, 2025, as a result of the decline in the market price of our Class A common stock since signing the Equity Line. As of the date of this report, we have not sold any shares to Atlas pursuant to the Equity Line, other than the commitment shares described in the preceding sentence.
Equity Distribution Agreement
On February 2, 2026, we entered into an Equity Distribution Agreement (the “ATM Facility”) with Maxim Group LLC (“Maxim”) to create an at-the-market equity program. Under the ATM Facility, we may offer and sell shares of our Class A common stock from time to time having an aggregate offering amount of up to $9,0 million during the term of the ATM Facility, through Maxim, as sales agent. The ATM Facility requires us to pay Maxim a commission equal to 3.0% of the gross sales price from the sales of shares of Class A common stock pursuant to the ATM Facility.
Any sales of our Class A common stock under the ATM Facility may be made through any method permitted by law to be “at-the-market equity offerings” as defined in applicable SEC rules, including sales directly on The Nasdaq Capital Market, at market prices or as otherwise agreed with Maxim. We have no obligation to sell any shares pursuant to the ATM Facility, and no assurance can be given that we will sell any shares pursuant to the ATM Facility, or if we do, as to the price or number of shares to be sold or the dates on which any such sales will take place. The ATM Facility will terminate on the earliest of (a) the sale, pursuant to the ATM Facility, of shares having an aggregate offering price of $9.0 million, (b) February 2, 2027, and (c) earlier termination in certain situations, as set forth in the ATM Facility.
Stock-Based Compensation
The Company maintains the Cloudastructure, Inc. Amended and Restated 2024 Equity Incentive Plan (the “Incentive Plan”), which was adopted by the board of directors on June 27, 2025, and approved by the Company's stockholders in September 2025. The Incentive Plan is an amendment and restatement of the Company's previous 2024 Stock Option Plan. Under the Incentive Plan, the Company may grant incentive stock options, non-qualified stock options, restricted stock awards, restricted stock units, and other stock-based awards to employees, directors, and consultants. As of December 31, 2025, there were the equivalent of shares available for future issuance under the Incentive Plan.
Stock options granted under the Incentive Plan are generally exercisable into shares of the Company's Class B common stock or Class A common stock. Since the Company's Nasdaq listing in January 2025, options have been granted at an exercise price equal to the closing price of the Company's Class A common stock on the date of grant. Since January 1, 2025, all standard stock grants have been for Class A common stock. Options generally vest over four years, with an initial one-year cliff, and expire ten years from the date of grant.
The fair value of stock option awards is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes model requires the use of subjective assumptions, including (i) the estimated fair value of the underlying stock on the measurement date, (ii) the expected term of the option, (iii) the expected volatility of the Company's stock price, and (iv) the risk-free interest rate. Due to the Company's limited trading history as a publicly listed company, expected volatility is estimated based on the historical volatility of the stock prices of comparable publicly traded companies over a period commensurate with the expected term. The expected term is estimated using the simplified method permitted under SEC Staff Accounting Bulletin No. 107, as the Company does not have sufficient historical exercise data to provide a reasonable basis for estimating the expected term. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period commensurate with the expected term.
| F-18 |
The following table summarizes the assumptions used to estimate the fair value of options granted during the years ended December 31, 2025 and 2024:
| Assumptions used for option valuation | 2025 | 2024 | ||||||
| Expected term (years) | ||||||||
| Expected volatility | % | % | ||||||
| Discount rate | ||||||||
| Expected dividend yield | % | % | ||||||
| Weighted-average grant date fair value per option | $ | $ | ||||||
The following summarizes stock option activity for the year ended December 31, 2025:
| Schedule of option activity | ||||||||||||
| Number of Options | Exercise Price Range | Weighted-Average Exercise Price | ||||||||||
| Options outstanding at December 31, 2024 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Canceled | ||||||||||||
| Exercised | ||||||||||||
| Options outstanding at December 31, 2025 | $ | $ | ||||||||||
As of December 31, 2025, total unrecognized compensation cost related to unvested stock option awards was approximately $, which is expected to be recognized over a weighted-average period of approximately years.
During the years ended December 31, 2025 and 2024, the Company recognized stock-based compensation expense of $ and $, respectively. Stock-based compensation expense is included in non-cash operating expenses on the consolidated statements of operations.
Outstanding Warrants
There were
| F-19 |
Note 6 – Related Party Transactions
The following transactions occurred between related parties; therefore, there can be no guarantee that the terms, conditions, interest rates, or prices were transacted at an arm’s-length rate.
Aircraft Lease
On September 1, 2023, the Company and Cloud Transport Operations LLC (“Cloud Transport”) entered into a dry lease agreement (the “Dry Lease”) for a Cessna T210N Turbo Centurion plane. The Dry Lease allows the Company to lease the plane for $350 per hour plus insurance and maintenance costs. Rick Bentley (“Bentley”), the Company’s Founder and its Chief Executive Officer at the time the Dry Lease was signed, has an indirect ownership interest in Cloud Transport. In addition, also effective September 1, 2023, the Company and Hydro Hash, Inc. (“HH”) entered into a side agreement related to the Dry Lease, pursuant to which HH agreed, in exchange for use of the plane, to cover 40% of the insurance and maintenance costs for the plane under the Dry Lease. Mr. Bentley is the Chairman and a significant stockholder of HH. On March 25, 2025, the Company exercised its right to cancel the Dry Lease by providing 120 days notification of termination.
Issuance of Shares for Note Receivable
On February 20, 2020, the Company issued
shares of Class A common stock to Mr. Bentley in exchange for a promissory note with a principal amount of $
Data Center Lease
On January 1, 2024, the Company entered into a
month-to-month lease agreement (the “Lease”) with Hydrohash (HH), a related party, for additional data center space. The
Lease includes space, power, and high-speed internet access and qualifies as a short-term lease under ASC 842. Accordingly, lease costs
are recognized as lease expense on a straight-line basis over the lease term, and no right-of-use asset or lease liability has been recorded.
Under the Lease, the Company pays fixed
Note 7 – Reverse Stock Split
Our board of directors and stockholders each approved
a
| F-20 |
Note 8 – Segment Reporting
We operate as operating segment focused on cloud-based AI video surveillance and remote guarding security services. Operating segments are defined as components of an enterprise for which separate financial information is available for evaluation by the CODM in deciding how to allocate resources and assess performance. Our CODM evaluates our financial information and resources and assesses the performance of these resources on a consolidated basis. There is no expense or asset information supplemental to the information disclosed in these financial statements that is regularly provided to the CODM. The allocation of resources and assessment of performance of the operating segment is based on net income as shown in our statement of operations. The CODM considers net income in the annual forecasting process and reviews actual results when making decisions about allocating resources. Since we operate as one operating segment, financial segment information, including profit or loss and asset information, can be found in these financial statements.
| Schedule of segment information | ||||||||
| Surveillance Segment | ||||||||
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Less: | ||||||||
| COGS | ||||||||
| R&D | ||||||||
| Sales & Marketing | ||||||||
| G&A | ||||||||
| Non Cash Expenses | ||||||||
| Other (settlements, interest, etc) | ||||||||
| Segment net income/(loss) | ( | ) | ( | ) | ||||
| Reconciliation of profit or loss | ||||||||
| Adjustments and reconciling items | ||||||||
| Consolidated net income/(loss) | $ | ( | ) | $ | ( | ) | ||
Major Customers
For the year ended December 31, 2025, two customers
each individually accounted for 10% or more of the Company's consolidated revenues. Revenue from Hasta Capital was approximately $
For the year ended December 31, 2024, two customers
each individually accounted for 10% or more of the Company's consolidated revenues. Revenue from SunRoad Enterprises was approximately
$
| F-21 |
Note 9 – Income Tax
As of December 31, 2025, the Company had net operating
loss carryforwards of approximately $
As of December 31, 2025, the Company had credit
carryforwards of approximately $
Utilization of the net operating loss carryforward may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of the net operating loss before utilization.
On January 1, 2009, the Company adopted the provisions of FASB Accounting Standards Codification (ASC 740-10), “Accounting for Uncertainty in Income Taxes.” ASC 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of any uncertain tax positions that have been taken or expected to be taken on a tax return. It is unlikely that the amount of liability for unrecognized tax benefits will significantly change over the year. No liability related to certain tax positions is recorded on the financial statements.
As of December 31, 2024, and December 31, 2025,
the Company had unrecognized tax benefits of $
The following table summarizes the activity related to the Company's unrecognized tax benefits:
| Schedule of unrecognized tax benefits | ||||
| Balance at December 31, 2024 | $ | |||
| Decreases related to prior year tax positions | ( |
) | ||
| Increases related to current-year tax positions | ||||
| Balance at December 31, 2025 | $ |
The Company’s tax years 2003 through 2025 will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss credits.
Note 10 – Subsequent Events
Management’s Evaluation
Management has evaluated subsequent events to determine if events or transactions occurring after the balance sheet date through the date the financial statements were issued require potential adjustment to or disclosure in the financial statements and has concluded that all such events or transactions that would require recognition or disclosure have been recognized or disclosed.
| F-22 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2025. Disclosure controls and procedures are controls and other procedures 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 and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2025, our disclosure controls and procedures were effective.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
| 49 |
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2025, based on the criteria set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management concluded that, as of December 31, 2025, our internal control over financial reporting was effective.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. As an emerging growth company under the JOBS Act, our management's report is not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management's report in this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) that occurred during the quarter ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
| (a) | None. | |
| (b) | During the fourth quarter of 2025,
no director or officer of the Company |
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers, and Corporate Governance.
Board of Directors
We operate under the direction of our board of directors, the members of which are accountable to the Company and our stockholders as fiduciaries. Our current board members are James McCormick, our Chief Executive Officer, and Craig Johnson, Jeff Kirby, and Ruba Qashu, Jr., each of whom is independent.
Our Second Amended and Restated Certificate of Incorporation divides our board of directors into three classes, designated Class I, Class II and Class III. Ruba Qashu is our Class I Director, with a term expiring at our 2028 annual meeting, Jeff Kirby is our Class II director, with a term expiring at our 2026 annual meeting, and James McCormick and Craig Johnson are Class III directors, with terms expiring at our 2027 annual meeting.
The following table sets forth information about our directors as of the date of this Form 10-K:
| Name | Age | Position | ||
| Class I Directors | ||||
| Ruba Qashu (1)(2)(3) | 53 | Independent Director | ||
| Class II Directors | ||||
| Jeff Kirby (1)(2)(3) | 68 | Independent Director | ||
| Class III Directors | ||||
| Craig Johnson (1)(2)(3) | 62 | Independent Director | ||
| James McCormick | 67 | Chief Executive Officer and Chairman of the Board |
| (1) | Member of the Audit Committee. |
| (2) | Member of the Compensation Committee. |
| (3) | Member of the Nominating and Corporate Governance Committee. |
Ruba Qashu has served on our board of directors since April 2023. Ms. Qashu is a partner at Procopio, Cory, Hargreaves & Savitch LLP, where she has been employed since February 2025. Ms. Qashu’s specialty is capital markets and securities transactions. She has over 20 years of experience as securities counsel for public companies and a substantive history structuring complex transactions and providing strategic counseling. Ms. Qashu’s capital markets experience includes CMPOs, registered direct offerings and PIPEs. Ms. Qashu handles ‘34 Act reporting and advises regarding corporate governance, equity compensation plans and stockholder communications. Prior to joining Procopio LLP, she was a Partner at Barton LLP and Raines Feldman Littrell LLP. Previously, from 2011 through 2021, she was a Partner at Libertas Law Group. Ms. Qashu holds a B.A. in English Literature from UC Berkeley and a J.D. from Hastings College of Law (now UC Law San Francisco). She is admitted to practice law in the State of California.
Jeff Kirby has served on our board of directors since June 2024. Mr. Kirby is the Founder of Resource Management and Development, a real estate investment firm with a seasoned team of commercial real estate service experts founded by Mr. Kirby in 1993. With expertise in master-planned communities and commercial development, Resource Management and Development had roles in developing and managing over 20,000 residential lots in the Northern Nevada market as well as developing over 800,000 square feet of office space in the Reno, Nevada market. Mr. Kirby served as Chief Financial Officer of Avantair from 2004 to 2007. In Mr. Kirby’s more than 25 year-career, he has also consulted on investment and pension fund matters for several prominent trusts and funds, created and managed joint venture partnership business arrangements and involvement in funding and capital generation for private and publicly traded companies, and co-founded North Valley Holdings, the single largest producer of new water rights to municipal markets in Nevada and Northern California. Mr. Kirby received his B.A. in communication and B.S. in psychology from the University of Colorado, Boulder.
Craig Johnson Craig Johnson has served on our board of directors since June 2024. Mr. Johnson has over 30 years of experience in a variety of Sales Management, Business Development, Marketing, Operations, and General Management positions at large corporations like Honeywell, and various start up organizations. His industry expertise includes Industrial Automation, Building Automation, Technology, and Security. Mr. Johnson earned his Bachelors of Business Administration in Marketing and Management from the University of Wisconsin-Madison and his Masters in Business Administration in Marketing from DePaul University in Chicago. He currently sits on two small company boards, one non-profit board and served as a Reserve Officer in the Armed Forces.
| 50 |
James McCormick has served as a director since November 2021 and was appointed Chief Executive Officer in June 2024. Mr. McCormick has over 30 years of experience in finance, operations and administration, primarily in the high tech industry. He has been instrumental in raising over $1 billion in funds for companies in which he was involved, including IPO’s, sales to strategic investors, investments by VC’s and securities sales through the capital markets. He has been involved in numerous M&A activities, both on buy-side and sell-side transactions. His experience has ranged from managing start-up companies to complex, multi-national entities. From May 2019 to July 2022, Mr. McCormick has served as the Chief Operating Officer for LTA Research and Exploration, an aerospace research and development company building experimental and certified manned and remotely piloted airships. From October 2015 to May 2019, Mr. McCormick served as Chief Financial Officer of Global Equipment Services (GES), a company specializing in production process and test equipment design, manufacturing, and global services for the semiconductor and electronics product manufacturing industry. While acting as CFO, Mr. McCormick oversaw the acquisition of GES by Kimball Electronics in an approximately $50 million transaction. He has held CEO, CFO and COO positions at various other public and private companies including Crossing Automation (sold to Brooks Automation (BRKS)), Serious Energy, PodTech, iPrint Technologies (sold to Harland Clarke), Tandem Computers (sold to Hewlett Packard (HPE)) and UB Networks (sold to Alcatel). Mr. McCormick holds a BBA from the University of Toledo and a MBA from the University of Michigan.
Committees of our Board of Directors
Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which operates pursuant to a charter adopted by our board of directors. Our board of directors may also establish other committees from time to time to assist the board of directors. The composition and functioning of all of our committees complies with all applicable requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules and regulations. Each committee’s charter is available on our website at https://investor.cloudastructure.com. The inclusion of our website address in this Form 10-K does not incorporate by reference the information on or accessible through our website into this Form 10-K.
Audit Committee
The members of our audit committee are Craig Johnson, Jeff Kirby and Ruba Qashu. Jeff Kirby serves as the chairperson of the committee. Our board of directors has determined that each member of the audit committee is “independent” as that term is defined in Nasdaq rules and has sufficient knowledge in financial and auditing matters to serve on the audit committee. In addition, our board of directors has determined that each member of the audit committee meets the heightened independence requirements for audit committees required under Section 10A of the Exchange Act and related SEC and Nasdaq rules. Our board of directors has determined that Jeff Kirby is an “audit committee financial expert,” as defined under the applicable rules of the SEC.
The audit committee’s responsibilities include:
| · | appointing, approving the compensation of and assessing the independence of our independent registered public accounting firm; | |
| · | pre-approving auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm; | |
| · | reviewing the overall audit plan with our independent registered public accounting firm and members of management responsible for preparing our financial statements; | |
| · | reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us; | |
| · | coordinating the oversight and reviewing the adequacy of our internal control over financial reporting; | |
| · | establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns; | |
| · | recommending based upon the audit committee’s review and discussions with management and our independent registered public accounting firm whether our audited financial statements shall be included in our annual report on Form 10-K; | |
| · | monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters; | |
| · | preparing the audit committee report required by SEC rules to be included in our annual proxy statement; | |
| · | reviewing all related person transactions for potential conflict of interest situations and approving all such transactions; and | |
| · | reviewing quarterly earnings releases. |
| 51 |
Compensation Committee
The members of our compensation committee are Craig Johnson, Jeff Kirby and Ruba Qashu. Ruba Qashu serves as the chairperson of the committee. Our board of directors has determined that each member of the compensation committee is “independent” as that term is defined in Nasdaq rules and is a “non-employee director” under Rule 16b-3 under the Exchange Act. In addition, our board of directors has determined that each member of the compensation committee meets the heightened independence requirements for compensation committee purposes under Section 10C of the Exchange Act and related SEC and Nasdaq rules. The compensation committee’s responsibilities include:
| · | reviewing and approving our philosophy, policies and plans with respect to the compensation of our chief executive officer; | |
| · | making recommendations to our board of directors with respect to the compensation of our chief executive officer and our other executive officers; | |
| · | reviewing and assessing the independence of compensation advisors; | |
| · | overseeing and administering our equity incentive plans; | |
| · | reviewing and making recommendations to our board of directors with respect to director compensation; and | |
| · | preparing the compensation committee reports required by the SEC, including our “compensation discussion and analysis” disclosure. |
Nominating and Corporate Governance Committee
The members of our nominating and corporate governance committee are Craig Johnson, Jeff Kirby and Ruba Qashu. Craig Johnson serves as the chairperson of the committee. Our board of directors has determined that each member of the nominating and corporate governance committee is “independent” as defined in Nasdaq rules. The nominating and corporate governance committee’s responsibilities include:
| · | developing and recommending to the board of directors criteria for board and committee membership; | |
| · | establishing procedures for identifying and evaluating board of director candidates, including nominees recommended by shareholders; | |
| · | reviewing the composition of the board of directors to ensure that it is composed of members containing the appropriate skills and expertise to advise us; | |
| · | identifying and screening individuals qualified to become members of the board of directors; | |
| · | recommending to the board of directors the persons to be nominated for election as directors and to each of the board’s committees; | |
| · | developing and recommending to the board of directors a code of business conduct and ethics and a set of corporate governance guidelines; and | |
| · | overseeing the evaluation of our board of directors and management. |
Family Relationships
There are no family relationships among any of our directors or executive officers.
Code of Conduct
We have adopted a written code of business conduct and ethics, which applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A current copy of our code is available on our website at www.cloudastructure.com. The inclusion of our website address in this Form 10-K does not incorporate by reference the information on or accessible through our website into this Form 10-K.
| 52 |
Insider Trading Arrangements and Policies
We have
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors, executive officers and individuals who beneficially own more than 10% of our Class A common stock to file reports of ownership and changes in ownership of our securities with the SEC on Forms 3, 4 and 5. Based solely on a review of the copies of such reports filed with the SEC, we believe that all reporting individuals complied with their filing obligations under Section 16(a) on a timely basis, except as described below.
In connection with our initial registration of securities under Section 12 of the Exchange Act, every reporting person was required to file Form 3 reports on January 29, 2025, the effective date of our registration statement, as amended (Registration No. 333-282038). The following individuals did not timely file their Form 3 reports: James McCormick, Ruba Qashu and Richard Bentley. We continue to monitor our internal procedures to facilitate timely filings in accordance with SEC requirements.
Item 11. Executive Compensation.
Executive Officers
The following table sets forth information about our executive officers as of the date of this Form 10-K:
| Name | Age | Position | ||
| James McCormick | 67 | Chairman of the Board and Chief Executive Officer | ||
| Greg Smitherman | 62 | Chief Financial Officer | ||
| Gregory Rayzman | 63 | Chief Technology Officer | ||
| Lauren O’Brien | 61 | Chief Revenue Officer |
James McCormick’s biography is set forth above under the heading “Board of Directors.”
Greg Smitherman Greg Smitherman has served as our Chief Financial officer since October 2021. Mr. Smitherman is a hands-on financial executive with over 20 years of M&A and venture capital experience and 10 years of operating experience. Prior to joining the Company, Mr. Smitherman served as Chief Financial Officer of Accelergy Corporation, a producer of specialty chemicals for industrial, food, pharmaceutical, and oil and gas markets, from February 2013 to October 2021. In this position, he managed the company’s financials, and was actively involved in developing and executing on the company’s fundraising strategy and joint venture negotiations, where he oversaw closing on over $20 million in funding. Mr. Smitherman brings extensive tactical, strategic and business planning experience in building and growing companies in multiple industries. He is experienced in successfully managing large and small teams in time-sensitive environments, and has had active roles in M&A transactions, fundraising efforts, and in navigating four companies undergoing IPOs. Mr. Smitherman received his BS in Aerospace Engineering from the University of Michigan, and his MBA from the University of Chicago.
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Gregory Rayzman Gregory Rayzman has served as our Chief Technology Officer since 2015 and originally joined the Company in 2004. From April 2015 to present, Mr. Rayzman has also served as Chief Technology Officer and Chief Data Architect of SteppeChange, leading various telecom, finance and security projects. Mr. Rayzman is a seasoned technologist and well recognized name in Silicon Valley. His expertise in Big Data and database architecture is sought by several emerging and well-established companies like Apple, where he provided pivotal leadership in designing and developing massively scalable and database backed infrastructures from 2013 to 2015. From May 2010 to March 2015, Mr. Rayzman worked at TheFind, developing a shopping search engine with relevancy and popularity algorithm. TheFind was acquired by Facebook in 2015. Prior to that, Mr. Rayzman served as Chief Data Architect of a forward-looking company NebuAd from 2006 to 2009, where he developed behavior targeting advertising systems based on the aggregate data. He was previously a founding engineer and Chief architect for ITM Software, acquired by BMC. Mr. Rayzman also served as CTO for Claridyne Inc., an IT infrastructure and integration company. Mr. Rayzman was founding engineer and Director of Software Engineering for Annuncio Inc., acquired by PeopleSoft (now Oracle). Mr. Rayzman holds both Bachelor and Master’s degrees in Computer Science from Moscow University and completed his postdoctoral education in Applied Mathematics at the Academy of Science before moving to the United States.
Lauren O’Brien, Chief Revenue Officer joined the Company in April 2021 and has served as our Chief Revenue Officer since May 2022. Lauren has over 20 years of executive experience in a variety of sales, sales management, marketing, operations and general management roles. Prior to joining the Company, Lauren most recently served as Chief Operating Officer of VentureBeat, a leading enterprise AI publication. Lauren joined VentureBeat in March 2017, initially serving as VP of Operations, and then as Chief Operating Officer, where she led the company to profitability for the first time in its history while driving sales to double digit growth year over year. Lauren still serves as a Board Advisor to VentureBeat. From 2002 to 2017, she served as Chief Executive Officer of Shift Communications and Consulting, a leading consulting firm providing strategic consulting services to businesses to accelerate growth and improve operations. There, she was directly responsible for driving sales, and delivering strategic consulting services to C-level clients, and often was hired in executive roles for early-stage companies. Ms. O’Brien has extensive experience in sales, marketing and go-to-market strategy building for Cloud-based startups. Ms. O’Brien also led the product strategy team for a $100 million CRM company where she was instrumental in securing enterprise sales with the company’s first cloud-based CRM product. Ms. O’Brien has an MBA in Marketing and Finance from University of California, Berkeley and a Bachelor’s Degree from the University of Vermont.
Executive Compensation
Our named executive officers, consisting of our principal executive officer and our next two most highly compensated executive officers who were serving as an executive officer as of December 31, 2025, for the fiscal year ended December 31, 2025, were:
| · | James McCormick, Chief Executive Officer and Director; | |
| · | Greg Smitherman, Chief Financial Officer; and | |
| · | Gregory Rayzman, Chief Technology Officer. |
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Summary Compensation Table
The following table represents information regarding the total compensation awarded to, earned by or paid to our named executive officers during the fiscal years ended December 31, 2025, 2024, and 2023:
| Name and Position | Year | Salary (2) ($) |
Bonus ($) |
Option Awards(3) ($) |
Total ($) | |||||||||
| James McCormick (1) | 2025 | $ | 283,793 | $ | 110,313 | $ | 550 | $ | 394,656 | |||||
| Chief Executive Officer and | 2024 | 43,333 | 40,000 | 2,434,432 | 2,517,765 | |||||||||
| Chairman of the Board of Directors | ||||||||||||||
| Greg Smitherman | 2025 | 247,841 | 166,875 | 550 | 415,266 | |||||||||
| Chief Financial Officer | 2024 | 161,667 | 60,000 | 506,001 | 727,668 | |||||||||
| Gregory Rayzman | 2025 | 196,648 | 81,563 | 550 | 278,761 | |||||||||
| Chief Technology Officer | 2024 | 158,333 | – | 616,000 | 774,333 | |||||||||
_______________
| (1) | On June 1, 2024, Mr. McCormick agreed to serve as our President on a part-time basis in addition to continuing to serve as a member of our board of directors. On June 24, 2024, we entered into an employment agreement with Mr. McCormick to serve as our Chief Executive Officer, effective June 29, 2024. During the fiscal year ended December 31, 2023, and through May 31, 2024, Mr. McCormick served as a nonexecutive member of our board of directors, for which he earned additional compensation that is not included within this table. |
| (2) | On September 1, 2024, each of our named executive officers entered into a Voluntary Reduction in Wages Agreement (the “Wage Reduction Agreement”), designed to allow us to conserve cash during the pendency of our direct listing. Pursuant to the terms of the Wage Reduction Agreement salaries were reduced to $2,916.67 per month, or $35,000 per annum, until such time as we raised $2,000,000 in new equity financing (the “Deferral Period”), at which point salaries would be restored to prior levels. In addition, the Wage Reduction Agreement provided that if we raised $4,000,000 in new equity financing, the named executed officer would receive a stay bonus equal to the difference between the monthly salary they would have received prior to entering into the Wage Reduction Agreement and the reduced monthly salary that they did receive during the Deferral Period, multiplied by 1.5. On November 25, 2024, we entered into a Securities Purchase Agreement, as amended by Amendment No. 1 to Securities Purchase Agreement, dated January 16, 2025, and Amendment No. 2 to Securities Purchase Agreement, dated January 29, 2025 (the “Series 1 Equity Financing”), with Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”), pursuant to which we agreed to issue and sell to Streeterville $6,300,000 of a newly designated series of Series 1 Convertible Preferred Stock, par value $0.0001 per share and 720,000 pre-delivery shares (the “Pre-Delivery Shares”). The Series 1 Equity Financing closed on January 29, 2025. |
| (3) | Amounts in this column reflect the aggregate grant date fair value of the option awards granted to our named executive officers, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Stock Compensation. The assumptions used in calculating the grant date fair value of the option awards reported in this column are set forth in Note 5 to our audited financial statements included in Part II of this Form 10-K. These amounts do not reflect the actual economic value that may be realized by the named executive officer upon the vesting of the option, the exercise of the option, or the sale of the common stock underlying the option. |
Annual Base Salary
Our named executive officers receive a base salary to compensate them for services rendered to us. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role, and responsibilities.
Annual Bonus
We seek to motivate and reward our executives for achievements relative to our corporate goals and expectations and individual performance for each fiscal year. Our named executive officers are eligible to receive annual bonuses of up to a percentage of the applicable executive’s gross base salary based on performance metrics, as determined by our Compensation Committee.
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The actual performance-based annual bonus paid, if any, has historically been calculated by multiplying the executive’s annual base salary, target bonus percentage, the percentage attainment of the corporate goals established by the Compensation Committee for such year, and the percentage attainment of individual goals. However, the Compensation Committee is not required to calculate bonuses in this manner and retains discretion in the amounts it awards and the factors it takes into consideration in determining bonus amounts. After the end of the year, the Compensation Committee reviews our performance against our goals and approves the extent to which our executives achieved each of our corporate and individual goals, as applicable, and, for each named executive officer, the amount of the bonus awarded.
Equity Compensation
We believe that equity awards provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives with the interests of our stockholders. We believe that equity awards are an important retention tool for our executive officers, as well as for our other employees.
We award equity awards broadly to our employees. Grants to our executives and other employees are made at the discretion of our board of directors and Compensation Committee.
Prior to December 31, 2024, we only granted stock option awards to acquire our Class B common stock because we believed they were an effective means by which to align the long-term interests of our executive officers with those of our stockholders. The use of stock options can also provide tax and other advantages to our executive officers relative to other forms of equity compensation. Since January 1, 2025, all standard stock grants have been for Class A common stock. Our equity incentive plan allows us to grant other stock-based compensation, such as restricted stock and restricted stock units, which we may introduce in the future.
Other Benefits; Perquisites
All of our named executive officers are eligible to participate in our broad-based employee benefit plans, generally available to our full-time employees, including our medical, dental, vision, benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance and life insurance.
We maintain a 401(k) plan that provides eligible U.S. employees, including our named executive officers, with an opportunity to save for retirement on a tax advantaged basis. Eligible employees are able to defer eligible compensation up to certain limits set forth in the Internal Revenue Code of 1986, as amended (the “Code”), which are updated annually. Currently, we do not make matching contributions or discretionary contributions to the 401(k) plan. The 401(k) plan is intended to be qualified under Section 401(a) of the Code, with the related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan are deductible by us when made and contributions and earnings on those amounts are not generally taxable to the employees until withdrawn or distributed from the 401(k) plan.
We also provide all employees, including our named executive officers, with a $125 monthly cell phone stipend.
Employment Agreements with our Named Executive Officers
James McCormick
On June 24, 2024, we entered into an employment agreement with Mr. McCormick, effective June 29, 2024, pursuant to which Mr. McCormick serves as our Chief Executive Officer. The employment agreement is “at-will” and terminable by either party for any reason and with or without notice. Mr. McCormick was initially entitled to a base salary of $160,000, which increased to $295,000 after we closed the Series 1 Equity Financing. Mr. McCormick is eligible to participate in any annual performance bonus plans that we establish for similarly situated executives and eligible to participate in Company-sponsored benefits. In addition, all reasonable business expenses incurred in the ordinary course of business are reimbursable to Mr. McCormick in accordance with our standard policies and procedures.
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Gregory Rayzman
On April 19, 2021, we entered into an employment agreement with Mr. Rayzman, pursuant to which Mr. Rayzman serves as our Chief Technology Officer. The employment agreement is “at-will” and terminable by either party for any reason and with or without notice. Mr. Rayzman was initially entitled to a base salary of $250,000, which decreased to $230,000 in 2023. Mr. Rayzman is eligible to participate in Company-sponsored benefits. In addition, all reasonable business expenses incurred in the ordinary course of business are reimbursable to Mr. Rayzman in accordance with our standard policies and procedures.
Greg Smitherman
On October 7, 2021, we entered into an employment agreement with Mr. Smitherman, pursuant to which Mr. Rayzman serves as our Chief Financial Officer. The employment agreement is “at-will” and terminable by either party for any reason and with or without notice, however, Mr. Smitherman is eligible to receive severance equal to 3 months’ salary if terminated without cause. Mr. Smitherman was initially entitled to a base salary of $300,000, which decreased to $225,000 in 2023. Mr. Smitherman is eligible to receive a 25% annual performance bonus upon terms to be negotiated between Mr. Smitherman and the Company. Mr. Smitherman is also eligible to receive equity compensation of approximately 2.5% of the Company. Mr. Smitherman is eligible to participate in Company-sponsored benefits. In addition, all reasonable business expenses incurred in the ordinary course of business are reimbursable to Mr. Smitherman in accordance with our standard policies and procedures.
Equity Compensation Plans
The following summarizes the material terms of our stock option plan.
Option Plans
On June 27, 2025, our board of directors adopted, subject to shareholder approval, the Cloudastructure, Inc. Amended and Restated 2024 Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan is an amendment and restatement of our previous 2024 Stock Option Plan. Our stockholders approved the Incentive Plan in September 2025. We have granted both incentive and non-qualified options to purchase shares of our Class A common stock and Class B common stock under the terms of our Incentive Plan. Since our Nasdaq listing in January 2025, options have been granted at an exercise price equal to the closing price of our Class A common stock on the date of grant. Generally, granted options are exercisable into shares of our Class B common stock or our Class A common stock, vest over four years, with an initial one-year cliff, and expire ten years from the vesting date.
As of December 31, 2025, there were the equivalent of 2,419,163 shares available for future issuance under the Incentive Plan.
The foregoing description of the Incentive Plan is qualified in its entirety by reference to the copy of the Incentive Plan filed as Exhibit 10.1 to this Annual Report on Form 10-K and incorporated here by reference.
Outstanding Equity Awards on December 31, 2025
The following table presents information regarding outstanding equity awards held by our named executive officers as of December 31, 2025.
| Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price |
Option Expiration Date | |||||||||||
| James McCormick | 603,485 | 1,268,282 | $ | 1.86-2.70 | November 2031 and June 2034 | ||||||||||
| Gregory Rayzman | 1,539,556 | 275,696 | $ | 0.024-2.70 | April 2029 - June 2034 | ||||||||||
| Greg Smitherman | 989,721 | 196,221 | $ | 1.86-2.70 | October 2031 - June 2034 | ||||||||||
| Richard Bentley | 780,677 | 238,491 | $ | 1.86-2.70 | March 2031 - June 2034 | ||||||||||
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Option Award Timing Policies and Practices
Our board of directors is responsible for approving equity awards to our executive officers and generally grants awards on a predetermined schedule, typically in connection with regularly scheduled board meetings. The timing of these meetings and related award grants is established without regard to anticipated earnings announcements, filings with the SEC, or other releases of MNPI. In addition, we do not time the release of MNPI for the purpose of affecting the value of executive compensation.
During the fiscal year ended December 31, 2025, we did not grant stock options or stock appreciation rights to any named executive officer during any period beginning four business days before and ending one business day after the filing of any periodic report on Form 10-Q or Form 10-K or the filing or furnishing of any current report on Form 8-K that disclosed MNPI.
Director Compensation
Non-employee Director Compensation Table
The following table presents the total compensation for each person who served as a non-employee member of our board of directors during the fiscal year ended December 31, 2025. Other than as set forth in the table and described more fully below, we did not pay any compensation, make any equity awards or non-equity awards, or pay any other compensation to any of the non-employee members of our board of directors in 2025 for their services as members of our board of directors.
| Name |
Fees Earned ($) |
Stock ($) |
Option ($) |
Total ($) |
||||||||||||
| Ruba Qashu | $ | 12,000 | $ | – | $ | 38,333 | $ | 50,333 | ||||||||
| Jeff Kirby | 12,000 | – | 136,000 | 148,000 | ||||||||||||
| Craig Johnson | 12,000 | – | 136,000 | 148,000 | ||||||||||||
As of December 31, 2025, the non-employee members of our board of directors held the following aggregate number of unexercised options:
| Name | Number of Securities Underlying Unexercised Options |
|||
| Ruba Qashu | 208,334 | |||
| Jeff Kirby | 209,375 | |||
| Craig Johnson | 318,500 | |||
Except as set forth above, no non-employee member of our board of directors held unexercised options or unvested shares of our Class A common stock or Class B Common Stock as of December 31, 2025.
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Non-Employee Director Compensation Policy
Our board of directors has adopted a non-employee director compensation policy. The policy is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors. Under the policy, each director who is not an employee will be paid cash compensation from and after the completion of this offering as set forth below:
| Position | Annual Retainer | |||
| Non-Employee Director | $ | 12,000 | ||
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Security Ownership of Certain Beneficial Owners and Management
Based solely upon information made available to us, the following table sets forth certain information with respect to the beneficial ownership of our Class A common stock and Class B common stock as of February 28, 2026, by:
| · | each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our Class A common stock and Class B common stock; | |
| · | each of our directors and named executive officers; and | |
| · | all of our directors and named executive officers as a group |
We have based percentage of beneficial ownership for the following table on 24,510,140 shares of Class A common stock, and 5,638 shares of Class B common stock outstanding as of February 28, 2026. In addition, in accordance with the rules of the SEC, beneficial ownership includes voting or investment power with respect to securities issuable within 60 days of February 28, 2026. As such, shares of Class A common stock and Class B common stock issuable pursuant to options and warrants that may be exercised or settled within 60 days of February 28, 2026 are deemed to be outstanding for purposes of computing the percentage of the class beneficially owned by the person holding such securities but are not deemed to be outstanding for purposes of computing the percentage of the class beneficially owned by any other person.
Each share of our Class A common stock is entitled to one vote per share and each Class B common stock is entitled to 20 votes per share on all matters submitted to a vote of the stockholders, including the election of directors.
Except as otherwise indicated in the footnotes to the table set forth below, all persons listed have sole voting power and investment power, except to the extent that authority is shared by spouses under applicable law, and record and beneficial ownership of their common stock. Unless otherwise indicated, the business address of each of the individuals and entities named below is c/o Cloudastructure, Inc., 228 Hamilton Avenue, 3rd Floor, Palo Alto, California 94301.
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| Shares Beneficially Owned | ||||||||||||||||||||||||
| Series 2 Convertible Preferred Stock† |
Class A Common Stock |
Class B Common Stock‡ |
Percentage of Total Voting | |||||||||||||||||||||
| Name of Beneficial Owner | Number | % | Number | % | Number | % | Power § | |||||||||||||||||
| Executive Officers and Directors | ||||||||||||||||||||||||
| James McCormick (1) | – | – | 2,500 | * | 1,062,308 | 99.5 | 46.1 | |||||||||||||||||
| Gregory Rayzman (2) | – | – | 2,500 | * | 1,590,355 | 99.6 | 56.2 | |||||||||||||||||
| Greg Smitherman (3) | – | – | 2,502 | * | 1,019,165 | 99.4 | 45.1 | |||||||||||||||||
| Lauren O’Brien (4) | – | – | 102,500 | * | 799,011 | 99.3 | 39.3 | |||||||||||||||||
| Ruba Qashu (5) | – | – | – | – | 114,583 | 95.3 | 8.4 | |||||||||||||||||
| Jeff Kirby (6) | – | – | 91,166 | – | 9,375 | 62.3 | 1.1 item | |||||||||||||||||
| Craig Johnson (7) | – | – | 91,666 | – | 118,500 | 95.4 | 9.0 | |||||||||||||||||
| All executive officers and directors as a group (7 persons) | – | – | 293,334 | 1.2 | 4,703,922 | 99.9 | 79.2 | |||||||||||||||||
| 5% Stockholders | ||||||||||||||||||||||||
| Streeterville Capital, LLC (8) | 4,961 | 100 | 173,508 | * | – | – | * | |||||||||||||||||
| Sheldon Richard Bentley (10) | – | – | 2,500 | * | 4,628,897 | 99.9 | 5 | |||||||||||||||||
| * | Represents beneficial ownership of less than 1%. |
| † | The Series 2 Preferred is convertible at any time by the holder into shares of Class A common stock by (i) multiplying the then-current Stated Value (as defined in the Certificate of Designations) by the number of Series 2 Preferred being converted, and (ii) dividing the resultant amount by the then-applicable Conversion Price (as defined in the Certificate of Designations). |
| ‡ | The Class B common stock is convertible at any time by the holder into shares of Class A common stock on a share-for-share basis, such that each holder of Class B common stock beneficially owns an equivalent number of shares of Class A common stock. |
| § | The percentage of total voting power represents voting power with respect to all shares of our Series 1 Preferred, Class A common stock and Class B common, as one class. Our Series 1 Preferred is entitled to vote on an as-converted basis with our shares of common stock. Each holder of our Class A common stock is entitled to one vote per share and each holder of our Class B common stock is entitled to 20 votes per share. Holders of our Series 1 Preferred, Class A common stock and Class B common stock will vote together as one class on all matters submitted to a vote of our stockholders, except as otherwise expressly provided in our Second Amended and Restated Certificate of Incorporation, Certificate of Designations, or as required by applicable law. |
| (1) | Includes 2,500 shares of Class A common stock and 1,062,308 shares of Class B common stock both of which are issuable upon exercise of options which are exercisable within 60 days. |
| (2) | Includes 2,500 shares of Class A common stock and 1,590,355 shares of Class B common stock both of which are issuable upon exercise of options which are exercisable within 60 days. The Company and Mr. Rayzman have also entered into a Standstill Agreement pursuant to the terms of which Mr. Rayzman has irrevocably agreed that he will not acquire through purchase, by transfer or assignment or in any other manner, directly or indirectly, shares of common stock of the Company that would result in Mr. Rayzman owning in excess of 49% of the Company’s voting power. |
| (3) | Includes 2,502 shares of Class A common stock and 1,019,165 shares of Class B common stock both of which are issuable upon exercise of options (except for 2 Class A shares) which are exercisable within 60 days. |
| (4) | Includes 102,500 shares of Class A common stock and 799,011 shares of Class B common stock both of which are issuable upon exercise of options which are exercisable within 60 days. The Company and Ms. O’Brien have entered into a Lock-Up Agreement which prohibits Ms. O’Brien from transferring or disposing of any shares of Class A common stock or related securities for 180 days after the Series 1 Equity Financing Shares are eligible for resale pursuant to an effective registration statement or Rule 144 of the Securities Act, whichever occurs first. |
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| (5) | Includes 114,583 shares of Class B common stock issuable upon exercise of options which are exercisable within 60 days. |
| (6) | Includes 91,666 shares of Class A common stock issuable upon exercise of options which are exercisable within 60 days. |
| (7) | Includes 91,666 shares of Class A common stock and 118,500 shares of Class B common stock both of which are issuable upon exercise of options which are exercisable within. |
| (8) | Includes (i) 173,508 pre-delivery shares issued to Streeterville pursuant to the terms of the Series 2 Securities Purchase Agreement, and (ii) 37,209 shares of Class A common stock held by or that may be issuable to Streeterville upon conversion of the Series 2 Preferred, subject to a 4.99% beneficial ownership limitation (the “Ownership Limitation”). Pursuant to the terms of the Certificate of Designations, the Company will not affect the conversion of any Series 2 Preferred if, after giving effect to such conversion, the holder thereof would, individually, beneficially own in excess of 4.99%, and, together with its affiliates, in excess of 9.99%, of the outstanding shares of Class A common stock on the conversion date. In addition, pursuant to the terms of the Certificate of Designations, in no event will a Series 2 Holder, together with its affiliates, be entitled to vote, on an as-converted basis and in the aggregate with respect to shares of common stock and preferred stock beneficially owned, more than 4.99% of the Company’s outstanding voting shares. In the absence of the Ownership Limitation, Streeterville would beneficially own additional shares of Class A common stock. The address of Streeterville is 297 Auto Mall Drive #4, St. George, Utah 84770. John M. Fife, President of Streeterville, has voting and investment power over these securities. |
| (9) | Common stock holdings consist of 2,500 shares of Class A common stock and 4,628,897 shares of Class B common stock both of which are issuable upon exercise of options which are exercisable within 60 days. The Company and Mr. Bentley have also entered into a Standstill Agreement pursuant to the terms of which Mr. Bentley has irrevocably agreed that he will not acquire through purchase, by transfer or assignment or in any other manner, directly or indirectly, shares of common stock of the Company that would result in Mr. Bentley owning in excess of 49% of the Company’s voting power. In addition, the Company and Mr. Bentley have entered into an Amended and Restated Voting Agreement pursuant to the terms of which Mr. Bentley has irrevocably agreed to abstain, directly or indirectly, from casting votes in excess 5% of the outstanding capital stock entitled to vote at any meeting of stockholders of the Company. The Company and Mr. Bentley have also entered into a Voting Agreement pursuant to the terms of which Mr. Bentley has irrevocably agreed, for as long as the Series 2 Preferred remain outstanding, to cast the maximum number of votes to which he is entitled to vote in accordance with the recommendations of the Company’s board of directors. |
| (10) | Consists of 83,333 shares of Class A common stock. |
Equity Compensation Plans
Information relating to securities authorized for issuance under equity compensation plans as of December 31, 2025, is as follows:
| Number of shares to be issued upon exercise of outstanding options, warrants, and rights (a) | Weighted average exercise price of outstanding options, warrants, and rights | Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)) | ||||||
| Equity compensation plans approved by security holders | 15,366,571 | $ | 2.00 | 2,419,163 | ||||
| Equity compensation plans not approved by security holders | — | — | — | |||||
All options reflected in the table above were granted pursuant to the Amended and Restated 2024 Equity Incentive Plan. See Note 5 – Share Capital above for information regarding this plan.
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Item 13. Certain Relationships And Related Transactions, And Director Independence.
Transactions With Related Persons
The following is a summary of transactions or series of transactions since January 1, 2025, or currently proposed transactions or series of transactions, to which we were, or will be, a party, in which the amount involved exceeded, or will exceed, $120,000, and in which any of our directors, executive officers, or to our knowledge, beneficial owners of 5% or more of our capital stock, or any member of the immediate family of, or entities affiliated with, any of the foregoing persons, had, or will have, a direct or indirect material interest.
Aircraft Lease
On September 1, 2023, the Company entered into a dry lease of a Cessna T210N Turbo Centurion plane with Cloud Transport Operations LLC. Richard Bentley, the Company’s former Chief Executive Officer, has an indirect ownership interest in Cloud Transport Operations LLC. This agreement allows the Company to lease the plane for $350 per hour and will cover insurance and maintenance costs.
Additionally, effective September 1, 2023, the Company also entered into a side agreement related to the dry lease agreement with Hydro Hash, Inc. (“HH”), a company of which Mr. Bentley is Chairman and a significant stockholder. HH agreed, in exchange for use of the plane, to cover 40% of the insurance and maintenance costs for the plane under the dry lease agreement between the Company and Cloud Transport Operations LLC.
On March 25, 2025, the Company exercised its right to cancel the dry lease by providing 120 days notification of termination.
Data Center Lease
On January 1, 2024, the Company entered into a month-to-month lease agreement (the “Lease”) with HH for additional data center space. The Lease includes space, power, and high-speed internet access. Under the Lease, the Company pays fixed monthly base rent of approximately $5,000. In addition, the Company pays a fixed monthly amount of approximately $3,000 to reimburse HH for third-party bandwidth services.
Director Independence
Our board of directors has determined that all members of our board of directors, except James McCormick, are independent directors for purposes of the rules of Nasdaq and the SEC. In making this determination, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances that our board of directors deemed relevant, including the beneficial ownership of our Class A common stock and Class B common stock by each non-employee director.
We believe that the composition and functioning of our board of directors and each of our committees is in compliance with all applicable requirements of Nasdaq and the rules and regulations of the SEC, subject to applicable phase-in periods for committees.
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Item 14. Principal Accountant Fees and Services.
The following table sets forth the aggregate fees for professional services provided by our independent registered public accounting firm, Bush & Associates CPA LLC, for the years ended December 31, 2025 and 2024.
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Audit Fees (1) | $ | 52,500 | $ | 52,500 | ||||
| Tax Fees (2) | – | – | ||||||
| $ | 52,500 | $ | 52,500 | |||||
| (1) | Audit fees consist of fees for services related to the annual audit of our fiscal year 2025 and 2024 financial statements, reviews of our interim unaudited financial statements, and services that are normally provided in connection with statutory and regulatory filings and engagements. |
| (2) | Tax fees consist of fees for professional services rendered during 2025 for 2024 state and federal tax compliance. |
Audit Committee Pre-Approval Policies and Procedures
In accordance with our audit committee charter, our audit committee is required to approve, in advance, all audit and non-audit services to be provided by our independent registered public accounting firm. All services reported in the table above were approved by our audit committee. Our audit committee charter is available on our website, www.cloudastructure.com. The inclusion of our website address in this Form 10-K does not incorporate by reference the information on or accessible through our website into this Form 10-K.
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PART IV
Item 15. Exhibits and Financial Statement Schedules.
| (a) | The following documents are filed as part of this Form 10-K: |
| (i) | Financial statements: See Item 8. Financial Statements and Supplementary Data. | |
| (ii) | Financial statement schedules: Schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are not applicable and therefore have been omitted. | |
| (iii) | Exhibits: The following exhibits are filed with this Form 10-K: |
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____________________
* Filed herewith.
# Indicated management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) or the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 2026
| CLOUDASTRUCTURE, INC. | ||
| By: | /s/ James McCormick | |
| James McCormick | ||
| Chairman of the Board and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Greg Smitherman | |
| Greg Smitherman | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Each director whose signature appears below hereby appoints James McCormick and Greg Smitherman and each of them severally as his or her attorney-in-fact, to sign his or her name and on his or her behalf, as a director, and to file with the Securities and Exchange Commission any and all amendments to this Annual Report on Form 10-K.
| /s/ James McCormick | Dated: March 31, 2026 |
| James McCormick, Chairman of the Board, Director, and CEO | |
| (Principal Executive Officer) | |
| /s/ Greg Smitherman | Dated: March 31, 2026 |
| Greg Smitherman, Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) | |
| /s/ Craig Johnson | Dated: March 31, 2026 |
| Craig Johnson, Director | |
| /s/ Jeff Kirby | Dated: March 31, 2026 |
| Jeff Kirby, Director | |
| /s/ Ruba Qashu | Dated: March 31, 2026 |
| Ruba Qashu, Director |
| 66 |
Exhibit 10.23
CLOUDASTRUCTURE, INC.
AMENDED AND RESTATED 2024 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Amended and Restated 2024 Equity Incentive Plan shall have the same defined meanings in this Stock Option Agreement.
| I. | NOTICE OF STOCK OPTION GRANT |
Name: «Name»
The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
| Date of Grant | «Grant Date» |
| Vesting Commencement Date | «Vesting Commencement Date» |
| Exercise Price per Share | «Exercise Price» |
| Total Number of Shares Granted | «Total Number of Shares» |
| Total Exercise Price | «Exercise Value» |
| Type of Option: | _______ Incentive Stock Option |
| _______ Nonstatutory Stock Option | |
| Term/Expiration Date: | «Expiration Date» |
This Option shall be exercisable, in whole or in part, according to the following vesting schedule: 25% of the Shares subject to the Option shall vest on the one (1) year anniversary of the Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall vest each month starting on the corresponding day of each month thereafter (or the last day of the month if that month does not have such day), subject to Optionee continuing to be a Service Provider on such dates.
Termination Period: This Option shall be exercisable for three (3) months after Optionee ceases to be a Service Provider. Upon Optionee’s death or Disability, this Option may be exercised for one (1) year after Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above.
| 1 |
| II. | AGREEMENT |
1. Grant of Option. The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant (the “Optionee”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 14(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”).
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.
3. Optionee’s Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
4. Lock-Up Period. Optionee hereby agrees that Optionee shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Optionee (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred eighty (180) days following the effective date of a registration statement of the Company filed under the Securities Act.
Optionee agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Optionee shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred eighty (180) day period. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section.
| 2 |
5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares acquired from the Company, either directly or indirectly, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
6. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.
7. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.
9. Tax Obligations.
(a) Withholding Taxes. Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements applicable to the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two years after the Date of Grant, or (ii) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws but not the choice of law rules of California.
| 3 |
11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.
| OPTIONEE | CLOUDASTRUCTURE, INC. | |
| Signature | By | |
| «Name» | ||
| Print Name | ||
| Personal Email | Title | |
| Mailing Address |
| 4 |
EXHIBIT A
CLOUDASTRUCTURE, INC.
AMENDED AND RESTATED 2024 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
CLOUDASTRUCTURE, INC.
228 Hamilton Ave 3rd Floor
Palo Alto, CA 94301
Attention: Secretary
| 1. | Exercise of Option. Effective as of today, _____________, _____, the undersigned (“Optionee”) hereby elects to exercise Optionee’s option to purchase _________shares of the Class A Common Stock (the “Shares”) of CLOUDASTRUCTURE, INC. (the “Company”) under and pursuant to the Amended and Restated 2024 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated_____________, _______________ (the “Option Agreement”). |
| 2. | Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option. |
| 3. | Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. |
| 4. | Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 12 of the Plan. |
| 5. | Company’s Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the “Right of First Refusal”). |
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
| A-1 |
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionee’s lifetime or on the Optionee’s death by will or intestacy to the Optionee’s immediate family or a trust for the benefit of the Optionee’s immediate family shall be exempt from the provisions of this Section. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier of (i) the closing date of the first sale of Common Stock of the Company to the general public, or (ii) the closing date of a Change in Control in which the successor corporation has equity securities that are publicly traded.
| 6. | Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice. |
| 7. | Restrictive Legends and Stop-Transfer Orders. |
(a) Legends. Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
| A-2 |
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
| 8. | Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns. |
| 9. | Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties. |
| 10. | Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws but not the choice of law rules, of California. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Option Agreement will continue in full force and effect. |
| 11. | Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. |
| A-3 |
| Submitted by: | Accepted by: | |
| OPTIONEE | CLOUDASTRUCTURE, INC. | |
| Signature | By | |
| Print Name | Title | |
| Address: | Address: | |
| Date Received | ||
| A-4 |
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE: «Name»
COMPANY: CLOUDASTRUCTURE, INC.
SECURITY: CLASS A COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:
| 1. | Optionee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). |
| 2. | Optionee acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionee’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with any legend required under applicable state securities laws. |
| 3. | Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited “broker’s transaction” or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. |
| B-1 |
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.
| 4. | Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event. |
| Signature of Optionee: | |
| Date: ____________ |
| B-2 |
Exhibit 21
Subsidiaries
| Name of Subsidiary | Jurisdiction of Organization |
| Cloudastructure India Private Limited | India |
Exhibit 23
Consent of Independent Registered Public Accounting Firm
Cloudastructure, Inc.
228 Hamilton Avenue, 3rd Floor
Palo Alto, California 94301
We consent to the incorporation by reference in the Registration Statements Nos. 333-282038, 333-284717, 333-286654, 333-287508, 333-288637, and 333-293113 on Forms S-1, S-3, and/or S-8 of Cloudastructure, Inc. of our report dated March 31, 2026, relating to the financial statements of Cloudastructure, Inc., appearing in the Annual Report on Form 10-K of Cloudastructure, Inc. for the year ended December 31, 2025.
/s/ Bush & Associates CPA LLC
Bush & Associates CPA LLC
Henderson, Nevada
March 31, 2026
PCAOB ID Number 6797
Exhibit 31.1
CERTIFICATION
I, James McCormick, certify that:
1. I have reviewed this Annual Report on Form 10-K of Cloudastructure, Inc.;
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;
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;
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)) for the registrant and have:
(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;
(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;
(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
(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
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):
(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
(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.
| CLOUDASTRUCTURE, Inc. | ||
| Date: March 31, 2026 | By: | /s/ James McCormick |
| James McCormick | ||
| Chief Executive Officer and Chairman of the Board | ||
| (Principal Executive Officer) | ||
Exhibit 31.2
CERTIFICATION
I, Greg Smitherman, certify that:
1. I have reviewed this Annual Report on Form 10-K of Cloudastructure, Inc.;
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;
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;
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)) for the registrant and have:
(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;
(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;
(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
(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
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):
(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
(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.
| CLOUDASTRUCTURE, Inc. | ||
| Date: March 31, 2026 | By: | /s/ Greg Smitherman |
| Greg Smitherman | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Cloudastructure, Inc. (the “Company”) for the period ended December 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| CLOUDASTRUCTURE, INC. | ||
| Date: March 31, 2026 | By: | /s/ James McCormick |
| James McCormick | ||
| Chief Executive Officer and Chairman of the Board | ||
| (Principal Executive Officer) | ||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Cloudastructure, Inc. (the “Company”) for the period ended December 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| CLOUDASTRUCTURE, INC. | ||
| Date: March 31, 2026 | By: | /s/ Greg Smitherman |
| Greg Smitherman | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||