TTTABLE OF CONTENTS
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| PART I |
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| Item 1. Business | | 6 |
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| Item 1A. Risk Factors | | 12 |
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| Item 1B. Unresolved Staff Comments | | 37 |
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| Item 1C. Cybersecurity | | 37 |
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| Item 2. Properties | | 38 |
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| Item 3. Legal Proceedings | | 38 |
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| Item 4. Mine Safety Disclosures | | 39 |
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| PART II |
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| Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | | 40 |
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| Item 6. [Reserved] | | 40 |
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| Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 40 |
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| Item 7A. Quantitative and Qualitative Disclosures About Market Risk | | 56 |
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| Item 8. Financial Statements and Supplementary Data | | 57 |
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| Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | | 99 |
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| Item 9A. Controls and Procedures | | 99 |
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| Item 9B. Other Information | | 100 |
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| Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | | 100 |
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| PART III |
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| Item 10. Directors, Executive Officers and Corporate Governance | | 101 |
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| Item 11. Executive Compensation | | 106 |
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| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | 113 |
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| Item 13. Certain Relationships and Related Transactions, and Director Independence | | 115 |
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| Item 14. Principal Accountant Fees and Services | | 116 |
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| PART IV |
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| Item 15. Exhibits and Financial Statement Schedules | | 117 |
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| Signatures | | 122 |
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In this Annual Report on Form 10-K, “we,” “our,” “us,” “zSpace,” and “the Company” refer to zSpace, Inc., together with its consolidated subsidiaries, unless the context requires otherwise.
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Many of the forward-looking statements are located in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “ongoing,” “contemplate” and similar terms. Forward-looking statements are not guarantees of future performance and actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled “Risk Factors” under Part I, Item 1A of this Annual Report on Form 10-K. The forward-looking statements in this Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future developments or otherwise.
MARKET DATA AND FORECASTS
We are responsible for the disclosures contained in this Annual Report on Form 10-K. However, unless otherwise indicated, information in this Annual Report on Form 10-K concerning economic conditions, our industry, our markets and our competitive position is based on information obtained from a variety of sources, including information from independent industry analysts and publications, as well as our own estimates and research.
Our estimates are derived from publicly available information released by third parties, as well as data from our internal research, and are based on such data and our knowledge of our industry, which we believe to be reasonable. None of the independent industry publications discussed in this Annual Report on Form 10-K were prepared on our behalf.
In presenting this information, we have made certain assumptions that we believe to be reasonable based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets in which we operate. Market and industry data, which is derived in part from management’s estimates and beliefs, are subject to change and may be limited by the availability of raw data, the voluntary nature of the data gathering process and other limitations inherent in any statistical survey of such data. In addition, projections, assumptions and estimates of the future performance of the markets in which we operate, and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in the subsection entitled “Risk Factors” under Part I, Item 1A of this Annual Report on Form 10-K. These and other factors could cause results to differ materially from those expressed in the estimates made by third parties and by us.
TRADEMARKS, TRADENAMES, SERVICE MARKS, AND COPYRIGHTS
We own or have rights to use various trademarks, tradenames, service marks, and copyrights, which are protected under applicable intellectual property laws, as further described herein. This Annual Report on Form 10-K also contains trademarks, tradenames, service marks, and copyrights of other companies, which are, to our knowledge, the property of their respective owners. Solely for convenience, certain trademarks, tradenames, service marks, and copyrights referred to in this Annual Report on Form 10-K may appear without the ©, ®, and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, tradenames, service marks, and copyrights. We do not intend our use or display of other companies’ trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, such other companies.
SUMMARY OF PRINCIPAL RISK FACTORS
This summary briefly lists the principal risks and uncertainties facing our business, which are only a select portion of those risks. A more complete discussion of those risks and uncertainties is set forth in Part I, Item 1A of this Annual Report, entitled “Risk Factors.” Additional risks not presently known to us or that we currently deem immaterial may also affect us. If any of these risks occur, our business, financial condition or results of operations could be materially and adversely affected. Our business is subject to the following principal risks and uncertainties:
| ● | Changes to the U.S. Department of Education and federal funding have created significant budgetary uncertainty for our customers. |
| ● | We will require additional capital to fund our operations and growth, and such capital may not be readily available. |
| ● | We may not be able to grow revenue in the future or manage our growth effectively. |
| ● | We may not be able to develop new products and successfully manage frequent product introductions and transitions. |
| ● | We face intense competition from companies more established and better capitalized than us and potential new technologies. |
| ● | Substantial time and effort are typically required to make a sale of our products. |
| ● | We may not be able to appropriately manage our inventory and supply chain. |
| ● | We may be unable to effectively expand our sales and marketing capabilities. |
| ● | Any errors, bugs, or vulnerabilities in our technology could significantly impact our business. |
| ● | Our existing and future levels of indebtedness could adversely affect our financial health, ability to obtain financing in the future, and ability to fulfill our obligations under such indebtedness. |
| ● | There is uncertainty regarding our ability to continue as a going concern. |
| ● | We have identified material weaknesses in our internal control over financial reporting. |
| ● | Our business has been adversely affected by dramatic changes in U.S. and international trade policies, as well as ongoing uncertainty regarding the current administration’s trade agenda. |
| ● | We are and could continue to be involved in legal disputes that are expensive and time consuming, and, if resolved adversely, could harm our business, operating results and financial condition. |
| ● | The obligations associated with operating as a public company will require significant resources and management attention and will cause us to incur additional expenses, which will adversely affect our results of operations. |
| ● | Failure to protect our proprietary technology and intellectual property rights could substantially harm our business. |
| ● | An inability to maintain licenses from third parties could severely harm our business. |
| ● | The failure of our IT systems or a security breach involving customer, student or employee personal data could dramatically impact our business. |
| ● | If our common stock fails to comply with the continued listing requirements of the Nasdaq Capital Market, we would face possible delisting, which would result in a limited public market for our common stock and make obtaining future debt or equity financing more difficult for us. |
| ● | We are a “controlled company” for purposes of the Nasdaq Listing Rules and as a result, our stockholders may not have the same protections afforded to stockholders of companies that are not controlled companies. |
| ● | We are an emerging growth company and a smaller reporting company, and the applicable reduced disclosure requirements may make our common stock less attractive to investors. |