CLOUDASTRUCTURE, INC. 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2026


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

Commission File Number: 001-42494

CLOUDASTRUCTURE, INC.

(Exact name of registrant as specified in its charter)

Delaware		87-0690564
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

3000 El Camino Real, Bldg 4, Ste 200., Palo Alto, CA		94306
(Address of principal executive offices)		(Zip Code)

	(650) 644-4160
	(Registrant’s telephone number, including area code)

	NONE
	(Former name or former address, if changed since last report.)

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

Title of Each Class

Trading Symbol(s)

Name of Each Exchange On Which Registered

Class A Common Stock

CSAI

Nasdaq Capital Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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


Large Accelerated Filer ☐	Accelerated Filer ☐	Non-Accelerated Filer ☒	Smaller Reporting Company ☒
			Emerging Growth Company ☒

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


	Class		Outstanding as of August 14, 2026
	Class A Common Stock		867,282
	Class B Common Stock		190

CLOUDASTRUCTURE, INC.

EXPLANATORY NOTE

In connection with the preparation of the financial statements for the quarter ended March 31, 2026, the Company identified errors in the accounting treatment of the Company’s Series 1 and Series 2 Convertible Preferred Stock relating to (1) the failure to bifurcate and separately account for the embedded conversion features as derivative liabilities under ASC 815-15, and (2) the incorrect classification of the preferred stock host instruments within permanent stockholders’ equity rather than in temporary equity (mezzanine) as required by ASC 480-10-S99-3A (ASR 268). Management has concluded that these errors were individually and in the aggregate immaterial to any previously filed financial statement and, accordingly, has corrected the errors by revising the comparative prior period financial information presented in this report, in accordance with ASC 250-10-45-23.

The comparative financial information for the three months and six months ended June 30, 2025, and the balance sheet as of December 31, 2025, presented in this report have been revised to reflect the correction of these errors. See Note 2 to the condensed consolidated interim financial statements for additional details regarding the nature of the errors, the affected financial statement line items, and the quantitative effects of the revisions. See also Part I, Item 4 of this report for a discussion of the related material weakness in internal control over financial reporting.

TABLE OF CONTENTS

			Page No.

PART I.		FINANCIAL INFORMATION	6

	Item 1.	Financial Statements	6

		Condensed Consolidated Unaudited Balance Sheets	6

		Condensed Consolidated Unaudited Statements of Operations	7

		Condensed Consolidated Unaudited Statements of Comprehensive Loss	8

		Condensed Consolidated Unaudited Statements of Temporary Equity and Stockholders’ Equity	9

		Condensed Consolidated Unaudited Statements of Cash Flows	11

		Notes to Interim Condensed Consolidated Unaudited Financial Statements	12

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

	Item 4.	Controls and Procedures	47

PART II.		OTHER INFORMATION	48

	Item 1.	Legal Proceedings	48

	Item 1A.	Risk Factors	48

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

	Item 5.	Other Information	50

	Item 6.	Exhibits	50

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that can involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report are 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 report may include, but are not limited to, statements about:

	·	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;
	·	our ability to access additional financing to support our operations
	·	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; 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, but these forward-looking statements are not guarantees of future performance or development. These statements are based upon information available to us as of the date of this report, 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 in this report, whether as a result of any new information, future events, or otherwise.

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 report, including, among others, those factors set forth in the “Risk Factors” section of our Annual Report on Form 10-K, as updated by information filed in our Forms 10-Q and Forms 8-K. 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:

	·	Although our Class A common stock has regained compliance with Nasdaq’s minimum bid price requirement, it remains at risk of being delisted from Nasdaq if we fail to maintain compliance with that requirement or with the MVLS requirement, as further discussed in Part II, Item 1A of this report;

	·	Our ability to continue as a going concern will likely require substantial additional capital, which may not be available to us (particularly if our Class A common stock gets delisted from Nasdaq) or only available on terms that are expensive or highly-dilutive to our existing stockholders;

	·	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 have identified a material weakness in our internal controls over financial reporting, as further discussed in Part I, Item 4 of this report;

	·	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 that are relatively new to us;

	·	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;

	·	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.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

CLOUDASTRUCTURE, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share numbers)


	June 30, 2026			December 31, 2025
	(unaudited)			(as revised)
ASSETS
Current assets:
Cash and cash equivalents	$	3,807		$	8,453
Accounts receivable		1,014			874
Inventory		282			304
Other current assets		558			186
Total current assets		5,661			9,817

Non-current assets:
Fixed assets, net		298			305

TOTAL ASSETS	$	5,959		$	10,122

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	237		$	531
Accrued expenses		97			8
Deferred revenue		674			590
Derivative liability		–			1,321
Preferred Dividends Payable		134			83
Total current liabilities		1,142			2,533

Note Payable, maturing July 30, 2027		1,300			–
Total long-term liabilities		1,300			–

TOTAL LIABILITIES		2,442			2,533

TEMPORARY EQUITY:
Preferred Stock, $0.0001 par value; 0 and 5,166 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively		–			4,187
STOCKHOLDERS' EQUITY:
Class A common stock, $0.0001 par value; 8,333,333 shares authorized; 832,872 and 796,859 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively*		3			3
Class B common stock, $0.0001 par value; 3,333,333 shares authorized; 190 and 190 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively*		–			–
Preferred Stock, $0.0001 par value; 5,000,000 shares authorized; 3,911 and 0 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively		–			0
Additional paid-in capital		59,318			53,987
Accumulated deficit		(55,794	)		(50,586	)
Accumulated other Comprehensive Income		(10	)		(2	)
TOTAL TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY		3,517			7,589

TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY	$	5,959		$	10,122

* - The number of shares presented above is adjusted retrospectively to reflect the 1-for-30 reverse stock split effected on July 31, 2026. The number of authorized common and preferred shares presented above is adjusted retrospectively to reflect the change in the article of incorporation effected on July 31, 2026.

See accompanying notes to the unaudited financial statements.

CLOUDASTRUCTURE, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share numbers)


	Three Months Ended						Six Months Ended
	June 30, 2026			June 30, 2025			June 30, 2026			June 30, 2025
(in thousands)	(unaudited)			(unaudited, as revised)			(unaudited)			(unaudited, as revised)
Revenues	$	1,233		$	1,086		$	2,548		$	1,824
Cost of goods sold		(623	)		(686	)		(1,228	)		(1,094	)
Gross profit (loss)		610			400			1,320			730

Operating expenses:
General and administrative		839			993			2,222			2,075
Research and development		570			539			1,275			1,308
Sales and marketing		943			622			1,856			1,434
Operations		359			171			671			274

Total operating expenses		2,712			2,324			6,025			5,091

Loss from operations		(2,102	)		(1,924	)		(4,705	)		(4,360	)

Other income/(expenses), net:
Interest income		56			73			95			82
State & sales taxes		(4	)		(2	)		(87	)		(4	)
Change in fair value of derivative liabilities		319			(334	)		191			81
Net loss	$	(1,731	)	$	(2,186	)	$	(4,505	)	$	(4,201	)

Deemed dividend for original issue discount on preferred shares		(122	)		(961	)		(571	)		(1,262	)
Net Loss Available to Common Stockholders	$	(1,853	)	$	(3,147	)	$	(5,076	)	$	(5,463	)


Basic and diluted (loss) per share of Class A and Class B common stock	$	(2.32	)	$	(5.52	)	$	(6.33	)	$	(9.95	)
Weighted Average Shares*		797,585			570,563			802,323			548,897

* The Company’s Weighted Average Shares for the three and six months ended June 30, 2026 and June 30, 2025 have been retroactively restated for the reverse stock split as described in the footnotes.

See accompanying notes to the unaudited financial statements.

CLOUDASTRUCTURE, INC.

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

For the periods ended June 30, 2026

(in thousands, except share and per share numbers)


	Three Months Ended June 30,						Six Months Ended June 30,
	2026			2025			2026			2025
Net Loss	$	(1,731	)	$	(2,186	)	$	(4,505	)	$	(4,201	)
Other comprehensive income (loss):
Change in foreign currency translation adjustment, net of tax		(5	)		–			(8	)		–
Comprehensive Loss	$	(1,736	)	$	(2,186	)	$	(4,513	)	$	(4,201	)

See accompanying notes to the unaudited financial statements.

CLOUDASTRUCTURE, INC.

Condensed Consolidated Statements of Temporary Equity and Stockholders’ Equity (Deficit) (Unaudited)

For the six months ended June 30, 2026

(in thousands, except share and per share numbers)

Temporary Equity Preferred Stock

Common Stock
Class A

Common Stock

Class B

Permanent Equity
Preferred Stock

Additional Paid-in Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

Total Stockholders' Equity (Deficit)

Total

Amount

Shares*

Amount

Shares*

Amount

Balance as of December 31, 2025 (As Revised)

5,166

4,187

796,859

190

–

53,987

(50,586

)

3,402

7,589

Issuance of Preferred Stock, net of embedded derivative bifurcation

–

Conversion of Preferred Stock to Class A common stock

(280

)

(311

)

18,221

–

388

–

388

Preferred stock deemed dividends and accretion

–

261

–

(449

)

–

(395

)

(134

)

Stock-based compensation

–

414

–

414

Common stock activity

–

11,125

–