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What changed in MultiSensor AI Holdings, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of MultiSensor AI Holdings, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+600 added−332 removedSource: 10-K (2026-03-19) vs 10-K (2025-03-28)

Top changes in MultiSensor AI Holdings, Inc.'s 2025 10-K

600 paragraphs added · 332 removed · 191 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe combine condition monitoring data with proprietary edge and cloud software to generate actionable insights that, we believe, minimize unplanned downtime, reduce maintenance costs, prevent catastrophe, and extend asset life. ​ Products Sensor Devices Our sensor devices cover a large range of the electromagnetic and mechanical spectrums, encompassing visible-light imagers, shortwave (“SWIR”), midwave (“MWIR”), and longwave infrared imagers (“LWIR”), ultraviolet (“UV”) imagers, acoustic imagers, and tunable diode laser emitter-detector pairs for laser absorption spectrometry (“TDLAS”).
Biggest changeWe expect this “big data” capability to be a significant advantage as we continue to develop transformative AI models. Hardware Our sensor hardware covers a broad range of the electromagnetic and mechanical spectrums, encompassing visible-light imagers, shortwave, midwave, and longwave infrared imagers, ultraviolet imagers, acoustic imagers, and tunable diode laser emitter-detector pairs for laser absorption spectrometry.
Competition The global market for infrared sensing devices is highly competitive and well established with large scale manufacturers, such as Teledyne FLIR and Fortive, selling primarily into military and commercial applications.
Competition The global market for infrared sensing devices is highly competitive and well established with large scale manufacturers, such as Teledyne FLIR, selling primarily into military and commercial applications.
Our target users in the manufacturing market traditionally include mechanical engineers and facilities and maintenance professionals. As our software solutions continue to evolve, we are increasingly targeting process design, safety, and operational leaders whose priorities involve process waste reduction, enhanced safety protocols, and improved consistency and quality in manufacturing outputs.
Our target users in the manufacturing market traditionally include mechanical engineers and facilities and maintenance professionals. As our software solutions continue to evolve, we are increasingly targeting process design, safety, and operational leaders whose priorities involve process waste reduction, enhanced safety protocols, and improved quality of manufacturing outputs.
Traditionally, target users include mechanical engineers and maintenance and facilities professionals. We believe that our data-driven solutions will expand the user base to include operations and safety executives, process engineers, and other process-oriented leaders. Manufacturing Our customers in the manufacturing market primarily include automotive and vehicle manufacturers, chemical and paper manufacturers, and aerospace and defense manufacturers.
Traditionally, target users include mechanical engineers and maintenance and facilities professionals. We believe that our data-driven solutions will expand the user base to include operations and safety executives, process engineers, and other process-oriented leaders. 8 Table of Contents Manufacturing Our customers in the manufacturing market primarily include automotive and vehicle manufacturers, chemical and paper manufacturers, and aerospace and defense manufacturers.
We also believe that our early entrance into our target markets affords us an advantageous opportunity to establish strong relationships globally with key customers in each market. Our Growth Strategies Our goal is to increase our sales by expanding the market for multi-sensor condition-based monitoring across multiple industry sectors.
We also believe that our early entrance into our target markets affords us an advantageous opportunity to establish strong relationships globally with key customers in each market. Our Growth Strategies Our goal is to increase our sales by expanding the market for multi-sensor condition-based monitoring across automation-intensive environments.
Employees As of December 31, 2024, we employed a total of 41 people, 36 of whom are employed on a full-time basis, in the United States. We also engage numerous consultants and contractors to supplement our permanent workforce. None of our employees are represented by a labor union or covered by collective bargaining agreements.
Employees As of December 31, 2025, we employed a total of 21 people, all of whom are employed on a full-time basis, in the United States. We also engage numerous consultants and contractors to supplement our permanent workforce. None of our employees are represented by a labor union or covered by collective bargaining agreements.
Intellectual Property We own and control various intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names, and copyrights. We do not expect the expiration or termination of any such patents, patent applications and license agreements to have a material adverse effect on our business, results of operations or financial condition.
Intellectual Property We own and control various intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names, and copyrights. We do not expect the expiration or termination of the foregoing to have a material adverse effect on our business, results of operations or financial condition.
Exporting our thermal cameras, infrared cameras, or infrared sensors to certain countries may be restricted by the United States Government’s thermal camera export restrictions and many fall under International Traffic in Arms Regulations (“ITAR”). All ITAR items are designated by the U.S. Department of State. Some of MSAI’s thermal cameras fall under specific Export Control Classification Number (“ECCN”) codes.
Exporting our thermal cameras, infrared cameras, or infrared sensors to certain countries may be restricted by the United States Government’s thermal camera export restrictions and many fall under International Traffic in Arms Regulations (“ITAR”). All ITAR items are designated by the U.S. Department of State.
MSAI Connect thereby receives and stores sensor data from our directly connected sensor devices, including thermal, visible, and acoustic imagers, indirectly connected sensors communicating with our edge software via standard industrial communications protocols, and other cloud-connected industrial sensor data repositories.
MSAI Connect thereby receives and stores sensor data from our directly connected sensor devices and indirectly connected sensors communicating with our edge software via standard industrial communications protocols or other cloud-connected industrial sensor data repositories.
Vibration Monitoring Technology Mechanical vibrations of industrial equipment can be monitored using piezoelectric or accelerometer-based vibration sensors. Vibration sensor data can then be analyzed by sophisticated software to identify mechanical anomalies based upon frequency and intensity of detected vibrations and their position on the asset being monitored.
Vibration Monitoring Technology Mechanical vibrations of industrial equipment can be monitored using piezoelectric or accelerometer-based vibration sensors. Vibration sensor data can then be analyzed by sophisticated software to identify mechanical anomalies based upon frequency and intensity of detected vibrations and their position on the asset being monitored. Multi-Sensor Technology Modern industrial environments are increasingly automated, interconnected, and operationally complex.
This distribution and logistics TAM includes conveyor system anomaly detection, hotspot detection, process automation, predictive maintenance, and failure avoidance, among other applications, with demand expected to be driven by both financial incentives related to process improvements and increased regulation pertaining to facility safety. Manufacturing Market Opportunity We believe that the manufacturing TAM in 2024 was approximately $3.2 billion.
Distribution and Logistics Market Opportunity We believe the distribution and logistics TAM in 2025 was approximately $3.9 billion. This TAM includes conveyor system anomaly detection, hotspot detection, process automation, predictive maintenance, and failure avoidance, among other applications. Demand is expected to be driven by financial incentives related to process improvements and increased regulations pertaining to facility safety.
No other customer accounted for more than 10% of total net revenue. ​ Distribution and Logistics Our customers in the distribution and logistics market are generally engaged in the maintenance and upkeep of facilities and their critical material-handling equipment assets. This includes conveyor systems, transportation and machinery, and electrical infrastructure.
No other customer accounted for more than 10% of total net revenue. ​ Distribution and Logistics Our customers in the distribution and logistics market are generally engaged in the maintenance and upkeep of e-commerce and retail distribution centers, couriers and express parcel hubs and their material-handling equipment assets. This includes conveyor systems, transportation and machinery, and electrical infrastructure.
For these reasons, we feel that the potential of our core technology to grow in prevalence and importance is significant, particularly as the cost of the technology continues to decline, opening up large new end applications. Acoustic Imaging Technology Audible and ultrasonic sounds across the mechanical wave spectrum have historically been detected and analyzed using single point microphones.
For these reasons, we feel that the potential of our core technology to grow in prevalence and importance is significant. Acoustic Imaging Technology Audible and ultrasonic sounds across the mechanical wave spectrum have historically been detected and analyzed using single point microphones.
Although we 11 Table of Contents believe our technology is class-leading and that our continued innovation will support our position, we have faced and will continue to face competition from existing competitors and new companies, as well as the potential for customers to develop their own end-to-end sensing solutions.
Although we believe our technology is class-leading and that our continued innovation will support our position, we have faced and will continue to face competition from existing competitors and new companies, as well as the potential for customers to develop their own end-to-end sensing solutions. We believe our competitive landscape varies somewhat across our target markets.
This radiometric capability enables the full analytical power of infrared cameras to be harnessed in the cloud as well as at the edge. In particular, this cloud radiometry enables vastly broader AI/ML capabilities, as models can be trained on radiometric data from large infrared datasets gathered from every camera connected at the edge.
This radiometric capability enables the full analytical power of infrared cameras to be harnessed in the cloud as well as at the edge. This data enables vastly broader artificial intelligence and machine learning (“AI/ML”) capabilities, as models can be trained on radiometric data from large infrared datasets gathered from every camera connected at the edge.
We estimate the TAM in these target markets based on a combination of the total number of estimated potential customers and facilities in each market, our expectations regarding the scope of potential uses of thermal and multi-sensing solutions in those markets, and our estimates of average selling prices in those markets and potential opportunity for software solutions to increase the utility of thermal imaging and multi-sensing solutions.
We estimate the total addressable market (“TAM”) in these target markets based on a combination of the total number of estimated potential customers and facilities in each market, our expectations regarding the scope of potential uses of our predictive maintenance and reliability platform in those markets, and our estimates of average selling prices in those markets and potential opportunity for our platform to increase the utility of maintenance and reliability programs.
As the technology grew in sophistication, and decreased dramatically in cost, the breadth of applications expanded. In the past three decades, thermal sensing technology has been applied across numerous applications, such as production process monitoring, electrical equipment monitoring, industrial plant monitoring, early fire detection, pressure vessel monitoring, tank level monitoring, and liquid and gas leak detection.
Industry Background Applied Infrared Technology ​ As thermal imaging and sensing technology has grown in sophistication, and decreased dramatically in cost, it has been applied across numerous applications, such as production process monitoring, electrical equipment monitoring, industrial plant monitoring, early fire detection, pressure vessel monitoring, tank level monitoring, and liquid and gas leak detection.
We believe our competitive landscape varies somewhat across our three target markets. In distribution and logistics, we mainly compete with large scale manufacturers of handheld sensor devices that provide on-device thermal image display and basic on-device software.
In distribution and logistics, we mainly compete with large scale manufacturers of handheld sensor devices that provide on-device thermal image display and basic on-device software.
ECCN items are governed by the U.S. Department of Commerce Bureau of Industry and Security. Likewise, most but not all of MSAI’s thermal cameras also have Commodity Jurisdiction codes.
Some of MSAI’s thermal cameras fall under specific Export Control Classification 12 Table of Contents Number (“ECCN”) codes. ECCN items are governed by the U.S. Department of Commerce Bureau of Industry and Security. Likewise, most but not all of MSAI’s thermal cameras also have Commodity Jurisdiction codes.
We estimate the TAM in 2024 in our target markets was approximately $10.7 billion, consisting of approximately $7.1 billion in hardware sales and $3.6 billion in software and service sales. Our current market share in each of our three target markets represents less than 0.1% penetration of the estimated TAM.
We estimate that the TAM in our target markets was approximately $9.0 billion in 2025, consisting of $6.6 billion in hardware sales and $2.4 billion in software and service sales annually. Our market share in each of our three target markets represented less than 0.1% penetration of the estimated TAM in 2025.
The market for software and turn-key solutions that support multiple sensor modalities is even less mature, as complete solutions have either been “Build-Your-Own” or installed by integrators.
The market for software and turn-key solutions that support multiple sensor modalities is even less mature, as complete solutions have either been “Build-Your-Own” or installed by integrators. We have established a differentiated position in the market providing a turn-key predictive maintenance and reliability platform for specific end markets.
For the year ended December 31, 2024, one customer in the distribution and logistics market accounted for 25% of total net revenue, and two customers in the manufacturing market accounted for 11% and 11% of total net revenue, respectively.
For the year ended December 31, 2025, one customer in the distribution and logistics market accounted for 36% of total net revenue.
We believe our early entrance into these markets with our MSAI Connect SaaS solution will enable us to gain expertise, informing our product development decisions so that we may more effectively customize our solutions for customers’ needs.
Diversified Applications We believe that the diversity of applications in which our technology can be applied in our target markets gives us several advantages. We believe our early entrance into these markets with our MSAI Connect platform will enable us to gain expertise, informing our product development decisions so that we may more effectively customize our solutions for customers’ needs.
Having optimized the fixed-mount hardware and associated thermal, visible, acoustic, vibration, and spectroscopy devices, we have shifted our focus towards the acquisition, storage and analysis of data through our proprietary edge software, MSAI Edge, and our cloud-based software, MSAI Connect.
Having optimized fixed-mount hardware, we have shifted our focus towards the acquisition, storage and analysis of data through our proprietary software platform, MSAI Connect, available both as cloud-based subscription service and as an on-premises deployment (formally referred to as MSAI Edge).
As a result, enhancing infrared image sensing with acoustic and visible image sensing as well as vibration monitoring can further improve asset and process condition monitoring and resultant predictive maintenance efforts. Continuous Monitoring and Data-Driven Insight In industrial settings, thermal technology has historically been applied primarily through handheld devices in order to inspect equipment on a periodic basis.
Continuous Monitoring and Data-Driven Insight In industrial settings, thermal technology has historically been applied primarily through handheld devices in order to inspect equipment on a periodic basis.
MSAI Connect, which currently runs on the Amazon Web Services platform, communicates bilaterally with one or more devices running our edge software as well as with other cloud-hosted industrial data repositories via any suitable internet connection.
MSAI Connect, when deployed on-premises, is sold as both a term-based software license, which generally provides access to the software for a period of 12 months, and as a perpetual license. ​ MSAI Connect, when deployed on the cloud, runs on the Amazon Web Services platform and communicates bilaterally with one or more devices as well as with other cloud-hosted industrial data repositories via any suitable internet connection.
This manufacturing market TAM includes process monitoring and control, predictive maintenance, electrical panel monitoring (sub grid scale), production motor drives, early fire detection, and electrified transport battery monitoring, among other applications.
Manufacturing Market Opportunity We believe the manufacturing TAM in 2025 was approximately $2.7 billion. This includes process monitoring and control, predictive maintenance, electrical panel monitoring (sub-grid scale), production motor drives, early fire detection, and electrified transport battery monitoring, among other applications. We expect demand to be driven by continued commercial adoption of data-driven predictive maintenance and manufacturing processes.
Available Information In accordance with the Exchange Act, we file electronically with the Securities and Exchange Commission (the “SEC”) our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other information.
In connection with the Merger, Legacy SMAP changed its name to “Infrared Cameras Holdings, Inc.” The registrant subsequently changed its name to MultiSensor AI Holdings, Inc. on February 9, 2024. 13 Table of Contents Available Information In accordance with the Exchange Act, we file electronically with the Securities and Exchange Commission (the “SEC”) our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other information.
Expand Our Distribution Network While the majority of our sales are direct to customers, we also sell our thermal sensors through a network of strategic channel partners. We believe that these partners enable us to reach more end customers in an operationally efficient manner.
Expand Our Distribution Network While the majority of our sales are generated through direct engagement with customers, we also utilize a network of strategic channel and distribution partners to extend our market reach. We believe these partnerships enable us to access additional end customers, geographic regions, and industry verticals in a capital-efficient manner while maintaining operational focus.
“ Risk Factors — Risks Related to Our Business and Industry ” and “ Risk Factors — Risks Related to Our Products ” for a more detailed discussion relating to the risks that apply to each of our three target markets, particularly as they relate to the adoption of our hardware and software offerings in each of the three target markets.
Please see Part I, Item 1A, “Risk Factors — Risks Related to Our Business and Industry” and “Risk Factors — Risks Related to Our Products” for a more detailed discussion of the risks applicable to the adoption of our hardware and software products in each of the three target markets.
While our sensor devices generally include an infrared imager as a core sensor technology, many of them are multi-sensor and include two or more of the aforementioned sensor devices.
While our sensor devices generally include an infrared imager as a core sensor technology, many of them are multi-sensor and include two or more of the aforementioned sensor devices. Sensor hardware is paired with our software to create customized solutions for predictive maintenance and is also sold on a standalone basis via our online store, www.infraredcameras.com .
These components are then assembled into finished systems, calibrated and tested at our primary production facility located in Beaumont, Texas. For both of these manufacturing approaches, we often apply our calibration process as part of final assembly.
For the remaining in-house manufacturing operations, we purchase many pre-assembled subcomponents, including certain detectors, coolers, optics, and other sensors, which are then assembled into finished systems, calibrated, and tested at our primary production facility in Beaumont, Texas, where we also apply our calibration processes as part of final assembly across both internal and outsourced production.
In addition to these internally funded activities, we may engage in research and development projects that are reimbursed by government agencies or prime contractors pursuant to development contracts we undertake. 12 Table of Contents Raw Materials We depend on a number of suppliers in China for certain component parts and equipment containing raw materials, including but not limited to gallium and germanium, used in critical stages of our manufacturing processes.
Insights derived from these engagements inform structured portfolio prioritization and capital allocation decisions. Raw Materials We depend on a number of suppliers in China for certain component parts and equipment containing raw materials, including but not limited to gallium and germanium, used in critical stages of our manufacturing processes.
We believe we have strong and positive relations with our employees. Properties Our corporate headquarters is located in Beaumont, Texas where we lease approximately 6,380 square feet of office space and 7,320 square feet of warehouse space. Our office space is leased pursuant to two one-year leases which both expire on December 31, 13 Table of Contents 2025.
We believe we have strong and positive relations with our employees. Properties Our corporate headquarters is located in Houston, Texas where we rent private office space in a co-working facility. Our office space is rented pursuant to a one-year agreement which expires on December 31, 2026.
These calculations were made with several assumptions and limitations in mind, applied consistently across the calculations in all three of the target markets.
These calculations were made with several assumptions and limitations, applied consistently across all three target markets. Specifically, these assumptions and limitations include: ● We evaluated data regarding facilities located within the United States, Canada, European Union member states, and the United Kingdom.
For customers with multiple facilities distributed geographically, this central monitoring capability provides a new and powerful tool for thermal, acoustic, and vibration anomaly detection and management. Our cloud software is distinguished by its capability to not only transmit thermal imaging metadata and RGB video from the edge to the cloud, but also transmit radiometric image data.
For customers operating geographically distributed sites, this capability supports standardized monitoring and earlier risk identification across their operational footprint. ​ The MSAI Connect platform is distinguished by its capability to transmit radiometric image data, not only thermal imaging metadata and RGB video from the edge to the cloud.
The ultimate sale by us of these devices and software subscriptions, the deployment of these devices by each of these customers at these additional sites and their timeline for doing so is subject to risks and uncertainties, including those described in Part I, Item 1A “ Risk Factors ” of this Annual Report.
The ultimate sale of additional devices and software subscriptions, the pace and scale of multi-site deployments, and customer expansion timelines are subject to risks and uncertainties, including those described in Part I, Item 1A “Risk Factors” of this Annual Report.
Based on our own commercial experience, and conservative estimates of the number of critical assets, physical lines of sight, and expected reterun on investments of individual use cases per facility, we estimate how many of our multi-sensor sensing systems could be deployed at these facility.
We did not make any assumptions about future potential growth or reduction of facilities from the point in time data obtained. ​ Based on our commercial experience and estimates of the number of critical assets, sensor coverage, and expected return on investment of individual use cases per facility, we estimated how many of our multi-sensor systems could be deployed across these facilities.
With this combination, we expect to develop new solutions for industry-specific applications, expanding our product offering without requiring significant manufacturing or inventory changes. Diversified Applications We believe that the diversity of applications in which our technology can be applied in our three target markets gives us several advantages.
With this combination, we expect to develop new innovative solutions for industry-specific applications, expanding our product offering without requiring significant manufacturing or inventory changes. Our system architecture is intentionally modular and extensible, allowing for the integration of sensing modalities developed internally and by third parties.
In addition to receiving and storing this data, our cloud software provides an intuitive and insight-rich dashboard that enables users to simultaneously view live thermal and visible video streams from multiple sensor devices as well as related data values and alerts for temperature, sound, and vibration.
In addition to receiving and storing this data, MSAI Connect provides a centralized monitoring dashboard that enables users to view live thermal and visual data streams, temperature trends, and anomaly alerts across multiple facilities.
In order to achieve that goal, key elements of our growth strategy include: Increase Investment in SaaS Solution Our MSAI Connect SaaS platform has been sold and is being used by key blue-chip accounts across our target markets. We believe the opportunity to cross-sell our value-added SaaS solutions alongside our sensors is an attractive opportunity to grow revenue.
In order to achieve that goal, key elements of our growth strategy include: Increase Investment in SaaS Solution We intend to expand investment in our MSAI Connect software platform as a core driver of recurring revenue growth and long-term customer value.
Multi-Sensor Technology Our integrated solutions leverage data generated from an array of sensors and sensor modalities to protect our customers' most critical assets.
Our integrated solutions leverage data generated from multiple sensor types and sensing modalities to protect our customers' most critical assets. We combine condition monitoring data with proprietary edge and cloud-based software to transform raw sensor inputs into actionable operational insights.
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Item 1. Business. Business Overview We build and deploy intelligent multi-sensing platforms incorporating edge and cloud software solutions that leverage artificial intelligence (“AI”).
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Item 1. Business. Business Overview ​We build and deploy integrated condition monitoring and early threat detection solutions that connect multiple sensor types through a unified edge-to-cloud software architecture. Our software platform integrates multiple sensing modalities such as thermal, visual and acoustic, among others.
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We are a provider of sensing systems built around high-resolution thermal imagers, visible and acoustic imagers, as well as vibration and laser spectroscopy sensors, that perceive and measure heat, sound, vibration, and gas in industrial assets and the surrounding environment, helping companies gain insight to protect and manage their most important assets and infrastructure.
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Customers deploy the MSAI Connect platform to continuously monitor critical assets and identify early degradation patterns (such as elevated operating temperatures) across electrical, mechanical, and environmental systems. This allows teams to intervene early and convert potential failures into planned maintenance before downtime, safety incidents, or operational disruption occur.
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We believe our platform is high performing and attractively priced across each of our primary target markets: distribution and logistics; manufacturing; and oil and gas.
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We are focused on growing our position as a Software as a Service (“SaaS”) leader in predictive maintenance. As of December 31, 2025, we had approximately 730 active sensors connected to our software platform, MSAI Connect, as compared to approximately 460 as of December 31, 2024. This represents a 59% increase year over year.
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We also offer a wide range of form factors for our sensor devices, including, among other form factors, small to large handheld designs with built-in displays and controls, fixed-mounted single- and multi-sensor camera sensor systems, with or without displays and controls, and mobile multi-sensor payload and gimbal systems for unmanned aerial vehicles (“UAVs”).
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We anticipate significant opportunities to drive increased recurring revenues with our solutions. ​ We focus on commercial environments where operational continuity is vital and automation intensity is high, including distribution and parcel logistics networks, data centers, and select manufacturing and industrial facilities.
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We believe that our digital multi-sensor software technology platform positions us to become a leader in thermal and related sensing as the introduction of continuous streaming thermal data alongside other adjacent sensor data, coupled with automated insights, replaces intermittent manual thermal and physical inspections.
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We believe our solutions offer a compelling combination of performance, scalability, and cost efficiency relative to traditional inspection and monitoring approaches. Our digital, multi-sensor software platform is designed to support the transition from intermittent, manual asset inspections towards continuous intelligent condition monitoring.
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Additionally, our cloud-connected thermal, visible, acoustic, vibration, and spectroscopy big data capture enables artificial intelligence and machine learning (“AI/ML”) opportunities to elevate critical asset management to a new level and provide differentiated insight.
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By streaming and analyzing radiometric thermal data in combination with other deployed sensor inputs, our MSAI Connect software platform can surface early anomaly signals that may not be visible or detected during periodic inspections. Our system architecture is intentionally modular and extensible, allowing for the integration of additional sensing modalities and analytics capabilities over time.
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In partnering with several blue-chip multinational customers throughout the development process, we have illustrated several high-value use cases for our MSAI Edge and MSAI Connect software across our three target markets, as described below.
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While our current commercial deployments are centered primarily on thermal-based monitoring enhanced by software-driven analytics and expert review, we believe the platform’s multi-sensor foundation positions us to expand into broader predictive and prescriptive use cases.
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Industry Background A Brief History of Applied Infrared Technology Thermal imaging and sensing technologies were first discovered and leveraged in the early part of the 19th century. Originally used for radiation detection, the technology began being used in military applications for night vision, as well as in scientific and astronomical applications throughout the early portions of the 20th century.
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Through collaboration with several blue-chip multinational customers during development and deployment, we have validated high-value, mission-critical use cases across our target markets: distribution and logistics, manufacturing and data centers. These engagements have informed our product evolution and reinforced our belief that integrated, AI-enabled multi-sensor monitoring represents a structural shift in how industrial reliability and asset protection are managed.
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In the late 20th century, infrared technology was incorporated into thermal cameras, used in manufacturing and other industrial settings to identify faulty equipment in need of maintenance, as well as other potential operational and safety issues by sensing “hotspots” or raised temperatures that often presage equipment failure.
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Many industrial operators are moving from intermittent, manual inspections to continuous monitoring that can surface early warning signals sooner. Our solution supports this shift by combining multi-sensor data with software insights and reliability expertise to detect anomalies early and guide response.
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Adjacent and Complementary Sensor Technologies to Infrared In industrial applications, infrared imaging technology is used to measure temperature in a uniquely high-resolution and non-contact fashion in order to detect asset and process condition anomalies. These anomalies can sometimes also be detected using sound, vibration, and visible image analysis.
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As asset density rises and tolerance for disruption declines, single-sensor systems and periodic manual inspections may be insufficient to detect emerging risks across interconnected equipment and infrastructure. We believe these environments require integrated, multi-sensor monitoring approaches capable of continuously analyzing diverse data streams to identify early indicators of performance degradation or failure.
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We offer a wide range of form factors for our sensor devices, including small to large handheld designs with built-in displays and controls, fixed-mounted single- and multi-sensor camera systems with or without displays and controls, fixed-mounted pan-tilt-zoom single- and multi-sensor camera standalone systems, and mobile multi-sensor payload and gimbal systems for UAVs and unmanned ground vehicles (“UGVs”). 5 Table of Contents Sensor Software We have developed a suite of edge and cloud software systems to acquire, store, analyze, action and archive sensor data.
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These insights are designed to enable earlier intervention and more informed decision making which we believe can minimize unplanned downtime, reduce maintenance costs, mitigate the risk of catastrophic failures and extend asset life. ​ Products Software ​MSAI Connect, our condition-based monitoring and early threat detection software platform, is available in both cloud-hosted and on-premises configurations.
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Our edge software can operate independently or be combined with our cloud system MSAI Connect. We believe that the combination of our edge and cloud software together creates a multitude of turn-key software solutions for our customers that solve industrial problems in ways previously unavailable.
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The platform utilizes continuous data inputs from strategically deployed sensor devices to monitor the health and performance of critical assets. MSAI Connect processes multi-sensor data in real time to surface early anomaly signals that may indicate developing mechanical or electrical degradation.
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Edge Software MSAI Edge is an “on premises” software, capable of processing advanced thermal imaging, visible imaging, and acoustic imaging data streams as well as multiple established industrial communications protocols. This setup enables continuous monitoring of critical equipment and processes, delivering real-time insights into their health and performance, and is readily integrated into existing operational and business intelligence systems.
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MSAI Connect, when deployed and connected to the cloud, is a 5 Table of Contents subscription service and is contracted for a period of 12 to 48 months.
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MSAI Edge is sold as both a term-based software license, which generally provides access to the software for a period of 12 months, and as a perpetual license.
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Services We offer installation services that cover on-site hardware mounting, sensor commissioning, and connectivity into the MSAI Connect platform. MSAI Solution Architects configure camera views and assist with establishing initial alerting thresholds and defining regions of interest so customers can quickly realize the full benefits of the MSAI Connect platform. We also perform calibrations and maintenance on hardware.
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MSAI Edge is highly specialized because, in addition to performing standard, visible-light video processing, it also processes the raw radiometric data output from our infrared sensors, consisting of high-precision absolute temperature values for every pixel in the sensor array (ranging from 49 thousand to 1.31 million pixels, depending on the sensor).
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We previously performed training through August 2025 and inspections through September 2025. Roadmap and Development ​ Over the past several years, we have been transitioning from a transactional sensor device provider into a subscription-based, integrated condition monitoring platform company. Our roadmap reflects this transformation.
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Our software is able to display a video image of the sensor output using customizable color palettes to represent temperature values and features automatic or adjustable minimum and maximum temperature values for this video image conversion.
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Rather than developing standalone hardware products, we now design and deploy coordinated device, edge, data hub, and cloud software capabilities that operate as a unified system to address complex industrial reliability challenges. Hardware Development Our hardware roadmap is focused on expanding and enhancing our multi-sensor portfolio to support broader industrial use cases and higher-performance environments.
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Our edge software is also able to perform analytics on the sensor output, with powerful data processing, capture, charting, and the creation of configurable temperature alerts and alarms for both the overall sensor array as well as for customizable regions of the array, or Regions of Interest (“ROI”).
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Development efforts prioritize: • sensors with improved sensitivity, resolution, and durability; • cost-efficient designs that support scalable deployment models; and • expanded sensing modalities to enable multi-dimensional asset intelligence.
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Additionally, powerful features like comparing temperatures between ROIs and measuring ROI temperature changes over time enable our software to provide extended insight into industrial equipment and processes. Built-in report generation features enable easy documentation of findings for customers still performing manual inspections.
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This approach supports our transition toward integrated subscription-based deployments in which hardware operates as a data acquisition layer within a broader software-driven intelligence platform. 6 Table of Contents Platform and Software Development ​Our platform and software roadmap is centered on transforming sensor data into automated, scalable insights.
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Our edge software also features multiple notification methods for communicating a discovered temperature anomaly, including automatic email and text message generation and automated work-order generation via customer Enterprise Asset Management systems.
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Development priorities include: • Integration of new sensor modalities into a unified data architecture • Incorporation of radiometric and multi-sensor data into advanced analytical and AI-driven anomaly detection models • Expansion of automated notification channels and workflow integrations • Continuous refinement of system architecture to improve performance, reliability, and cost efficiency We are focused on evolving from alert-based monitoring toward increasingly predictive and prescriptive capabilities that embed operational expertise directly into the platform.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA failure to achieve scale may affect our ability to sell at competitive prices, limit our customer base or lead to losses. ● Our revenue and margins could be adversely affected if we fail to maintain competitive average selling prices or high sales volumes, or we fail to reduce product costs. ● If we are not able to effectively grow our sales and marketing organization, or maintain or grow an effective network of distributors, our business prospects, results of operations and financial condition could be adversely affected. ● Certain of our commercial contracts with our customers, agreements with suppliers or co-development agreements with partners could be terminated or may not materialize into long-term contract partnership arrangements. ● Components used in our sensors may fail as a result of manufacturing, design or other defects over which we have no control and render our devices permanently inoperable. ● We will incur significant expenses and administrative burdens as a public company, which could negatively impact our business, financial condition and results of operations. ​ Risks Related to Our Business and Industry We have a history of losses or low income and may continue to incur losses or limited income in the future.
Biggest changeA failure to achieve scale may affect our ability to sell at competitive prices, limit our customer base or lead to losses. ● If we are not able to effectively grow our sales and marketing organization, or maintain or grow an effective network of distributors, our business prospects, results of operations and financial condition could be adversely affected. ● The loss of large customers could result in a material adverse effect to our financial results. ● Certain of our commercial contracts with our customers, agreements with suppliers or co-development agreements with partners could be terminated or may not materialize into long-term contract partnership arrangements. ● Components used in our sensors may fail as a result of manufacturing, design or other defects over which we have no control and render our devices permanently inoperable. ● We have been notified by Nasdaq of our failure to comply with certain continued listing requirements and, if we are unable to regain compliance with such requirements, our Common Stock could be delisted. ● We incur significant costs as a result of operating as a public company, and our management devotes and will continue to devote substantial time to new compliance initiatives. ​ Risks Related to Our Business and Industry We have a history of losses or low income and may continue to incur losses or limited income in the future.
We may continue to incur losses or limited income in future periods as we: ● expand our sales and marketing presence; 15 Table of Contents ● increase investment in SaaS solutions; ● execute on our product roadmaps; ● grow wallet share with enterprise customers; ● expand our distribution network; and ● pursue strategic acquisitions.
We may continue to incur losses or limited income in future periods as we: ● expand our sales and marketing presence; ● increase investment in SaaS solutions; 15 Table of Contents ● execute on our product roadmaps; ● grow wallet share with enterprise customers; ● expand our distribution network; and ● pursue strategic acquisitions.
Even when we succeed in securing contracts, these large companies have been and may continue to be uncertain about their technical specifications for our products and terminate our agreement or make a later determination that our products are not satisfactory.
Even when we succeed in securing contracts, these large companies have been and may continue to be uncertain about their technical specifications for our products and may terminate our agreement or make a later determination that our products are not satisfactory.
Accordingly, our future success will depend largely on our ability to hire, train, retain, and motivate skilled regional sales managers and direct sales representatives with significant technical knowledge and understanding of our products. Because of the competition for their skill set, we may not be able to attract or retain such personnel on reasonable terms, if at all.
Accordingly, our future success will depend largely on our ability to hire, train, retain, and motivate skilled sales managers and direct sales representatives with significant technical knowledge and understanding of our products. Because of the competition for their skill set, we may not be able to attract or retain such personnel on reasonable terms, if at all.
Additionally, undetected errors, defects or reliability issues, especially as new products are introduced or as new versions are released, could result in serious injury to the end users of technology incorporating our products, or those in the surrounding area, our customers never being able to commercialize technology incorporating our products, litigation against us, negative publicity and other consequences.
Additionally, undetected errors, defects or reliability issues, especially as new products are introduced or as new versions of existing products are released, could result in serious injury to the end users of technology incorporating our products, or those in the surrounding area, our customers never being able to commercialize technology incorporating our products, litigation against us, negative publicity and other consequences.
We will require additional capital in order to execute on our business plan and may additionally require capital to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances and may determine to engage in equity or debt financings or enter into credit facilities for other reasons.
We may require additional capital in order to execute on our business plan and may additionally require capital to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances and may determine to engage in equity or debt financings or enter into credit facilities for other reasons.
If we are unable to build confidence with our existing customers, either through these preliminary agreements (due to any failure to enter into or perform under the agreements) or otherwise, or if we are unable to secure opportunity from these non-binding agreements, involving strategic customer agreements, we may be unable to produce accurate forecasts or increase our sales.
If we are unable to build confidence with our customers, either through these preliminary agreements (due to any failure to enter into or perform under the agreements) or otherwise, or if we are unable to secure opportunity from these non-binding agreements, involving strategic customer agreements, we may be unable to produce accurate forecasts or increase our sales.
Certain factors that could alone or in combination prevent us from successfully commercializing these solutions include: ● our ability to gain market acceptance of our SaaS solutions with customers and maintain and expand customer relationships, whether through strategic customer agreements or otherwise; ● the long lead time for development of market opportunities for which we are only at an early stage of deployment; ● the adaptability of our SaaS solutions and the ability of our customers to integrate our SaaS solutions into their products and processes in a timely and effective manner; ● our ability to successfully expand our SaaS offerings; ● our ability to develop and protect intellectual property; ● the actions of direct and indirect competitors that may seek to enter the markets in which we expect to compete or that may seek to impose barriers to one or more markets that we intend to target; ● our ability to forecast our revenue and budget for, and manage, our expenses; ● our ability to comply with existing and new or modified laws and regulations applicable to our business, or laws and regulations applicable to our customers for applications in which they may use our solutions; ● our ability to anticipate and respond to macroeconomic changes and changes in the markets in which we operate and expect to operate; ● our ability to maintain and enhance the value of our reputation and brand; ● our ability to effectively manage our growth and business operations; and ● our ability to recruit and retain talented people at all levels of our organization.
Certain factors that could alone or in combination prevent us from successfully commercializing these solutions include: ● our ability to gain market acceptance of our SaaS solutions with customers and maintain and expand customer relationships, whether through strategic customer agreements or otherwise; ● the long lead time for development of market opportunities for which we are only at an early stage of deployment; ● the adaptability of our SaaS solutions and the ability of our customers to integrate our SaaS solutions into their products and processes in a timely and effective manner; ● our ability to successfully expand our SaaS offerings; ● our ability to develop and protect our intellectual property; ● the actions of direct and indirect competitors that may seek to enter the markets in which we expect to compete or that may seek to impose barriers to one or more markets that we intend to target; ● our ability to forecast our revenue and budget for, and manage, our expenses; ● our ability to comply with existing, new or modified laws and regulations applicable to our business, or laws and regulations applicable to our customers for applications in which they may use our solutions; ● our ability to anticipate and respond to macroeconomic changes and changes in the markets in which we operate and expect to operate; ● our ability to maintain and enhance the value of our reputation and brand; 16 Table of Contents ● our ability to effectively manage our growth and business operations; and ● our ability to recruit and retain talented people at all levels of our organization.
Item 1A. Risk Factors. You should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our financial statements and the related notes and Part II. Item 7.
Item 1A. Risk Factors. You should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and Part II. Item 7.
Risks Related to Our Growth Strategy We will need to raise additional capital in the future in order to execute our business plan, which may not be available on terms acceptable to us, or at all.
Risks Related to Our Growth Strategy We may need to raise additional capital in the future in order to execute our business plan, which may not be available on terms acceptable to us, or at all.
In connection with any acquisitions, we could issue additional equity securities, which would dilute our stockholders, incur substantial debt to fund the acquisitions or assume significant liabilities.
In connection with any acquisitions, we could issue additional equity securities, which would dilute our existing stockholders, incur substantial debt to fund the acquisitions or assume significant liabilities.
The already competitive landscape of the thermal infrared technology market, along with both foreseeable and unforeseeable entries of competitors and similar technology from those competitors in our target markets, may result in pricing pressure, reduced margins and may impede our ability to increase the sales of our products or cause us to lose market share, any of which will adversely affect our business, results of operations and financial condition.
The already competitive landscape of the market, along with both foreseeable and unforeseeable entries of competitors and similar technology from those competitors in our target markets, may result in pricing pressure, reduced margins and may impede our ability to increase the sales of our products or cause us to lose market share, any of which will adversely affect our business, results of operations and financial condition.
Significant increases in the cost of certain components used in our products, to the extent they are not timely reflected in the price we charge our customers, could materially and adversely impact our results. For example, we have experienced significant increases in prices for certain electronic components, as well as significantly increased lead times.
Significant increases in the cost of certain components used in our products, to the extent they are not timely reflected in the price we charge our customers, could materially and adversely impact our results. For example, we have experienced significant increases in prices for certain electronic components and optical lenses, as well as significantly increased lead times.
With respect to new customers, they may be less confident in our business and less likely to purchase our solutions because of a lack of awareness about our solutions. They may also not be convinced that our business will succeed because of the absence of an established sales, service, support and operating history.
With respect to prospective customers, they may be less confident in our business and less likely to purchase our solutions because of a lack of awareness about our solutions. They may also not be convinced that our business will succeed because of the absence of an established sales, service, support and operating history.
We are continuing to establish, develop and refine our disclosure controls, internal control over financial reporting, and other procedures that are designed to ensure that information required to be disclosed in the reports that we will file with the SEC are recorded, processed, summarized, and reported within the time periods specified in the rules of and on the forms 28 Table of Contents required by the SEC, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.
We are continuing to establish, develop and refine our disclosure controls, internal control over financial reporting, and other procedures that are designed to ensure that information required to be disclosed in the reports that we will file with the SEC are recorded, processed, summarized, and reported within the time periods specified in the rules of and on the forms required by the SEC, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.
While we intend to invest substantial resources to remain on the forefront of technological development, continuing technological changes in sensing technology and the markets for these products could adversely affect adoption of our products, either generally or for particular applications.
While we intend to invest substantial resources to remain at the forefront of technological development, continuing technological changes in sensing technology and the markets for these products could adversely affect adoption of our products, either generally or for particular applications.
If we are unsuccessful in overcoming these barriers, it may affect our entrance into, or adoption by, these target or new markets, which could adversely affect our future results of operations. 17 Table of Contents Our products are used in a wide variety of existing and emerging use cases in the distribution and logistics market.
If we are unsuccessful in overcoming these barriers, it may affect our entrance into, or adoption by, these target or new markets, which could adversely affect our future results of operations. Our products are used in a wide variety of existing and emerging use cases in the distribution and logistics market.
If we are unable to grow our sales and marketing organization, we may not be able to increase our revenue, which would adversely affect our business, financial condition and results of operations. 22 Table of Contents Additionally, we rely on a network of independent distributors to help generate sales of our products.
If we are unable to grow our sales and marketing organization, we may not be able to increase our revenue, which would adversely affect our business, financial condition and results of operations. Additionally, we rely on a network of independent distributors to help generate sales of our products.
Both false positive alerts and the failure to generate alerts of actual fires may result in customer dissatisfaction, potential loss of confidence in our solutions, and potential liabilities to customers or other third parties, any of which could harm our reputation and adversely impact our business and operating results.
Both false positive alerts and the failure to generate alerts of actual threats or hazards may result in customer dissatisfaction, potential loss of confidence in our solutions, and potential liabilities to customers or other third parties, any of which could harm our reputation and adversely impact our business and operating results.
A false negative, in which there is a failure to alert law enforcement or security personnel of an actual fire, could result in a less rapid or no response by police officers and first responders, increasing the probability of injury or loss of life.
A false negative, in which there is a failure to alert law enforcement or security personnel of an actual threat or hazard, could result in a less rapid or no response by police officers and first responders, increasing the probability of injury or loss of life.
Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would adversely affect our financial results, including our gross margin, and have a negative effect 21 Table of Contents on our brand.
Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would adversely affect our financial results, including our gross margin, and have a negative effect on our brand.
The loss of business from our large customers (whether by lower overall demand for our products, cancellation of 23 Table of Contents existing contracts or product orders or the failure to incorporate our product designs or award us new business) could have a material adverse effect on our business.
The loss of business from our large customers (whether by lower overall demand for our products, cancellation of existing contracts or product orders or the failure to incorporate our product designs or award us new business) could have a material adverse effect on our business.
Whether this expansion will be successful and will accomplish our business and financial objectives is subject to uncertainties, including, but not limited to, customer demand, attach and renewal rates, channel adoption, our ability to further develop and scale infrastructure, our 16 Table of Contents ability to include functionality and usability in such offerings that address customer requirements, and the related costs.
Whether this expansion will be successful and will accomplish our business and financial objectives is subject to uncertainties, including, but not limited to, customer demand, attach and renewal rates, channel adoption, our ability to further develop and scale infrastructure, our ability to include functionality and usability in such offerings that address customer requirements, and the related costs.
In addition, unfavorable economic conditions could result in financial distress among contract manufacturers upon which we rely, thereby increasing the risk of disruption of supplies necessary to fulfill our production requirements and meet customer demands.
In addition, unfavorable economic conditions could result in financial distress 20 Table of Contents among contract manufacturers upon which we rely, thereby increasing the risk of disruption of supplies necessary to fulfill our production requirements and meet customer demands.
To date, we have limited experience with acquisitions and the integration of acquired technology and personnel. Acquisitions may divert our attention from our core business.
To date, we have limited experience with acquisitions and the integration of acquired technology and personnel. Acquisitions may divert management’s time and attention from our core business.
The selling cycle for our products with new customers varies widely depending on the application, market, customer, and the complexity of the product. In the warehouse and logistics market, for example, this selling cycle can be a year (or more). These selling cycles result in us investing our resources prior to realizing any revenue from commercialization.
The selling cycle for our products with new customers varies widely depending on the application, market, customer, and the complexity of the product and can be a year or more. These selling cycles result in us investing our resources prior to realizing any revenue from commercialization.
To provide for an appropriate level of inventory supply, we forecast inventory needs and expenses, places orders sufficiently in advance with our suppliers and manufacturing partners and manufactures products based on our estimates of future demand.
To provide for an appropriate level of inventory supply, we forecast inventory needs and expenses, intending to place orders sufficiently in advance with our suppliers and manufacturing partners and manufactures products based on our estimates of future demand.
If one or more of these markets experience a shift in customer or prospective 18 Table of Contents customer demand, our products may not compete as effectively, if at all, and they may not be designed into commercialized products.
If one or more of these markets experience a shift in customer or prospective customer demand, our products may not compete as effectively, if at all, and they may not be designed into commercialized products.
Additionally, the perception of a false positive alert or of a failure to generate an alert, even where our customers understand that our solutions were utilized correctly, could lead to negative publicity or harm the public perception of our solutions, which could harm our reputation and adversely impact our business and operating results. ​ Product integration could face complications or unpredictable difficulties, which may adversely impact customer adoption of our products and our financial performance.
Additionally, the perception of a false positive alert or of a failure to generate an alert, even when our customers understand that our solutions were utilized correctly, could lead to negative 26 Table of Contents publicity or harm the public perception of our solutions, which could harm our reputation and adversely impact our business and operating results . ​ Product integration could face complications or unpredictable difficulties, which may adversely impact customer adoption of our products and our financial performance.
If these third parties experience financial, operational, manufacturing capacity or other difficulties, or experience shortages in required components, our supply may be disrupted, we may be required to seek alternate suppliers and we may be required to re-design our products.
If these third parties experience financial, operational, manufacturing capacity or other difficulties, or experience shortages in required components, our supply may be disrupted, we may be required to seek alternate suppliers and we may be required to redesign our products.
In addition, unfavorable economic conditions could result in financial distress among third-party suppliers upon which we rely, thereby increasing the risk of disruption of supplies necessary to fulfill our production requirements and meet customer demands. For example, in 2024, due to the reorganization of a vendor, we recorded a write down of a deposit of approximately $930,000.
In addition, unfavorable economic conditions could result in financial distress among third-party suppliers upon which we rely, thereby increasing the risk of disruption of supplies necessary to fulfill our production requirements and meet customer demands. For example, in 2024, due to the reorganization of a vendor, we recorded a write down of a deposit of approximately $0.9 million.
As a result of our reliance on third-party distributors, we may be subject to disruptions and increased costs due to factors beyond our control, including labor strikes, third-party errors and other issues.
As a result of our use of third-party distributors, we may be subject to disruptions and increased costs due to factors beyond our control, including labor strikes, third-party errors and other issues.
Risks Related to Our Customers and Suppliers The loss of large customers could result in a material adverse effect to our financial results. For the years ended December 31, 2024 and 2023, our top three customers represented approximately 47% and 19% of our revenue, respectively.
Risks Related to Our Customers and Suppliers The loss of large customers could result in a material adverse effect to our financial results. For the years ended December 31, 2025 and 2024, our top three customers represented approximately 46% and 47% of our revenue, respectively.
A false positive alert, in which a fire is incorrectly identified, could result in an unnecessary rapid deployment of police officers and first responders, which may raise unnecessary fear among the occupants of a facility, and may be deemed a waste of police and first responder resources.
A false positive alert, in which a threat or hazard is incorrectly identified, could result in an unnecessary rapid deployment of police officers and first responders, which may raise unnecessary fear among the occupants of a facility, and may be deemed a waste of police and first responder resources.
If one or more of our major customers would be unable to pay our invoices as they become due or a customer simply refuses to make such payments if it experiences financial difficulties, our business would be adversely affected.
If one 24 Table of Contents or more of our major customers were unable to pay our invoices as they become due or a customer simply refuses to make such payments if it experiences financial difficulties, our business would be adversely affected.
If these components have a manufacturing, design or other defect, they can cause our sensors to fail and render them permanently inoperable. 26 Table of Contents As a result, we may have to replace these sensors at our sole cost and expense.
If these components have a manufacturing, design or other defect, they can cause our sensors to fail and render them permanently inoperable. As a result, we may have to replace these sensors at our sole cost and expense.
We believe there are a limited number of competent, high-quality suppliers in the industry that meet our strict quality and control standards, and as we seek to obtain additional or alternative supplier arrangements in the future, there can be no assurance that we would be able to do so on satisfactory terms, in a timely manner, or at all.
We believe there are a limited number of competent, high-quality suppliers in the industry that meet our strict quality and control standards, and as we seek to obtain additional or alternative supplier arrangements in the future, we may not be able to do so on satisfactory terms, in a timely manner, or at all.
If we have overestimated the size of our TAM now or in the future, our future growth rate may be limited.
If we have overestimated the size of our TAM or do so in the future, our future growth rate may be limited.
We rely on third parties to supply key components of our products. If any of our major third-party component suppliers experience interruptions, delays or disruptions in supplying their products or services, including by natural disasters, health epidemics and outbreaks, or work stoppages or capacity constraints, our ability to ship products to distributors and customers may be delayed.
If any of our major third-party component suppliers experience interruptions, delays or disruptions in supplying their products or services, including by natural disasters, health epidemics and outbreaks, or work stoppages or capacity constraints, our ability to ship products to distributors and customers may be delayed.
While we work with system integrators that lend their experience to these workstreams, there is no guarantee that unforeseen delays or setbacks would not arise that would impair our ability to launch with key programs across our sectors of focus.
While we work with system integrators that lend their experience to these workstreams, unforeseen delays or setbacks could arise that would impair our ability to launch with key programs across our sectors of focus.
If we do not successfully manage our lines of business or product lines, or any other similar activities that we may undertake in the future, expected efficiencies and benefits might be delayed or not realized, and our operations and business could be disrupted.
There is no assurance that our efforts will be successful. If we do not successfully manage our lines of business or product lines, or any other similar activities that we may undertake in the future, expected efficiencies and benefits might be delayed or not realized, and our operations and business could be disrupted.
If any of our contract manufacturers experience interruptions, delays, or disruptions in supplying our products, including by natural disasters, epidemics or outbreaks of contagions, increased military conflict or tensions, such as in the Middle East, Eastern Europe or Asia, or work stoppages or capacity constraints, our ability to ship products would be delayed.
If any of our contract manufacturers experience interruptions, delays, or disruptions in supplying our products, including by natural disasters, epidemics or outbreaks of contagions, increased military conflict or tensions or work stoppages or capacity constraints, our ability to ship products would be delayed.
In connection with this development, we plan to incur substantial, and potentially increasing, research and development costs. Because we account for research and development as an operating expense, these expenditures could adversely affect our results of operations in the future. Further, our research and development program may be delayed and may not produce timely results.
In connection with this development, we plan to incur substantial, and potentially increasing, research and development costs. These expenditures could adversely affect our results of operations in the future. 17 Table of Contents Further, our research and development program may be delayed and may not produce timely results.
We sell certain of our products directly to small and mid-sized businesses and other customers. Our outstanding trade receivables are not covered by collateral, third-party bank support or financing arrangements or credit insurance. Our exposure to credit and collectability risk on our trade receivables is higher in certain markets and our ability to mitigate such risks may be limited.
Our outstanding trade receivables are not covered by collateral, third-party bank support or financing arrangements or credit insurance. Our exposure to credit and collectability risk on our trade receivables is higher in certain markets and our ability to mitigate such risks may be limited.
These companies may have substantial research and development resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies. Such activities may foreclose significant sales opportunities for our products.
These companies may have substantial research and development resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies. Such activities may foreclose significant sales opportunities for our products. Our suppliers could raise prices on key components, which may adversely affect our profitability.
Acquisitions may require us to record goodwill and non-amortizable intangible assets that will be subject to testing on a regular basis and potential period impairment charges, incur amortization expenses related to certain intangible assets, and incur write offs and restructuring and other related expenses, any of which could harm our operating results and financial condition.
Acquisitions may require us to record goodwill and non-amortizable intangible assets that will be subject to testing on a regular basis and potential period impairment charges, incur amortization expenses related to certain intangible assets, and incur write offs and restructuring and other related expenses, any of which could harm our operating results and financial condition. 23 Table of Contents New business strategies, especially those involving acquisitions, are inherently risky and may not be successful.
These product-related issues could result in claims against us and our business could be adversely affected. The markets in which we compete are characterized by technological change, which requires us to continue to develop new products and product innovations and could adversely affect market adoption of our products.
The markets in which we compete are characterized by technological change, which requires us to continue to develop new products and product innovations and could adversely affect market adoption of our products.
Accordingly, we cannot assure that it will not face increased prices in the future or, if we do, whether we will be effective in containing margin pressures from any further component price increases. Key components in our products come from limited or single source third party suppliers. Interruptions in our relationships with these third parties could adversely impact our business.
Accordingly, we cannot assure that it will not face increased prices in the future or, if we do, whether we will be effective in containing margin pressures from any further component price increases. 25 Table of Contents Key components in our products come from limited or single source third party suppliers.
Our estimates of TAM are based on a combination of the total number of estimated potential customers in a given market, our expectations regarding the scope of potential use cases for our thermal infrared technology solutions in such markets, our estimates of average selling prices for our products in those markets and the potential opportunity for software solutions to increase the utility of thermal infrared technology solutions. ​ We cannot assure you of the accuracy or completeness of our estimates.
Our estimates of TAM are based on a combination of the total number of estimated potential customers in a given market, our expectations regarding the scope of potential use cases for our solutions in such markets, our estimates of average selling prices for our products in those markets and the potential opportunity for software solutions to increase the utility of thermal infrared technology solutions. ​ While we believe our market size estimates are reasonable, such information is inherently imprecise.
In addition, if the sale of any non-strategic business cannot be consummated or is not practical, alternative courses of action, including relocation of product lines or closure, may not be available to us or may be more costly than anticipated.
We may not be able to sell non-strategic businesses on terms that are acceptable to us, or at all. In addition, if the sale of any non-strategic business cannot be consummated or is not practical, alternative courses of action, including relocation of product lines or closure, may not be available to us or may be more costly than anticipated.
We have incurred net losses or low income in recent years, as we pivoted the Company from primarily stand-alone device sales to pairing device sales with sales of our software solutions. We incurred a net loss of approximately $22,268,000 for the year ended December 31, 2023, and approximately $21,495,000 for the year ended December 31, 2024.
We have incurred net losses or low income in recent years, as we pivoted the Company from primarily standalone device sales to pairing device sales with sales of our software solutions. We incurred a net loss of approximately $21.5 million for the year ended December 31, 2024, and approximately $11.7 million for the year ended December 31, 2025.
Below is a summary of our risk factors with a more detailed discussion following: ● We have a history of losses or low income and may continue to incur losses or limited income in the future. ● Our history of net losses, negative cash flows from operations and negative net working capital raise substantial doubt about our ability to continue as a going concern. ● We will need to raise additional capital in the future in order to execute our business plan, which may not be available on terms acceptable to us, or at all. ● The loss of large customers could result in a material adverse effect to our financial results. ● If we fail to successfully manage the expansion of our software as a service (“SaaS”) capabilities and offerings, our business and financial results could be adversely affected. ● We have a limited operating history providing SaaS solutions, which makes it difficult to evaluate our future prospects and the risks and challenges we may encounter. ● If our products are not adopted in our targeted end markets, our business will be materially adversely affected. ● We expect to incur substantial research and development costs and devote significant resources to developing and commercializing new products, which could significantly affect our ability to become profitable and may never result in revenue.
Below is a summary of our risk factors with a more detailed discussion following: ● We have a history of losses or low income and may continue to incur losses or limited income in the future. ● If we fail to successfully manage the expansion of our software as a service (“SaaS”) capabilities and offerings, our business and financial results could be adversely affected. ● We have a limited operating history providing SaaS solutions, which makes it difficult to evaluate our future prospects and the risks and challenges we may encounter. ● If our products are not adopted in our targeted end markets, our business will be materially adversely affected. ● We expect to incur substantial research and development costs and devote significant resources to developing and commercializing new products, which could significantly affect our ability to become profitable and may never result in revenue.
If we are unable to make products that meet these requirements, or sell products at the required price point, we could lose this business to competitors or competitive technologies. Our target markets involve risks of program delay, loss, and cancellation.
If we are unable to make products that meet these requirements, or sell products at the required price point, we could lose this business to competitors or competitive technologies. Our target markets involve risks of program delay, loss, and cancellation. Our products also can be used in a wide variety of emerging use cases in the data center market.
Real or perceived false positive fire detection alerts or failure or perceived failure to generate alerts for actual fires could adversely affect our customers and their operations, damage our brand and reputation and adversely affect our growth prospects and results of operations. Certain of our products may be used for early fire detection.
Real or perceived false positive alerts or failure or perceived failure to generate alerts for actual threats or hazards, including fires or fire risks, electrical hazards, liquid leaks or machinery threats or failures, could adversely affect our customers and their operations, damage our brand and reputation and adversely affect our growth prospects and results of operations. ​ Certain of our products may be used for early fire, electrical hazard, liquid leak or machinery threats or failure detection, among other uses.
Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to production facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, prospects, financial condition or operating results.
Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to production facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, prospects, financial condition or operating results. 21 Table of Contents If we do not maintain the correct level of inventory or if we do not adequately manage our inventory, we could lose sales or incur higher inventory-related expenses, which could negatively affect our operating results.
If a major customer were to enter into bankruptcy proceedings or similar proceedings whereby contractual commitments are subject to stay of execution and the possibility of legal or other modification, we could be forced to record a substantial loss.
If a major customer were to enter into bankruptcy proceedings or similar proceedings whereby contractual commitments are subject to stay of execution and the possibility of legal or other modification, we could be forced to record a substantial loss. From time to time, we may make prepayments associated with long-term supply agreements to secure supply of inventory components.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited and our business could be materially and adversely affected.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited and our business could be materially and adversely affected. 22 Table of Contents We create innovative technology by designing and developing unique hardware and software solutions.
Product liability claims challenging the quality or safety of our products may result in a decline in sales for a product, which could adversely affect our results of operations. This could be the case even if the claims themselves are proven to be untrue or settled for immaterial amounts.
Our results of operations are susceptible to adverse publicity regarding the quality or safety of our products. Product liability claims challenging the quality or safety of our products may result in a decline in sales for a product, which could adversely affect our results of operations.
If we are unable to devote adequate resources to develop products or cannot otherwise successfully develop products or system configurations that meet customer requirements on a timely basis or that remain competitive with technological alternatives, our products could lose market share, our revenue will decline, we may experience operating losses and our business and prospects will be adversely affected.
Delays in introducing products and innovations, the failure to choose correctly among technical alternatives or the failure to offer innovative products or configurations at competitive prices may cause existing and potential customers to purchase our competitors’ products or turn to alternative sensing technology. 27 Table of Contents If we are unable to devote adequate resources to develop products or cannot otherwise successfully develop products or system configurations that meet customer requirements on a timely basis or that remain competitive with technological alternatives, our products could lose market share, our revenue will decline, we may experience operating losses and our business and prospects will be adversely affected.
We sell a portion of our products through third parties such as distributors and manufacturers representatives. Using third parties for distribution exposes us to many risks, including concentration risk, credit risk and legal risk because, under certain circumstances, we may be held responsible for the actions of those third-party sales channels.
Using third parties for distribution exposes us to many risks, including concentration risk, credit risk and legal risk because, under certain circumstances, we may be held responsible for the actions of those third-party sales channels. We may rely on one or more key distributors for selling a product, and the loss of these distributors could reduce our revenue.
Our reputation or brand may be damaged as a result of these problems and customers may be reluctant to buy our products, which could adversely affect our ability to retain existing customers and attract new customers and could adversely affect our financial results. 27 Table of Contents In addition, we could face material legal claims for breach of contract, product liability, fraud, tort or breach of warranty as a result of these problems.
Our reputation or brand may be damaged as a result of these problems and customers may be reluctant to buy our products, which could adversely affect our ability to retain existing customers and attract new customers and could adversely affect our financial results.
Any delay or interruption of the development and commercialization of new products may adversely affect our existing business and prospects for winning future business. ● Product liability claims, product recalls and field service actions could have a material adverse effect on our reputation, business, results of operations and financial condition. ● We create innovative technology by designing and developing unique hardware and software solutions.
Any delay or interruption of the development and commercialization of new products may adversely affect our existing business and prospects for winning future business. ● Product liability claims, product recalls and field service actions could have a material adverse effect on our reputation, business, results of operations and financial condition. ● Our revenue and margins could be adversely affected if we fail to maintain competitive average selling prices or high sales volumes, or we fail to reduce product costs. ● We may need to raise additional capital in the future in order to execute our business plan, which may not be available on terms acceptable to us, or at all. ● We create innovative technology by designing and developing unique hardware and software solutions.
Failing to manage risks related to our use of third-party sales channels may reduce sales, increase expenses, and weaken our competitive position, and could result in sanctions against us.
Our distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivables and financial results. Competitors could also block our access to such parties. Failing to manage risks related to our use of third-party sales channels may reduce sales, increase expenses, and weaken our competitive position, and could result in sanctions against us.
To achieve profitability and maintain margins, we will also need to continually reduce product and manufacturing costs. Reductions in product and manufacturing costs are principally achieved by scaling production volumes and through step changes in manufacturing and continued engineering of the most cost-effective designs for our products.
Reductions in product costs are principally achieved by scaling production volumes and continued engineering of the most cost-effective designs for our products and platform.
Other of our end markets are similarly subject to potential volatility, including as a result of general economic factors. We are exposed to credit risk on our trade accounts receivables, supplier non-trade receivables, prepayments to manufacturers and SaaS subscription agreements, and this risk is heightened during periods when economic conditions worsen.
We are exposed to credit risk on our trade accounts receivables, supplier non-trade receivables, prepayments to manufacturers and SaaS subscription agreements, and this risk is heightened during periods when economic conditions worsen. We sell certain of our products directly to small and mid-sized businesses and other customers.
We incur significant costs related to procuring the materials and components required to manufacture and assemble our high-performance products as well as related to designing and developing our software solutions.
A failure to achieve scale may affect our ability to sell at competitive prices, limit our customer base or lead to losses. We incur significant costs related to procuring the materials and components required to manufacture and assemble our high-performance products as well as related to designing and developing our software solutions.
If we are unable to maintain competitive average selling prices, increase our sales volume or successfully introduce new, low-cost products, our revenue and overall gross margin would likely decline. 19 Table of Contents We face risks related to sales through distributors and other third parties which could harm our business.
We need to continually increase sales volume and introduce new, lower-cost products in order to maintain our overall gross margin. If we are unable to maintain competitive average selling prices, increase our sales volume or successfully introduce new, low-cost products, our revenue and overall gross margin would likely decline.
Product liability claims, product recalls and field service actions could have a material adverse effect on our reputation, business, results of operations and financial condition.
Accordingly, the estimates of our TAM included in this Annual Report should not be taken as indicative of our ability to grow. Product liability claims, product recalls and field service actions could have a material adverse effect on our reputation, business, results of operations and financial condition.
One risk specific to the manufacturing target market is that many manufacturing customers have some form of legacy system, usually vibration monitors, that perform functions that overlap with some of the MSAI Connect functionality In addition to the technical risks of integrating our products into our customers’ workflows, applications and other technology solutions, our customers must be comfortable with the cybersecurity and software integrity of our products, including the MSAI Connect system.
One risk specific to the manufacturing target market is that many manufacturing customers have some form of legacy system, usually vibration monitors, that perform functions that overlap with some of the MSAI Connect functionality.
In addition, we must continuously drive initiatives to reduce labor cost, improve worker efficiency, reduce the cost of materials, use fewer materials and further lower overall product costs by carefully managing component prices, inventory and shipping cost. We need to continually increase sales volume and introduce new, lower-cost products in order to maintain our overall gross margin.
In addition, we must continuously drive initiatives to reduce platform costs, labor cost, improve worker efficiency, reduce the cost of materials or data, use fewer materials, adjust data transmitted, and further lower overall costs by carefully managing component prices and cloud services.
Defending a lawsuit, regardless of its merit, could be costly and may divert management’s attention and adversely affect the market’s perception of us and our products. In addition, our business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms or at all.
In addition, our business liability insurance coverage could prove inadequate with respect to a claim and future coverage may be unavailable on acceptable terms or at all. These product-related issues could result in claims against us and our business could be adversely affected.
It would be time-consuming, and could be costly and impracticable, to begin to use new manufacturers or designs, and such changes could cause significant interruptions in supply.
It would be time-consuming, and could be costly and impracticable, to begin to use new manufacturers or designs, and such changes could cause significant interruptions in supply. Such changes could also have an adverse effect on our ability to meet our scheduled product deliveries and may subsequently lead to the loss of sales.
Our customers must also be comfortable that the integration of our products will not disrupt our supply chain operations, which are typically continuous in nature. Customers must be convinced that their legacy systems alone are not adequate for predictive-maintenance, process-improvement or safety tasks.
Customers must be convinced that their legacy systems alone are not adequate for predictive-maintenance, process-improvement or safety tasks.
While we are implementing procedures to monitor and limit exposure to credit risk on our trade and supplier non-trade receivables, there can be no assurance such procedures will effectively limit our credit risk and avoid losses. 24 Table of Contents We may not be able to anticipate changing customer and consumer preferences or respond quickly enough to changes in technology and standards to be able to develop and introduce commercially viable products.
While we are implementing procedures to monitor and limit exposure to credit risk on our trade and supplier non-trade receivables, there can be no assurance such procedures will effectively limit our credit risk and avoid losses.
If we fail to successfully manage the expansion of our SaaS capabilities and offerings, our business and financial results could be adversely affected. Expanding our SaaS capabilities and offerings will require considerable additional investment in our business.
If our revenue does not grow, our ability to achieve and maintain profitability may be adversely affected, and the value of our business may significantly decrease. If we fail to successfully manage the expansion of our SaaS capabilities and offerings, our business and financial results could be adversely affected.
While we believe our market size estimates are reasonable, such information is inherently imprecise. If internally-generated data used in our estimates proves to be inaccurate or we make errors in our assumptions based on such data, our actual market may be more limited than our estimates.
If internally-generated data used in our estimates proves to be inaccurate or we make errors in our assumptions based on such data, our actual market may be more limited than our estimates. In addition, these inaccuracies or errors may cause us to misallocate capital and other critical business resources, which could harm our business.
Product recalls can be expensive and tarnish our reputation and have a material adverse effect on the sales of our products. Awarded damages could be more than our accruals. We cannot assure that we will not have product liability claims or that we will not recall any products.
This could be the case even if the claims themselves are proven to be untrue or settled for immaterial amounts. Product recalls can be expensive and tarnish our reputation and have a material adverse effect on the sales of our products. Awarded 18 Table of Contents damages could be more than our accruals.
We may experience delays in shipments or issues concerning product quality from our contract manufacturers.
Reliance on contract manufacturers reduces our control over the manufacturing process, including reduced control over quality, product costs, and product supply and timing. We may experience delays in shipments or issues concerning product quality from our contract manufacturers.
Our revenue and margins could be adversely affected if we fail to maintain competitive average selling prices or high sales volumes, or we fail to reduce product costs. Cost-cutting initiatives adopted by our customers can place increased downward pressure on our average selling prices.
We cannot assure that we will not have product liability claims or that we will not recall any products. Our revenue and margins could be adversely affected if we fail to maintain competitive average selling prices or high sales volumes, or if we fail to reduce product costs.
Our growth is subject to many factors, including the successful implementation of our business strategy, which is subject to many risks and uncertainties. Accordingly, the estimates of our TAM included in this Annual Report should not be taken as indicative of our ability to grow.
Even if our TAM meets our size estimates and experiences growth, we may not continue to grow our share of the market. Our growth is subject to many factors, including the successful implementation of our business strategy, which is subject to many risks and uncertainties.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. 47 Table of Contents Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. ​ Our cybersecurity risk management program includes: ​ ● risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; ● the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; ● cybersecurity awareness training of our employees, incident response personnel, and senior management; and ● a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents. ​ We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Biggest changeOur cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. ​ Our cybersecurity risk management program includes: ​ ● risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, third-party service providers, and our broader enterprise IT environment ; ● the use of external service providers , where appropriate, to assess, test or otherwise assist with aspects of our security controls; ● cybersecurity awareness training of our employees, incident response personnel, and senior management; and ● a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents. ​ We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. ​ Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment. ​
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment. ​
In addition, management updates the Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential. ​ The Committee reports to the full Board regarding its activities, including those related to cybersecurity.
The Committee oversees management’s implementation of our cybersecurity risk management program. The Committee receives periodic reports from management on our cybersecurity risks. In addition, management updates the Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential. The Committee reports to the full Board regarding its activities, including those related to cybersecurity.
The full Board also receives briefings from management on our cyber risk management program. ​ Our management team is responsible for assessing and managing our material risks from cybersecurity threats.
The full Board also receives briefings from management on our cyber risk management program. ​ 45 Table of Contents Our management team is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants.
We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework (the “NIST CSF”).
We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework (the “NIST CSF”). This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
Removed
See “ Risk Factors – We are subject to cybersecurity risks to operational systems, security systems, infrastructure, firmware in our thermal infrared technology and customer data processed by us or third-party vendors or suppliers and any material failure, weakness, interruption, cyber event, incident or breach of security could prevent us from effectively operating our business .” ​ Cybersecurity Governance ​ Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (the “Committee”) oversight of cybersecurity and other information technology risks.
Added
Further discussion regarding cybersecurity risks generally is described in Part I, Item 1A “Risk Factors” of this Annual Report. Cybersecurity Governance ​ Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (the “Committee”) oversight of cybersecurity and other information technology risks.
Removed
The Committee oversees management’s implementation of our cybersecurity risk management program. ​ The Committee receives periodic reports from management on our cybersecurity risks.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Our corporate headquarters is located in Beaumont, Texas where we lease approximately 6,380 square feet of office space and 7,320 square feet of warehouse space. Our office space is leased pursuant to two one-year leases which both expire on December 31, 2025. Our warehouse space is leased pursuant to a one-year which expires July 31, 2025.
Biggest changeItem 2. Properties. Our corporate headquarters is located in Houston, Texas where we rent private office space in a co-working facility. Our office space is rented pursuant to a one-year agreement which expires on December 31, 2026. We also lease a facility, approximately 5,000 square feet, in Beaumont, Texas pursuant to a one-year agreement which expires December 31, 2026.
We believe that our office and warehouse space is adequate for our current needs and, should we need additional space, we believe we will be able to obtain additional space on commercially reasonable terms.
Our Beaumont facility contains engineering, manufacturing, research and development and administrative personnel and stores most of our inventory. We believe that our office and warehouse space is adequate for our current needs and, should we need additional space, we believe we will be able to obtain additional space on commercially reasonable terms.
We expect to be able to extend these leases prior to their expiration on commercially reasonable terms. Our office space contains engineering, manufacturing, research and development and administrative functions of the Company. Our warehouse space houses our inventory, stock items and quality control operations.
We expect to be able to extend both agreements prior to their expiration on commercially reasonable terms should the space continue to align with the Company’s location and office strategy. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently a party to any actions, claims, suits or other legal proceedings the outcome of which, 48 Table of Contents if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, and results of operations. Item 4. Mine Safety Disclosures.
Biggest changeWe are not currently a party to any actions, claims, suits or other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, and results of operations. Item 4. Mine Safety Disclosures. Not Applicable. ​ 46 Table of Contents PART II
Removed
Not Applicable. ​ ​ 49 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures. 49 PART II ​ 50 Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 50 Item 6. [Reserved]. 50 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 51 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 59 Item 8.
Biggest changeItem 4. Mine Safety Disclosures. 46 PART II ​ 47 Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 47 Item 6. [Reserved]. 47 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 48 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 57 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders As of March 10, 2025, there were approximately 80 holders of record of our Common Stock. Dividends We have never declared or paid cash dividends on our capital stock.
Biggest changeThe closing price of our Common Stock and SPAC Warrants as reported by Nasdaq on March 9, 2026, was $0.32 and $0.05, respectively. Holders As of March 9, 2026, there were approximately 193 holders of record of our Common Stock. Dividends We have never declared or paid cash dividends on our capital stock.
In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. Recent Sales of Unregistered Securities There was no unregistered sale of our equity securities during the year ended December 31, 2024 that were not otherwise disclosed in a Current Report on Form 8-K.
In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. Recent Sales of Unregistered Securities There were no unregistered sales of our equity securities during the year ended December 31, 2025 that were not otherwise disclosed in a Current Report on Form 8-K.
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information On December 20, 2023, our Common Stock and SPAC Warrants began trading on the Nasdaq Global Market under the symbols “MSAI” and “MSAIW,” respectively. Prior to that time, there was no public market for our securities.
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Common Stock and SPAC Warrants are traded on The Nasdaq Capital Market under the symbols “MSAI” and “MSAIW,” respectively.

Item 7. Management's Discussion & Analysis

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

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Biggest changeAs a result of such sales, we received net proceeds of approximately $4.3 million. ​ ​ 52 Table of Contents Results of Operations Year ended December 31, 2024 compared to Year ended December 31, 2023 The following table presents summary results of operations for the periods indicated, in thousands: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, Amount ​ ​ ​ 2024 2023 Change % Change Revenue, net ​ $ 7,402 ​ $ 5,430 ​ $ 1,972 36 % Cost of goods sold (exclusive of depreciation) ​ 2,582 ​ 2,297 ​ 285 12 % Inventory Impairment ​ ​ 2,272 ​ ​ 1,689 ​ ​ 583 ​ 35 % Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ 15,655 ​ 8,044 ​ 7,611 95 % Share-based compensation expense ​ ​ 3,382 ​ ​ 14,061 ​ ​ (10,679) ​ (76) % Depreciation ​ 1,140 ​ 872 ​ 268 31 % Loss (gain) on asset disposal ​ ​ 322 ​ ​ (56) ​ ​ 378 ​ (675) % Other loss ​ ​ 930 ​ ​ — ​ ​ 930 ​ NM ​ Total operating expenses ​ 21,429 ​ 22,921 ​ (1,492) (7) % Operating loss ​ (18,881) ​ (21,477) ​ 2,596 (12) % Interest expense ​ 63 ​ 94 ​ (31) (33) % Change in fair value of convertible notes ​ 475 ​ (970) ​ 1,445 (149) % Tariff refund ​ — ​ (2,401) ​ 2,401 (100) % Change in fair value of warrants liabilities ​ (39) ​ (195) ​ 156 (80) % Loss on financing transaction ​ 1,553 ​ 4,043 ​ (2,490) (62) % Other (income) expenses, net ​ ​ 1,027 ​ ​ 12 ​ ​ 1,015 ​ 8,458 % Loss before income taxes ​ (21,960) ​ (22,060) ​ 100 (0) % Income tax expense (benefit) ​ (465) ​ 208 ​ (673) (324) % Net loss ​ $ (21,495) ​ $ (22,268) ​ $ 773 (3) % ​ Revenue: Revenue for the year ended December 31, 2024 was $7.4 million, compared to $5.4 million for the year ended December 31, 2023.
Biggest changeResults of Operations Year ended December 31, 2025 compared to Year ended December 31, 2024 The following table presents summary results of operations for the periods indicated, in thousands: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ Amount ​ ​ ​ % ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ Change ​ Change ​ Revenue, net ​ $ 5,551 ​ $ 7,402 ​ $ (1,851) (25) % Cost of goods sold (exclusive of depreciation) ​ ​ 2,638 ​ ​ 2,582 ​ ​ 56 2 % Inventory impairment ​ ​ 511 ​ ​ 2,272 ​ ​ (1,761) ​ (78) % Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative ​ ​ 11,482 ​ ​ 15,655 ​ ​ (4,173) (27) % Share-based compensation expense ​ ​ 1,665 ​ ​ 3,382 ​ ​ (1,717) ​ (51) % Depreciation ​ ​ 1,299 ​ ​ 1,140 ​ ​ 159 14 % Loss (gain) on asset disposal ​ ​ (33) ​ ​ 322 ​ ​ (355) ​ (110) % Other loss ​ ​ — ​ ​ 930 ​ ​ (930) ​ (100) % Total operating expenses ​ ​ 14,413 ​ ​ 21,429 ​ ​ (7,016) (33) % Operating loss ​ ​ (12,011) ​ ​ (18,881) ​ ​ 6,870 (36) % Interest expense (income), net ​ ​ (77) ​ ​ 63 ​ ​ (140) (222) % Change in fair value of convertible notes ​ ​ — ​ ​ 475 ​ ​ (475) (100) % Change in fair value of warrants liabilities ​ — ​ (39) ​ 39 (100) % Loss on financing transaction ​ ​ — ​ ​ 1,553 ​ ​ (1,553) ​ (100) % Other expense (income), net ​ ​ (189) ​ ​ 1,027 ​ ​ (1,216) (118) % Loss before income taxes ​ ​ (11,745) ​ ​ (21,960) ​ ​ 10,215 (47) % Income tax expense (benefit) ​ ​ (32) ​ ​ (465) ​ ​ 433 (93) % Net loss ​ $ (11,713) ​ $ (21,495) ​ $ 9,782 (46) % ​ 50 Table of Contents Revenue: Revenue for the year ended December 31, 2025 was $5.6 million, compared to $7.4 million for the year ended December 31, 2024.
In addition, we believe that such non-GAAP financial measures are used by analysts and others in the investment community to analyze our historical results and to provide estimates of future performance. EBITDA and Adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net income or any other measure as determined in accordance with GAAP.
In addition, we believe that such non-GAAP financial measures are used by analysts and others in the investment community to analyze our historical results and to provide estimates of future performance. EBITDA and Adjusted EBITDA should not be considered as alternatives to, or more meaningful than, net income (loss) or any other measure as determined in accordance with GAAP.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
Pursuant to the Securities Purchase Agreement, we have made the following corporate governance changes, which are to remain in effect for so long as the Purchaser beneficially owns at least 10.0% of the then-outstanding shares of Common Stock: ● our board of directors (the “Board”) appointed a representative of the Purchaser as a member of the Board and as a member of the Board’s compensation and nominating and corporate governance committees; ● the Board established a new finance committee consisting of four independent directors, with the purpose of improving the Company’s operational and financial performance, including evaluating the Company’s budgets, capital allocation practices and policies and review of strategic alternatives, and making recommendations to the Board on the foregoing matters; and 56 Table of Contents ● the Board amended the Amended and Restated Bylaws of the Company to permit any single director to be able to call a special meeting of the Board and bring forward business at any regular or special meeting of the Board.
Pursuant to the Securities Purchase Agreement, we have made the following corporate governance changes, which are to remain in effect for so long as the Purchaser beneficially owns at least 10.0% of the then-outstanding shares of Common Stock: ● our board of directors (the “Board”) appointed a representative of the Purchaser as a member of the Board and as a member of the Board’s compensation and nominating and corporate governance committees; ● the Board established a new finance committee consisting of four independent directors, with the purpose of improving the Company’s operational and financial performance, including evaluating the Company’s budgets, capital allocation practices and policies and review of strategic alternatives, and making recommendations to the Board on the foregoing matters; and ● the Board amended the Amended and Restated Bylaws of the Company to permit any single director to be able to call a special meeting of the Board and bring forward business at any regular or special meeting of the Board.
This discussion should be read in conjunction with our audited consolidated financial statements as of and for the years ended December 31, 2024, and 2023, together with the related notes thereto, included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties.
This discussion should be read in conjunction with our audited consolidated financial statements as of and for the years ended December 31, 2025, and 2024, together with the related notes thereto, included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties.
We may not be able to timely secure additional debt or equity financing on favorable terms, or at all, as these plans are subject to market conditions and are not within the Company’s control. There is no assurance that the Company will be successful in implementing their plans.
We may not be able to timely secure additional debt or equity financing on favorable terms, or at all, as these plans are subject to market conditions and are not within the Company’s control. There is no assurance that the Company will be successful in implementing its plans.
This technology harnesses the power of continuous data inputs from advanced thermal imaging, acoustic imaging, visible imaging, and vibration sensing hardware solutions, which are strategically placed in customer's facilities to continuously monitor the health and performance of a customer's critical equipment and processes.
This technology harnesses the power of continuous data inputs from advanced thermal imaging, acoustic imaging, visible imaging, and vibration sensing hardware solutions, 49 Table of Contents which are strategically placed in customer's facilities to continuously monitor the health and performance of a customer's critical equipment and processes.
We believe the risk of technological obsolescence of hardware is not significant, as device technology and functionality is stable and the devices that the Company has in its inventory are more deployable with for the Company’s integrated solutions offerings.
We believe the risk of technological obsolescence of certain hardware is not significant, as device technology and functionality is stable and the devices that the Company has in its inventory are deployable with the Company’s integrated solutions offerings.
Riley from the resale of the Commitment Shares prior to certain times set forth in the Purchase Agreement, is less than $500 thousand, in exchange for B. Riley returning to us for cancelation all of the Commitment Shares we originally issued to B. Riley upon execution of the Purchase Agreement that were not previously resold.
Riley from the resale of the Commitment Shares prior to certain times set forth in the Purchase Agreement, is less than $500 thousand, in exchange for B. Riley returning to us for cancelation all of the Commitment Shares we originally issued to B. Riley upon execution of the Purchase Agreement that were not previously resold. On January 8, 2025, B.
On June 27, 2024, we also entered into a securities purchase agreement (the “Securities Purchase Agreement”) with 325 Capital, LLC (collectively with its affiliates, the “Purchaser”), pursuant to which the Purchaser agreed to purchase all of the Placement Shares and Pre-Funded Warrants offered in the 2024 Private Placement.
On June 27, 2024, we also entered into a securities purchase agreement (the “Securities Purchase Agreement”) with 325 Capital (collectively with its affiliates, the “Purchaser”), pursuant to which the Purchaser agreed to purchase all of the Placement Shares and 54 Table of Contents Pre-Funded Warrants offered in the 2024 Private Placement.
We will require additional capital in order to execute on our business plan and may require capital to fund our operations or to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances, and we may determine to raise capital through equity or debt financings or enter into credit facilities for other reasons.
We may require additional capital in order to execute on our business plan and may require capital to fund our operations or to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances, and we may determine to raise capital through equity or debt financings or enter into credit 52 Table of Contents facilities for other reasons.
To the extent we believe that we do not meet the test that recovery is more likely than not, we establish a valuation allowance. To the extent that we establish a valuation allowance or changes this allowance in a period, we adjust the tax provision or tax benefit in the consolidated statement of operations.
To the extent we believe that we do not meet the test that recovery is more likely than not, we establish a valuation allowance. To the extent that we establish a valuation allowance or change this allowance in a period, we adjust the tax provision or tax benefit in the consolidated statement of 56 Table of Contents operations.
Non-GAAP Financial Measures EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA, are supplemental non-generally accepted accounting principles (“GAAP”) financial measures used by management. We define EBITDA as net (loss) income before (i) interest expense (net interest income), (ii) depreciation and (iii) taxes.
Non-GAAP Financial Measures EBITDA and Adjusted EBITDA Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA, are supplemental non- GAAP financial measures used by management. We define EBITDA as net (loss) income before (i) interest expense (net interest income), (ii) depreciation and (iii) taxes.
Financing Activities Net cash provided by financing activities was $21.6 million for the year ended December 31, 2024, an increase of $15.0 million, as compared to $6.6 million of net cash provided by financing activities for the year ended December 31, 2023.
Financing Activities Net cash provided by financing activities was $29.6 million for the year ended December 31, 2025, an increase of $8.0 million, as compared to $21.6 million of net cash provided by financing activities for the year ended December 31, 2024.
Under this method of accounting, Legacy ICI has been determined to be the accounting acquirer, as it held the majority composition of the executive management and was greater in overall asset, revenue and employee size following the Business Combination. Revenue Sources Our revenues are derived from multiple sources.
Under this method of accounting, Legacy ICI has been determined to be the accounting acquirer, as it held the majority composition of the executive management and was greater in overall asset, revenue and employee size following the Business Combination.
Share-Based Compensation Expense: Share-based compensation expense for the year ended December 31, 2024 was $3.4 million, compared to $14.1 million for the year ended December 31, 2023.
Share-Based Compensation Expense: Share-based compensation expense for the year ended December 31, 2025 was $1.7 million, compared to $3.4 million for the year ended December 31, 2024.
The increase in loss on asset disposal, was primarily the result of the Company disposing of certain aged or inoperable assets, primarily in the machinery and equipment category, resulting in a loss on disposal of $0.3 million during the year ended December 31, 2024.
Loss (gain) on asset disposal: The decrease in loss on asset disposal, was primarily the result of the Company disposing of aged or inoperable assets, primarily in the machinery, equipment, and demo category, resulting in a loss on disposal of $0.3 million during the year ended December 31, 2024, which did not occur in 2025.
The increase in depreciation expense was primarily due to increases in property, plant, and equipment, primarily software associated with our development of MSAI Connect. Loss (gain) on asset disposal: Loss on asset disposal for the year ended December 31, 2024 was $0.3 million, compared to a gain of $0.06 million for the year ended December 31, 2023.
Depreciation Expense: Depreciation expense for the year ended December 31, 2025 was $1.3 million, compared to $1.1 million for the year ended December 31, 2024. The increase in depreciation expense was primarily due to increases in property, plant, and equipment, primarily software associated with our development of MSAI Connect.
Cash Flows Year ended December 31, 2024, Compared to Year ended December 31, 2023 The following table summarizes our cash flows for the periods indicated, in thousands: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 Net cash used in operating activities ​ $ (15,567) ​ $ (4,551) Net cash used in investing activities ​ (2,667) ​ (1,512) Net cash provided by financing activities ​ 21,587 ​ 6,564 Net increase (decrease) in cash, cash equivalents, and restricted cash equivalents ​ 3,353 ​ 501 ​ ​ ​ Operating Activities Net cash used in operating activities was $15.6 million for the year ended December 31, 2024, an increase of $11.0 million, as compared to $4.6 of net cash used in operating activities for the year ended December 31, 2023.
Cash Flows Year ended December 31, 2025, Compared to Year ended December 31, 2024 The following table summarizes our cash flows for the periods indicated, in thousands: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Net cash provided by (used in) operating activities ​ $ (8,020) ​ $ (15,567) Net cash provided by (used in) investing activities ​ (1,607) ​ (2,667) Net cash provided by (used in) financing activities ​ 29,584 ​ 21,587 Net increase/(decrease) in cash, cash equivalents, and restricted cash equivalents ​ $ 19,957 ​ $ 3,353 ​ Operating Activities Net cash used in operating activities was $8.0 million for the year ended December 31, 2025, a decrease of $7.6 million, as compared to $15.6 million of net cash used in operating activities for the year ended December 31, 2024.
We have historically funded our operations with internally generated cash flows, lines of credit with banks, convertible notes, and promissory notes with stockholders and related parties.
We have historically funded our operations with internally generated cash flows, equity financings, debt, convertible notes, and promissory notes with stockholders and related parties.
Public Equity Offering On July 1, 2024, we consummated a public offering (the “Public Offering”) of 6,250,000 shares of Common Stock, which was sold at a public offering price of $1.60 per share less the underwriting discount, generating gross proceeds to us of $10 million before deducting underwriting discounts, commissions and offering expenses.
Following the delivery of exercise notices to the Company on November 5, 2025 and November 6, 2025, the 2025 Pre-Funded Warrants were exercised in full. 2024 Public Equity Offering On July 1, 2024, we consummated a public offering (the “2024 Public Offering”) of 6,250,000 shares of Common Stock, which was sold at a public offering price of $1.60 per share less the underwriting discount, generating gross proceeds to us of $10 million before deducting underwriting discounts, commissions and offering expenses.
In accordance with the Purchase Agreement, on April 16, 2024, we issued shares of our Common Stock to B. Riley as consideration for its commitment to purchase the Purchase Shares under the Purchase Agreement (the “Commitment Shares”). Under the terms of the Purchase Agreement, in certain circumstances, we may be required to pay B.
Riley as consideration for its commitment to purchase the Purchase Shares under the Purchase Agreement (the “Commitment Shares”). Under the terms of the Purchase Agreement, in certain circumstances, we may be required to pay B.
We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business. 54 Table of Contents EBITDA and Adjusted EBITDA, when viewed in a reconciliation to respective GAAP measures, provide an additional way of viewing the Company’s results of operations and factors and trends affecting the Company’s business.
EBITDA and Adjusted EBITDA, when viewed in a reconciliation to respective GAAP measures, provide an additional way of viewing the Company’s results of operations and factors and trends affecting the Company’s business.
Revenue is recognized when control of the hardware is transferred to the customer. 51 Table of Contents — Software MSAI Connect is an innovative, cloud-based, AI-powered software, that enables predictive asset reliability and process control in industrial environments.
Revenue is recognized when control of the hardware is transferred to the customer. Software MSAI Connect is an innovative platform that enables predictive asset reliability and process control in industrial environments, available both as cloud-based subscription service and as an on-premises deployment.
In connection with the Public Offering, the underwriters were granted a 45-day option from the date of the prospectus to purchase up to 937,500 additional shares of Common Stock at the public offering price, less the underwriting discount, and on June 28, 2024, the underwriters fully exercised the over-allotment option, generating additional gross proceeds of $1.5 million to us before deducting underwriting discounts, commissions and offering expenses.
In connection with the 2024 Public Offering, the underwriters were granted a 45-day option from the date of the prospectus to purchase up to 937,500 additional shares of Common Stock at the public offering price, less the underwriting discount, and on June 28, 2024, the underwriters fully exercised the over-allotment option, generating additional gross proceeds of $1.5 million to us before deducting underwriting discounts, commissions and offering expenses. 2024 Private Placement On July 1, 2024, we issued and sold in a private placement (the “2024 Private Placement”) (i) 2,772,561 shares (the “Placement Shares”) and (ii) pre-funded warrants to purchase 6,602,439 shares of Common Stock (the “Pre-Funded Warrants”) for aggregate gross proceeds of $15.0 million before deducting placement agent fees and offering expenses.
Cost of Goods Sold: Cost of goods sold for the year ended December 31, 2024 was $2.6 million, compared to $2.3 million for the year ended December 31, 2023. The increase in cost of goods sold was attributable to increased sales as well as a change in product mix.
The increase in cost of goods sold was attributable to a change in product mix and quantity of hardware sold. Inventory Impairment: Inventory impairment for the year ended December 31, 2025 was $0.5 million, compared to $2.3 million for the year ended December 31, 2024.
As our business offerings evolve over time, we may be required to modify our estimated standalone selling prices, and as a result the timing and classification of our revenue could be affected. 58 Table of Contents Income Taxes We are required to reduce our deferred tax assets by a valuation allowance if, based on the weight of the available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized.
Income Taxes We are required to reduce our deferred tax assets by a valuation allowance if, based on the weight of the available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized.
Inventory Impairment: Inventory impairment for the year ended December 31, 2024 was $2.3 million , compared to $1.7 million for the year ended December 31, 2023. The increase in inventory impairment was primarily related to thermal cameras specifically designed for medical applications that have been unable to be converted to alternative applications for which there is customer demand.
The impairment recorded during the year ended December 31, 2025, was primarily related to drone-related sensor payloads and accessories. The impairment recorded during the year ended December 31, 2024, was primarily related to thermal cameras specifically designed for medical applications that have been unable to be converted to alternative applications for which there is customer demand.
MSAI Connect can process and analyze vast amounts of data in real-time, providing actionable insights and predictive analytics. This enables businesses to proactively identify potential issues, prevent costly downtime, and optimize their operations for maximum efficiency and reliability. MSAI Connect is a subscription service and is generally contracted for a period of 12 months.
MSAI Connect can process and analyze vast amounts of data in real-time, providing actionable insights and enabling predictive analytics. This supports a customer with proactively identifying potential issues, preventing costly downtime, and optimizing their operations for maximum efficiency and reliability.
The following tables present a reconciliation of EBITDA and Adjusted EBITDA to the GAAP financial measure of net income for each of the periods indicated (unaudited), in thousands: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Adjusted EBITDA 2024 2023 Net loss ​ $ (21,495) ​ $ (22,268) ​ Interest expense ​ 63 ​ 64 ​ Interest expense, related parties ​ — ​ ​ 30 ​ Income tax expense (benefit) ​ (465) ​ 208 ​ Depreciation ​ 1,140 ​ 872 ​ EBITDA ​ ​ (20,757) ​ ​ (21,094) ​ Change in fair value of convertible notes ​ 475 ​ (970) ​ Change in fair value of warrants liabilities ​ (39) ​ (195) ​ Share-based compensation expense ​ 3,382 ​ 14,061 ​ Inventory impairment ​ 2,272 ​ 1,689 ​ Loss on financing transaction ​ 1,553 ​ 4,043 ​ Tariff refund ​ — ​ (2,401) ​ Other expenses, net ​ 1,027 ​ 12 ​ Other Loss ​ ​ 930 ​ ​ — ​ Loss (gain) on asset disposal ​ ​ 322 ​ ​ (56) ​ Adjusted EBITDA ​ $ (10,835) ​ $ (4,911) ​ ​ Liquidity and Capital Resources We incurred losses for the year ended December 31, 2024, due to negative net working capital excluding deferred transaction costs and other current assets that are not settled in cash, and an increase in investment in technology innovation and commercial capabilities as compared to year ended December 31, 2023.
The following tables present a reconciliation of EBITDA and Adjusted EBITDA to the GAAP financial measure of net income (loss) for each of the periods indicated, in thousands: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Adjusted EBITDA 2025 ​ ​ ​ 2024 Net loss $ (11,713) ​ $ (21,495) Interest expense (income), net ​ (77) ​ ​ 63 Income tax expense (benefit) ​ (32) ​ ​ (465) Depreciation ​ 1,299 ​ ​ 1,140 EBITDA $ (10,523) ​ $ (20,757) Change in fair value of convertible notes — ​ 475 Change in fair value of warrants liabilities — ​ (39) Share-based compensation expense 1,665 ​ 3,382 Inventory impairment 511 ​ 2,272 Loss on financing transaction — ​ 1,553 Other expense (income), net (189) ​ 1,027 Other loss ​ — ​ ​ 930 Loss (gain) on asset disposal ​ (33) ​ ​ 322 Adjusted EBITDA $ (8,569) ​ $ (10,835) ​ Liquidity and Capital Resources We incurred losses for the years ended December 31, 2025 and 2024.
On August 23, 2024, the issuance of the shares of Common Stock underlying the Pre-Funded Warrants was approved by our stockholders, and on September 24, 2024, the holders of the Pre-Funded Warrants exercised their warrants in exchange for Common Stock.
O n September 24, 2024, the holders of the Pre-Funded Warrants exercised their warrants in exchange for Common Stock.
Income tax expense (benefit): Income tax benefit increase due to a $0.5 million tax benefit primarily driven by a tax refund due to the Company from the filing of the Legacy SMAP short period 2023 federal income tax return recorded during the year ended December 31, 2024.
During the year ended December 31, 2024, the Company incurred a fee to enter into the ELOC arrangement of $0.5 million along with a make-whole obligation which was remeasured based on the stock price as of December 31, 2024 resulting in a $0.2 million loss. 51 Table of Contents Income tax expense (benefit): Income tax benefit decreased due to a $0.5 million tax benefit primarily driven by a tax refund due to the Company from the filing of the Legacy SMAP short period 2023 federal income tax return recorded during the year ended December 31, 2024, which did not occur in 2025.
Our computations of EBITDA and Adjusted EBITDA may not be comparable to EBITDA or Adjusted EBITDA of other companies.
Our computations of EBITDA and Adjusted EBITDA may not be comparable to EBITDA or Adjusted EBITDA of other companies. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business.
Riley up to $25 million worth of Common Stock (the “Purchase Shares”) over the term of the Purchase Agreement, beginning only after certain conditions set forth in the Purchase Agreement have been satisfied, including that the registration statement registering the Purchase Shares for resale (the “Registration Statement”) shall have been declared effective under the Securities Act of 1933, as amended.
Riley up to $25 million worth of Common Stock (the “Purchase Shares”) over the term of the Purchase Agreement, beginning only after certain conditions set forth in the Purchase Agreement have been satisfied. In accordance with the Purchase Agreement, on April 16, 2024, we issued shares of our Common Stock to B.
The net present value of operating lease liabilities as of December 31, 2024, and 2023 is $1.1 million. Off-Balance Sheet Arrangements As of December 31, 2024, we did not have any off-balance sheet arrangements. Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with GAAP.
The increase in net cash provided by financing activities is primarily attributable to proceeds from 2025 Private Placement and 2025 Registered Direct Offering. Off-Balance Sheet Arrangements As of December 31, 2025, we did not have any off-balance sheet arrangements. 55 Table of Contents Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP.
The increase in net cash used in investing activities was primarily attributable to an increase in capital expenditures related to software development for the year ended December 31, 2024, compared to the year ended December 31, 2023.
The decrease in net cash used in investing activities was primarily attributable to a decrease in cash paid for capital expenditures.
If the standalone selling price is not observable through past transactions, we estimate the standalone selling price based on our pricing model.
If the standalone selling price is not observable through past transactions, we estimate the standalone selling price based on our pricing model. As our business offerings evolve over time, we may be required to modify our estimated standalone selling prices, and as a result the timing and classification of our revenue could be affected.
Selling, General and Administrative Expense: SG&A expense for the year ended December 31, 2024 was $15.7 million, compared to $8.0 million for the year ended December 31, 2023. The increase in SG&A expense was attributable to an increase in professional and legal expenses associated with the cost of compliance as a public company.
Selling, General and Administrative Expense: Selling, general and administrative expense for the year ended December 31, 2025 was $11.5 million, compared to $15.7 million for the year ended December 31, 2024.
The Registration Statement was filed with the SEC on April 29, 2024 (File No. 333-278979) and was declared effective by the SEC on May 13, 2024. Through December 31, 2024, the Company utilized the B. Riley Committed Equity Facility to sell 23,999 shares of Common Stock for cash proceeds totaling $58 thousand.
Riley notified the Company that it had sold the Commitment Shares, which resolved the liability. Through December 31, 2025 and 2024, the Company utilized the B. Riley Committed Equity Facility to sell 1,814,731 and 23,999 shares of Common Stock for cash proceeds totaling $4.7 million and $58 thousand, respectively.
Other loss: Other loss for the year ended December 31, 2024 was $0.9 million due to the write-down of a deposit of $0.9 million. Interest Expense: Interest expense for the year ended December 31, 2024 was $0.06 million, compared to $0.09 million for the year ended December 31, 2023.
Other loss: The decrease in other loss was primarily due to the write-down of a deposit of $0.9 million which was recorded in the third quarter of 2024, which did not occur in 2025.
This setup enables continuous monitoring of critical equipment and processes, delivering real-time insights into their health and performance, and is readily integrated into existing operational and business intelligence systems. MSAI Edge is sold as both a term-based software license which generally provides access to the software for a period of 12 months and as a perpetual license.
MSAI Connect, when deployed on-premises, is sold as both a term-based software license which generally provides access to the software for a period of 12 months and as a perpetual license. Revenue for the software licenses are recognized upfront upon delivery of the software license.
We define “Adjusted EBITDA” as EBITDA before share-based compensation expenses and other non-operating income or expenses or other non-cash items.
We define “Adjusted EBITDA” as EBITDA before share-based compensation expenses, change in fair value of convertible notes and warrant liabilities, inventory impairment, loss on financing transaction, other expense (income) and loss (gain) on disposal of assets.
The increase in net cash used in operating activities was primarily attributable to payments made to reduce our liabilities during the year, in an effort to improve our capital structure. Investment Activities Net cash used in investing activities was $2.7 million for the year ended December 31, 2024, as compared to $1.5 million for the year ended December 31, 2023.
These initiatives have included a reduction in employee headcount and professional fees, a consolidation of real estate, employee benefits realignment and vendor renegotiations. Investment Activities Net cash used in investing activities was $1.6 million for the year ended December 31, 2025, as compared to $2.7 million for the year ended December 31, 2024.
The increase in change in fair value of convertible notes was the result of notes being remeasured prior to being converted in 2023 and 2024. Change in fair value of warrants liabilities: Change in fair value of warrants liabilities for the year ended December 31, 2024 was $(0.04) million, compared to $(0.2) million for the year ended December 31, 2023.
Change in fair value of convertible notes: The decrease in loss (gain) in fair value of convertible notes was the result of the convertible notes being converted in fiscal year 2024, which did not occur in 2025.
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Overview The Company and its wholly owned subsidiaries provide turn-key predictive maintenance and process control solutions, which combine cutting edge imaging and sensing technologies with AI-powered enterprise software.
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Overview We build and deploy integrated condition monitoring and early threat detection solutions that connect multiple sensor types through a unified edge-to-cloud software architecture. Our software platform integrates multiple sensing modalities such as thermal, visual and acoustic, among others, to detect anomalies at earlier stages.
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Our software leverages a continuous stream of data from thermal imaging, visible imaging, acoustic imaging, vibration sensing, and laser sensing devices to provide comprehensive, real-time condition monitoring for a customer’s critical assets, processes, and manufactured outputs.
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Our customers use our products to protect uptime, enhance safety, and extend the useful life of critical assets across industrial operations. We are focused on growing our position as a Software as a Service (“SaaS”) leader in predictive maintenance.
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Our cloud and edge solutions are deployed by organizations to protect critical assets across a wide range of industries including distribution and logistics; manufacturing and oil and gas. In tandem with these solutions, we provide various services for our customers including training, calibration, and repair. Merger On December 19, 2023, SportsMap Tech Acquisition Corp.
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As of December 31, 2025, we had approximately 730 active sensors connected to our software platform, MSAI Connect, as compared to approximately 460 as of December 31, 2024. This represents an 59% increase year over year. We anticipate significant opportunities to drive increased recurring revenues with our solutions.
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The following are descriptions of principal revenue generating activities: — Hardware The Company sells a dynamic range of advanced infrared cameras, optical gas imaging cameras and acoustic imagers, designed and manufactured by us or through various partnerships with other manufacturers.
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During 2025, we realigned our market strategy to target industries and countries where, we believe, the largest opportunity exists for our current platform offerings. These industries include distribution and logistics; manufacturing; and data centers in the United States, Canada, European Union member states, and the United Kingdom. This realignment resulted in the deprioritization of certain industries, products, and services.
Removed
Annual subscription payments are generally collected in advance and revenue is recognized ratably over the subscription period. MSAI Edge is an “on premises” software. Seamlessly integrating with existing operational systems, MSAI Edge utilizes advanced thermal imaging, acoustic imaging, visible imaging, and vibration sensing hardware solutions strategically deployed throughout facilities.
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Regarding industries, we have deprioritized oil and gas and metals and mining, where the applications generally require specialized sensors and customized solutions to handle the often-harsh environmental conditions in which monitoring is being performed.
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Revenue for the software licenses are recognized upfront upon delivery of the software license. —Services The Company performs condition-based monitoring and preventive maintenance inspection services. Our mission is to help our clients transform how they approach asset management, creating safer, more efficient, and more profitable operations across a variety of industries.
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Regarding products, we made the strategic decision to cease marketing, development, and sale of drone related product offerings given the high degree of customization required and limited overlap with our software platform. Regarding services, we discontinued offering training and inspection related services which were ancillary to our core offerings.
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Inspections can include the use of thermography, optical gas imaging, and acoustic imaging to recognize future equipment failures or inefficiencies, detect spills or leaks, or identify electrical anomalies. The Company also performs calibrations and maintenance on hardware for our customers along with training services.
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We believe this realignment will allow us to focus on our core competencies and offerings and position us for success in 2026 and beyond. In the distribution and logistics market, we believe our solutions, through enhanced predictive maintenance, provide value by minimizing unplanned downtime to reduce labor and maintenance costs and increase throughput.
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Services derived from inspections, calibrations, maintenance and training are recognized at a point in time when service is provided to the client. Recent Developments On January 7, 2025, we sold 1,581,213 shares of Common Stock under the ELOC .
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We are particularly encouraged by over $1.5 million in purchase orders received in the fourth quarter of 2025 from our large global distributor customer, which will increase the number of sensors deployed in their facilities. These orders represented approximately $0.3 million in hardware revenue recognized in the fourth quarter of 2025.
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The increase in revenue was primarily due to an increase in units sold, which was partially offset by $2.9 million in sales returns for the twelve months ended December 31, 2024. The sales returns are related to a transaction with a long-standing customer who also is a launch customer for MSAI Connect.
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Software subscription revenue for these orders will be recognized predominately over a period of four years beginning upon the commencement of the subscriptions, which is expected to occur in the first quarter of 2026. We are also excited by new pilots which we received purchase orders for in the fourth quarter of 2025.
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Under the terms of this transaction, certain biorisk-related devices sold to this customer in prior years were exchanged for devices appropriate for industrial use, when combined with the MSAI Edge and MSAI Connect software. The customer paid cash as well as credit for the returned devices. There were no sales returns for the twelve months ended December 31, 2023.
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Manchester Airport Group selected our platform to help elevate the reliability and performance of its baggage-handling operations. Initial deployments at Manchester Airport were completed in the first quarter of 2026. Additionally, we received a purchase order from a global direct-to-consumer food solutions company to leverage our solution for monitoring critical assets in cold storage facilities.
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The decrease in share-based compensation expense was primarily attributable to a reduced level of equity grants compared to the year ended December 31, 2023 in which the certain restricted stock units related to the Business Combination were issued, and the issuance of such grants at lower prices in the year ended December 31, 2024. 53 Table of Contents Depreciation Expense: Depreciation expense for the year ended December 31, 2024 was $1.1 million, compared to $0.9 million for the year ended December 31, 2023.
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In the manufacturing market, our go-to market strategy centers on our early threat detection solution. We continue to work closely with two of the Big 3 automakers on our ongoing pilot programs for lithium-ion battery pack monitoring and the application of dual vision hardware sensors and remain engaged in identifying additional applications for our solutions.
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The decrease in interest expense was due to the settlement of debt during 2024. Change in fair value of convertible notes: Change in fair value of convertible notes for the year ended December 31, 2024 was $0.5 million, compared to $(1.0) million for the year ended December 31, 2023.
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In the data center market, our focus is on the infrastructure surrounding and supporting a data center. This includes using MSAI Connect solutions to monitor power and cooling control systems.
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The increase in change in fair value of warrants liabilities was primarily due to the decrease in the share price during the period. Loss on financing transaction: Loss on financing transaction for the year ended December 31, 2024 was $1.6 million, compared to $4.0 million for the year ended December 31, 2023.
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During the fourth quarter of 2025, we began discussions to pilot these solutions with several large data center owners and operators, and shortly after year-end, we received our first purchase order for a pilot implementation with a U.S. based data center. 48 Table of Contents Strategic Cost Optimization Initiatives We have executed and continue to execute strategic cost optimization initiatives to align our expense base with current operations to enhance long-term profitability, preserve agility, and position MSAI for scalable and efficient growth.
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The decrease in loss on financing transaction was primarily due to the loss being incurred due to two separate transactions in each year. Other (Income) Expenses, net: Other (income) expenses, net for the year ended December 31, 2024 was $1.0 million, compared to $0.01 million for the year ended December 31, 2023.
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These initiatives include a reduction in employee headcount and professional fees, a consolidation of real estate, employee benefits realignment and vendor renegotiations. Specifically, in July 2025, the Company implemented a reduction in force impacting 10 employees across various departments.
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Other (income) expense, net increased primarily due to costs associated with our ELOC during the twelve-month period ended December 31, 2024.
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The Company incurred approximately $65 thousand of expense, primarily related to severance payments recorded in Selling, general and administrative on the Consolidated Statements of Operations during the year ended December 31, 2025. Merger On December 19, 2023, SportsMap Tech Acquisition Corp.
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As noted in the Company’s consolidated financial statements, there is substantial doubt as to our ability to fund our planned operations in both the short- and long-term and to continue to operate as a going concern.
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Recent Developments On March 13, 2026, we entered into an at market issuance sales agreement (the “2026 Sales Agreement”) with Roth Capital Partners, LLC and H.C.
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We have assessed our ability to continue as a going concern, and, based on our need to raise additional capital to finance our future operations, recurring losses from operations incurred since inception, and an expectation of continuing operating losses for the foreseeable future, we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that these consolidated financial statements are issued.
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Wainwright & Co., LLC as sales agents or principals (the “Agents”), under which we may offer and sell shares of our Common Stock having an aggregate market value of up to $60 million from time to time through the Agents.
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The Company will continue to pursue obtaining additional liquidity which may include raising additional funds from investors (in the form of debt, equity, or equity-like instruments) and reducing operating expenses. 55 Table of Contents Equity Line of Credit On April 16, 2024, we entered into the Purchase Agreement with B. Riley.
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We intend to use the net proceeds from sales of Common Stock under the 2026 Sales Agreement, if any, for working capital and general corporate purposes. ​ Revenue Sources Our revenues are derived from multiple sources.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item. ​ 59 Table of Contents ​
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item. ​ 57 Table of Contents ​

Other MSAI 10-K year-over-year comparisons