zSpace, Inc.
For the period ended Mar 31, 2026. Filed May 15, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 15, 2026
ZSPC$0.15-16.6%Stored close · as of Jul 8, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-13.
0001104659-25-111329
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-15.
0001104659-26-062781
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 188 previous paragraphs and 143 current paragraphs.
79 unchanged; 52 reworded; 11 added; 46 removed; 11 previous and 1 current paragraphs rearranged.
Tables are not compared: 17 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
We generate revenue by selling our hardware products, software and professional development services to our customers.
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Operating Expenses
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Interest Expense
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Software revenue remained relatively flat at $2.0 million for the three months ended March 31, 2026 and 2025. For the three months ended March 31, 2026 and 2025, software revenue as a percentage of total revenue is 37% and 29%, respectively.
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Operating Expenses
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For the three months ended March 31, 2026, operating expenses decreased by $1.9 million, or 22%, to $6.7 million from $8.6 million for the three months ended March 31, 2025. The decrease in expenses was primarily dueto decreased costs in personnel expenses, travel related expenses and consulting expenses and fees incurred through the three months ended March 31, 2026.
Current report
General and administrative expenses decreased by $0.2 million or 5%, to $3.3 million for the three months ended March 31, 2026, from $3.5 million for the three months ended March 31, 2025. The decrease in expenses was primarily attributable to lower consulting related expenses primarily related to lower audit costs and the fees incurred for the issuance of convertible debt in March 2025.
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Interest Expense
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Other Term Loans.
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In addition, the Company and Senior Lender agreed in the Amendment to conduct a second closing pursuant to the Note SPA, which occurred on March 16, 2026 (the “Second Closing”). On the Second Closing, the Company issued an additional senior secured convertible promissory note in the original principal amount of $4,301,075 (the “Additional Senior Secured Convertible Note,” and together with the Initial Senior Secured Convertible Note, the “Senior Secured Convertible Note”). The Company used the net proceeds from the issuance of the Additional Senior Secured Convertible Note to repay approximately $2,000,000 of existing debt owed to the Senior Lender, and for working capital and general corporate purposes.
Current report
The Additional Senior Secured Convertible Note is substantially similar to the form of the Initial Senior Secured Convertible Note, except that the maturity date of the Additional Senior Secured Convertible Note is March 15, 2028, the Initial Conversion Price is $0.28 per share, and the Additional Senior Secured Convertible Note is subject to a floor price of $0.05 per share.
Removed paragraphs (46)
Previous report
Graphics and speed of computing have increased exponentially over time, but the physical computing experience has remained largely static since the introduction of the mouse and touchscreen in the 1980s. We believe limiting the user experience to the confines of a screen creates inherent limitations such as slowing technological breakthroughs, discouraging engagement and hampering creativity, particularly when utilizing technology as a learning tool. We were founded with the goal of eliminating that barrier between students and content and reinventing the student experience. We hope to accomplish this through a range of proprietary innovations in hardware and software that comprise the foundation of our educational platform. We believe that these innovations help to eliminate a barrier between digital content and students so that students can be immersed in content: manipulate it, experience it, and interact with it as if it were real. We sell our platform directly to United States school districts, both as a primary educational tool in K-12 classrooms and as a career training solution for higher grade levels, as well as to community college customers through both a direct sales and support team as well as regional resellers. Internationally, we rely exclusively on resellers to bring our products to those markets. Today, our platform is implemented in more than 3,500 of the approximately 13,000 United States public school districts. Our K-12 platform is currently deployed in over 80% of the largest 100 K-12 public school districts in the United States, as measured by student enrollment, and our CTE solutions have been deployed in approximately 73% of those public school districts we serve. Our CTE solutions have also been deployed in approximately 2% of United States community and technical colleges. In addition, we have partnered with over 25 resellers and have expanded our customer network into over 50 countries.
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Since 2014, we have been developing and delivering hardware and software technology focused on improving education in K-12 and CTE classrooms. We believe that our platform leads to (i) deeper understanding of content, (ii) increased motivation of students to learn (iii) additional engagement of students with content and (iv) improved preparedness for the workforce. We believe that we have significant growth potential and that we have demonstrated a repeatable value proposition and the ability to scale our sales growth model. With a mature and tested go-to-market playbook and team in place, we are focused on scaling execution across a carefully selected set of growth vectors, including scaling in the United States, expanding internationally, investing in research and development (“R&D”), and acquiring software, both specific software applications and third party software developers, in order to increase the growth of our software offerings. Such acquisitions, if completed, are intended to be accretive to earnings and materially increase our software revenues.
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We estimate using data from national government sources specifying the number of schools within their regions that our total addressable market (TAM) for the K-12 market is approximately $21.4 billion in the United States, $29.0 billion in Europe, Middle East and Africa region (EMEA) and $5.6 billion in the Asia Pacific region (APAC) and that our TAM
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for the CTE market is approximately $6.2 billion in the United States, $5.4 billion in EMEA and $0.8 billion in APAC, with an overall global TAM of greater than $68 billion. Our TAM for the K-12 market is an estimate of the revenue that we would receive over a five year period assuming that each public school in the applicable region purchases one “lab” (consisting of 25 laptops and one cart) at our current prices. Such estimates include recurring annual revenue per laptop based on the average software subscription revenue we receive per unit per year from K-12 customers and assumes an 80% renewal rate. Our TAM for the CTE market is an estimate of the revenue that we would receive over a five year period assuming that each school that offers vocational/CTE programs (including community colleges) in the applicable region purchases one “lab” (consisting of 27 laptops and one cart) at our current prices. Such estimates include recurring annual revenue based on the average software subscription revenue we receive per unit per year from CTE customers in such region and assumes an 80% renewal rate. We have estimated the number of schools in the K-12 market and the CTE market in the US/Canada region, EMEA region and APAC region based on data sourced from third parties, including the Institute of Education Science, the British Educational Suppliers Association, Statista, various governmental instrumentalities, articles and published papers.
Previous report
We generate revenue by selling hardware, software and services to customers, who are primarily K-12 schools, as well as community colleges, technical colleges and trade colleges. Our hardware product includes our flagship product, the Inspire laptop which works together with our patented stylus product to create an interactive AR/VR experience. Our software consists of a series of educational applications that run on our hardware to provide interactive experiences. Our services consist of support services from our professional development team. We are focused on driving substantial annual growth in software applications revenue and product revenue while maintaining modest growth in services revenue.
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Factors Affecting Our Performance
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We believe that our growth and financial performance are dependent upon many factors, including the key factors described below which are in turn subject to significant risks and challenges, including those discussed below and in the section of this report entitled “Risk Factors.”
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Retention of Key Employees
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In 2020, in response to concerns relating to the COVID-19 pandemic, we made significant changes to our business, including changes to our structure and employee base. We moved to a remote working environment at the onset of the pandemic and have transitioned to a hybrid working environment. In many respects, we believe these changes have better positioned our workforce and our company for profitability. However, we believe we have many employees that are key to our operations, and in the event some of these key employees were to leave our company, it would have a detrimental effect on our business and operations.
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Strategic PC OEM Partnerships
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Prior to our most recent laptop product, Inspire, we worked exclusively with tier-one Original Development Manufacturers (“ODMs”) to manufacture our products. In 2021, we made the strategic decision to partner with a major PC OEM, working together to build Inspire, a proprietary laptop product, which allowed us to leverage the OEM’s supply chain network and volumes. As of September 30, 2025, approximately 21,600 Inspires have been shipped under our agreement with this PC OEM. Our master agreement with our PC OEM partner is subject to an initial one-year term, with automatic renewal for subsequent one-year terms. Either party is permitted to terminate the agreement upon written notice delivered to the other party not later than three months prior to the expiration of the applicable term. During 2023, we entered into an agreement with another PC OEM for the manufacture of an additional laptop product. If either PC OEM decided to discontinue their relationship with us, our business could be materially and adversely impacted. We also rely upon one third-party partner located in China to manufacture our stylus. If our manufacturing partners that we rely upon decide to discontinue their relationship with us and we are unable to replace such parties on similar terms or at all, our business could be materially and adversely impacted.
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Scaling in the United States
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Our fundamental go-to-market model is built upon a solution-oriented selling approach. We believe it is critical that we continue to grow and scale our business in the United States in order to be successful. School districts can at times be prone to long sales cycles as a result of the bureaucratic purchasing process. In addition, education funding is subject to change based on political, policy or economic variables at the federal, state or local level, which can impact a school district’s funding, both positively and negatively, and impact our business in the United States.
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Software Acquisitions for Growth
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An important component to our future growth plan going forward is the acquisition of key software companies and/or intellectual property in specific areas within the education market. We believe that the completion and successful integration of such companies and assets will be important to our success.
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Beginning in the first quarter of 2025, new tariffs were announced on imports to the U.S. ("U.S. Tariffs"), including tariffs on imports from China, where the Company manufactures its products, and multiple nations have announced tariffs and other actions in response. Trade negotiations are ongoing, but overall the global trade environment remains fluid and highly uncertain. Modifications and delays to the U.S. Tariffs have been announced and further changes are expected to be made in the future. Tariffs and other measures that are applied to the Company’s products or their components can have a material adverse impact on the Company’s business, results of operations and financial condition, including impacting the Company’s supply chain, pricing and gross margin. The ultimate impact remains uncertain and will depend on several factors, including whether additional or incremental U.S. Tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, and the overall magnitude and duration of these measures. Trade and other international disputes can have an adverse impact on the overall macroeconomic environment and result in shifts and reductions in spending for the Company’s products and services, all of which can further adversely affect the Company’s business and results of operations.
Previous report
Software revenue decreased by $1.3 million or 23%, to $4.3 million for the three months ended September 30, 2025, from $5.6 million for the three months ended September 30, 2024. Software content purchased on new unit deployments and retention of existing software licenses revenue were disproportionately affected by customer funding disruptions in the three months ended September 30, 2025. For the three months ended September 30, 2025 and 2024, software revenue as a percentage of total revenue is 49% and 39%, respectively.
Previous report
The Company’s hardware costs include shipping and handling fees paid to the primary logistics agent for tariffs, custom duties and related logistics expenses. For the three months ended September 30, 2025, these costs were approximately $0.1 million, as compared to $0 for the three months ended September 30, 2024.
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Excess and obsolete expense decreased by $0.3 million or 85%, to $47,000 for the three months ended September 30, 2025, from $0.3 million in the three months ended September 30, 2024. The decrease was attributable to the write-off of inventory in the three months ending September 30, 2024.
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Excluding the $0.1 million of shipping costs paid to the primary logistics agent and the write-off of excess and obsolete charges in the three months ended September 30, 2025, gross margin for the three months ended September 30, 2025 would have been 52% compared to the actual gross margin of 51%.
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For the three months ended September 30, 2025, operating expenses increased by $3.0 million, or 47%, to $9.3 million from $6.3 million for the three months ended September 30, 2024. The increase in expenses was primarily attributable to an increase of $2.3 million of stock-based compensation expense due to annual grants of 1.3 million RSUs to members of the Board of Directors, named executive officers and employees in February and March 2025 at a grant date fair value of $17.5 million. After removing the stock-based compensation and RSU expense from the totals, for the three months ended September 30, 2025, the adjusted operating expenses totaled $6.6 million and resulted in an increase of $0.3 million or
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4%, from the $6.3 million total operating expenses for the three months ended September 30, 2024. This net increase was primarily due to increased costs in personnel and professional expenses through the three months ended September 30, 2025 andadditional selling and marketing activities.
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General and administrative expenses increased by $1.4 million or 67%, to $3.4 million for the three months ended September 30, 2025, from $2.0 million for the three months ended September 30, 2024. The increase in expenses was primarily attributable to the increase in stock-based compensation expense of $1.4 million.
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Revenue
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Hardware revenue decreased by $5.2 million or 30%, to $11.9 million for the nine months ended September 30, 2025, from $17.1 million for the nine months ended September 30, 2024. The decrease in hardware revenue was primarily attributable to tariff and trade policy uncertainty, as well as uncertainty in federal funding sources for education available to our K-12 segment customers, and the resulting impact on laptop shipments, during nine months ended September 30, 2025. For the nine months ended September 30, 2025 and 2024, hardware revenue as a percentage of total revenue was 52% and 58%, respectively.
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Software revenue decreased by $1.6 million or 15%, to $8.7 million for the nine months ended September 30, 2025 from $10.2 million for the nine months ended September 30, 2024. Notwithstanding adverse factors affecting hardware shipments, and software content purchased on new unit deployments, retention of existing software licenses revenue, and increases in the sales price of software, generated an improvement in software revenue relative to the decline in hardware revenue. For the nine months ended September 30, 2025 and 2024, software revenue as a percentage of total revenue was 38% and 35%, respectively.
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Service revenue increased by $0.2 million or 9%, to $2.4 million for the nine months ended September 30, 2025, from $2.2 million for the nine months ended September 30, 2024. The increase in service revenue was primarily attributable to increased sales of extended warranty and technology support services. For the nine months ended September 30, 2025 and 2024, services revenue as a percentage of total revenue was 11% and 8%, respectively.
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For the nine months ended September 30, 2025, total cost of goods sold decreased by $5.3 million, or 31%, to $12.1 million compared to $17.5 million for the nine months ended September 30, 2024. This decrease was primarily attributable to reduced hardware costs of $4.6 million due to fewer shipments of Inspire units, a decrease in software costs of $1.0 million and a decrease in excess and obsolete of $0.1 million, partially offset by an increase in service cost of $0.3 million. For the nine months ended September 30, 2025 and 2024, gross margin was 47% and 41%, respectively.
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Cost of hardware sold decreased by $4.6 million, or 36%, to $8.0 million for the nine months ended September 30, 2025, from $12.6 million for the nine months ended September 30, 2024. The decrease in cost of hardware sold was primarily attributable to the 30% decrease in hardware revenue driven primarily by a decrease in the volumes shipped of Inspire laptops, as well as reductions in the bill of materials costs of the new Inspire 2 laptop relative to the Inspire 1 model which was sold during the nine months ended September 30, 2024.
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The Company’s hardware costs include shipping and handling fees paid to the primary logistics agent for tariffs, custom duties and related logistics expenses. For the nine months ended September 30, 2025, these costs were approximately $0.1 million, as compared to $0 for the nine months ended September 30, 2024.
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For the nine months ended September 30, 2025 and 2024, hardware gross margin was 35% and 27%, respectively.
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Cost of software sold decreased by $1.0 million or 28%, to $2.5 million for the nine months ended September 30, 2025, from $3.5 million for the nine months ended September 30, 2024. The decrease in cost of software sold corresponded to decreased sales of third party point-in-time software and overall software application sales. The decrease in third-party point-in-time software costs was also related to success in acquiring software applications on which the company formerly incurred revenue share. For the nine months ended September 30, 2025 and 2024, software gross margin was 68% and 66%, respectively.
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Cost of services sold increased by $0.3 million or 28%, to $1.4 million for the nine months ended September 30, 2025, from $1.1 million for the nine months ended September 30, 2024. The increase in cost of services sold was primarily attributable to increased sales of technology support services. For the nine months ended September 30, 2025 and 2024, services gross margin was 42% and 52%, respectively.
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Excess and obsolete expense decreased $0.1 million or 30%, to $0.2 million for the nine months ended September 30, 2025, from $0.3 million in the nine months ended September 30, 2024. The decrease was attributable to the write-off of inventory costs in the nine months ending September 30, 2024.
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Excluding the $0.1 million of shipping costs paid to the primary logistics agent and the write-off of $0.2 million of excess and obsolete costs in the nine months ended September 30, 2025, gross margin for the nine months ended September 30, 2025 would have been 49% compared to the actual gross margin of 47%.
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For the nine months ended September 30, 2025, operating expenses increased by $0.4 million, or 1%, to $27.4 million from $27.0 million for the nine months ended September 30, 2024. The increase in expenses was primarily attributable to increased costs in personnel.
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Research and development expenses decreased by $0.2 million or 4%, to $3.9 million for the nine months ended September 30, 2025, from $4.1 million for the nine months ended September 30, 2024. The decrease in expenses was primarily attributable to a decrease in stock-based compensation expense of $0.4 million due to grants to employees in March 2024.
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Selling and marketing expenses increased by $0.2 million or 1%, to $12.3 million for the nine months ended September 30, 2025, from $12.1 million for the nine months ended September 30, 2024. The increase in expenses was primarily attributable to increased headcount and compensation expense partially offset by a decrease in stock-based compensation expense of $1.0 million due to grants to employees in March 2024.
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General and administrative expenses increased by $0.4 million or 4%, to $11.2 million for the nine months ended September 30, 2025, from $10.8 million for the nine months ended September 30, 2024. The increase in expenses was primarily attributable to increased costs in personnel and professional expenses in 2025 related to being a public Company partially offset by a $0.7 million decrease in stock compensation expenses due to grants to employees in March 2024.
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Income Tax Expense
Showing the first 40 of 46 passages. Open the source sections for the rest.
Reworded paragraphs (52)
Previous wording
We are a leading provider of augmented and virtual reality educational technology solutions. We believe that we are a recognized brand in the education market with a current focus on both United States K-12 schools and the Career and Technical Education (“CTE”) markets.
Current wording
We are a leading provider of augmented and virtual reality educational technology products, focusing primarily on United States K-12 schools, the Career and Technical Education sector, and select international markets. Our proprietary hardware and software platform delivers interactive, stereoscopic three-dimensional (3D) learning experiences without the need for VR goggles or specialty glasses. We generate revenue through the sale of our hardware (such as our Inspire and Imagine laptops and tracked styluses), and software licenses for STEM and CTE applications, and implementation and professional development services.
Previous wording
Our platform is designed to work with a wide range of learning applications, for both K-12 education and CTE, that come to life by having 3D models projected out of the screen. Our flagship product is the Inspire line of products, our latest laptop product built in partnership with a major PC OEM. It is our first product offering 3D stereo visualization without the need to utilize glasses/eyewear. Our initial original edition product offerings (OE) used a proprietary passive circular polarized display to create comfortable 3D stereo using lightweight eyewear. We are no longer producing our OE products, although we continue to sell existing inventory outside of the US. Product revenue accounted for 52% and 58% of our total revenue for the nine months ended September 30, 2025 and 2024, respectively.
Current wording
Our laptops are designed to work with a wide range of learning applications, for both K-12 education and CTE, that come to life by having 3D models projected out of the screen. Our flagship product is the Inspire, our latest laptop product built in partnership with a major PC OEM. Hardware Product revenue accounted for 53% and 57% of our total revenue for the three months ended March 31, 2026 and 2025, respectively.
Previous wording
Our platform allows for immersive experiential learning experiences across science, math technology, engineering and career training applications. We derive software applications revenue from the sale of licenses and subscription plans to the software applications available on our platform.
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We derive software applications revenue from the sale of licenses and subscription plans to the software applications available on our platform.
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Our software applications are priced based on the number of devices or users and length of the contract. We offer discount programs based on increases in volume of devices or users and the length of the contract. We believe the wide variety and flexibility of our software applications help us retain existing customers and acquire additional customers. Software applications revenue accounted for 38% and 35% of our total revenue for the nine months ended September 30, 2025 and 2024, respectively. We expect that going forward our software applications revenue will grow faster in absolute dollars and as a percentage of our total revenue than our product or service revenues.
Current wording
Our software applications are priced based on the number of devices or users and length of the contract. We offer discount programs based on increases in volume of devices or users and the length of the contract. We believe the wide variety and flexibility of our software applications help us retain existing customers and acquire additional customers. Software applications revenue accounted for 37% and 29% of our total revenue for the three months ended March 31, 2026 and 2025, respectively. We expect that going forward our software applications revenue will grow faster in absolute dollars and as a percentage of our total revenue than our product or service revenues.
Previous wording
We typically invoice our customers annually in advance of providing software and services. Software sales consist of licenses of our functional intellectual property that are materially satisfied at a point in time when key codes are provided to allow customers to access the software. In transactions where a third-party is involved in providing software licenses to a customer, we recognize the revenue from the third-party ratably on a straight-line basis.
Current wording
We typically invoice our customers annually in advance of providing software and services. Software sales consist of licenses of our functional intellectual property that are materially satisfied at a point in time when key codes are provided to allow customers to access the software. In transactions where a third-party is involved in providing software licenses to a customer, we recognize the revenue from the third-party ratably over-time on a straight-line basis.
Previous wording
Our services are a “turn-key” solution that aids customers with configuring purchased products with software and license keys specific to the customer’s use. This service allows the applicable school to quickly get started with an out-of-the-box ready system. We derive services revenue from installation and/or training services for products, both of which are separate performance obligations and typically are satisfied within a short period of time, often less than one month delivered remotely or on-site at the customer’s location. Additionally, we offer one- and two-year extended warranty contracts that customers can purchase at their option, which are also separate performance obligations. Services revenue accounted for 11% and 8% of our total revenue for the nine months ended September 30, 2025 and 2024, respectively.
Current wording
We derive services revenue from installation and/or training services for products, both of which are separate performance obligations and typically are satisfied within a short period of time, often less than one month delivered remotely or on-site at the customer’s location. Additionally, we offer one- and two-year extended warranty contracts that customers can purchase at their option, which are also separate performance obligations. Services revenue accounted for 9% and 14% of our total revenue for the three months ended March 31, 2026 and 2025, respectively.
Previous wording
We believe our ability to retain and grow our product and software revenue will be dependent on our ability to grow in both our United States CTE and K-12 market segments. We track our performance in this area by measuring our bookings from customers in each of these markets. We calculate this metric on a quarterly basis by comparing the aggregate number of bookings in each market for the most recent quarter divided by the number of bookings attributable to the same market for the same quarter in the previous fiscal year. CTE bookings accounted for approximately 49% and 41% for the three months ended September 30, 2025 and 2024, respectively, while K-12 bookings accounted for approximately 51% and 59%, for the three months ended September 30, 2025 and 2024, respectively. CTE bookings accounted for approximately 38% and 34% for the nine months ended September 30, 2025 and 2024, respectively, while K-12 bookings accounted for approximately 62% and 66%, for the nine months ended September 30, 2025 and 2024, respectively.
Current wording
We believe our ability to retain and grow our product and software revenue will be dependent on our ability to grow in both our United States CTE and K-12 market segments. We track our performance in this area by measuring our bookings from customers in each of these markets. We calculate this metric on a quarterly basis by comparing the aggregate number of bookings in each market for the most recent quarter divided by the number of bookings attributable to the same market for the same quarter in the previous fiscal year. CTE bookings accounted for approximately 43% and 29% for the three months ended March 31, 2026 and 2025, respectively, while K-12 bookings accounted for approximately 57% and 71%, for the three months ended March 31, 2026 and 2025, respectively.
Previous wording
Subsequent to September 30, 2024, we experienced significant cancellations ("debooks") of previously reported customer commitments that affect full year bookings performance. These debooks totaled $1.8 million for the nine months ended September 30, 2024. The primary factors contributing to these debooks were customer financial constraints.
Current wording
Subsequent to March 31, 2025, we experienced significant cancellations ("debooks") of previously reported customer commitments that affect full year bookings performance. These debooks totaled $1.7 million for the three months ended March 31, 2025. The primary factors contributing to these debooks were customer financial constraints.
Previous wording
We track our performance in international sales by measuring bookings from our international reseller partners relative to total bookings. We calculate this metric on a quarterly basis by comparing the aggregate amount of bookings attributable to international partners for the most recent quarter compared to the number of bookings attributable to international partners for the same quarter in the previous fiscal year and the prior quarter. International bookings accounted for approximately 17% and 27% for the three months ended September 30, 2025 and 2024, respectively. International bookings accounted for approximately 14% and 16% for the nine months ended September 30, 2025 and 2024, respectively.
Current wording
We track our performance in international sales by measuring bookings from our international reseller partners relative to total bookings. We calculate this metric on a quarterly basis by comparing the aggregate amount of bookings attributable to international partners for the most recent quarter compared to the number of bookings attributable to international partners for the same quarter in the previous fiscal year and the prior quarter. International bookings accounted for approximately 10% and 3% for the three months ended March 31, 2026 and 2025, respectively.
Previous wording
To monitor our ability to retain and grow our customer base for our software we monitor the annualized contract value of active software licenses, with particular attention to customers with at least $50,000 in annualized contract value (“ACV”). Our ACV for the nine months ended September 30, 2025 and 2024 was approximately $10.2 million and $11.3 million, respectively. We calculate our Dollar-Based Retention Rate as of a given period end by starting with the ACV from all customers as of 12 months prior to such period end (“Prior Period ACV”) and calculating the ACV from these same customers as of the current period end (“Current Period ACV”). Current Period ACV includes any upsells and is net of contraction or attrition over the trailing 12 months but excludes revenue from new customers in the current period. We then divide the total Current Period ACV by the total Prior Period ACV to arrive at our Dollar- Based Retention Rate. For the trailing twelve-month period ended September 30, 2025 and 2024, our NDRR on customers with at least $50,000 of ACV was 77% and 102%, respectively.
Current wording
To monitor our ability to retain and grow our customer base for our software we monitor the annualized contract value of active software licenses, with particular attention to customers with at least $50,000 in ACV. Our ACV for the three months ended March 31, 2026 and 2025 was approximately $10.1 million and $11.6 million, respectively. We calculate our Dollar-Based Retention Rate as of a given period end by starting with the ACV from all customers as of 12 months prior to such period end (“Prior Period ACV”) and calculating the ACV from these same customers as of the current period end (“Current Period ACV”). Current Period ACV includes any upsells and is net of contraction or attrition over the trailing 12 months but excludes revenue from new customers in the current period. We then divide the total Current Period ACV by the total Prior Period ACV to arrive at our Dollar- Based Retention Rate. For the trailing twelve-month period ended March 31, 2026 and 2025, our NDRR on customers with at least $50,000 of ACV was 65% and 97%, respectively.
Previous wording
We calculate Adjusted EBITDA as GAAP net loss adjusted for interest expense, depreciation and amortization expense, stock-based compensation, change in fair value of convertible debt, loss on debt extinguishment and income tax expense. We believe this measure provides our management and investors with consistency and comparability with our past financial performance and is an important indicator of the performance and profitability of our business.
Current wording
We calculate Adjusted EBITDA as GAAP net loss adjusted for interest expense, depreciation and amortization expense, offering costs related to financing activities, stock-based compensation, change in fair value of convertible debt, change in fair value of Series P Preferred Stock liability and income tax expense. We believe this measure provides our management and investors with consistency and comparability with our past financial performance and is an important indicator of the performance and profitability of our business.
Previous wording
power adapters, and a standard assurance type warranty. Hardware accessories are also sold on a stand-alone basis. Customers place orders for the hardware and we fulfill the order and ship the hardware directly to the customer or authorized resellers. Generally, we receive payment from customers or authorized resellers at the time of hardware delivery; however, in certain circumstances our United States customers may remit payment at a later date pursuant to the terms of their agreement with us. We recognize hardware revenue associated with a sale in full at the time of shipment. Customers purchasing hardware from us also typically purchase our enabled software applications for use on their devices.
Current wording
*Hardware Revenue —*Hardware revenue is generated from the sale of our learning stations bundled with pre-loaded perpetual license software, accessories necessary for full use of our products, including stylus, eyewear (if needed) and power adapters, and a standard assurance type warranty. Hardware accessories are also sold on a stand-alone basis. Customers place orders for the hardware and we fulfill the order and ship the hardware directly to the customer or authorized resellers. Generally, we receive payment from customers or authorized resellers at the time of hardware delivery; however, in certain circumstances our United States customers may remit payment at a later date pursuant to the terms of their agreement with us. We recognize hardware revenue associated with a sale in full at the time of shipment. Customers purchasing hardware from us also typically purchase our enabled software applications for use on their devices.
Previous wording
The following table sets forth our results of operations for the three and nine months ended September 30, 2025 and 2024:
Current wording
The following table sets forth our results of operations for the three months ended March 31, 2026 and 2025:
Previous wording
Total revenue decreased by $5.4 million, or 38%, for the three months ended September 30, 2025 to $8.8 million as compared to the three months ended September 30, 2024. This decrease in revenue is primarily attributable to lower hardware and software revenues attributable to uncertainty in our K-12 end-user markets where funding sources have been disrupted, causing longer than usual sales cycles, and in some cases prompting customers to delay receipt of confirmed order bookings. Potential tariff volatility surcharges have also contributed to potentially elongated sales cycles as we communicate these pricing impacts to customers in revised quotes.
Current wording
Total revenue decreased by $1.5 million, or 22%, for the three months ended March 31, 2026 to $5.3 million as compared to the three months ended March 31, 2025. This decrease in revenue is primarily attributable to lower hardware and software revenues attributable to uncertainty in our K-12 end-user markets where funding sources have been disrupted, causing longer than usual sales cycles, and in some cases prompting customers to delay receipt of confirmed order bookings. Potential tariff volatility surcharges have also contributed to potentially elongated sales cycles as we communicate these pricing impacts to customers in revised quotes.
Previous wording
Hardware revenue decreased by $3.9 million or 51%, to $3.8 million for the three months ended September 30, 2025, from $7.7 million for the three months ended September 30, 2024. The decrease in hardware revenue was primarily attributable to a decrease in units shipped. For the three months ended September 30, 2025 and 2024, hardware revenue as a percentage of total revenue was 43% and 54%, respectively.
Current wording
Hardware revenue decreased by $1.0 million or 27%, to $2.8 million for the three months ended March 31, 2026, from $3.8 million for the three months ended March 31, 2025. The decrease in hardware revenue was primarily attributable to a decrease in units shipped. For the three months ended March 31, 2026 and 2025, hardware revenue as a percentage of total revenue was 53% and 57%, respectively.
Previous wording
Our key software retention metrics are as follows: (1) ACV as of September 30, 2025 decreased to $10.2 million as compared to September 30, 2024 of $11.3 million and (2) NDRR for the trailing twelve-month period ended September 30, 2025 was 77%, as compared to 102% for the trailing twelve-month period ended September 30, 2024.
Current wording
Our key software retention metrics are as follows: (1) ACV as of March 31, 2026 decreased to $10.1 million as compared to March 31, 2025 of $11.6 million and (2) NDRR for the trailing twelve-month period ended March 31, 2026 was 65%, as compared to 97% for the trailing twelve-month period ended March 31, 2025.
Previous wording
Service revenue decreased by $0.2 million or 21%, to $0.7 million for the three months ended September 30, 2025, from $0.9 million for the three months ended September 30, 2024. The decrease in revenue was primarily attributable to decreased sales of extended warranty and technology support services. For the three months ended September 30, 2025 and 2024, services revenue as a percentage of total revenue was 8% and 6%, respectively.
Current wording
Service revenue decreased by $0.5 million or 49%, to $0.5 million for the three months ended March 31, 2026, from $1.0 million for the three months ended March 31, 2025. The decrease in revenue was primarily attributable to decreased sales of extended warranty and technology support services and reflects the revenue recognition of expiring contracts in Q1 FY 25. For the three months ended March 31, 2026 and 2025, services revenue as a percentage of total revenue was 9% and 14%, respectively.
Previous wording
For the three months ended September 30, 2025, total cost of goods sold decreased by $3.6 million, or 45%, to $4.3 million compared to $7.9 million for the three months ended September 30, 2024. This decrease was primarily attributable to reduced hardware costs of $2.9 million due to fewer units sold partially and the lower cost of Inspire units. For the three months ended September 30, 2025 and 2024, gross margin was 51% and 45%, respectively.
Current wording
For the three months ended March 31, 2026, total cost of goods sold decreased by $1.1 million, or 31%, to $2.5 million compared to $3.6 million for the three months ended March 31, 2025. This decrease was primarily attributable to reduced hardware costs of $0.8 million due to fewer units sold partially and the lower cost of laptops and accessories, including the launch of zStylus 1 in December 2025. For the three months ended March 31, 2026 and 2025, gross margin was 53% and 47%, respectively.
Previous wording
Cost of hardware sold decreased by $2.9 million, or 52%, to $2.7 million for the three months ended September 30, 2025, from $5.5 million for the three months ended September 30, 2024. The decrease in cost of hardware sold was primarily attributable to a decrease in the volumes shipped of Inspire laptops and reductions in the bill of materials costs of the new Inspire 2 laptop, relative to the Inspire 1 model which was sold during the three months ended September 30, 2024.
Current wording
Cost of hardware sold decreased by $0.8 million, or 34%, to $1.6 million for the three months ended March 31, 2026, from $2.4 million for the three months ended March 31, 2025. The decrease in cost of hardware sold was primarily attributable to a decrease in the volumes shipped of Inspire laptops.
Previous wording
For the three months ended September 30, 2025 and 2024, hardware gross margin was 36% and 28%, respectively.
Current wording
For the three months ended March 31, 2026 and 2025, hardware gross margin was 43% and 37%, respectively.
Previous wording
Cost of software sold decreased by $0.6 million or 35%, to $1.1 million for the three months ended September 30, 2025, from $1.7 million for the three months ended September 30, 2024. The decrease in cost of software sold corresponded to decreased sales of third party point-in-time software and overall software application sales. The decrease in third-party point-in-time software costs was also related to success in acquiring software applications on which the company formerly incurred revenue share. For the three months ended September 30, 2025 and 2024, software gross margin was 68% and 70%, respectively.
Current wording
Cost of software sold decreased by $0.1 million or 12%, to $0.6 million for the three months ended March 31, 2026, from $0.7 million for the three months ended March 31, 2025. The decrease in cost of software sold corresponded to decreased sales of third-party point-in-time software and overall software application sales. For the three months ended March 31, 2026 and 2025, software gross margin was 70% and 66%, respectively.
Previous wording
Cost of services sold increased by $0.2 million or 52%, to $0.5 million for the three months ended September 30, 2025, from $0.3 million for the three months ended September 30, 2024. For the three months ended September 30, 2025 and 2024, services gross margin was 25% and 63%, respectively.
Current wording
Cost of services sold decreased by $0.2 million or 41%, to $0.3 million for the three months ended March 31, 2026, from $0.5 million for the three months ended March 31, 2025. For the three months ended March 31, 2026 and 2025, services gross margin was 44% and 53%, respectively.
Previous wording
Research and development expenses increased by $0.5 million or 51%, to $1.6 million for the three months ended September 30, 2025, from $1.0 million for the three months ended September 30, 2024. The increase in expenses was primarily attributable to an increase in compensation costs resulting from higher headcount, as well as expanded R&D project activities including new product development and outside services.
Current wording
Research and development expenses decreased by $0.1 million or 9%, to $1.0 million for the three months ended March 31, 2026, from $1.1 million for the three months ended March 31, 2025. The decrease in expenses was primarily attributable to a decrease in compensation costs resulting from lower headcount.
Previous wording
Selling and marketing expenses increased by $1.1 million or 33%, to $4.3 million for the three months ended September 30, 2025, from $3.3 million for the three months ended September 30, 2024. The increase in expenses was mainly due to higher compensation and commission expenses associated with the expanded sales team, reflecting increased pay levels and performance-based incentives.
Current wording
Selling and marketing expenses decreased by $1.6 million or 40%, to $2.4 million for the three months ended March 31, 2026, from $4.0 million for the three months ended March 31, 2025. The decrease in expenses was mainly due to lower compensation and commission expenses associated with the reduced sales team and fewer sales, and less travel related expenses, reflecting decreased staff size and fewer performance-based incentives being reached.
Previous wording
For the three months ended September 30, 2025, interest expense decreased by $0.3 million, or 49%, to $0.3 million, from $0.6 million for the three months ended September 30, 2024. The decrease in interest expense was primarily attributable to the convertible loans converting into Common Stock as part of the IPO in December 2024 and a lower interest rate on the convertible debt entered into in April 2025 compared to the debt paid off with a portion of the proceeds from the convertible debt.
Current wording
For the three months ended March 31, 2026, interest expense decreased by $0.2 million, or 31%, to $0.3 million, from $0.5 million for the three months ended March 31, 2025. The decrease in interest expense was primarily attributable to a lower interest rate on the convertible debt entered into in April 2025 compared to the debt paid off with a portion of the proceeds from the convertible debt.
Previous wording
Income tax expense for each of the three months ended September 30, 2025 and 2024 was immaterial. We estimate an annual effective tax rate for the year ending December 31, 2025 of (0.09)% as we incurred losses for the three months ended September 30, 2025 andexpect to continue to incur losses through the remainder of our fiscal year, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2025. The United States federal statutory rate is 21% while our effective tax rate for the years ended December 31, 2024 and 2023 was 0.1% and zero, respectively. No federal or state income taxes are expected outside of immaterial state tax payments.
Current wording
Income tax expense for each of the three months ended March 31, 2026 and 2025 was immaterial. We estimate an annual effective tax rate for the year ending December 31, 2026 of (0.07)% as we incurred losses for the three months ended March 31, 2026 andexpect to continue to incur losses through the remainder of our fiscal year, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2026. The United States federal statutory rate is 21% while our effective tax rate for the years ended December 31, 2025 and 2024 was 0.1% and 0.1%, respectively. No federal or state income taxes are expected outside of immaterial state tax payments.
Previous wording
For the nine months ended September 30, 2025, our operating activities used cash of $14.0 million, primarily due to our net loss of $18.1 million and the changes in our operating assets and liabilities of $2.4 million, partially offset by adjustments for non-cash charges, including stock-based compensation expense of $5.2 million, the change in fair value of convertible debt of $0.6 million, issuance of restricted stock units of $0.4 million, provision for excess and obsolete inventory of $0.2 million, and non-cash amortization of other debt discount of $0.1 million. The change in our operating assets and liabilities was primarily the result of an increase in accounts receivable of $0.5 million and prepaid and other assets of $1.0 million and a decrease in accounts payable of $1.7 million and deferred revenue of $0.6 million, partially offset by a decrease in inventory of $0.7 million and an increase in accrued expenses of $0.1 million and accrued interest of $0.7 million.
Current wording
For the three months ended March 31, 2026, our operating activities used cash of $3.0 million, primarily due to our net loss of $6.6 million and the changes in our operating assets and liabilities of $0.5 million, partially offset by adjustments for non-cash charges, including stock-based compensation expense of $1.6 million, the change in fair value of convertible debt of $2.0 million, non-cash amortization of debt discount of $0.1 million, and bad debt expense of $30,000. The change in our operating assets and liabilities was primarily the result of an increase in accounts receivable of $1.2 million and prepaid and other assets of $0.3 million and a decrease in accounts payable of $0.2 million, partially offset by the change in fair value of the Series P Preferred Stock liability of $0.2 million, a decrease in inventory of $0.4 million and an increase in accrued expenses of $0.2 million, deferred revenue of $0.5 million and accrued interest of $0.3 million.
Previous wording
For the nine months ended September 30, 2024, our operating activities used cash of $3.9 million, primarily due to our net loss of $17.2 million partially offset by changes in our operating assets and liabilities of $5.8 million, an adjustment for non-cash charge of stock-based compensation expense of $7.4 million, and loss on extinguishment of debt of $0.1 million. The change in our operating assets and liabilities was primarily the result of a decrease in accounts receivable of $0.6 million and inventory of $1.0 million, and an increase in accounts payable of $1.9 million, accrued expenses of $0.2
Current wording
For the three months ended March 31, 2025, our operating activities used cash of $4.6 million, primarily due to our net loss of $5.8 million partially offset by changes in our operating assets and liabilities of $0.2 million and adjustments for non-cash charge, including stock-based compensation expense of $1.0 million. The change in our operating assets and liabilities was primarily the result of a decrease in inventory of $1.2 million and an increase in accounts payable of $0.4 million, and accrued interest of $0.3 million, partially offset by an increase in accounts receivable of $0.7 million and prepaid expenses and other assets of $0.7 million, and a decrease in accrued expenses of $0.2 million, deferred revenue of $0.5 million and accrued interest of $0.3 million.
Previous wording
For the nine months ended September 30, 2025 and 2024, net cash used in investing activities was immaterial due to our low capital equipment requirements.
Current wording
For the three months ended March 31, 2026 and 2025, net cash used in investing activities was immaterial due to our low capital equipment requirements.
Previous wording
For the nine months ended September 30, 2025, net cash provided by financing activities was $13.7 million primarily due to proceeds from convertible debt of $13.0 million, other debt issuances of $4.0 million, proceeds from issuance of common stock from equity line-of-credit of $3.6 million, and proceeds from exercise of stock options of $0.2 million partially offset by repayment of other debt issuances of $6.8 million, and fees paid for debt issuance of $0.1 million.
Current wording
For the three months ended March 31, 2026, net cash provided by financing activities was $4.9 million primarily due to proceeds from convertible debt of $4.0 million, proceeds from other debt issuances of $1.3 million, proceeds from issuance of common stock from equity line-of-credit of $0.1 million, and proceeds from issuance of Preferred Stock Series P of $3.0 million partially offset by repayment of convertible debt of $2.0 million and other debt issuances of $1.6 million.
Previous wording
For the nine months ended September 30, 2024, net cash provided by financing activities was $4.0 million primarily due to proceeds from convertible notes of $5.0 million and proceeds from other term loan issuances of $3.5 million partially offset by repayment of other debt issuances of $3.9 million and fees paid for deferred offering costs of $0.5 million.
Current wording
For the three months ended March 31, 2025, net cash provided by financing activities was $1.0 million due to proceeds from other term debt issuances of $2.0 million partially offset by repayment of other debt issuances of $1.0 million, and fees paid for debt issuance of $30,000.
Previous wording
As of September 30, 2025 and December 31, 2024, we had an accumulated deficit of $308.5 million and $290.4 million, respectively. Our net losses were $18.1 million and $17.2 million for the nine months ended September 30, 2025 and 2024, respectively. A portion of our net losses in the nine months ended September 30, 2024 related to $7.4 million in stock compensation expense from options issued during the period.
Current wording
As of March 31, 2026 and December 31, 2025, we had an accumulated deficit of $322.3 million and $315.8 million, respectively. Our net losses were $6.6 million and $5.8 million for the three months ended March 31, 2026 and 2025, respectively.
Previous wording
As of September 30, 2025 and December 31, 2024, we had cash and cash equivalents of $4.3 million and $4.9 million, respectively. In April 2025, we raised $14.0 million in a Senior Secured Convertible Note Financing. See Note 5 to our condensed consolidated financial statements for the nine months ended September 30, 2025 elsewhere in this report for additional information. In the nine months ended September 30, 2025 and the years ended December 31, 2024 and 2023, we raised $20.6 million, $18.5 million and $11.4 million, respectively, for an aggregate of $50.5 million through debt and financing arrangements, including the $13.0 million of convertible debt, $7.5 million of net proceeds from the IPO, $9.3 million under loan and security agreements with Fiza, $5.0 million in convertible notes and $5.6 million in other debt issuances. In May 2024 and June 2024, we entered into multiple loan agreements from an existing lender to borrow a total of $3.5 million secured by certain of our assets. Our accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. Our accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. Our financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should we be unable to continue as a going concern. The recurring losses and negative cash flows from operations, working capital deficiency, the need for additional financing, uncertainties frequently encountered by companies in the technology industry and the dependency on closing this offering are factors that raise substantial doubt about our ability to continue as a going concern for the twelve-month period from the date the financial statements included herein were issued. See Note 1 to our condensed consolidated financial statements for the three and nine months ended September 30, 2025 included elsewhere in this report for additional information on our assessment.
Current wording
As of March 31, 2026 and December 31, 2025, we had cash and cash equivalents of $2.9 million and $1.0 million, respectively. In April 2025, we raised $14.0 million in a Senior Secured Convertible Note Financing. See Note 5 – Debt and Related Party Debt to our condensed consolidated financial statements for the three months ended March 31, 2026 elsewhere in this report for additional information. In the three months ended March 31, 2026 and the year ended December 31, 2025, we raised $7.0 million and $18.5 million, respectively, for an aggregate total all-time of $50.5 million through debt and financing arrangements, including $13.0 million of convertible debt, $7.5 million of net proceeds from the IPO, $9.3 million under loan and security agreements with Fiza, $5.0 million in convertible notes and $5.6 million in other debt issuances. In May 2024 and June 2024, we entered into multiple loan agreements from an existing lender to borrow a total of $3.5 million secured by certain of our assets. Our accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. Our financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should we be unable to continue as a going concern. The recurring losses and negative cash flows from operations, working capital deficiency, the need for additional financing, uncertainties frequently encountered by companies in the technology industry and the dependency on closing this offering are factors that raise substantial doubt about our ability to continue as a going concern for the twelve-month period from the date the financial statements included herein were issued. See Note 1 to our condensed consolidated financial statements for the three months ended March 31, 2026 included elsewhere in this report for additional information on our assessment.
Previous wording
of achieving future profitability among other factors discussed under “Cautionary Note Regarding Forward - Looking Statements”. Our success depends on the outcome of our research and development activities, scale-up and successful partnering and commercialization of our products and product candidates. In February 2025, we entered into two Loan and Security agreements that provided us with $2.0 million in financing. In April 2025, we entered into a convertible debt agreement that may provide us with up to $20.0 million in financing. In July 2025, we entered into an equity line-of-credit agreement that may provide us with up to $30.0 million in equity. In August 2025, we entered into new debt loans that provided us with $2.0 million in financing.
Current wording
During the three months ended March 31, 2026, we incurred a net loss of $6.6 million, had Adjusted EBITDA of ($2.1) million and had negative cash flows from operations of $3.0 million. For the years ended December 31, 2025, we incurred a net loss of $25.4 million, and incurred negative cash flows from operations of $18.0 million. We had combined cash and cash equivalents of $2.9 million and $1.0 million as of March 31, 2026 and December 31, 2025, respectively. We have incurred operating losses and negative cash flows from operations since inception. Our prospects are subject to risks, expenses and uncertainties frequently encountered by companies in the technology industry. These risks include, but are not limited to, the uncertainty of successfully developing our products, availability of additional financing, gaining customer acceptance and uncertainty of achieving future profitability among other factors discussed under “Cautionary Note Regarding Forward - Looking Statements”. Our success depends on the outcome of our research and development activities, scale-up and successful partnering and commercialization of our products and product candidates. In February 2025, we entered into two Loan and Security agreements that provided us with $2.0 million in financing. In April 2025, we entered into a convertible debt agreement that may provide us with up to $20.0 million in financing. In July 2025, we entered into an equity line-of-credit agreement that may provide us with up to $30.0 million in equity. In August 2025, we entered into new debt loans that provided us with $2.0 million in financing.
Previous wording
The Company has three outstanding loans as of September 30, 2025 with Fiza Investments Limited, (“Fiza”) with a total outstanding principal balance of $7.2 million. On April 10, 2025, in connection with the Senior Secured Convertible Note Financing described in Note 5 to the to the condensed consolidated financial statements, the maturity date of the Fiza loans were amended to be the latter to occur of December 31, 2027 or the date in which there is no debt outstanding under the Senior Secured Convertible Note (as defined in Note 5 to the to the condensed consolidated financial statements). As of September 30, 2025 and December 31, 2024, gross principal amounts due on the Fiza term debt is $7.2 million and have been classified as non-current other term loans on the balance sheet.
Current wording
The Company has three outstanding loans as of March 31, 2026 with Fiza Investments Limited, (“Fiza”) with a total outstanding principal balance of $7.2 million. On April 10, 2025, in connection with the Initial Senior Secured Convertible Note (as defined) in Note 5 – Debt and Related Party Debt to the condensed consolidated financial statements, the maturity date of the Fiza loans were amended to be the latter to occur of December 31, 2027 or the date in which there is no debt outstanding under the Senior Secured Convertible Note (as defined in Note 5 – Debt and Related Party Debt to the condensed consolidated financial statements). The repayment schedule for the Fiza loans is such that beginning on the latter to occur of December 31, 2027 or the date in which there is no debt outstanding under the Initial Senior Secured Convertible Note (the “Convertible Note Repayment Date”), the Company will repay all remaining principal and interest under the Fiza loans over twelve equal monthly installments. In addition, the interest rate of the Fiza loans dated July 11, 2024 was lowered from 25% to 20% and the Company is only required to make payments of interest under such loans until the Convertible Note Repayment Date. As of March 31, 2026 and December 31, 2025, gross principal amounts due on the Fiza term debt is $7.2 million and have been classified as non-current other term loans on the balance sheet.
Previous wording
On August 20, 2025, the Company entered into two Loan and Security Agreements in the principal amounts of $1,000,000 each (“Term Loans 10 and 11”) for an aggregate total of $2,000,000. One of the Term Loans 10 and 11 bears interest at a rate of 18.00% per year and is payable on a monthly basis in 15 equal installments, maturing on the 15-month anniversary of the funding date. The second Term Loans 10 and 11bears interest at a rate of 18.99% per year and is payable on a monthly basis in 18 equal installments, maturing on the 18-month anniversary of the funding date. The Company may prepay either of Term Loans 10 and 11Loans in full at any time after the first month of the term, subject to a prepayment fee equal to 1.5% of the unpaid principal balance if the Term Loans 10 and 11are prepaid within the first 12 months of the term. See Note 5 – Debt and Related Party Debt for more information.
Current wording
On August 20, 2025, the Company entered into two Loan and Security Agreements with Itria Ventures LLC (“Itria”) in the principal amounts of $1,000,000 each (“Term Loans 10 and 11”) for an aggregate total of $2,000,000 at a rate of 18.00% to 18.99% per year. On March 19, 2026, the Company, entered into a new Loan and Security Agreement the (“New Loan Agreement”) with Itria in connection with the refinancing of all of its outstanding debt with Itria. Pursuant to the New Loan Agreement, the Lender agreed to provide the Company with a term loan in the principal amount of $1,344,500 (the “New Loan”) at an interest rate of 18.99% per year. The New Loan is payable on a monthly basis in 24 equal installments, maturing on the 24-month anniversary of the funding date. The proceeds of the New Loan were used to refinance and pay off in full Term Loans 10 and 11. See Note 5 – Debt and Related Party Debt for more information.
Previous wording
The outstanding balance of all Itria loans as of September 30, 2025 and December 31, 2024 is $1.9 million and $4.8 million, respectively.
Current wording
The outstanding balance of all Itria loans as of March 31, 2026 and December 31, 2025 is $1.3 million and $1.6 million, respectively.
Previous wording
On April 10, 2025, the Company entered into a securities purchase agreement (the “Note SPA”) with the Note Investor, pursuant to which the Company sold, and the Note Investor purchased, a senior secured convertible note issued by the Company (the “Senior Secured Convertible Note,” and such financing, the “Senior Secured Convertible Note Financing”) in the original principal amount of $13,978,495, which is convertible into shares of the Company’s Common Stock. The Senior Secured Convertible Note Financing closed on April 11, 2025.
Current wording
On April 10, 2025, the Company entered into a securities purchase agreement (the “Note SPA”) with an investor, (the “Senior Lender”), pursuant to which the Company sold, and the Senior Lender purchased, a senior secured convertible note issued by the Company (the “Initial Senior Secured Convertible Note,” and such financing, the “Senior Secured Convertible Note Financing”) in the original principal amount of $13,978,495, which is convertible into shares of the Company’s common stock. The Senior Secured Convertible Note Financing initially closed on April 11, 2025. The gross proceeds to the Company from the Initial Senior Secured Convertible Note Financing, prior to the payment of legal fees and transaction expenses, was $13,000,000.
Previous wording
Note SPA, the Company may issue an additional senior secured convertible note to the Note Investor in the principal amount of $7,526,882 (for additional gross proceeds of $7,000,000). The Company intends to use the net proceeds from the Senior Secured Convertible Note Financing to repay existing debt and for working capital and general corporate purposes.
Current wording
Subject to the satisfaction of certain conditions contained in the Note SPA (including mutual agreement by the Company and the Senior Lender), the Company may issue additional senior secured convertible note to the Note Investor in the principal amount of $3,225,807 (for additional gross proceeds of $3,000,000).
Previous wording
Description of the Note
Current wording
Description of the Senior Secured Convertible Notes
Showing the first 40 of 52 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing
Rearranged previous paragraphs (11)
Previous report — wording carried elsewhere
*Hardware Revenue —*Hardware revenue is generated from the sale of our learning stations bundled with pre-loaded perpetual license software, accessories necessary for full use of our products, including stylus, eyewear (if needed) and
Previous report — wording carried elsewhere
Comparison of financial results for the nine months ended September 30, 2025 and 2024
Previous report — wording carried elsewhere
Total revenue decreased by $6.6 million, or 22%, for the nine months ended September 30, 2025 to $23.0 million as compared to $29.6 million forthe nine months ended September 30, 2024. This decrease in revenue was primarily attributable to lower hardware revenues and attributable to uncertainty in the Company’s K-12 end-user markets where funding sources have been disruptive, causing longer than usual sales cycles, and in some cases prompting customers to delay receipt of confirmed order bookings. Potential tariff volatility surcharges have also contributed to potentially elongated sales cycles as we communicate these pricing impacts to customers in revised quotes.
Previous report — wording carried elsewhere
Our key software retention metrics are as follows: (1) ACV as of September 30, 2025 decreased to $10.2 million as compared to September 30, 2024 of $11.3 million and (2) NDRR for the trailing twelve-month period ended September 30, 2025 was 77%, as compared to 102% for the trailing twelve-month period ended September 30, 2024.
Previous report — wording carried elsewhere
For the nine months ended September 30, 2025, interest expense decreased by $1.1 million, or 50%, to $1.1 million, from $2.2 million for the nine months ended September 30, 2024. The decrease in interest expense was attributable to the convertible loans converted into Common Stock as part of the IPO in December 2024 and a lower interest rate on the convertible debt entered into in April 2025 compared to the debt paid off with a portion of the proceeds from the convertible debt.
Previous report — wording carried elsewhere
Income tax expense for each of the nine months ended September 30, 2025 and 2024 was immaterial. We estimate an annual effective tax rate for the year ending December 31, 2025 of (0.09)% as we incurred losses for the nine months ended September 30, 2025 andexpect to continue to incur losses through the reminder of our fiscal year, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2025. The United States federal statutory rate is 21% while our effective tax rate for the years ended December 31, 2024 and 2023 was 0.1% and zero, respectively. No federal or state income taxes are expected outside of immaterial state tax payments.
Previous report — wording carried elsewhere
million, deferred revenue of $1.1 million, and accrued interest of $1.3 million partially offset by an increase in prepaid expenses and other assets of $0.3 million.
Previous report — wording carried elsewhere
During the nine months ended September 30, 2025, we incurred a net loss of $18.1 million and had Adjusted EBITDA of ($10.7) million and negative cash flows from operations of $14.0 million. For the years ended December 31, 2024 and 2023, we incurred net losses of $20.8 million and $13.0 million, respectively, and incurred negative cash flows from operations of $8.9 million and $6.4 million, respectively. We had combined cash and cash equivalents of $4.3 million and $4.9 million as of September 30, 2025 and December 31, 2024, respectively. We have incurred operating losses and negative cash flows from operations since inception. Our prospects are subject to risks, expenses and uncertainties frequently encountered by companies in the technology industry. These risks include, but are not limited to, the uncertainty of successfully developing our products, availability of additional financing, gaining customer acceptance and uncertainty
Previous report — wording carried elsewhere
On April 11, 2025, in connection with the Senior Secured Convertible Note Financing (as defined below), the Company entered into an amendment (the “Fiza 1 Amendment”) to that certain Loan and Security Agreement with Fiza dated November 3, 2022 (the “Fiza 1 Agreement”). Pursuant to the Fiza 1 Amendment, the maturity date of the Fiza 1 Agreement is extended to December 31, 2027. The Fiza 1 Amendment also amends the repayment schedule such that, beginning on the latter to occur of December 31, 2027 or the date in which there is no debt outstanding under the Senior Secured Convertible Note (the “Convertible Note Repayment Date”), the Company will repay all remaining principal and interest under the Fiza 1 Agreement over twelve equal monthly installments.
Previous report — wording carried elsewhere
The gross proceeds to the Company from the Senior Secured Convertible Note Financing, prior to the payment of legal fees and transaction expenses, was $13,000,000. Subject to the satisfaction of certain conditions contained in the
Previous report — wording carried elsewhere
In connection with a “Change of Control” (as defined in the Senior Secured Convertible Note), the Note Investor will have the right to require the Company to redeem all or any portion of the Note in cash at a price equal to 110% times the