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zSpace, Inc.

zSpace, Inc.ZSPC決算レポート

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zSpace, Inc. is an American technology firm based in San Jose, California that delivers virtual and augmented reality experiences in STEM, CTE, and career readiness programs from a computer. zSpace mostly provides AR/VR technology to the education market, allowing teachers and learners to interact with simulated objects in virtual environments.

What changed in zSpace, Inc.'s 10-K — 2024 vs 2025

Top changes in zSpace, Inc.'s 2025 10-K

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Item 1. Business

Business — how the company describes what it does

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Our hands-on “learning by doing” solutions have been shown to enhance the learning process and drive higher student test scores, as evidenced by a study on the utility of 3D virtual reality technologies for student knowledge gains published in the Journal of Computer Assisted Learning in 2021.
Our hands-on “learning by doing” products have been shown to enhance the learning process and drive higher student test scores, as evidenced by a study on the utility of 3D virtual reality technologies for student knowledge gains published in the Journal of Computer Assisted Learning in 2021.
In international markets, we exclusively utilize an indirect partner go-to-market approach, and we have found that these third-party resellers offer strong relationships in particular schools or geographies. We believe this structure allows us to market our solutions effectively and efficiently to public schools of all sizes across the world. ● Direct sales.
In international markets, we utilize an indirect partner go-to-market approach, and we have found that these third-party resellers offer strong relationships in particular schools or geographies. We believe this structure allows us to market our solutions effectively and efficiently to public schools of all sizes across the world.
Our stylus works together with the eye-tracking technology in our products to read the position of the user’s body and respond to movements throughout the interaction, creating a natural, comfortable and effortless experience. Each stylus includes three buttons designed to map the buttons on a traditional mouse to provide a familiar interface model for the user.
Our styluses, working together with the eye-tracking technology in our products to read the position of the user’s body and respond to movements throughout the interaction, creating a natural, comfortable and effortless experience. Each stylus includes three buttons designed to map the buttons on a traditional mouse to provide a familiar interface model for the user.
Additionally, potential customers might evaluate our products against a non-immersive alternative such as a 2D human anatomy web-based experience rather than the immersive content available on our platform. 13 Table of Contents Competitors in the education technology ecosystem include: ● Companies that provide technology solutions and services to educators and students, such as Chegg, Coursera, Docebo, Duolingo, Instructure, Kahoot, Powerschool, and Udemy; ● CTE companies such as A Cloud Guru Ltd., Degreed, Inc., LinkedIn Corporation through its LinkedIn Learning services, Pluralsight, Inc. and Udacity, Inc.; ● Companies that operate in the virtual technology market, such as Apple, Google, Meta Platforms, Matterport Inc and Unity Software; ● Providers of free educational resources such as Khan Academy, Inc., The Wikipedia Foundation, Inc. and Google LLC through its YouTube services; and ● AR/VR focused companies such as ClassVR, Inception XR, Interplay Learning, Umety Solutions Ltd, Transfr VR Victory XR.
Additionally, potential customers might evaluate our products against a non-immersive alternative such as a 2D human anatomy web-based experience rather than the immersive content available on our platform. 9 Table of Contents Competitors in the education technology ecosystem include: ● Companies that provide technology solutions and services to educators and students, such as Chegg, Coursera, Docebo, Duolingo, Instructure, Kahoot, Powerschool, and Udemy; ● CTE companies such as Degreed, Inc., LinkedIn Corporation through its LinkedIn Learning services and Pluralsight, Inc.; ● Companies that operate in the virtual technology market, such as Apple, Google, Meta Platforms, Matterport Inc and Unity Software; ● Providers of free educational resources such as Khan Academy, Inc., The Wikipedia Foundation, Inc. and Google LLC through its YouTube services; and ● AR/VR focused companies such as Avantis Education, Prisms VR, Interplay Learning, Umety Solutions Ltd, Transfr VR and Victory XR.
Facilities Our corporate headquarters is located in a leased facility in San Jose, California. The facility is approximately 6,464 square feet, and our lease of this facility expires in January 2026. We believe this facility is adequate for the needs of our business.
Facilities Our corporate headquarters is located in a leased facility in San Jose, California. The facility is approximately 6,464 square feet, and our lease of this facility expires in October 2027. We believe this facility is adequate for the needs of our business.
We have deployed a multi-channel sales approach to reach potential customers. In general, in the United States, we employ a combination of a direct sales approach and a channel partner approach to expand our reach with the aim of providing a frictionless, convenient purchase process for customers.
In general, in the United States, we employ a combination of a direct sales approach and a channel partner approach to expand our reach with the aim of providing a frictionless, convenient purchase process for customers.
Our K-12 platform is currently deployed in over 80% of the largest 100 K-12 public school districts in the United States, as measured by student enrollment, and our CTE solutions have been deployed in approximately 73% of those public school districts we serve. Our CTE solutions have also been deployed in approximately 2% of United States community and technical colleges.
Our K-12 platform is currently deployed in over 80% of the largest 100 K-12 public school districts in the United States, as measured by student enrollment, and our CTE solutions have been deployed in approximately 73% of those public school districts we serve.
Such acquisitions, if completed, are intended to be accretive to earnings and materially increase our software revenue. ● Scale within the United States education market. We expect to continue to drive growth by increasing marketing efforts, expanding use cases and introducing new applications within the United States.
Such acquisitions, if completed, are intended to be accretive to earnings and materially increase our software revenue. ● Continued Focus in the United States education market . We expect to continue to drive growth by expanding use cases and introducing new applications within the United States.
In the K-12 market, we offer applications in areas such as Science, Health and Math, and in the CTE markets we provide applications in key areas such as Automotive, Advanced Manufacturing, Health and Agri-Sciences.
In the K-12 market, we offer applications in areas such as Science, Health and Math, and in the CTE markets we provide applications in key areas such as Automotive, Advanced Manufacturing, Health and Agri-Sciences. 8 Table of Contents ● Services .
With a specialized optical lens and eye-tracking technology, a set of images for each eye is created and directly projected through the lens to where the eyes are looking for a unique 3D experience. We deliver each Inspire laptop with our patented hand-held stylus, which allows users to interact with and manipulate 3D images.
With a specialized optical lens and eye-tracking technology, a set of images for each eye is created and directly projected through the lens to where the eyes are looking for a unique 3D experience. We deliver each Inspire laptop with our patented hand-held stylus. ● Imagine Laptops . Our Imagine laptops are focused on elementary school students.
According to market analysis by Grand View Research, the global education technology market was valued at $142.4 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 13.6% from 2023 to 2030.
Competitive Business Conditions According to market analysis by Grand View Research, the global education technology market was valued at $163.5 billion in 2024 and is expected to grow at a compound annual growth rate (CAGR) of 13.3% from 2025 to 2030.
Item 1. Business Our Company We are a leading provider of augmented reality (AR) and virtual reality (VR) educational technology solutions. We believe that we are a recognized brand in the education market with a current focus on both United States K-12 schools and Career & Technical Education (CTE) markets.
Item 1. Business Our Company We are a leading provider of augmented reality (AR) and virtual reality (VR) educational technology products. We focus on United States K-12 schools, the Career & Technical Education (CTE) sector and select international markets.
Such acquisitions, if completed, are intended to be accretive to earnings and materially increase our software revenues. From a technology perspective, graphics and speed of computing have increased exponentially over time, but the physical computing experience has remained largely static since the introduction of the mouse and touchscreen in the 1980s.
From a technology perspective, graphics and speed of computing have increased exponentially over time, but the physical computing experience has remained largely static since the introduction of the mouse and touchscreen in the 1980s.
Today, our platform is implemented in more than 3,500 of the approximately 13,000 United States public school districts.
Internationally, we rely exclusively on resellers to bring our products to those markets. Today, our platform is implemented in more than 3,500 of the approximately 13,000 United States public school districts.
In addition, we have partnered with over 25 resellers and have expanded our customer network into over 50 countries. We believe the applicability of our platform in education environments provides an opportunity for significant scale. Since 2014, we have been developing and delivering hardware and software technology focused on improving education in K-12 and CTE classrooms.
In addition, we have partnered with over 25 resellers and have expanded our customer network into over 50 countries. We believe the applicability of our products in education environments provides an opportunity for significant scale.
Our tracked stylus allows users to interact with the projection of the 3D information to provide a comfortable and realistic experience as well as the precise interaction with the virtual objects in open space.
Our patented tracked styluses allow users to interact with the projection of the 3D information from our laptops to provide a comfortable and realistic experience as well as the precise interaction with the virtual objects in open space. It allows students to bring objects out of the screen and interact with them as if they were real objects.
Unpatented research, development, know-how and engineering skills make an important contribution to our business, but we pursue patent protection when we believe it is possible and consistent with our overall strategy for safeguarding intellectual property.
Unpatented research, development, know-how and engineering skills make an important contribution to our business, but we pursue patent protection when we believe it is possible and consistent with our overall strategy for safeguarding intellectual property. As of December 31, 2025, we had over 80 patents issued, and more than ten United States and foreign patent applications that are pending.
Our board of directors oversees matters relating to managing our human capital resources. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. We believe we offer competitive compensation and benefits packages, the principal purposes of which are to attract, retain and motivate our employees.
None of our employees are represented by a labor union or subject to a collective bargaining agreement. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing 11 Table of Contents and additional employees. We believe we offer competitive compensation and benefits packages, the principal purposes of which are to attract, retain and motivate our employees.
We also employ part-time subject matter experts and engage consultants and contractors to supplement our permanent workforce. 14 Table of Contents To date, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing. None of our employees are represented by a labor union or subject to a collective bargaining agreement.
Human Capital Resources Our employees are critical to our success. As of December 31, 2025, we had 54 full-time employees. We also employ part-time subject matter experts and engage consultants and contractors to supplement our permanent workforce. To date, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing.
Further, according to Insight Partners, the global AR, VR and mixed reality market is expected to grow at a 37% CAGR to $252 billion by 2028 compared to $28 billion in 2021. Markets and Markets Research predicts that spending on AR and VR in the education market globally will grow to $14.2 billion by 2028 (CAGR of 30% from 2023).
Markets and Markets Research predicts that spending on AR and VR in the education market globally will grow to $14.2 billion by 2028 (CAGR of 30% from 2023). The markets that we serve are highly competitive.
Our platform serves a broad range of critical educational tools designed for K-12 science, technology, engineering and math (STEM) lessons as well as training skilled trades in areas such as health sciences, automotive engineering/repair, Unity3D ® software programming and advanced manufacturing.
Our platform serves a broad range of educational tools designed for K-12 science, technology, engineering and math (STEM) lessons as well as training skilled trades in areas such as health sciences, automotive engineering/repair, Unity3D ® software programming and advanced manufacturing. 6 Table of Contents We sell our products directly to United States school districts, both as a primary educational tool in K-12 classrooms and as a career training solution, as well as to community college customers through both a direct sales and support team as well as regional resellers.
Our Customers We sell to education institutions, ranging from K-12 schools to community colleges, technical colleges and trade colleges, both directly and through our resellers. The majority of our customer base is comprised of United States public school districts, who purchase products as a primary K-12 educational tool and also to support career training education at the higher grade levels.
We expect to continue to leverage our position and increase our brand awareness to grow our customer base. Recent Developments The majority of our customer base consists of United States public school districts, who purchase products as a primary K-12 educational tool and also to support career training education at the higher grade levels.
The Imagine is 41% smaller and 30% lighter than the Inspire, making it easier for younger learners to use in the classroom. It also features a smaller, 14-inch screen, but similar CPU performance using the Intel 13th generation i7-1360P, ensuring sufficient performance for zSpace applications.
The Imagine, built with safety and comfort in mind for young learners, is smaller and lighter than the Inspire, making it easier for younger learners to use in the classroom. It also features a smaller screen, but similar CPU performance. ● Tracked styluses .
We have developed a network of trainers in the United States with education experience with the goal of making our customers’ experience with our products positive and effective. Internationally, we rely exclusively on resellers to provide these services to our customers.
Implementation and professional development services are part of the overall solution we offer to our customers so they can quickly use, and be fully trained on, our products. We have developed a network of trainers in the United States with education experience with the goal of making our customers’ experience with our products positive and effective.
Imagine is our fourth-generation laptop product launched in early 2025 and built in partnership with a different PC OEM than the Inspire or Inspire 2. Like the Inspire 2, the Imagine delivers autostereoscopic 3D graphics not requiring any eyewear or headset and uses the zSpace hand-held stylus. The Imagine was built with safety and comfort in mind for young learners.
They also were built in partnership with a major PC OEM. Like the Inspire, the Imagine delivers autostereoscopic 3D graphics not requiring any eyewear or headset and uses the zSpace hand-held stylus.
Outside the United States, certain Chinese companies have produced replicas of our original edition hardware products that require specialty eyewear, which we no longer produce or sell in the United States. We are currently not aware of any other companies producing or selling solutions substantially similar to our products.
Outside the United States, certain Chinese companies have produced replicas of our original edition hardware products that require specialty eyewear, which we no longer produce or sell in the United States. We have also found imitation products being sold at a small scale in the Middle East and Turkey.
We work closely with original equipment manufacturers (OEMs) to produce devices that deliver a 3D experience. 9 Table of Contents ● Inspire . Inspire is our second-generation laptop product launched in early 2022 and built in partnership with a major PC OEM. It is our first product that delivers autostereoscopic 3D graphics, not requiring any eyewear or headset.
Inspire is our current generation laptop product, built in partnership with a major PC OEM. It incorporates and delivers autostereoscopic 3D graphics not requiring any eyewear or headset.
We allow students and teachers to experience learning in the classroom that may otherwise be dangerous, impossible, counterproductive, or expensive using traditional techniques.
We believe that our platform leads to (i) deeper understanding of content, (ii) increased motivation of students to learn, (iii) additional engagement of students with content and (iv) improved preparedness for the workforce. We allow students and teachers to experience learning in the classroom that may otherwise be dangerous, impossible, counterproductive, or expensive using traditional techniques.
In addition, we rely upon a third-party partner located in China to manufacture our stylus. Certain components of our stylus sensor module are sourced in Asia and manufactured in the United States. Sales and Marketing We believe we have developed a scalable go-to-market business built upon the strength of our platform and a targeted sales approach designed for education customers.
Sales and Marketing We believe we have developed a scalable go-to-market business built upon the strength of our platform and a targeted sales approach designed for education customers. We have deployed a multi-channel sales approach to reach potential customers.
Research and Development Our R&D team is headquartered in San Jose, California, with engineering resources situated throughout the United States. The R&D team has extensive experience in many key engineering disciplines including electrical engineering, firmware development, software application development and quality assurance.
The R&D team has extensive experience in many key engineering disciplines including electrical engineering, firmware development, software application development and quality assurance. Intellectual Property Our ability to drive innovation in our business depends in part upon our ability to protect our core technology and intellectual property.
These include: ● Targeted software growth via both software acquisitions and application acquisitions. We intend to pursue software acquisitions, both specific software applications and third-party software developers, in order to increase the growth of our software offerings.
In this context, we are focused on scaling execution across a carefully selected set of growth vectors. These include: ● Targeted software growth via additional application acquisition. We intend to pursue additional software applications in order to increase the growth of our software offerings.
Our Competitive Strengths We believe that we have a number of competitive strengths that will enable us to grow our business. Our competitive strengths include: ● Breadth and depth of our platform . Our platform is focused on delivering virtual interactive learning capabilities to the education market.
We are currently not aware of any other companies producing or selling solutions substantially similar to our products. We believe that we have a number of competitive strengths that will enable us to grow our business. Our competitive strengths include: ● Breadth and depth of our platform .
Because the stylus is wired, charging is unnecessary and removal of the stylus from our devices is discouraged. The stylus also supports haptic feedback, allowing applications to provide a physical response to engaging in the learning process, enhancing realism and providing distinct feedback to the user. ● Original Edition (OE) Products .
The buttons on the stylus perform different actions depending on the application. The styluses also support haptic feedback allowing applications to provide a physical response to engagement in the learning process, enhancing realism and providing distinct feedback to the user. ● Software .
Going forward, we plan to continue to expand our content library and platform to address the needs of our current and future customers. We also plan to increase investments in specific sales and marketing initiatives to increase sales efficiency and increase users and growth in renewing software revenue.
Going forward, we plan to continue to expand our content library and platform to address the needs of our current and future customers. Research and Development Our R&D team is headquartered in San Jose, California, with engineering resources situated throughout the United States.
From our technology design to content development, our products have the ability to deliver value across the world-wide education spectrum. The same platform can be used by third 11 Table of Contents grade learners and college students.
Our platform is focused on delivering virtual interactive learning capabilities across the worldwide education spectrum. The same platform can be used by third grade learners and college students.
Government Regulation We are subject to various laws, regulations and permitting requirements of federal, state and local authorities, including those related to the education industry, conducting business on the Internet, data privacy and data security, export controls and other laws and regulations of general applicability to employers and companies in general.
Government Regulation We are subject to various federal, state, local and foreign laws and regulations that affect our business, including those related to the education industry, data privacy, and data security. Because our hardware supply chain and sales reach international markets, we are also subject to complex trade restrictions. These include economic sanctions administered by the U.S.
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We sell our platform directly to United States school districts, both as a primary educational tool in K-12 classrooms and as a career training solution, as well as to community college customers through both a direct sales and support team as well as regional resellers. Internationally, we rely exclusively on resellers to bring our products to those markets.
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You can find additional information on our website at www.zspace.com . The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this Annual Report on Form 10-K. ​ Our Products Our platform consists of three key components — hardware, software and services. ● Hardware.
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We believe that our platform leads to (i) deeper understanding of content, (ii) increased motivation of students to learn, (iii) additional engagement of students with content and (iv) improved preparedness for the workforce. We believe that we have significant growth potential and that we have demonstrated a repeatable value proposition and the ability to scale our sales growth model.
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Our proprietary hardware is the enabler of the 3D learning experience on our platform, allowing students to interact directly with complex, spatial, and abstract concepts . We work closely with original equipment manufacturers (OEMs) to produce devices that deliver a 3D experience. ​ 7 Table of Contents ● Inspire Laptops .
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With a mature and tested go-to-market playbook and team in place, we are focused on execution across a carefully selected set of growth vectors, including scaling in the United States, expanding internationally, investing in research and development (“R&D”), and acquiring software, both specific software applications and third party software developers, in order to increase the growth of our 7 Table of Contents software offerings.
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Internationally, we rely exclusively on resellers to provide these services to our customers. Manufacturing and Suppliers We utilize an outsourced manufacturing model for the production of our hardware and peripheries. We do not own or operate any manufacturing facilities. Instead, we rely on third-party contract manufacturers and original equipment manufacturers (OEMs) to produce our products in accordance with our specifications.
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We hope to accomplish this through a range of proprietary innovations in hardware and software that comprise the foundation of our educational platform. We believe that these innovations help to eliminate a barrier between digital content and students so that students can be immersed in content: manipulate it, experience it and interact with it as if it were real.
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We believe this asset-light approach allows us to minimize capital expenditures, scale production to meet demand, and leverage the purchasing power and supply chain expertise of our partners. For our core Inspire laptop, we rely on major personal computer OEMs.
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You can find additional information on our website at www.zspace.com .
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By partnering with established PC manufacturers, we are able to leverage their extensive global supply chain networks, component purchasing power, and quality control certifications. This relationship allows us to deliver high-performance hardware without the overhead of managing a bespoke computer manufacturing line. We rely on a specific third-party manufacturing partner located in China to assemble our proprietary stylus.
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The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this Annual Report on Form 10-K. ​ Our Industry and Market Opportunity We estimate, using data from national government sources specifying the number of schools within their regions, that our total addressable market (TAM) for the K-12 market is approximately $21.4 billion in the United States, $29.0 billion in Europe, Middle East and Africa region (EMEA) and $5.6 billion in the Asia Pacific region (APAC) and that our TAM for the CTE market is approximately $6.2 billion in the United States, $5.4 billion in EMEA and $0.8 billion in APAC, with an overall global TAM of greater than $68 billion.
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This partner is responsible for component procurement, final assembly, and quality assurance testing based on our proprietary designs. Because our stylus utilizes specialized tracking technology that is integral to the zSpace user experience, this manufacturing relationship is critical to our product delivery. In addition, we rely on third-party software developers to create and maintain appropriate software products for our platform.
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Our TAM for the K-12 market is an estimate of the revenue that we would receive over a five-year period assuming that each public school in the applicable region purchases one “lab” (consisting of 25 laptops and one cart) at our current prices.
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We engage these external development firms and contractors to augment our internal engineering teams, specifically to assist in the creation of educational content applications and system integrations.
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Such estimates include recurring annual revenue per laptop based on the average software subscription revenue we receive per unit per year from K-12 customers and assumes an 80% renewal rate.
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Relying on these third parties allows us to accelerate our content roadmap and offer a broader library of curriculum-aligned modules to our K-12 and CTE customers without bearing the full fixed costs of a large in-house content development staff.
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Our TAM for the CTE market is an estimate of the revenue that we would receive over a five-year period assuming that each school that offers vocational/CTE programs (including community colleges) in the applicable region purchases one “lab” (consisting of 27 laptops and one cart) at our current prices.
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Further, according to The Insight Partners, the global AR, VR and mixed reality market is expected to grow at a 37% CAGR to $647 billion by 2031 compared to $52 billion in 2023.
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Such estimates include recurring annual revenue based on the average software subscription revenue we receive per unit per year from CTE customers in such region and assumes an 80% renewal rate.
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These schools frequently rely on funding from the U.S. Department of Education (“US DoE”) for specific populations of students or strategic initiatives.
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We have estimated the number of schools in the K-12 market and the CTE market in the US/Canada region, EMEA region and APAC region based on data sourced from third parties, including the Institute of Education Science, the British Educational Suppliers Association, Statista, various governmental instrumentalities, articles and published papers.
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When this funding is unavailable, schools rarely cut the core classes and services; instead, they cut the specialized support services that federal money supports. 10 Table of Contents Our business in the United States K-12 market is significantly influenced by the availability of government funding.
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Over the past several years, a significant portion of our revenue was generated in the United States. For the year ended December 31, 2023, our revenue in the United States was $38.7 million and our revenue outside of the United States was $5.2 million, representing 88% and 12% of our total revenue, respectively.
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In previous years, our revenue growth was supported by substantial federal stimulus funding allocated to schools, such as the Elementary and Secondary School Emergency Relief (ESSER) funds. However, as these specific funding programs have expired or been fully allocated, the budgetary environment for our K-12 customers has tightened.
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For the year ended December 31, 2024, our revenue in the United States was $33.5 million and our revenue outside of the United States was $4.6 million, representing 88% and 12% of our total revenue, respectively.
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In addition, in January 2025, the current administration moved to make significant changes at the US DoE, including freezing federal grants and loans that many of our customers relied upon to purchase our products and services. The operational disruptions and funding freezes initiated at the U.S. DoE in early 2025 created a volatile contracting environment for the education technology sector.
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In 2023, our revenue in China was $2.8 million, representing 6% of our total revenue and in 2024, our revenue in China was $0.9 million, representing 2% of our total revenue.
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As the administration moved to withhold federal grants and signal a potential dissolution of the agency, school districts—already grappling with the expiration of pandemic-era ESSER funds—adopted a defensive spending posture, freezing capital outlays to preserve cash for essential operations.
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We are in the process of focusing on expanding our business in the United States and elsewhere, and we expect the percentage of our total revenue generated from China in 2025 to be lower than in 2024. ​ 8 Table of Contents Our Learning Platform Key elements of our platform include: The ability for users to easily understand abstract concepts.
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This resulted in extended sales cycles for zSpace and a decrease in capital expenditures by schools, which has caused a decline in our revenue from this sector. We expect that our future results will continue to be sensitive to the cyclical nature of state and federal education budgets.
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Our products have the ability to deliver an interactive, autostereoscopic 3D experience, allowing students to interact directly with complex, spatial, and abstract concepts. Our products integrate the latest AR/VR technology with science, math, and career training applications that empower students to learn in a 3D world without the fear of making mistakes. An immersive 3D experience using familiar hardware.
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Treasury’s Office of Foreign Assets Control (OFAC), U.S. export control laws, and anti-corruption regulations such as the U.S. Foreign Corrupt Practices Act (FCPA) and the U.K. Bribery Act. These laws prohibit business with certain embargoed countries, sanctioned persons, and restricted entities.
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Traditionally, AR/VR technology has required complicated hardware, including glasses or goggles, that is difficult to incorporate into a classroom setting and limits collaboration. Our 3D experience uses a laptop without the need for any external eyewear.
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As U.S. export policies evolve, particularly regarding technology manufacturing in Asia, we may face increased compliance costs or administrative burdens.
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Using our patented hand-held stylus device, which functions like a pen, interactions are designed to be simple and familiar so customers can feel more comfortable bringing the latest technology into classrooms. Our platform is designed to work with natural gestures and movements to allow learners to manipulate objects in a 360-degree experience outside the confines of the screen.
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Effective kinesthetic learning tools. Our products leverage hands on, kinesthetic learning (i.e., using body movements to interact with learning environments). With built-in eye-tracking technology and our patented hand-held stylus device, learners naturally move their heads and rotate their wrists as they pick-up, dissect, and interact with virtual objects.
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We believe that engaging tactile learning with movement, testing, and trial and error in a non-traditional learning environment can support retention and recall of information. Our Products Our platform consists of three key components — proprietary hardware, software and services. ● Hardware. Our hardware is the enabler of the 3D learning experience on our platform.
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When not being used in 3D stereo, the screen provides 2D color accuracy, including 100% Adobe RGB color gamut and Delta E ● Inspire 2: Inspire 2 is our third-generation laptop product launched in late 2024 and built in partnership with a major PC OEM.
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It is our second product that delivers autostereoscopic 3D graphics not requiring any eyewear or headset. We continue to deliver each Inspire 2 laptop with our patented hand-held stylus, which allows users to interact with and manipulate 3D images.
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While having the same visual performance as the Inspire, the Inspire 2 laptops feature a 20 - 22% boost in processing and graphics performance, run zSpace applications longer on battery power, and are 16% lighter than previous models, making it more portable and accessible for active learning environments. ● Imagine .
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The Imagine is sold as part of an Elementary focused solution that includes the Imagine Laptops with a 3-year warranty, interactive software, curriculum-aligned lessons, and professional learning, all designed to be used in an elementary classroom. ● Tracked stylus .
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Our patented hand-held stylus device allows for freedom of movement, enabling students to use our products with familiar movements and interactions that they commonly perform, such as rotating their wrists naturally as they examine and manipulate 3D visuals. It allows students to bring objects out of the screen and interact with them as if they were real objects.
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The buttons on the stylus perform different actions depending on the application. 10 Table of Contents Our hand-held stylus device is designed to leverage the experience all students have with using a pen/ pencil. It is sized to be comfortable for both adult and child users when held like a pen/pencil in either the right or left hand.
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Our all-in-one products and OE laptop were our initial product offerings that used a proprietary passive circular polarized display to create comfortable 3D stereo using lightweight eyewear. We are no longer producing our OE products, although we continue to sell existing inventory outside of the US. ● Software .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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In 2024, our five largest customers accounted for approximately $9.8 million of revenue and our largest customer accounted for $4.9 million of revenue, representing approximately 26% and 13% of our total 2024 revenue, respectively.
In 2024, our five largest customers accounted for $9.8 million of revenue and our largest customer accounted for $4.9 million of revenue, representing approximately 26% and 13% of our total 2024 revenue, respectively.
The price of our common stock may fluctuate due to a variety of factors, including: ● actual or anticipated fluctuations in our user growth, retention, engagement, revenue or other operating results; ● developments involving our competitors; ● variations between our actual operating results and the expectations of securities analysts, investors and the financial community; ● actual or anticipated fluctuations in quarterly or annual operating results; ● any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; ● publication of research reports by securities analysts about us, our competitors or our industry; ● the public’s reaction to our press releases, our other public announcements and our filings with the SEC; 41 Table of Contents ● additional shares of common stock being sold into the market by us or our stockholders, or the anticipation of such sales, or the sale of shares by existing stockholders subject to lock-up agreements into the market, when applicable “lock-up” periods end; ● additions and departures of key personnel; ● commencement of, or involvement in, litigation involving us; ● changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; ● the number of shares of common stock available for public sale; ● announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; ● announcements by us or estimates by third parties of actual or anticipated changes in the number of our customers or the level of user engagement; ● changes in operating performance and stock market valuations of technology companies in our industry, including our partners and competitors; ● price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole, including interest rate changes and inflation; ● developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and ● other events or factors, including those resulting from wars, recessions, instability in the global banking system, local and national elections, international currency fluctuations, corruption, political instability and acts of terrorism.
The price of our common stock may fluctuate due to a variety of factors, including: ● actual or anticipated fluctuations in our user growth, retention, engagement, revenue or other operating results; ● developments involving our competitors; ● variations between our actual operating results and the expectations of securities analysts, investors and the financial community; ● actual or anticipated fluctuations in quarterly or annual operating results; ● any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; ● publication of research reports by securities analysts about us, our competitors or our industry; ● the public’s reaction to our press releases, our other public announcements and our filings with the SEC; ● additional shares of common stock being sold into the market by us or our stockholders, or the anticipation of such sales, or the sale of shares by existing stockholders subject to lock-up agreements into the market, when applicable “lock-up” periods end; ● additions and departures of key personnel; ● commencement of, or involvement in, litigation involving us; ● changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; ● the number of shares of common stock available for public sale; 32 Table of Contents ● announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; ● announcements by us or estimates by third parties of actual or anticipated changes in the number of our customers or the level of user engagement; ● changes in operating performance and stock market valuations of technology companies in our industry, including our partners and competitors; ● price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole, including interest rate changes and inflation; ● developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and ● other events or factors, including those resulting from wars, recessions, instability in the global banking system, local and national elections, international currency fluctuations, corruption, political instability and acts of terrorism.
Any proceedings, claims or inquiries involving our company, whether successful or not, may be time consuming, result in costly litigation, unfavorable outcomes or increased costs of business, require us to change our business practices or platform, require significant amount of management’s time or may harm our reputation or otherwise harm our business, operating results, and financial condition.
Any proceedings, claims or inquiries involving our company, whether successful or not, may be time consuming, result in costly litigation, unfavorable outcomes or increased costs of business, require us to change our business practices or platform, require a significant amount of management’s time or may harm our reputation or otherwise harm our business, operating results, and financial condition.
We are also required to manage multiple relationships with customers and other third parties. Further growth of our operations, our information technology systems or our internal controls and procedures may not be adequate to support our operations. We will need to continue to improve our operational, financial and management controls and reporting systems and procedures.
We are also required to manage multiple relationships with customers and other third parties. Further growth of our operations, our information technology (“IT”) systems or our internal controls and procedures may not be adequate to support our operations. We will need to continue to improve our operational, financial and management controls and reporting systems and procedures.
Companies in the Internet, technology and education industries typically own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights.
In addition, companies in the Internet, technology and education industries typically own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to capital markets.
In the United States and internationally, we have filed various applications for protection of certain aspects of our intellectual property, and we currently hold issued patents and copyrights in the United States and foreign jurisdictions, and multiple trademark registrations in the United States and other foreign countries.
In the United States and internationally, we have filed various applications for protection of certain aspects of our intellectual property, and we currently hold issued patents and copyrights in the United States and foreign jurisdictions, and trademark registrations in the United States and other foreign countries.
This level of indebtedness could: ● unless refinanced, require us to dedicate a substantial portion of our cash to the payment of principal and interest on our indebtedness, thereby reducing the amount of funds to be used for working capital, acquisitions, product development, capital expenditures and other general corporate purposes; ● limit our ability to obtain additional financing; ● limit our ability to refinance indebtedness or cause the associated costs of such refinancing to increase; ● increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; and 22 Table of Contents ● place us at a competitive disadvantage compared to our competitors with proportionately less debt or comparable debt at more favorable interest rates which, as a result, may be better positioned to withstand economic downturns.
This level of indebtedness could: ● unless refinanced, require us to dedicate a substantial portion of our cash to the payment of principal and interest on our indebtedness, thereby reducing the amount of funds to be used for working capital, acquisitions, product development, capital expenditures and other general corporate purposes; ● limit our ability to obtain additional financing; ● limit our ability to refinance indebtedness or cause the associated costs of such refinancing to increase; ● increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; and ● place us at a competitive disadvantage compared to our competitors with proportionately less debt or comparable debt at more favorable interest rates which, as a result, may be better positioned to withstand economic downturns.
Due to the nature of the remediation process and the need to allow adequate time after implementation to evaluate and test the effectiveness of the controls, no assurance can be given as to the timing and cost of full remediation.
Due to the nature of the remediation process and the need to allow adequate time after implementation to evaluate and test the effectiveness of the controls, no assurance can be given as to the timing or cost of full remediation.
Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2024, which stated that management has concluded that substantial doubt exists about our ability to continue as a going concern for one year after the date our consolidated financial statements are issued.
Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2025, which stated that management has concluded that substantial doubt exists about our ability to continue as a going concern for one year after the date our consolidated financial statements are issued.
If we are unable to retain employees, or if we need to increase our compensation expenses to retain our employees, our business, operating results and financial condition could be adversely affected. 23 Table of Contents If we fail to effectively expand our sales and marketing capabilities, we could harm our ability to increase our customer base and achieve broader market acceptance of our platform.
If we are unable to retain employees, or if we need to increase our compensation expenses to retain our employees, our business, operating results and financial condition could be adversely affected. 18 Table of Contents If we fail to effectively expand our sales and marketing capabilities, we could harm our ability to increase our customer base and achieve broader market acceptance of our platform.
Were it determined that our use was not in compliance with a particular license, we 39 Table of Contents could be required to release our proprietary source code, defend claims, pay damages for breach of contract or copyright infringement, grant licenses to our patents, re-engineer our platform, or take other remedial action that may divert resources away from our product development efforts, any of which could negatively impact our business.
Were it determined that our use was not in compliance with a particular license, we could be required to release our proprietary source code, defend claims, pay damages for breach of contract or copyright infringement, grant licenses to our patents, re-engineer our platform, or take other remedial action that may divert resources away from our product development efforts, any of which could negatively impact our business.
A number of factors influence the time and effort required for us to make sales, including, for example, the purchasing approval processes of potential customers, which are typically public school districts with a large number of stakeholders involved in decision-making, the need to educate potential customers about the uses and benefits of our products, the discretionary nature of potential customers’ purchasing and budget cycles and fluctuations in the needs of 19 Table of Contents potential customers.
A number of factors influence the time and effort required for us to make sales, including, for example, the purchasing approval processes of potential customers (which are typically public school districts with a large number of stakeholders involved in decision-making), the need to educate potential customers about the uses and benefits of our products, the discretionary nature of potential customers’ purchasing and budget cycles and fluctuations in the needs of potential customers.
As a result of any of the foregoing, we may ultimately be unable to recover the full investment that we make in a new offering or achieve any level of profitability from such offering. If we fail to manage our inventory and supply chain effectively, our business, financial condition and results of operations may be materially and adversely affected.
As a result of any of the foregoing, we may ultimately be unable to recover the full investment that we make in a new offering or achieve any level of profitability from such offering. 16 Table of Contents If we fail to manage our inventory and supply chain effectively, our business, financial condition and results of operations may be materially and adversely affected.
We also accept safety stock of long lead time items. If we overestimate our requirements, we and our contract manufacturers will have excess inventory, increasing our costs and the amount of our capital tied up in inventory.
We also maintain safety stock of long lead time items. If we overestimate our requirements, we and our contract manufacturers will have excess inventory, increasing our costs and the amount of our capital tied up in inventory.
Computer malware, viruses, physical or electronic break-ins and similar disruptions could lead to interruption and delays in our services and operations and loss, misuse or theft of data. Computer malware, viruses, ransomware, hacking and 40 Table of Contents phishing attacks against online networks have become more prevalent and may occur on our systems in the future.
Computer malware, viruses, physical or electronic break-ins and similar disruptions could lead to interruption and delays in our services and operations and loss, misuse or theft of data. Computer malware, viruses, ransomware, hacking and phishing attacks against online networks have become more prevalent and may occur on our systems in the future.
We cannot be certain that pending or future United States or foreign trademark applications will be approved in a timely manner or at all, or that such registrations will effectively protect our brand names and trademarks. Third parties may also oppose our trademark applications, or otherwise 37 Table of Contents challenge our use of the trademarks.
We cannot be certain that pending or future United States or foreign trademark applications will be approved in a timely manner or at all, or that such registrations will effectively protect our brand names and trademarks. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks.
If new technologies emerge that are able to deliver AR/VR learning tools at lower prices, more efficiently, more conveniently or more securely than ours, and if we fail to adopt such technologies or do so in a timely manner, our ability to compete would be adversely affected.
If new technologies emerge that deliver AR/VR learning tools at lower prices, more efficiently, more conveniently or more securely than ours, and if we fail to adopt such technologies or do so in a timely manner, our ability to compete effectively would be adversely affected.
Our operating results in any given quarter can be influenced by numerous factors, many of which are unpredictable or are outside of our control, including: ● our ability to generate revenues from our platform; ● our ability to attract and retain customers; ● our ability to recognize revenue or collect payments from customers or other third parties in a particular period; ● the ability of our third-party partners to manufacture and deliver our hardware, including due to global supply chain issues; ● fluctuations in spending by our customers due to availability of government funding and subsidies, episodic regional or global events, or other factors; ● the pricing of our product offerings; ● the timing, cost of and mix of our new and existing sales and marketing and promotional efforts; ● changes to our platform or the development and introduction of new products or services by our competitors; ● changes in local, state or federal regulations regarding education, particularly the introduction of limitations on education products or topics for the K-12 school population, including, for example, Florida’s Parental Rights in Education bill, which became effective as of July 1, 2022; ● system failures, disruptions, breaches of security or privacy, whether on our platform or on those of third parties, and the costs associated with any such breaches and remediation; ● negative publicity associated with our products; ● health epidemics, such as the COVID-19 pandemic, influenza, and other highly communicable diseases or viruses; ● the timing of incurring additional expenses, such as increases in sales and marketing or research and development expenses; ● adverse litigation judgments, settlements or other litigation-related costs; ● other changes in the legislative or regulatory environment, including with respect to education standards and privacy and cybersecurity, or actions by governments or regulators, including fines, orders or consent decrees; ● changes in United States generally accepted accounting principles; and 27 Table of Contents ● changes in domestic and global business and macroeconomic conditions, including as a result of increasing interest rates, inflation, instability in the global banking system, and global unrest including the wars in Gaza and Ukraine.
Our operating results in any given quarter can be influenced by numerous factors, many of which are unpredictable or are outside of our control, including: ● our ability to generate revenues from our platform; ● our ability to attract and retain customers; ● our ability to recognize revenue or collect payments from customers or other third parties in a particular period; ● the ability of our third-party partners to manufacture and deliver our hardware, including due to global supply chain issues; ● fluctuations in spending by our customers due to availability of government funding and subsidies, episodic regional or global events, or other factors; ● changes to our platform or the development and introduction of new products or services by our competitors; ● changes in local, state or federal regulations regarding education, particularly the introduction of limitations on education products or topics for the K-12 school population, including, for example, Florida’s Parental Rights in Education bill, which became effective as of July 1, 2022; ● system failures, disruptions, breaches of security or privacy, whether on our platform or on those of third parties, and the costs associated with any such breaches and remediation; ● negative publicity associated with our products; ● health epidemics, such as the COVID-19 pandemic, influenza, and other highly communicable diseases or viruses; ● the timing of incurring additional expenses, such as increases in sales and marketing or research and development expenses; ● adverse litigation judgments, settlements or other litigation-related costs; ● other changes in the legislative or regulatory environment, including with respect to education standards and privacy and cybersecurity, or actions by governments or regulators, including fines, orders or consent decrees; 21 Table of Contents ● changes in United States generally accepted accounting principles; and ● changes in domestic and global business and macroeconomic conditions, including as a result of increasing interest rates, inflation, instability in the global banking system, and global unrest, including the wars in the Middle East and Ukraine.
If any of our resellers or partners violate applicable laws or implements business practices that are regarded as unethical, the distribution of our products in those jurisdictions could be 26 Table of Contents interrupted, usage of our platform could decline, our reputation could be damaged, and we may be subject to liability.
If any of our resellers or partners violate applicable laws or implements business practices that are regarded as unethical, the distribution of our products in those jurisdictions could be interrupted, usage of our platform could decline, our reputation could be damaged, and we may be subject to liability.
Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in agreements and financing instruments, business prospects and such other factors 43 Table of Contents as our board of directors deems relevant.
Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in agreements and financing instruments, business prospects and such other factors as our board of directors deems relevant.
Our reputation and ability to attract, retain and serve our customers and to scale our product offerings and solutions are dependent upon the reliable performance of our platform and its underlying technical infrastructure. We have in the past experienced immaterial, and may in the future experience immaterial or material, interruptions in the performance 18 Table of Contents of our platform.
Our reputation and ability to attract, retain and serve our customers and to scale our product offerings and solutions are dependent upon the reliable performance of our platform and its underlying technical infrastructure. We have in the past experienced immaterial, and may in the future experience immaterial or material, interruptions in the performance of our platform.
As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases. If analysts do not publish research about our business or if they publish inaccurate or unfavorable research, our stock price and trading volume could decline.
As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases. 34 Table of Contents If analysts do not publish research about our business or if they publish inaccurate or unfavorable research, our stock price and trading volume could decline.
Our Charter provides that the federal district courts of the United States will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum 45 Table of Contents Provision”).
Our Charter provides that the federal district courts of the United States will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”).
The regulatory framework for privacy, information security, data protection and processing worldwide and interpretations of existing laws and regulations is likely to continue to be uncertain and current or future legislation or regulations in the United States and other jurisdictions, or new interpretations of existing laws and regulations, could significantly restrict or impose conditions on our ability to process data we use in our business operations.
The regulatory framework for privacy, information security, data protection and processing worldwide and interpretations of existing laws and regulations is likely to continue to be uncertain and current or future legislation or regulations in the United States and other jurisdictions, or new interpretations of existing laws and regulations, could significantly restrict or impose conditions on our ability to process data we use in our business operations, which could affect our operating results.
In connection with the preparation of our financial statements for the years ended December 31, 2023 and 2024, we concluded that there were five material weaknesses in our internal control over financial reporting.
In connection with the preparation of our financial statements for the years ended December 31, 2024 and 2025, we concluded that there were material weaknesses in our internal control over financial reporting.
With respect to any intellectual property claims, we may have to seek a license to continue using technologies or engaging in practices found to be in violation of a third-party’s rights, which may not be available on reasonable terms and may significantly increase our operating expenses (for example, by being required to pay significant royalties in connection with such licenses).
We may have to seek a license to continue using technologies or engaging in practices found to be in violation of a third-party’s rights, which may not be available on reasonable terms and may significantly increase our operating expenses (for example, by being required to pay significant royalties in connection with such licenses).
If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our stockholders, including you, could suffer significant dilution in their percentage ownership of us, and any new securities that we issue could have rights, preferences and privileges senior to those of holders of our common stock.
Because we will likely need to raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our stockholders, including you, could suffer significant dilution in their percentage ownership of us, and any new securities that we issue could have rights, preferences and privileges senior to those of holders of our common stock.
We expect to continue to require additional capital from equity or debt financing in the future to support our growth, fund our operations or to respond to competitive pressures or strategic opportunities. We may not be able to secure additional financing on favorable terms or at all.
We expect that we will require additional capital from equity or debt financing in the near future to support our growth, fund our operations or to respond to competitive pressures or strategic opportunities. We may not be able to secure additional financing on favorable terms or at all.
As a result, our business, operating results and financial condition would be adversely affected. The failure of our information technology (“IT”) systems or a security breach involving customer or employee personal data, and the remediation of any such failure or breach, could materially impact our reputation and adversely affect our business, results of operations or financial condition.
As a result, our business, operating results and financial condition would be adversely affected. The failure of our IT systems or a security breach involving customer, student or employee personal data, and the remediation of any such failure or breach, could materially impact our reputation and adversely affect our business, results of operations or financial condition.
Our business is subject to seasonal sales and customer growth fluctuations which could result in volatility in our operating results, some of which may not be immediately reflected in our financial position and results of operations. Our business may be affected by the general seasonal trends common to education, tutoring and standardized testing markets.
Our business is subject to seasonal sales fluctuations which could result in volatility in our operating results, some of which may not be immediately reflected in our financial position and results of operations. Our business may be affected by the general seasonal trends common to the education markets.
Our future success depends on the continuing ability to attract, train, integrate and retain highly skilled personnel, including software engineers and sales personnel with experience in the education market. We face intense competition for qualified individuals from numerous software and other technology companies.
Our business depends largely on our ability to attract and retain talented employees, including senior management. Our future success depends on the continuing ability to attract, train, integrate and retain highly skilled personnel, including software engineers and sales personnel with experience in the education market. We face intense competition for qualified individuals from numerous software and other technology companies.
Further, we had an accumulated deficit of approximately $(290.4) million as of December 31, 2024. To address our shortage of working capital necessary to fund our operations, management is developing a remediation plan that includes refinancing existing debt facilities and raising new sources of capital.
Further, we had an accumulated deficit of approximately $315.8 million as of December 31, 2025. To address our shortage of working capital necessary to fund our operations, management is developing a remediation plan that includes refinancing existing debt facilities and raising new sources of capital.
Among other things, the Charter and Bylaws include provisions that: ● require super-majority voting to amend provisions in the Charter and Bylaws; ● provide that stockholders holding more than 40% of our voting securities will be entitled to nominate two persons for election to our board of directors and stockholders holding 40% or less but more than 25% of our voting securities will be entitled to nominate one person for election to our board of directors; ● provides that our board of directors will be classified, such that the initial term of our independent directors will expire at our first annual meeting of stockholders to be held in 2025 and the initial term of our non-independent directors will expire at our second annual meeting of stockholders to be held in 2026; ● provide that only a majority of our board of directors, the chairman of our board of directors, our chief executive officer, our President or stockholders collectively holding more than 30% of our voting securities will be authorized to call a special meeting of stockholders; ● do not provide for cumulative voting; ● provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders entitled to vote at an election of directors; ● prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; ● provide that our board of directors is expressly authorized to make, alter, or repeal our bylaws, subject to DGCL requirements; and ● establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Among other things, the Charter and Bylaws include provisions that: ● require super-majority voting to amend provisions in the Charter and Bylaws; ● provide that stockholders holding more than 40% of our voting securities will be entitled to nominate two persons for election to our board of directors and stockholders holding 40% or less but more than 25% of our voting securities will be entitled to nominate one person for election to our board of directors; ● provides that our board of directors will be classified, such that the initial term of our independent directors will expire at our first annual meeting of stockholders to be held in 2025 and the initial term of our non-independent directors will expire at our second annual meeting of stockholders to be held in 2026; ● provide that only a majority of our board of directors, the chairman of our board of directors, our chief executive officer, our President or stockholders collectively holding more than 30% of our voting securities will be authorized to call a special meeting of stockholders; ● do not provide for cumulative voting; 35 Table of Contents ● provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders entitled to vote at an election of directors; ● provide that our board of directors is expressly authorized to make, alter, or repeal our bylaws, subject to Delaware General Corporation Law (“DGCL”) requirements; and ● establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
As a result, in the event we rely on such exceptions, our stockholders would not have the same protections afforded to stockholders of companies that are not controlled companies. Currently, dSpace Investments Limited controls a majority of the voting power of our outstanding common stock.
As a result, in the event we rely on such exceptions, our stockholders would not have the same protections afforded to stockholders of companies that are not controlled companies. Currently, dSpace, bSpace and Fiza control a majority of the voting power of our outstanding common stock.
We cannot be sure that any new products or services will be widely accepted and purchased by our customers or that we will be able to successfully manage product introductions and transitions.
We cannot be sure that any new products or services will be widely accepted and purchased by our customers or that we will be able to successfully manage product introductions and transitions. Failure by our customers to accept our new products and services, or our failure to manage product introductions and transitions, could adversely affect our operating results.
Any investigations, actions or sanctions could harm our reputation, business, operating results, and financial condition. The obligations associated with operating as a public company will require significant resources and management attention and will cause us to incur additional expenses, which will adversely affect our results of operations.
Our business, operating results and financial condition could be harmed as a result The obligations associated with operating as a public company will require significant resources and management attention and will cause us to incur additional expenses, which will adversely affect our results of operations.
A license to continue using such technologies or practices may not be available to us at all and we may be required to discontinue use of such technologies or practices or to develop alternative non-infringing technologies or practices.
A license to continue using such technologies or practices may not be available to us at all and we may be required to discontinue use of such technologies or practices or to develop alternative non-infringing technologies or practices. The development of alternative non-infringing technologies or practices could require significant effort and expense or may not be achievable at all.
We have experienced significant net losses since we began operations in 2014, including a net loss of approximately $(20.8) million for the year ended December 31, 2024 and approximately $(13.0) million for the year ended December 31, 2023. We have an accumulated deficit of $(290.4) million and a total stockholders’ deficit of $(14.7) million as of December 31, 2024.
We have experienced significant net losses since we began operations in 2014, including a net loss of approximately $25.4 million for the year ended December 31, 2025 and approximately $20.8 million for the year ended December 31, 2024. We have an accumulated deficit of $315.8 million and a total stockholders’ deficit of $22.5 million as of December 31, 2025.
As of December 31, 2024, we had United States federal net operating loss (“NOL”) carryforwards of approximately $200.8 million and state NOL carryforwards of approximately $167.4 million after Section 382 limitations.
As of December 31, 2025, we had United States federal net operating loss (“NOL”) carryforwards of approximately $219.8 million and state NOL carryforwards of approximately $176.9 million after Section 382 limitations.
As of December 31, 2024, we had outstanding indebtedness in the aggregate principal amount of approximately $12.0 million with maturity dates ranging from May 2025 through June 2026.
As of December 31, 2025, we had outstanding indebtedness in the aggregate principal amount of approximately $17.7 million with maturity dates ranging from 2026 through 2027.
In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our products to new and existing customers. There is uncertainty regarding our ability to continue as a going concern.
In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our products to new and existing customers. We have a history of net losses.
A regional or global health pandemic, such as the COVID-19 pandemic, could severely affect our business, results of operations and financial condition. A regional or global health pandemic, depending upon its duration and severity, could have a material adverse effect on our business. For example, the COVID-19 pandemic has had numerous effects on the global economy.
Another regional or global health pandemic, depending upon its duration and severity, could have a material adverse effect on our business. For example, the COVID-19 pandemic had numerous effects on the global economy.
If we are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or if we identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our stock price may decline as a result.
The material weaknesses will be considered fully remediated when, in the opinion of our management, the revised control processes have been operating for a sufficient period of time and have been tested for operating effectiveness. 22 Table of Contents If we are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or if we identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our stock price may decline as a result.
If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of our brands and other intangible assets may be diminished and competitors may be able to mimic our platform and methods of operations more effectively.
If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of our brands and other intangible assets may be diminished and competitors may be able to mimic our platform and methods of operations more effectively. 27 Table of Contents To prevent substantial unauthorized use of our intellectual property and proprietary rights, it may be necessary to prosecute actions for infringement and/or misappropriation of our proprietary rights against third parties.
As we expand our customer base and the application/solution coverage of our existing customers, we may be subject to increased scrutiny, potential reputational risk or potential liability should our platform and products fail to 25 Table of Contents perform as contemplated in such deployments or should we not comply with the terms of our government contracts or government contracting requirements.
As we expand our customer base and the application/solution coverage of our existing customers, we may be subject to increased scrutiny, potential reputational risk or potential liability should our platform and products fail to perform as contemplated in such deployments or should we not comply with the terms of our government contracts or government contracting requirements. 19 Table of Contents If we fail to maintain relationships with third-party software developer partners or fail to expand our partnerships with industry partners, our ability to grow our business and revenue will suffer.
We may not be able to anticipate future market needs or be able to improve our products or platform or to develop new products, services or software enhancements to meet such needs on a timely basis, if at all. In addition, our inability to diversify beyond our current offerings could adversely affect our business.
As we develop new products, we may not be able to anticipate future market needs or be able to improve our products or platform or to develop new products, services or software enhancements to meet such needs on a timely basis, if at all.
Under the Nasdaq Listing Rules, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain stock exchange corporate governance requirements, including: ● the requirement that a majority of a company’s board of directors consist of independent directors; ● the requirement that nominating matters be decided solely by independent directors; and ● the requirement that executive and officer compensation matters be decided solely by independent directors. 42 Table of Contents Accordingly, in the event that we decide to rely on the “controlled company” exemption to reduce our corporate governance requirements, our stockholders would not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
Under the Nasdaq Listing Rules, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain stock exchange corporate governance requirements, including: ● the requirement that a majority of a company’s board of directors consist of independent directors; ● the requirement that nominating matters be decided solely by independent directors; and ● the requirement that executive and officer compensation matters be decided solely by independent directors.
We believe that building a strong reputation and brand as an innovative and effective educational tool and continuing to increase the strength of our customer base is critical to our future success.
We believe that building a strong reputation and brand as an innovative and effective educational tool and continuing to increase the strength of our customer base is critical to our future success. The successful development of our reputation and brand will depend on a number of factors, many of which are outside our control.
Failure to manage growth effectively could result in difficulties or delays in attracting new customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing or enhancing products and services, loss of customers, information security vulnerabilities or other operational difficulties, internal controls over financial reporting and procedures being inadequate to support our operations, any of which could adversely affect our business performance and operating results.
Failure to manage growth effectively could result in difficulties or delays in attracting new customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing or enhancing products and services, loss of customers, information security vulnerabilities or other operational difficulties, internal controls over financial reporting and procedures being inadequate to support our operations, any of which could adversely affect our business performance and operating results. 13 Table of Contents To remain competitive and stimulate demand, we must continue to develop new products, successfully manage frequent product introductions and transitions and adapt to rapid technological change and evolving industry standards.
If an author or other third-party that distributes open source software that we use or license alleges that we did not comply with the conditions of the applicable license, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from offering our products that contained the open source software, required to release proprietary source code, required to obtain licenses from third parties or required to comply with the conditions unless and until we can re-engineer the product so that it complies with the open source license or does not incorporate the open source software.
If an author or other third-party that distributes open source software that we use or license alleges that we did not comply with the conditions of the applicable license, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from offering our products that contained the open source software, required to release proprietary source code, required to obtain licenses from third parties or required to comply with the conditions unless and until we can re-engineer the product so that it complies with the open source license or does not incorporate the open source software. 29 Table of Contents Neither the United States nor foreign courts have interpreted a large number of open source licenses, and accordingly, there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to commercialize our platform.
We must incur significant expense in technology and content development to launch a new product or software application, and we may not generate sufficient revenue from new offerings to offset our costs.
A failure to increase sales to existing customers could adversely affect our business, operating results and financial condition. We must incur significant expense in technology and content development to launch a new product or software application, and we may not generate sufficient revenue from new offerings to offset our costs.
Any future changes in United States tax laws in respect of the utilization of NOL carryforwards may further affect the limitation in future years. In addition, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited at the state level, which could also impact our ability to utilize NOL carryforwards.
In addition, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited at the state level, which could also impact our ability to utilize NOL carryforwards.
Our technologies and content, including the content that partners may create for use on our platform, may not be able to withstand such third-party claims, and could have a material adverse effect on our business.
We also receive letters from holders of copyrighted content alleging infringement of their intellectual property rights. Our technologies and content, including the content that partners may create for use on our platform, may not be able to withstand such third-party claims, and could have a material adverse effect on our business.
We may not be able to grow revenue in the future or manage our growth effectively, which would adversely affect our business, operating results and financial condition. Our consolidated revenue for the year ended December 31, 2023 increased over 22% as compared to the year ended December 31, 2022.
We may not be able to grow revenue in the future or manage our growth effectively, which would adversely affect our business, operating results and financial condition.
As a result, even if we attain profitability, we may be unable to use all or a material portion of our NOLs, which could adversely affect our business, operating results, financial condition, and cash flows. We could be subject to changes in tax rates, the adoption of new United States or international tax legislation, or exposure to additional tax liabilities.
As a result, even if we attain profitability, we may be unable to use all or a material portion of our NOLs, which could adversely affect our business, operating results, financial condition, and cash flows. We may have exposure to greater-than-expected tax liabilities, which could seriously harm our business.
Item 1A. Risk Factors An investment in our common stock involves risks. You should carefully consider each of the following risks and all of the information set forth in this report and in other documents we file with the SEC before deciding to invest in our common stock.
Item 1A. Risk Factors An investment in our common stock involves risks. You should carefully consider each of the following risks and all of the other information set forth in this Annual Report on Form 10-K, before deciding to invest in our common stock. The risks and uncertainties described below are not the only ones we face.
We are required to comply with certain requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and other applicable securities rules and regulations. The Exchange Act requires, among other things, us to file annual, quarterly, and current reports with respect to our business and operating results with the SEC.
We are required to comply with certain requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and other applicable securities rules and regulations.
Low trading volume can also make it difficult for us to raise additional capital through the sale of equity securities. If we need to raise additional capital in the future, we may be unable to do so on favorable terms, or at all, if an active trading market for our common stock does not exist. Item 1B.
If we need to raise additional capital in the future, we may be unable to do so on favorable terms, or at all, if an active trading market for our common stock does not exist. 36 Table of Contents Item 1B. Unresolved Staff Comments None.
Our business is dependent on our ability to maintain and scale our hardware and software offerings and technical infrastructure, and any significant disruption in the performance of our products could damage our reputation, result in a potential loss of customers and engagement, and adversely affect our business, operating results and financial condition.
If we cannot compete successfully against our current competitors and new entrants or new technology in the market, our ability to grow our business and achieve profitability could be impaired. 14 Table of Contents Our business is dependent on our ability to maintain and scale our hardware and software offerings and technical infrastructure, and any significant disruption in the performance of our products could damage our reputation, result in a potential loss of customers and engagement, and adversely affect our business, operating results and financial condition.
We have recorded a full valuation allowance related to our United States federal and state NOL carryforwards and other net deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets. Our NOL carryforwards may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.
Our NOL carryforwards may also be impaired under similar provisions of state law. We have recorded a full valuation allowance related to our United States federal and state NOL carryforwards and other net deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.
We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business. Future sales of our common stock could cause the market price of our common stock to decline.
We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business. Compliance obligations under the Sarbanes-Oxley Act may require substantial financial and management resources.
If significant portions of our workforce are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with a regional or global health pandemic, our operations will be negatively impacted.
If significant portions of our workforce are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with a regional or global health pandemic, our operations will be negatively impacted. 17 Table of Contents We plan to continue to make acquisitions, which could negatively impact our financial condition or results of operations and may adversely affect the price of our common stock.
Due to the highly volatile and competitive nature of the industries in which we compete, we must continually introduce new products and services, enhance existing products and services, and effectively stimulate customer demand for new and upgraded products.
To remain competitive in our industry, we must continually introduce new products and services, enhance existing products and services, and effectively stimulate customer demand for new and upgraded products.
In addition, we may be unsuccessful in scaling our technical infrastructure to accommodate new product offerings and increased usage cost-effectively.
In addition, we may be unsuccessful in scaling our technical infrastructure to accommodate new product offerings and increased usage cost-effectively. We have in the past been, and may in the future be, dependent on a limited number of significant customers.
Furthermore, patent holding companies, non-practicing entities, and other adverse patent owners that are not deterred by our existing intellectual property protections may seek to assert patent claims against us.
In addition, many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, patent holding companies, non-practicing entities, and other adverse patent owners that are not deterred by our existing intellectual property protections may seek to assert patent claims against us.
In addition, our revenue coming from career training education might decline if such organizations experience a decline in enrollment rates. 24 Table of Contents Our platform and internal systems rely on software and hardware that is highly technical, and any errors, bugs, or vulnerabilities in these systems, or failures to address or mitigate technical limitations in our systems, could adversely affect our business.
Our platform and internal systems rely on software and hardware that is highly technical, and any errors, bugs, or vulnerabilities in these systems, or failures to address or mitigate technical limitations in our systems, could adversely affect our business.
We could be involved in legal disputes that are expensive and time consuming, and, if resolved adversely, could harm our business, operating results and financial condition.
We are and could continue to be involved in legal disputes that are expensive and time consuming, and, if resolved adversely, could harm our business, operating results and financial condition. From time to time, we may be involved in actual and threatened legal proceedings, claims, investigations and government inquiries arising in the ordinary course of our business.
The material weaknesses that were identified related to: ● lack of segregation of duties; ● certain information technology general controls, including controls review of user access roles and administrative access; ● account reconciliations and cutoff; ● analysis of significant and unusual transactions, and ● lack of a formal risk assessment policy for entity level controls.
As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, we identified five material weaknesses related to: (1) lack of segregation of duties; (2) certain information technology general controls, including controls over the review of user access roles and administrative access; (3) account reconciliations and cutoff; (4) analysis of significant and unusual transactions; and (5) lack of a formal risk assessment policy for entity-level controls.
Any interruptions in our operations due to cyberattacks or to our failure to maintain adequate security and supporting infrastructure as we scale, could damage our reputation, business, operating results, and financial condition.
Consequently, any breach involving student information would likely result in disproportionate reputational damage compared to other types of corporate breaches. 30 Table of Contents Any interruptions in our operations due to cyberattacks or to our failure to maintain adequate security and supporting infrastructure as we scale, could damage our reputation, business, operating results, and financial condition.
As a result, you should not rely upon our past quarterly and annual operating results as indicators of future performance. We have encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly evolving markets, such as the risks and uncertainties described herein.
We have encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly evolving markets, such as the risks and uncertainties described herein.
We may also face exposure to third-party intellectual property infringement, misappropriation or violation actions if we engage software engineers or other personnel who were previously engaged by competitors or other third parties and those personnel inadvertently or deliberately incorporate proprietary technology and intellectual property of third parties into our products.
We have in the past received immaterial, and may in the future receive material or immaterial, claims we have misappropriated, misused, or infringed other parties’ intellectual property rights, and, to the extent we gain greater market visibility, we may face a higher risk of being the subject of intellectual property infringement claims. 28 Table of Contents We may also face exposure to third-party intellectual property infringement, misappropriation or violation actions if we engage software engineers or other personnel who were previously engaged by competitors or other third parties and those personnel inadvertently or deliberately incorporate proprietary technology and intellectual property of third parties into our products.
We have completed an initial Section 382 analysis, and it is most likely that we have previously undergone one or more ownership changes so that our use of NOLs is currently subject to limitation.
We have completed an initial Section 382 analysis, and it is most likely that we have previously undergone one or more ownership changes so that our use of NOLs is currently subject to limitation. 23 Table of Contents We may also experience ownership change(s) in the future as a result of subsequent shifts in our stock ownership, some of which may be outside our control.
Our existing and future levels of indebtedness could adversely affect our financial health, ability to obtain financing in the future, ability to react to changes in our business and ability to fulfill our obligations under such indebtedness.
Any of these events could have a negative impact on our business, financial condition, and results of operations. Risks Related to Financial and Accounting Matters Our existing and future levels of indebtedness could adversely affect our financial health, ability to obtain financing in the future, and ability to fulfill our obligations under such indebtedness.
In 2023, our five largest customers accounted for $10.0 million of revenue and our largest customer accounted for $2.2 million of revenue, representing approximately 23% and 5% of our total 2023 revenue, respectively.
In 2025, our five largest customers accounted for approximately $4.1 million of revenue and our largest customer accounted for $1.9 million of revenue, representing approximately 15% and 7% of our total 2025 revenue, respectively.
We rely on a combination of confidentiality, assignment and license agreements with our employees, consultants and third parties with whom we have relationships, as well as trademark, copyright, patent, trade secret, and domain name protection and other intellectual property laws, to protect our proprietary rights.
We rely on trademark, copyright, patent, trade secret, and domain name protection and other intellectual property laws, to protect our proprietary rights.
If we fail to maintain relationships with third-party software developer partners or fail to expand our partnerships with industry partners, our ability to grow our business and revenue will suffer. The success of our business depends in large part on the continued and increased development and volume of compelling content and on continuing to recruit and work with third-party developers.
The success of our business depends in large part on the continued and increased development and volume of compelling content and on continuing to recruit and work with third-party developers. We may face several challenges in establishing and expanding these relationships.
Further, if we were to lose certain key third-party developers, or otherwise lose a significant number of third-party developers, our growth and revenue would be negatively impacted. We depend on a limited number of third-party partners to produce, resell and distribute our products.
Further, if we were to lose certain key third-party developers, or otherwise lose a significant number of third-party developers, our growth and revenue would be negatively impacted. Failure of our resellers or other commercial partners to use acceptable ethical business practices or comply with applicable laws could negatively impact our business.
As we face increasing competition and grow our business and platform offerings, the possibility of receiving a larger number of intellectual property claims against us grows. In addition, various “non-practicing entities” that own patents and other intellectual property rights may in the future attempt to assert intellectual property claims against us to extract value through licensing or other settlements.
In addition, various “non-practicing entities” that own patents and other intellectual property rights may in the future attempt to assert intellectual property claims against us to extract value through licensing or other settlements. 25 Table of Contents From time to time, we receive letters from patent holders alleging that our platform infringes on their patent rights and from trademark holders alleging infringement of their trademark rights.
These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers. 36 Table of Contents Efforts to reduce the U.S. federal deficit could adversely affect our results of operations and financial condition.
These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers. 26 Table of Contents Risks Related to Intellectual Property Failure to register, protect or enforce our proprietary technology and intellectual property rights could substantially harm our business, operating results and financial condition.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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The CISO also notifies the audit committee chair of any material cybersecurity incident. As of the date of this Annual Report on Form 10-K, we are not aware of any cybersecurity incidents that have materially affected or are reasonably likely to materially affect our Company, including our business strategy, results of operations, or financial condition.
The CISO also notifies the audit committee chair of any material cybersecurity incident. 37 Table of Contents As of the date of this Annual Report on Form 10-K, we are not aware of any cybersecurity incidents that have materially affected or are reasonably likely to materially affect our Company, including our business strategy, results of operations, or financial condition.
Governance Board of Directors The audit committee of our board of directors is responsible for, among other things, reviewing and discussing with management and the internal audit group management’s risk assessment and risk management policies, including 46 Table of Contents cybersecurity risks.
Governance Board of Directors The audit committee of our board of directors is responsible for, among other things, reviewing and discussing with management and the internal audit group management’s risk assessment and risk management policies, including cybersecurity risks.
Risk Factors” in Annual Report on Form 10-K.
Risk Factors” included elsewhere in this Annual Report on Form 10-K.

Item 2. Properties

Properties — owned and leased real estate

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Item 2. Properties We maintain our current principal office at 55 Nicholson Lane, San Jose, CA 95134. The San Jose office is comprised of 24,444 square feet of office space in a multi-tenant building under a multi-year lease that expires in January 2026.
Item 2. Properties We maintain our current principal office at 55 Nicholson Lane, San Jose, CA 95134. The San Jose office is comprised of 6,464 square feet of office space in a multi-tenant building under a multi-year lease that expires in October 2027.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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We are not presently a party to any litigation the outcome of which, we believe, if determined 47 Table of Contents adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition other than as follows: On May 16, 2022, we entered into a merger agreement (the “EdtechX Merger Agreement”) with EdtechX Holdings Acquisition Corp II (“EdtechX”), a Special Purpose Acquisition Company (“SPAC”).
We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition other than as follows: On May 16, 2022, we entered into a merger agreement (the “EdtechX Merger Agreement”) with EdtechX Holdings Acquisition Corp II (“EdtechX”), a Special Purpose Acquisition Company (“SPAC”).
Removed
On September 20, 2024, the Company filed a motion to dismiss the complaint in Delaware Superior Court. See Note 11 (Commitments and Contingencies) of the consolidated financial statements, for additional information. ​ Item 4. Mine Safety Disclosures Not applicable. PART II
Added
Trial has been set for January 20, 2027. The Company believes this lawsuit is without merit and intends to vigorously defend itself against these allegations. See Note 11 (Commitments and Contingencies) of the consolidated financial statements, for additional information. On February 9, 2026, Jiangxi Kmax Industrial Co., Ltd.
Added
(“KMax”) filed a complaint against zSpace in the United States District Court for the Northern District of California. The complaint arises from a Software Resale License Agreement, dated July 24, 2019, and alleges breach of contract related to unpaid revenue share invoices totaling $557,940 plus interest.
Added
We have recorded an account payable of $0.6 million as of December 31, 2025 in connection with this matter, however, we intend to assert counterclaims. Our response to the complaint is due April 20, 2026. On March 11, 2026, Kmax filed a second complaint against the Company and certain of its current and former officers in the U.S.
Added
District Court for the Southern District of New York. The complaint alleges violations of federal securities laws as well as various state common law claims. The allegations arise from Kmax's $15 million investment in the Company’s pre-IPO private placement financings between 2017 and 2019. Kmax seeks compensatory and rescissory damages, interest, and costs.
Added
The Company believes the claims are without merit and intends to defend itself vigorously against these allegations. 38 Table of Contents ​ ​ Item 4. Mine Safety Disclosures Not applicable. ​ 39 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Our common stock is listed on the Nasdaq Global Market ® (“Nasdaq”) under the symbol “ZSPC” and began trading on December 5, 2024. Prior to that date, there was no public trading market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Our common stock is listed on the Nasdaq Capital Market ® (“Nasdaq”) under the symbol “ZSPC” and began trading on December 5, 2024. Prior to that date, there was no public trading market for our common stock.
On February 28, 2025, there were 205 holders of record of our common stock. The actual number of holders of our common stock is greater than the number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or by other nominees.
On January 31, 2026, there were 208 holders of record of our common stock. The actual number of holders of our common stock is greater than the number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or by other nominees.
Recent Sales of Unregistered Equity Securities The following information relates to all securities issued or sold by us during the period covered by this Annual Report on Form 10-K and not registered under the Securities Act.
Recent Sales of Unregistered Equity Securities Other than those previously disclosed in our Current Reports on Form 8-K and/or Quarterly Reports on Form 10-Q, each as filed with the SEC, there have been no unregistered sales of our equity securities during the period covered by this Annual Report on Form 10-K. ​ Item 6. [Reserved]
Removed
All share and per share information in this Item 5 has been adjusted to reflect the 1-for-75 reverse stock split that we effected on December 29, 2023. ​ Since January 1, 2023, we have issued the following unregistered securities: ● On May 29, 2023, we issued a promissory note to Fiza Investments Limited (“Fiza”) with an aggregate principal amount of $3.0 million. ● On November 20, 2023, we issued a promissory note to Fiza with an aggregate principal amount of $1.3 million. ● On December 30, 2023, we entered into a loan termination agreement with bSpace pursuant to which we issued 36,918 shares of our NCNV 3 Preferred Stock 3 for $36.9 million. ● In January 2024, we issued 5,752 shares our NCNV 2 Preferred Stock in exchange for the cancellation of approximately $5.8 million in debt obligations held by Kuwait Investment Authority (“KIA”). 48 Table of Contents ● In March 2024, we issued a convertible promissory note to Fiza with an aggregate principal amount of $5.0 million, which converted into an aggregate of 1,176,471 shares of our common stock upon closing of the IPO. ● In March 2024, we granted our employees and members of our board of directors stock options to purchase a total of 5,028,756 shares of common stock at an exercise price of $2.57 per share. ● In July 2024, we entered into SAFE agreements with three suppliers in the total amount of $3.25 million. ​ None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering.
Removed
We believe that the offers, sales and issuances of the above securities were exempt from registration under the Securities Act by virtue of Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving any public offering, or in reliance on Rule 701 promulgated under Section 3(b) of the Securities Act because the transactions were pursuant to compensatory benefit plans or contracts relating to compensation as provided under Rule 701.
Removed
The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.
Removed
All recipients had adequate information about us or had adequate access, through their relationships with us, to information about us. ​ Use of Proceeds from our Initial Public Offering of Common Stock On December 4, 2024, our Registration Statement on Form S-1, as amended (File No. 333-280427) (the “Registration Statement”), was declared effective in connection with our IPO, pursuant to which we sold an aggregate of 1,875,000 shares of our common stock at a price to the public of $5.00 per share.
Removed
Roth Capital Partners, LLC and Northland Securities, Inc. acted as joint book-running managers and Barrington Research Associates, Inc. acted as co-manager. The IPO closed on December 6, 2024. The aggregate net proceeds from the IPO were $7.5 million, after deducting underwriting discounts and commissions and other offering costs.
Removed
The offering terminated after the sale of all securities registered pursuant to the Registration Statement.
Removed
None of the expenses associated with the IPO were paid to directors, officers, persons owning ten percent or more of any class of equity securities, or to their associates, or to our affiliates, other than payments from our net proceeds in the ordinary course of business to officers for salaries and to non-employee directors as compensation for service on the board of directors or committees of the board of directors. ​ Upon receipt, the net proceeds from our IPO were held in cash, cash equivalents and investments.
Removed
As of December 31, 2024, we have used $5.7 million of the net proceeds from our IPO for working capital purposes, including inventory, personnel costs and operating expenses.
Removed
There has been no material change in the planned use of proceeds from our IPO as described in the Company’s final prospectus for its IPO filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on December 6, 2024. Item 6. [Reserved ]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Item 6. [Reserved ] ​ 49 ​ ​ ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 49 ​ ​ ​ Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ 69 ​ ​ ​ Item 8. Financial Statements and Supplementary Data ​ 70 ​ ​ ​
Item 6. [Reserved] ​ 40 ​ ​ ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 40 ​ ​ ​ Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ 56 ​ ​ ​ Item 8. Financial Statements and Supplementary Data ​ 57 ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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The change in our operating assets and liabilities was primarily the result of a decrease in accounts receivable of $1.8 million and an increase in accounts payable of $0.6 million, accrued expenses of $0.7 million and accrued interest of $1.3 million, partially offset by an increase in inventory of $0.2 million and prepaid expenses and other assets of $0.5 million, and a decrease in deferred revenue of $1.4 million.
The change in our operating assets and liabilities was primarily the result of an increase in prepaid and other assets of $0.5 million and a decrease in accounts payable of $1.6 million, accrued expenses of $1.6 million and deferred revenue of $1.4 million, partially offset by a decrease in accounts receivable of $1.6 million and inventory of $0.7 million and an increase in accrued interest of $0.8 million.
Overall cost of revenue is largely dependent on a combination of revenue types, hardware component supply and pricing and cost of third-party software applications. Cost of Hardware Sold — Cost of hardware sold consists primarily of costs associated with the manufacture of our products and personnel-related expenses associated with manufacturing employees, including salaries, benefits, bonuses, overhead and stock-based compensation.
Overall cost of revenue is largely dependent on a combination of revenue types, hardware component supply and pricing and cost of third-party software applications. 46 Table of Contents Cost of Hardware Sold — Cost of hardware sold consists primarily of costs associated with the manufacture of our products and personnel-related expenses associated with manufacturing employees, including salaries, benefits, bonuses, overhead and stock-based compensation.
The United States federal statutory rate is 21% while our effective tax rate for the years ended December 31, 2024 and 2023 was 0.1% and zero, respectively. No federal or state income taxes are expected outside of immaterial state tax payments.
The United States federal statutory rate is 21% while our effective tax rate for the years ended December 31, 2025 and 2024 was 0.1% and 0.1%, respectively. No federal or state income taxes are expected outside of immaterial state tax payments.
After underwriting discounts and commissions of $0.8 million and offering expenses of $2.5 million, we received net proceeds from the IPO of $7.5 million. In connection with the IPO, 4.0 million outstanding shares of 63 Table of Contents preferred stock were converted into 18.7 million shares of common stock.
After underwriting discounts and commissions of $0.8 million and offering expenses of $2.5 million, we received net proceeds from the IPO of $7.5 million. In connection with the IPO, 4.0 million outstanding shares of preferred stock were converted into 18.7 million shares of common stock.
We expect to accelerate the transition of our revenue mix to software from hardware through continued improvement in renewing revenue from the retention and expansion of our customers. Retention and Expansion of Customers Our ability to increase revenue depends in part on retaining our existing customers and expanding their use of our platform.
We expect to accelerate the transition of our revenue mix to software from hardware through continued improvement in renewing revenue from the retention and expansion of our customers. 43 Table of Contents Retention and Expansion of Customers Our ability to increase revenue depends in part on retaining our existing customers and expanding their use of our platform.
In addition, we expect that our selling, general and administrative expenses will increase in absolute dollars as our business grows. 58 Table of Contents Interest Expense Interest expense consists primarily of changes in accrued interest expense, interest payments and amortization of debt issuance costs for our debt facilities.
In addition, we expect that our selling, general and administrative expenses will increase in absolute dollars as our business grows. Interest Expense Interest expense consists primarily of changes in accrued interest expense, interest payments and amortization of debt issuance costs for our debt facilities.
The above aspects of software revenue are captured in the annualized contract value (ACV) and net dollar revenue retention rate (NDRR) metrics described below under “Retention and Expansion of Customers.” We believe that these annualized measures provide important context to understanding the strength and growth of our software license revenue.
The above aspects of software revenue are captured in the annualized contract value (“ACV”) and net dollar revenue retention rate (“NDRR”) metrics described below under “Retention and Expansion of Customers.” We believe that these annualized measures provide important context to understanding the strength and growth of our software license revenue.
Additionally, we offer one-and two-year extended warranty contracts that customers can purchase at their option, which are also separate performance obligations. Services revenue accounted for between 7% and 9% of our total revenue for the years ended December 31, 2024 and 2023.
Additionally, we offer one-and two-year extended warranty contracts that customers can purchase at their option, which are also separate performance obligations. Services revenue accounted for between 9% and 11% of our total revenue for the years ended December 31, 2025 and 2024.
The increase in cost of services sold is attributable to purchases of extended warranty contracts and delivery costs for increased sales of Inspire laptops and technology support services, respectively. For the years ended December 31, 2024 and 2023, services gross margin is 65% and 76%, respectively.
The increase in cost of services sold is attributable to purchases of extended warranty contracts and increased delivery costs for sales of Inspire laptops and technology support services, respectively. For the years ended December 31, 2025 and 2024, services gross margin is 37% and 65%, respectively.
The determination of the number of performance obligations in a contract requires significant judgment and could change the timing of the amount of revenue recorded for a given period. For contracts with multiple performance obligations, the transaction price is allocated based on standalone selling prices (SSP), with list prices typically used for most items.
The determination of the number of performance obligations in a contract requires significant judgment and could change the timing of the amount of revenue recorded for a given period. 54 Table of Contents For contracts with multiple performance obligations, the transaction price is allocated based on standalone selling prices (“SSP”), with list prices typically used for most items.
Following the December 2024 closing of our IPO, we expect to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to remediating our material weaknesses and compliance and reporting obligations, and increased expenses for insurance, investor relations and professional services.
We incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to remediating our material weaknesses and compliance and reporting obligations, and increased expenses for insurance, investor relations and professional services.
Some of these costs are internal resources while others are associated with third parties engaged to develop or deliver the services. Other costs include travel and technology used in the development or delivery of the services.
Cost of Services Sold — Cost of services sold consists primarily of personnel costs associated with the development and delivery of the services. Some of these costs are internal resources while others are associated with third parties engaged to develop or deliver the services. Other costs include travel and technology used in the development or delivery of the services.
As of December 31, 2024, approximately 18,400 Inspires have been shipped under our agreement with this PC OEM. Our master agreement with our PC OEM partner is subject to an initial one-year term, with automatic renewal for subsequent one-year terms.
As of December 31, 2025, approximately 21,700 Inspires have been shipped under our agreement with this PC OEM. Our master agreement with our PC OEM partner is subject to an initial one-year term, with automatic renewal for subsequent one-year terms.
We derive software applications revenue from the sale of licenses and subscription plans to the software applications available on our platform. Our software applications are priced based on the number of devices or users and length of the contract. We offer discount programs based on increases in volume of devices or users and the length of the contract.
Software Applications Revenue We derive software applications revenue from the sale of licenses and subscription plans to the software applications available on our platform. Our software applications are priced based on the number of devices or users and length of the contract.
Commissions paid on the sale in which at least a portion of the goods and services will be satisfied over a period of time (services primarily consisting of extended warranties) are not material and are expensed when incurred.
Commissions paid on the sale of hardware and short-term software licenses are recognized upon delivery. Commissions paid on the sale in which at least a portion of the goods and services will be satisfied over a period of time (services primarily consisting of extended warranties) are not material and are expensed when incurred.
As of December 31, 2024 and 2023, we had cash and cash equivalents of $4.9 million and $3.1 million, respectively.
As of December 31, 2025 and 2024, we had cash and cash equivalents of $1.0 million and $4.9 million, respectively.
For the years ended December 31, 2024 and December 31, 2023, our Net Dollar Retention Rate (“NDRR”) on customers with at least $50,000 of ACV was 92% and 112%, respectively. Average Term Length We measure the ACV dollar-weighted term length of our renewable software license agreements.
For the years ended December 31, 2025 and December 31, 2024, our NDRR on customers with at least $50,000 of ACV was 71% and 92%, respectively. Average Term Length We measure the ACV dollar-weighted term length of our renewable software license agreements.
Our key retention metrics are as follows: (1) ACV for the year ended December 31, 2024 increased to $11.3 million as compared to the year ended December 31, 2023 of $10.6 million and (2) NDRR for the trailing twelve-month period ended December 31, 2024 was 92% and for December 31, 2023 was 112%.
Our key retention metrics are as follows: (1) ACV for the year ended December 31, 2025 decreased to $9.9 million as compared to the year ended December 31, 2024 of $11.3 million and (2) NDRR for the trailing twelve-month period ended December 31, 2025 was 71% and for December 31, 2024 was 92%.
Our bookings growth is represented below for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2024 2023 Bookings ​ $ 41,484 ​ $ 41,081 ​ United States CTE & K-12 Bookings We believe our ability to retain and grow our product and software revenue will be dependent on our ability to grow in both our United States CTE and K-12 market segments.
Our bookings growth is represented below for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2025 ​ ​ ​ 2024 Bookings ​ $ 26,087 ​ $ 39,265 ​ 42 Table of Contents United States CTE & K-12 Bookings We believe our ability to retain and grow our product and software revenue will be dependent on our ability to grow in both our United States CTE and K-12 market segments.
The loans have periodic principal and interest payments of 24 equal monthly payments beginning in June and July 2024. 66 Table of Contents Contractual Obligations Our principal commitments consist of obligations for office space under a non-cancelable operating lease that expires in January 2026, as well as repayment of borrowings under other financing arrangements as described above under “— Liquidity and Capital Resources — Debt and Financing Arrangements .” In addition, we have agreements with certain hardware suppliers to purchase inventory; as of December 31, 2024, we had approximately $8.9 million in purchase obligations outstanding under such agreements, all of which are scheduled to come due on or before December 31, 2025.
Contractual Obligations Our principal commitments consist of obligations for office space under a non-cancelable operating lease that expires in January 2026, as well as repayment of borrowings under other financing arrangements as described above under “— Liquidity and Capital Resources — Debt and Financing Arrangements .” In addition, we have agreements with certain hardware suppliers to purchase inventory; as of December 31, 2025, we had approximately $10.4 million in purchase obligations outstanding under such agreements, all of which are scheduled to come due on or before December 31, 2026.
Cash Flows The following table summarizes our cash flows for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands) 2024 2023 Net cash used in operating activities ​ $ (8,874) ​ $ (6,410) Net cash used in investing activities ​ $ (13) ​ $ (5) Net cash provided by financing activities ​ $ 10,482 ​ $ 5,587 ​ Operating Activities For the year ended December 31, 2024, our operating activities used cash of $8.9 million, primarily due to our net loss of $20.8 million and change in the fair value of embedded derivative of $0.2 million, partially offset by changes in our operating assets and liabilities of $3.6 million and adjustments for non-cash charges, including stock-based compensation expense of $7.7 million, provision for excess and obsolete inventory of $0.4 million, non-cash amortization of other debt discount of $0.1 million, and loss on extinguishment of debt of $0.4 million.
For the year ended December 31, 2024, our operating activities used cash of $8.9 million, primarily due to our net loss of $20.8 million and change in the fair value of embedded derivative of $0.2 million, partially offset by changes in our operating assets and liabilities of $3.6 million and adjustments for non-cash charges, including stock-based compensation expense of $7.7 million, provision for excess and obsolete inventory of $0.4 million, non-cash amortization of other debt discount of $0.1 million, and loss on extinguishment of debt of $0.4 million.
Components of Results of Operations Revenue Our revenue consists of hardware revenue, software applications revenue and services revenue. We recognize revenue at the amount to which we expect to be entitled when control of the products, software or services is transferred to its customers as described below.
We recognize revenue at the amount to which we expect to be entitled when control of the products, software or services is transferred to its customers as described below.
For the years ended December 31, 2024 and 2023, hardware revenue as a percentage of total revenue is 58% and 63%, respectively. Software revenue decreased by $0.4 million or 3%, to $12.9 million for the year ended December 31, 2024, from $13.2 million for the year ended December 31, 2023.
For the years ended December 31, 2025 and 2024, hardware revenue as a percentage of total revenue is 51% and 58%, respectively. Software revenue decreased by $2.3 million or 18%, to $10.6 million for the year ended December 31, 2025, from $12.9 million for the year ended December 31, 2024.
Excess and obsolete write-downs decreased by $0.5 million or 58% to $0.4 million for the year ended December 31, 2024, from $0.9 million for the year ended December 31, 2023.
Excess and obsolete write-downs decreased by $0.2 million or 55% to $0.2 million for the year ended December 31, 2025, from $0.4 million for the year ended December 31, 2024.
For the years ended December 31, 2024 and 2023, software gross margin is 61% and 58%, respectively. Cost of services sold increased by $0.4 million or 48%, to $1.2 million for the year ended December 31, 2024, from $0.8 million for the year ended December 31, 2023.
For the years ended December 31, 2025 and 2024, software gross margin is 71% and 61%, respectively. 50 Table of Contents Cost of services sold increased by $0.8 million or 69%, to $1.9 million for the year ended December 31, 2025, from $1.2 million for the year ended December 31, 2024.
See Notes 1 (Description of Business and Basis of Presentation) and 6 (Temporary Redeemable Preferred Stock and Stockholders’ Equity) for more information. Debt and Financing Arrangements Fiza Loan .
See Note 1 (Description of Business and Basis of Presentation) and Note 6 (Temporary Redeemable Preferred Stock and Stockholders’ Equity) for more information.
We derive services revenue from installation and/or training services for products, both of which are separate performance obligations and typically are satisfied within a short period of time, often less than one month delivered remotely or on-site at the customer’s location.
This service allows the applicable school to quickly get started with an out-of-the-box ready system. We derive services revenue from installation and/or training services for products, both of which are separate performance obligations and typically are satisfied within a short period of time, often less than one month delivered remotely or on-site at the customer’s location.
Adjusted EBITDA We calculate Adjusted EBITDA as GAAP net loss adjusted for interest expense, depreciation and amortization expense, write-off of deferred offering costs, stock-based compensation, loss on debt extinguishment and income tax expense.
Adjusted EBITDA We calculate Adjusted EBITDA as GAAP net loss adjusted for interest expense, depreciation and amortization expense, stock-based compensation, loss on change in fair value of convertible debt, loss on debt extinguishment and income tax expense.
Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ Change ​ (in thousands) ​ 2024 ​ ​ 2023 $ % Interest expense $ (2,815) ​ $ (2,900) ​ 85 ​ (3) % ​ For the year ended December 31, 2024, interest expense decreased by $0.1 million, or 3%, to $2.8 million, from $2.9 million for the year ended December 31, 2023.
Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ Change ​ (in thousands) ​ 2025 ​ ​ 2024 ​ ​ $ ​ % ​ Interest expense $ (1,478) ​ ​ ​ $ (2,815) ​ $ 1,337 ​ (47) % ​ For the year ended December 31, 2025, interest expense decreased by $1.3 million, or 47%, to $1.5 million, from $2.8 million for the year ended December 31, 2024.
In the years ended December 31, 2024 and 2023, we raised $18.5 million and $11.4 million, respectively, for an aggregate of $29.9 million through debt and financing arrangements, including the $7.5 million of net proceeds from the IPO, $9.3 million under loan and security agreements with Fiza, $5.0 million in convertible notes and $5.6 million in other debt issuances.
In the years ended December 31, 2025 and 2024, we raised $22.6 million and $18.5 million, respectively, for an aggregate of $41.1 million through debt and financing arrangements, including the $5.6 million of net proceeds from our equity line, $7.5 million of net proceeds from our initial public offering (“the IPO”), $9.3 million under loan and security agreements with Fiza, $18.0 million in convertible notes and $10.6 million in other debt issuances.
Software Subscription Renewable Revenue Growth We believe that our ability to renew and increase the software revenues on our platform from existing customers is an indicator of market penetration, adoption, the growth of our business and future revenue trends.
International bookings accounted for approximately 15% of our total bookings for each year ended December 31, 2025 and 2024. Software Subscription Renewable Revenue Growth We believe that our ability to renew and increase the software revenues on our platform from existing customers is an indicator of market penetration, adoption, the growth of our business and future revenue trends.
Our Business Model We generate revenue by selling software to customers, selling our products, including our flagship product, the Inspire laptop, and by providing services to customers from our professional development team. We are focused on driving substantial annual growth in software applications revenue and product revenue while maintaining modest growth in services revenue.
Our Business Model We generate revenue by selling software to customers, selling our products, including our flagship product, the Inspire laptop, and by providing services to customers from our professional development team.
For the year ended December 31, 2023, net cash provided by financing activities was $5.6 million primarily due to proceeds from other debt issuances of $11.4 million partially offset by repayment of revolving credit line of $3.0 million, repayment of other debt issuances of $2.2 million, and fees paid for deferred offering costs of $0.4 million.
Financing Activities For the year ended December 31, 2025, net cash provided by financing activities was $14.4 million primarily due to proceeds from convertible debt of $13.0 million, other debt issuances of $4.0 million, proceeds from issuance of common stock from equity line-of-credit of $5.6 million, and proceeds from exercise of stock options of $0.2 million partially offset by repayment of other debt issuances of $7.2 million, and fees paid for debt issuance of $0.1 million.
Hardware accessories are also sold on a stand-alone basis. Customers place orders for the hardware and we fulfill the order and ship the hardware directly to the customer or authorized resellers.
Customers place orders for the hardware and we fulfill the order and ship the hardware directly to the customer or authorized resellers.
Investing Activities For the years ended December 31, 2024 and December 31, 2023, net cash used in investing activities was immaterial due to our low capital equipment requirements. 62 Table of Contents Financing Activities For the year ended December 31, 2024, net cash provided by financing activities was $10.5 million primarily due to proceeds from initial public offering of $10.0 million, convertible notes of $5.0 million, and other debt issuances of $3.5 million partially offset by repayment of other debt issuances of $5.7 million, and fees paid for deferred offering costs of $2.5 million.
For the year ended December 31, 2024, net cash provided by financing activities was $10.5 million primarily due to proceeds from initial public offering of $10.0 million, convertible notes of $5.0 million, and other debt issuances of $3.5 million partially offset by repayment of other debt issuances of $5.7 million, and fees paid for deferred offering costs of $2.5 million. 52 Table of Contents Liquidity and Capital Resources For the years ended December 31, 2025 and 2024, we incurred net losses of $25.9 million and $20.8 million, respectively, and incurred negative cash flows from operations of $18.0 million and $8.9 million, respectively.
While we do not routinely adjust previously reported bookings figures for normal course cancellations, the magnitude of these debooks was deemed material enough to warrant specific disclosure in this Annual Report on Form 10-K. International Bookings We track our performance in international sales by measuring bookings from our international reseller partners relative to total bookings.
Management believes the disclosure of these material debooks provides investors with important context for evaluating business performance. While we do not routinely adjust previously reported bookings figures for normal course cancellations, the magnitude of these debooks was deemed material enough to warrant specific disclosure in this Annual Report on Form 10-K.
Income Taxes We use the asset and liability method under FASB ASC Topic 740, Income Taxes , when accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
While these arrangements can lower operating costs, they also reduce our direct control over 57 Table of Contents distribution. During the COVID-19 pandemic, certain of our logistical service providers experienced disruptions. Refer to “ Supply Chain Challenges ” for more information.
While these arrangements can lower operating costs, they also reduce our direct control over distribution. During the COVID-19 pandemic, certain of our logistical service providers experienced disruptions. Refer to “ Supply Chain Challenges ” for more information. Cost of goods sold related to delivered hardware and bundled software, including estimated standard warranty costs, are recognized at the time of sale.
Costs incurred to provide product-related bundled services and unspecified software upgrade rights are recognized as cost of sales as incurred. Cost of Services Sold — Cost of services sold consists primarily of personnel costs associated with the development and delivery of the services.
Cost of Software Sold — Cost of software sold consists primarily of fees paid to third parties for software licenses, costs associated with the technical support of software applications and the cost of our customer success operations. Costs incurred to provide product-related bundled services and unspecified software upgrade rights are recognized as cost of sales as incurred.
In addition, education funding is subject to change based on political, policy or economic variables at the federal, state or local level, which can impact a school district’s funding, both positively and negatively, and impact our business in the United States.
In addition, education funding is subject to change based on political, policy or economic variables at the federal, state or local level, which can impact a school district’s funding, both positively and negatively, and impact our business in the United States. 45 Table of Contents Software Acquisitions for Growth An important component to our future growth plan going forward is the acquisition of key software companies and/or intellectual property in specific areas within the education market.
Software sales consist of licenses of our functional intellectual property that are materially satisfied at a point in time when key codes are provided to allow customers to access the software. In transactions where a third-party is involved in providing software licenses to a customer, we recognize the revenue from the third-party ratably on a straight-line basis.
We typically invoice our customers annually in advance of providing software and services. Software sales consist of licenses of our functional intellectual property that are materially satisfied at a point in time when key codes are provided to allow customers to access the software.
We expect that going forward our software applications revenue will grow faster in absolute dollars and as a percentage of our total revenue than our product or service revenues. We typically invoice our customers annually in advance of providing software and services.
Software applications revenue accounted for between 34% and 38% of our total revenue for the years ended December 31, 2025 and 2024. We expect that going forward our software applications revenue will grow faster in absolute dollars and as a percentage of our total revenue than our product or service revenues.
Product Revenue Our platform is designed to work with a wide range of learning applications, for both K-12 education and CTE, that come to life by having 3D models projected out of the screen. Our flagship product is Inspire, our latest laptop product built in partnership with a major PC OEM.
We are focused on driving substantial annual growth in software applications revenue and product revenue while maintaining modest growth in services revenue. 41 Table of Contents Hardware Product Revenue Our platform is designed to work with a wide range of learning applications, for both K-12 education and CTE, that come to life by having 3D models projected out of the screen.
We had combined cash and cash equivalents of $4.9 million and $3.1 million as of December 31, 2024 and December 31, 2023, respectively. We have incurred operating losses and negative cash flows from operations since inception. Our prospects are subject to risks, expenses and uncertainties frequently encountered by companies in the technology industry.
We had combined cash and cash equivalents of $1.0 million and $4.9 million as of December 31, 2025 and December 31, 2024, respectively. We have incurred operating losses and negative cash flows from operations since inception.
See Note 1 to our consolidated financial statements for the year ended December 31, 2024 included elsewhere in this Annual Report on Form 10-K for additional information on our assessment. Effective internal control over financial reporting is necessary for us to provide reliable financial reports in a timely manner.
See Note 1 (Description of Business and Basis of Presentation) to our consolidated financial statements for the year ended December 31, 2025 included elsewhere in this Annual Report on Form 10-K for additional information on our assessment.
We have elected to record revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other current liabilities until remitted to the relevant government authority. 56 Table of Contents Hardware Revenue — Hardware revenue is generated from the sale of our learning stations bundled with pre-loaded perpetual license software, accessories necessary for full use of our products, including stylus, eyewear (if needed) and power adapters, and a standard assurance type warranty.
Hardware Revenue — Hardware revenue is generated from the sale of our learning stations bundled with pre-loaded perpetual license software, accessories necessary for full use of our products, including stylus, eyewear (if needed) and power adapters, and a standard assurance type warranty. Hardware accessories are also sold on a stand-alone basis.
Write-downs and write-offs are charged to cost of goods sold.
Write-downs and write-offs are charged to cost of goods sold. Convertible Debt We have issued convertible debt under numerous convertible promissory notes.
Selling and marketing — Selling and marketing expenses consist of labor and other costs directly related to the promotion of our products, including compensation for our marketing team and travel expense incurred in connection with promotional efforts.
Selling and marketing — Selling and marketing expenses consist of labor and other costs directly related to the promotion of our products, including compensation for our marketing team and travel expense incurred in connection with promotional efforts. 47 Table of Contents General and administrative expenses — General, and administrative expenses consist primarily of personnel-related expenses associated with our finance, legal, information technology, human resources, facilities and administrative employees, including salaries, benefits, bonuses, sales commissions and stock-based compensation.
If we determine that we would be able to realize our deferred tax assets in the future in excess of their net 68 Table of Contents recorded amount, we will make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we will make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. 55 Table of Contents JOBS Act The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.
To monitor our ability to retain and grow our customer base for our software we monitor the annualized contract value of active software licenses, with particular attention to customers with at least $50,000 in annualized contract value 54 Table of Contents (“ACV”).
To monitor our ability to retain and grow our customer base for our software we monitor the ACV of active software licenses, with particular attention to customers with at least $50,000 in ACV. Our ACV for the year ended December 31, 2025 and December 31, 2024 was approximately $9.9 million and $11.3 million, respectively.
This net increase was primarily due to increased costs in personnel and professional expenses throughout 2024 related to preparing the Company for the IPO and additional selling and marketing activities. Research and development expenses increased by $0.7 million or 16%, to $4.9 million for the year ended December 31, 2024, from $4.2 million for the year ended December 31, 2023.
The increase in expenses was primarily attributable to increased costs in personnel. Research and development expenses increased by $0.4 million or 8%, to $5.3 million for the year ended December 31, 2025, from $4.9 million for the year ended December 31, 2024.
For the years ended December 31, 2024 and 2023, services revenue as a percentage of total revenue is 9% and 7%, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Change (in thousands) ​ 2024 2023 ​ $ % Cost of goods sold: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hardware ​ $ 15,950 ​ $ 19,741 ​ $ (3,791) ​ (19) % Software ​ 5,025 ​ 5,545 ​ (520) ​ (9) % Services ​ 1,152 ​ 779 ​ 373 ​ 48 % Excess and obsolete ​ 402 ​ 948 ​ (546) ​ (58) % Other ​ — ​ 15 ​ (15) ​ (100) % Total cost of goods sold ​ $ 22,529 ​ $ 27,028 ​ $ (4,499) ​ (17) % ​ For the year ended December 31, 2024, total cost of goods sold decreased by $4.5 million, or 17%, to $22.5 million as compared to $27.0 million for the year ended December 31, 2023.
For the years ended December 31, 2025 and 2024, services revenue as a percentage of total revenue is 11% and 9%, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ Change (in thousands) ​ 2025 ​ ​ ​ 2024 ​ $ ​ ​ ​ % Cost of goods sold: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hardware ​ $ 9,374 ​ $ 15,950 ​ $ (6,576) ​ (41) % Software ​ 3,097 ​ 5,025 ​ (1,928) ​ (38) % Services ​ 1,944 ​ 1,152 ​ 792 ​ 69 % Excess and obsolete ​ 182 ​ 402 ​ (220) ​ (55) % Total cost of goods sold ​ $ 14,597 ​ $ 22,529 ​ $ (7,932) ​ (35) % ​ For the year ended December 31, 2025, total cost of goods sold decreased by $7.9 million, or 35%, to $14.6 million as compared to $22.5 million for the year ended December 31, 2024.
Issuance of Common Stock On December 6, 2024, we completed an initial public offering (the “IPO”) of 2.2 million shares of common stock at a price of $5.00 per share, which included 0.3 million shares sold to the underwriters pursuant to their option to purchase additional shares.
Our consolidated financial statements do not contain any adjustments that might result if we are unable to continue as a going concern. 53 Table of Contents Issuance of Common Stock On December 6, 2024, we completed our IPO of 2.2 million shares of common stock at a price of $5.00 per share, which included 0.3 million shares sold to the underwriters pursuant to their option to purchase additional shares.
The following table presents our Adjusted EBITDA from operations for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2024 2023 GAAP Net Loss ​ $ (20,823) ​ $ (13,036) Add back (deduct): ​ ​ Interest expense ​ 2,815 ​ 2,900 Depreciation and amortization ​ 12 ​ 32 Income tax expense (benefit) ​ 34 ​ 3 Write-off of deferred offering costs ​ — ​ 1,683 Stock-based compensation ​ 7,735 ​ 1 Loss on extinguishment of debt ​ 359 ​ ​ 1,541 Adjusted EBITDA ​ $ (9,868) ​ $ (6,876) ​ Factors Affecting Our Performance We believe that our growth and financial performance are dependent upon many factors, including the key factors described below which are in turn subject to significant risks and challenges, including those discussed below and in the section of this report entitled “ Risk Factors .” 55 Table of Contents Supply Chain Challenges The COVID-19 pandemic, and its persisting effects, significantly altered the supply chain delivery capability that existed prior to the onset of the pandemic and on which suppliers of physical products previously relied.
We believe this measure provides our management and investors with consistency and comparability with our past financial performance and is an important indicator of the performance and profitability of our business. 44 Table of Contents The following table presents our Adjusted EBITDA from operations for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 GAAP Net Loss ​ $ (25,388) ​ $ (20,823) Add back (deduct): ​ ​ ​ ​ Interest expense ​ 1,478 ​ 2,815 Depreciation and amortization ​ 10 ​ 12 Income tax expense ​ 14 ​ 34 Stock-based compensation ​ 7,120 ​ 7,735 Loss on change in fair value of convertible debt ​ 1,945 ​ — Loss on extinguishment of debt ​ — ​ ​ 359 Adjusted EBITDA ​ $ (14,821) ​ $ (9,868) ​ Factors Affecting Our Performance We believe that our growth and financial performance are dependent upon many factors, including the key factors described below which are in turn subject to significant risks and challenges, including those discussed below and in the section of this report entitled “ Risk Factors .” Retention of Key Employees In 2020, in response to concerns relating to the COVID-19 pandemic, we made significant changes to our business, including changes to our structure and employee base.
Revenue Recognition We recognize revenue from signed contracts with customers, change orders (approved and unapproved) and claims on those contracts that we conclude to be enforceable under the terms of the signed contracts. Some of our contracts have one clearly identifiable performance obligation. However, many contracts provide the customer several promises that include hardware, software and professional services.
Some of our contracts have one clearly identifiable performance obligation. However, many contracts provide the customer several promises that include hardware, software and professional services.
Results of Operations The following table sets forth our results of operations for the years ended December 31, 2024 and 2023 : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Change (in thousands) ​ 2024 2023 $ % Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hardware ​ $ 21,991 ​ $ 27,461 ​ $ (5,470) ​ (20) % Software ​ 12,857 ​ 13,229 ​ (372) ​ (3) % Services ​ 3,250 ​ 3,232 ​ 18 ​ 1 % Total Revenues ​ 38,098 ​ 43,922 ​ (5,824) ​ (13) % Cost of goods sold (1) ​ 22,529 ​ 27,028 ​ (4,499) ​ (17) % Gross profit ​ 15,569 ​ 16,894 ​ (1,325) ​ (8) % Operating expenses: ​ ​ ​ ​ ​ ​ Research and development (1) ​ 4,893 ​ 4,218 ​ 675 ​ 16 % Selling and marketing (1) ​ 15,915 ​ 12,898 ​ 3,017 ​ 23 % General and administrative (1) ​ 12,419 ​ 6,710 ​ 5,709 ​ 85 % Other operating expenses ​ — ​ 1,683 ​ (1,683) ​ 100 % Total operating expenses ​ 33,227 ​ ​ 25,509 ​ ​ 7,718 ​ 30 % Loss from operations ​ (17,658) ​ (8,615) ​ (9,043) ​ 105 % Other (expense) income: ​ ​ ​ ​ ​ Interest expense ​ (2,815) ​ (2,900) ​ 85 ​ (3) % Other income (expense), net ​ ​ 43 ​ 23 ​ 20 ​ 87 % Loss on extinguishment of debt ​ (359) ​ (1,541) ​ 1,182 ​ (77) % Loss before income taxes ​ (20,789) ​ (13,033) ​ (7,756) ​ 60 % Income tax expense ​ 34 ​ 3 ​ 31 ​ 1,026 % Net loss ​ $ (20,823) ​ $ (13,036) ​ $ (7,787) ​ 60 % (1) Includes stock-based compensation expense as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) ​ 2024 2023 ​ ​ ​ ​ ​ ​ Cost of goods sold ​ $ 130 ​ $ — Research and development ​ 802 ​ — Sales and marketing ​ 2,808 ​ 1 General and administrative ​ 3,995 ​ — Total stock-based compensation expense ​ $ 7,735 ​ $ 1 ​ 59 Table of Contents Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change (in thousands) ​ 2024 2023 ​ $ ​ % Revenues: ​ ​ ​ ​ Hardware ​ $ 21,991 ​ $ 27,461 ​ $ (5,470) ​ (20) % Software ​ 12,857 ​ 13,229 ​ (372) ​ (3) % Services ​ 3,250 ​ 3,232 ​ 18 ​ 1 % Total Revenues ​ $ 38,098 ​ $ 43,922 ​ $ (5,824) ​ (13) % Retention and Expansion Metrics ​ ​ ​ ​ ​ Annualized Contract Value (ACV) ​ $ 11,257 ​ $ 10,621 ​ $ 636 ​ 6 % Net Dollar Retention Rate (NDRR) ​ 92 % 112 % (20) % ​ ​ Total revenue decreased by $5.8 million, or 13%, to $38.1 million for the year ended December 31, 2024, from $43.9 million for the year ended December 31, 2023.
We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance. 48 Table of Contents Results of Operations The following table sets forth our results of operations for the years ended December 31, 2025 and 2024 : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ Change (in thousands) ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ $ ​ ​ ​ % Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hardware ​ $ 14,208 ​ $ 21,991 ​ $ (7,783) ​ (35) % Software ​ 10,558 ​ 12,857 ​ (2,299) ​ (18) % Services ​ 3,092 ​ 3,250 ​ (158) ​ (5) % Total Revenues ​ 27,858 ​ 38,098 ​ (10,240) ​ (27) % Cost of goods sold (1) ​ 14,597 ​ 22,529 ​ (7,932) ​ (35) % Gross profit ​ 13,261 ​ 15,569 ​ (2,308) ​ (15) % Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development (1) ​ 5,298 ​ 4,893 ​ 405 ​ 8 % Selling and marketing (1) ​ 16,232 ​ 15,915 ​ 317 ​ 2 % General and administrative (1) ​ 13,872 ​ 12,419 ​ 1,453 ​ 12 % Total operating expenses ​ 35,402 ​ ​ 33,227 ​ ​ 2,175 ​ 7 % Loss from operations ​ (22,141) ​ (17,658) ​ (4,483) ​ 25 % Other (expense) income: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ (1,478) ​ (2,815) ​ 1,337 ​ (47) % Other income (expense), net ​ ​ 190 ​ 43 ​ 147 ​ 341 % Loss on extinguishment of debt ​ — ​ (359) ​ 359 ​ (100) % Loss on change in fair value of convertible debt ​ (1,945) ​ — ​ (1,945) ​ N/A % Loss before income taxes ​ (25,374) ​ (20,789) ​ (4,585) ​ 22 % Income tax expense ​ 14 ​ 34 ​ (20) ​ (59) % Net loss ​ ​ $ (25,388) ​ $ (20,823) ​ $ (4,565) ​ 22 % (1) Includes stock-based compensation expense as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ (in thousands) ​ 2025 ​ ​ ​ 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of goods sold ​ $ 77 ​ $ 130 ​ Research and development ​ 388 ​ 802 ​ Sales and marketing ​ 2,122 ​ 2,808 ​ General and administrative ​ 4,533 ​ 3,995 ​ Total stock-based compensation expense ​ $ 7,120 ​ $ 7,735 ​ ​ Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change (in thousands) ​ 2025 ​ ​ ​ 2024 ​ $ ​ % Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hardware ​ $ 14,208 ​ $ 21,991 ​ $ (7,783) ​ (35) % Software ​ 10,558 ​ 12,857 ​ (2,299) ​ (18) % Services ​ 3,092 ​ 3,250 ​ (158) ​ (5) % Total Revenues ​ $ 27,858 ​ $ 38,098 ​ $ (10,240) ​ (27) % Retention and Expansion Metrics ​ ​ ​ ​ ​ ​ ​ ​ ​ Annualized Contract Value (ACV) ​ $ 9,917 ​ $ 11,257 ​ $ (1,340) ​ (12) % Net Dollar Retention Rate (NDRR) ​ 71 % 92 % (21) % ​ ​ ​ Total revenue decreased by $10.2 million, or 27%, to $27.9 million for the year ended December 31, 2025, from $38.1 million for the year ended December 31, 2024.
Cost of hardware sold decreased by $3.8 million, or 19%, to $16.0 million for the year ended December 31, 2024, from $19.7 million for the year ended December 31, 2023.
For the years ended December 31, 2025 and 2024, gross margin is 48% and 41%, respectively. Cost of hardware sold decreased by $6.6 million, or 41%, to $9.4 million for the year ended December 31, 2025, from $16.0 million for the year ended December 31, 2024.
The conditions identified above raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not contain any adjustments that might result if we are unable to continue as a going concern.
The conditions identified above raise substantial doubt about our ability to continue as a going concern.
For the years ended December 31, 2024 and 2023, software revenue as a percentage of total revenue is 34% and 30%, respectively. Service revenue increased by $18,000 or 1%, to $3.3 million for the year ended December 31, 2024, from $3.2 million for the year ended December 31, 2023.
For the years ended December 31, 2025 and 2024, software revenue as a percentage of total revenue is 38% and 34%, respectively.
A portion of our net losses in the year ended December 31, 2024 related to $7.7 million in stock compensation expense from options issued during the period and $1.7 million of our net losses in the year ended December 31, 2023 resulted from costs incurred in connection with our terminated EdtechX Merger Agreement.
Our net losses were $25.9 million and $20.8 million for the years ended December 31, 2025 and 2024, respectively. A portion of our net losses in the years ended December 31, 2025 and 2024 related to $7.6 million and $7.7 million, respectively, in stock compensation and RSU expense from RSUs and options issued during the period.
Explanation of these non-GAAP financial measures and reconciliation to the most directly comparable GAAP financial measures are included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Investors should not consider 49 Table of Contents non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.
Explanation of these non-GAAP financial measures and reconciliation to the most directly comparable accounting principles generally accepted in the United States of America (“GAAP”) financial measures are included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
International bookings accounted for approximately 15% and 17% of our total bookings for the years ended December 31, 2024 and 2023, respectively.
CTE bookings accounted for approximately 41% and 37% of our total United States bookings for the years ended December 31, 2025 and 2024, respectively, while K-12 bookings accounted for approximately 59% and 63% of our total United States bookings for the years ended December 31, 2025 and 2024, respectively.
Cost of software sold decreased by $0.5 million or 9%, to $5.0 million for the year ended December 31, 2024, from $5.5 million for the year ended December 31, 2023. The decrease in cost of software sold corresponds to decreased sales of point-in-time software.
For the years ended December 31, 2025 and 2024, hardware gross margin is 34% and 27%, respectively. Cost of software sold decreased by $1.9 million or 38%, to $3.1 million for the year ended December 31, 2025, from $5.0 million for the year ended December 31, 2024.
For the year ended December 31, 2023, our operating activities used cash of $6.4 million, primarily due to our net loss of $13.0 million partially offset by changes in our operating assets and liabilities of $2.3 million and adjustments for non-cash charges including provision for excess and obsolete inventory of $0.8 million, non-cash amortization of other debt discount of $0.1 million, write-off of deferred offering costs of $1.7 million, cancellation of purchase obligations of $0.1 million, and loss on extinguishment of debt of $1.5 million.
Cash Flows The following table summarizes our cash flows for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, (in thousands) ​ ​ ​ 2025 ​ ​ ​ 2024 Net cash used in operating activities ​ $ (17,969) ​ $ (8,874) Net cash used in investing activities ​ $ (26) ​ $ (13) Net cash provided by financing activities ​ $ 14,382 ​ $ 10,482 ​ Operating Activities For the year ended December 31, 2025, our operating activities used cash of $18.0 million, primarily due to our net loss of $25.9 million and the changes in our operating assets and liabilities of $2.0 million, partially offset by adjustments for non-cash charges, including stock-based compensation expense of $7.1 million, the change in fair value of convertible debt of $1.9 million, issuance of restricted stock units of $0.5 million, provision for excess and obsolete inventory of $0.2 million, and non-cash amortization of other debt discount of $0.1 million.
The decrease in write-downs is attributable to less product and component inventory supply disruptions correlated to the reduced impact of the COVID-19 pandemic. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change (in thousands) ​ ​ 2024 ​ 2023 ​ ​ $ ​ % Operating Expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 4,893 ​ $ 4,218 ​ $ 675 ​ 16 % Selling and marketing ​ 15,915 ​ 12,898 ​ ​ 3,017 ​ 23 % General and administrative ​ 12,419 ​ 6,710 ​ ​ 5,709 ​ 85 % Other operating expenses ​ ​ — ​ 1,683 ​ ​ (1,683) ​ 100 % Total operating expenses ​ $ 33,227 ​ $ 25,509 ​ $ 7,718 ​ 30 % ​ For the year ended December 31, 2024, total operating expenses increased by $7.7 million, or 30%, to $33.2 million, from $25.5 million for the year ended December 31, 2023.
The decrease was attributable to the write-off of inventory costs in the year ending December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ Change (in thousands) ​ ​ 2025 ​ ​ ​ ​ 2024 ​ ​ $ ​ % Operating Expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 5,298 ​ $ 4,893 ​ $ 405 ​ 8 % Selling and marketing ​ 16,232 ​ 15,915 ​ ​ 317 ​ 2 % General and administrative ​ 13,872 ​ 12,419 ​ ​ 1,453 ​ 12 % Total operating expenses ​ $ 35,402 ​ $ 33,227 ​ $ 2,175 ​ 7 % ​ For the year ended December 31, 2025, total operating expenses increased by $2.2 million, or 7%, to $35.4 million, from $33.2 million for the year ended December 31, 2024.
The increase in expenses is primarily attributable to an increase in stock-based compensation expense of $0.8 million due to grants to employees in March and May 2024. Selling and marketing expenses increased by $3.0 million or 23%, to $15.9 million for the year ended December 31, 2024, from $12.9 million for the year ended December 31, 2023.
Selling and marketing expenses increased by $0.3 million or 2%, to $16.2 million for the year ended December 31, 2025, from $15.9 million for the year ended December 31, 2024.
These debooks, totaling $1.2 million and $1.6 million for the years ended December 31, 2024 and 2023, respectively, primarily occurred in the last three quarters of fiscal year 2024. The primary factors contributing to these debooks were customer financial constraints . ​ Management believes the disclosure of these material debooks provides investors with important context for evaluating business performance.
Subsequent to fiscal year 2024, we experienced significant cancellations ("debooks") of previously reported customer commitments that affect full year bookings performance. These debooks, totaling $1.7 for the year ended December 31, 2024, primarily occurred in the last three quarters of fiscal year 2024. The primary factors contributing to these debooks were customer financial constraints .
For information on our significant accounting policies, refer to Note 2 — Summary of Significant Accounting Policies to our audited consolidated financial statements contained elsewhere in this report.
For information on our significant accounting policies, refer to Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements contained elsewhere in this report. Revenue Recognition We recognize revenue from signed contracts with customers, change orders (approved and unapproved) and claims on those contracts that we conclude to be enforceable under the terms of the signed contracts.
The increase in expenses is primarily attributable to an increase in stock-based compensation expense of $2.8 million due to grants to employees in March and May 2024. General and administrative expenses increased by $5.7 million or 85%, to $12.4 million for the year ended December 31, 2024, from $6.7 million for the year ended December 31, 2023.
The increase in expenses was primarily attributable to increased headcount and compensation expense partially offset by a decrease in stock-based compensation expense of $0.7 million due to grants to employees in March 2024.
Hardware revenue decreased by $5.5 million or 20%, to $22.0 million for the year ended December 31, 2024, from $27.5 million for the year ended December 31, 2023. The decrease in hardware revenue is primarily attributable to constraint of available working capital to fund hardware purchases to fulfill order backlog.
Service revenue decreased by $0.2 million or 5%, to $3.1 million for the year ended December 31, 2025, from $3.3 million for the year ended December 31, 2024. The decrease in revenue is attributable to decreased sales of extended warranty and technology support services.
Overview We are a leading provider of augmented and virtual reality educational technology solutions. We believe that we are a recognized brand in the education market with a current focus on both United States K-12 schools and the CTE markets.
Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP. Overview We are a leading provider of augmented and virtual reality educational technology products, focusing primarily on United States K-12 schools, the Career and Technical Education sector, and select international markets.
Services Revenue Our services are a “turn-key” solution that aids customers with configuring purchased products with software and license keys specific to the customer’s use. This service allows the applicable school to quickly get started with an out-of-the-box ready system.
In transactions where a third-party is involved in providing software licenses to a customer, we recognize the revenue from the third-party ratably over-time on a straight-line basis. Services Revenue Our services are a “turn-key” solution that aids customers with configuring purchased products with software and license keys specific to the customer’s use.
This decrease in revenue is primarily attributable to constraint of available working capital to fund hardware purchases to fulfill order backlog during the year as a result of our IPO not being completed until December 6, 2024.
The decrease in hardware revenue was primarily attributable to tariff and trade policy uncertainty, as well as uncertainty in federal funding sources for education available to our K-12 segment customers, and the resulting impact on laptop shipments, during the year ended December 31, 2025.The decrease in hardware revenue is primarily attributable to constraint of available working capital to fund hardware purchases to fulfill order backlog.
We believe the wide variety and flexibility of our software applications help us retain existing customers and acquire additional customers. Software applications revenue accounted for between 30% and 34% of our total revenue for the years ended December 31, 2024 and 2023.
We offer discount programs based on increases in volume of devices or users and the length of the contract. We believe the wide variety and flexibility of our software applications help us retain existing customers and acquire additional customers.
With a mature and tested go-to-market playbook and team in place, we are focused on scaling execution across a carefully selected set of growth vectors, including scaling in the United States, expanding internationally, investing in R&D, and acquiring software, both specific software applications and third party software developers, in order to increase the growth of our software offerings.
In this context, we are focused on scaling execution across a carefully selected set of growth vectors. These include: ● Targeted software growth via additional application acquisition. We intend to pursue additional software applications in order to increase the growth of our software offerings.
Software Acquisitions for Growth An important component to our future growth plan going forward is the acquisition of key software companies and/or intellectual property in specific areas within the education market. We believe that the completion and successful integration of such companies and assets will be important to our success.
We believe that the completion and successful integration of such companies and assets will be important to our success. Components of Results of Operations Revenue Our revenue consists of hardware revenue, software applications revenue and services revenue.
Such acquisitions, if completed, are intended to be accretive to earnings and materially increase our software revenues.
Such acquisitions, if completed, are intended to be accretive to earnings and materially increase our software revenue. ● Continued Focus in the United States education market . We expect to continue to drive growth by expanding use cases and introducing new applications within the United States.
The increase in expenses is primarily attributable to a $4.0 million increase in stock compensation expenses due to grants to employees in March and May 2024, and to the increased costs in personnel and professional expenses throughout 2024 related to preparing the Company for the IPO. 61 Table of Contents Other operating expenses decreased by $1.7 million or 100%, to zero for the year ended December 31, 2024, from $1.7 million for the year ended December 31, 2023.
The increase in expenses was primarily attributable to increased costs in personnel and professional expenses in 2025 related to being a public company and a $0.5 million increase in stock compensation expenses due to grants to employees in April 2025.
The decrease in cost of goods sold is primarily attributable to a decrease in the volumes shipped of Inspire laptops. For the years ended December 31, 2024 and 2023, gross margin is 41% and 38%, respectively.
The decrease in cost of hardware sold was primarily attributable to a decrease in the volumes shipped of Inspire laptops, as well as reductions in the bill of materials costs of the new Inspire 2 laptop relative to the Inspire 1 model which was sold during the year ended December 31, 2024.
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From a technology perspective, graphics and speed of computing have increased exponentially over time, but the physical computing experience has remained largely static since the introduction of the mouse and touchscreen in the 1980s.

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