zSpace, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2026

Description of Business

zSpace, Inc. (“zSpace” or the “Company”) was incorporated in the state of Delaware in 2006 and is headquartered in San Jose, California with wholly owned subsidiaries in China and Japan. The Company is the developer of full-service augmented reality/virtual reality (“AR/VR”) solutions built for K-12 education and career technical education. zSpace’s primary product is a mixed reality hardware device that provides an immersive, collaborative, and interactive learning experience. zSpace generates revenues via hardware sales in addition to recurring software revenue for access to zSpace interactive learning applications. The Company’s customer base includes federal, state, and local governments who are making large investments in education technology.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and include the assets, liabilities, results of operations and cash flows of the Company.

The Company has prepared its unaudited condensed consolidated financial statements in accordance with GAAP in the United States of America (“GAAP”) and the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information or note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and notes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on March 30, 2026.

All intercompany accounts and transactions have been eliminated in consolidation.

Liquidity Risk and Going Concern

For the three months ended March 31, 2026, the Company incurred a net loss of approximately $6.6 million. For the three months ended March 31, 2025, the Company incurred a net loss of $5.8 million. For the three months ended March 31, 2026 and 2025, the Company incurred negative cash flows from operations of $3.0 million and $4.6 million, respectively. The Company had combined cash, cash equivalents and restricted cash balance of $2.9 million and $1.0 million as of March 31, 2026 and December 31, 2025, respectively. The Company has incurred operating losses and negative cash flows from operations since inception. The Company’s 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 its products, availability of additional financing, gaining customer acceptance, and uncertainty of achieving future profitability. The Company’s success depends on obtaining additional financing, increasing sales, expanding its partnerships with resellers, controlling costs, and continued research and development activities to improve product offerings to end-users. The Company has historically funded its operations through the issuance of common and preferred stock to private investors (Note 6 – Stockholders’ Deficit), the proceeds of its Initial Public Offering (the “IPO”) in December 2024 and debt financing (Note 5 – Debt and Related Party Debt). The Company

evaluated its financial condition as of the date of issuance and determined it is probable that, without consideration of a remediation plan to refinance existing debt facilities and raise new sources of capital, the Company would be unable to meet repayment obligations and the ongoing working capital shortfall in the next twelve months, and there is uncertainty about the Company’s ability to continue as a going concern. The conditions identified above raise substantial doubt about the Company’s ability to continue as a going concern for at least twelve months from the issuance date of the condensed consolidated financial statements.

The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business and does not include any adjustments to reflect the outcome of this uncertainty.

Foreign Operations

Operations outside the United States include subsidiaries in China and Japan. Foreign operations are subject to risks inherent in operating under different legal systems and various political and economic environments. Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of Accumulated Other Comprehensive Income. Income and expense accounts are translated at average exchange rates during the periods presented.

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements are disclosed in the notes to the consolidated financial statements for the fiscal year ended December 31, 2025 and have not changed significantly since those consolidated financial statements were issued.

Cash, Cash Equivalents, and Restricted Cash

The Company considers cash on hand, deposits in banks, and investments with original maturities of three months or less, such as the Company’s money market funds, to be cash and cash equivalents.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the condensed consolidated balance sheet as of March 31, 2026 and December 31, 2025, to the amounts reported on the condensed consolidated statement of cash flows (in thousands):

The restricted cash is legally restricted to secure credit card charges incurred by the Company.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are customer obligations due under normal trade terms. Expected credit losses include losses expected based on known credit issues with specific customers as well as a general expected credit loss allowance based on relevant information, including historical loss rates, current conditions, and reasonable economic forecasts that affect collectability. The Company updates its allowance for credit losses on a quarterly basis with changes in the allowance recognized in loss from operations. The Company reserves for any accounts receivable balances that are determined to be uncollectible in the allowance for credit losses.

After all attempts to collect accounts receivable balances have failed, the balance is written off against the allowance for credit losses. As of March 31, 2026 and December 31, 2025, the Company reported an allowance for credit losses balance of $0.1 million.

Series P Preferred Stock Liability

In accordance with ASC 480-10-25-14, the Company determined that the Series P Preferred Stock should be classified as a liability and recorded at fair value as a non-current liability as of March 31, 2026 on the condensed consolidated balance sheet. This classification reflects the embedded obligation to issue a variable number of common shares upon automatic conversion, based predominantly on a measure other than the fair value of the Company’s equity shares (the lower of the Conversion Price or 80% of the 90-Day VWAP of the Company’s common stock).

The Series P Preferred Stock is measured at fair value at each reporting date, with changes in fair value recognized in earnings. The fair value measurement incorporates the present value of all contractual cash flows, including accrued PIK dividends at the 18% stated rate through the Required Conversion date. No separate dividend accrual is recognized.

Fair Value of Financial Instruments

The carrying amounts of cash, cash equivalents, and restricted cash, accounts receivable, accrued liabilities, and accounts payable approximate fair value due to their relatively short-term maturities and are classified as short-term assets and liabilities in the accompanying balance sheets. The following table represents the fair value hierarchy for the financial assets and liabilities held by the Company measured at fair value on a recurring basis (in thousands):

The following table presents the roll-forward of the Series P Preferred Stock liability balance for the three months ended March 31, 2026 (in thousands):

The Company measures its convertible debt at fair value on a quarterly basis. The fair value of the Company’s debt approximates book value as of March 31, 2026 utilizing a Monte Carlo simulation using observable market conditions for items such as interest free rates, discount rates and volatility assumptions. The fair value of the convertible debt has been categorized as a Level 2 item as of March 31, 2026.

The Company measures its Series P Preferred Stock liability at fair value on a quarterly basis. The fair value of the Company’s liability is calculated using a Probability Weighted Expected Return Method (“PWERM”) Model which included a Monte Carlo simulation of the share price and volume weighted average price at exit. The scenario probabilities for change in control, maturity expiration and dissolution assumptions are provided by management. The fair value of the convertible stock has been categorized as a Level 3 item as of March 31, 2026.

The significant inputs to the model were as follows:

During the three months ended March 31, 2026, there were no transfers of financial assets and liabilities between Levels 1, 2 or 3.

Revenue

The Company accounts for revenue in accordance with ASC Topic 606,Revenue from Contracts with Customers. The revenue recognition guidance provides a single model to determine when and how revenue is recognized. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company recognizes revenue using a five-step model resulting in revenue being recognized as performance obligations within a contract have been satisfied. The steps within that model include: (i) identifying the existence of a contract with a customer; (ii) identifying the performance obligations within the contract; (iii) determining the contract’s transaction price; (iv) allocating the transaction price to the contract’s performance obligations; and (v)recognizing revenue as the contract’s performance obligations are satisfied. Judgment is required to apply the principles-based, five-step model for revenue recognition. Management is required to make certain estimates and assumptions about the Company’s contracts with its customers, including, among others, the nature and extent of its performance obligations, its transaction price amounts and any allocations thereof, the events which constitute satisfaction of its performance obligations, and when control of any promised goods or services is transferred to its customers. The standard also requires certain incremental costs incurred to obtain or fulfill a contract to be deferred and amortized on a systematic basis consistent with the transfer of goods or services to the customer.

The Company assesses the goods and/or services promised in each customer contract and separately identifies a performance obligation for each promise to transfer to the customer a distinct good or service. The Company then allocates the transaction price to each performance obligation in the contract using relative Standalone Selling Price (“SSP”). The Company determines standalone selling prices based on the price at which a good or service is sold separately. If the standalone selling price is not observable through historic data, the Company estimates the standalone selling price by considering the cost-plus margin approach, along with all reasonably available information, including peer-company selling information while taking into consideration market conditions and other factors, such as customer size, volume purchased, market and industry conditions, product specific factors and historical sales of the deliverables.

The Company sells proprietary augmented reality and virtual reality hardware, software, and related installation and training services to education customers. The Company has contractual agreements with customers that set forth the general terms and conditions of the relationship, including pricing of goods and services, payment terms and contract duration. Revenue is recognized when the obligation under the terms of the Company’s contract with its customer is satisfied and is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

The Company offers standard warranty coverage on substantially all products which provides the customer with assurance that the product will function as intended during the first year. This standard warranty coverage is accounted for as an assurance warranty and is not considered to be a separate performance obligation. Returns and repairs under the Company’s general assurance warranty of products have not been material.

Payment is generally due within 30 days of invoice issuance. The Company uses the practical expedient and does not recognize a significant financing component for payment considerations of less than one year.

Hardware: Hardware sales represent separate performance obligations, all of which are satisfied at a point in time when the hardware is delivered to the customer, which is typically FOB shipping point.

Software: Software sales consist of licenses of functional intellectual property that are satisfied at a point in time when key codes are provided to allow customers to access the software, which is the contract start date.

In transactions where the Company provides user-based based software licenses to a customer, zSpace recognizes software revenue ratably on a straight-line basis. These fees charged to its customers are recognized on a gross basis as zSpace has determined that it is the principal in the transaction. As a principal to the transaction, the Company obtains control of the third-party software licenses before control is transferred to the customer. The fees paid to third parties for software licenses are recognized as transaction expenses and recorded in cost of goods sold in the condensed consolidated statements of operations and comprehensive (loss) income.

Services: The Company offers installation and/or training services for its products, both of which are separate performance obligations and typically are satisfied within a short period of time, often less than one month. Additionally, the Company offersone-andtwo-year extended warranty contracts that customers can purchase at their option, which are also separate performance obligations. All warranty-related performance obligations are generally fulfilled evenly throughout the contract term. Services also includes post-contract support (“PCS”) which is akin to a stand-ready performance obligation that is provided throughout the contract term. For all services related performance obligations, the Company believes that the passage of time corresponds directly to the satisfaction of the performance obligations; therefore, an output method of measuring progress based on time elapsed during the contract period is used to recognize revenue ratably on a straight-line basis.

Contract Liabilities: The Company typically bills in advance of providing goods and services, including for installation and training services, PCS, and extended warranties, resulting in contract liabilities (i.e., deferred revenue). Contract liabilities are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations.

Contract Costs: The Company incurs incremental contract commission costs to obtain contracts with customers which are expected to be recoverable through the term of those contracts. The Company allocates contract costs among the underlying performance obligations to which they relate and amortizes those costs on a systematic basis consistent with the pattern of the transfer of the goods and services. Contract cost assets are typically completely amortized soon after initial recognition as the majority of the Company’s revenue on the underlying performance obligations is recognized upon delivery of the goods or services.

Cost of Goods Sold

The Company includes within cost of goods sold those costs related to the manufacture and distribution of its AR/VR products, as well as the cost to purchase third-party software. Specifically, the Company includes in cost of goods sold

each of the following: material costs, labor and employee benefit costs related to the manufacture of our products, and freight and shipping costs. Costs are expensed as incurred, or as control of products is transferred, except for costs incurred to fulfill a contract, which are capitalized and amortized on a straight-line basis over the expected period of performance. The Company does not incur significant incremental costs to acquire contracts.

New Accounting Pronouncements

As of March 31, 2026 there are no new accounting pronouncements affecting the Company other than those discussed in the financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 30, 2026.

Disaggregation of Revenue

The Company earns revenue through the sale of products and services. Product and service revenue are the disaggregation of revenue primarily used by management, as this disaggregation allows for the evaluation of market trends and certain product lines and services vary in renewing versus non-renewing nature.

The following table disaggregates revenue by recognition method for the three months ended March 31, 2026 and 2025 (in thousands):

The following table disaggregates revenue by type of products and services for the three months ended March 31, 2026 and 2025 (in thousands):

The following table disaggregates revenue by geographic area for the three months ended March 31, 2026 and 2025 (in thousands):

The amount of deferred revenue as of March 31, 2026 and December 31, 2025 reflects the revenue expected to be recognized in future periods related to remaining performance obligations as the Company collects payment in advance of satisfaction of performance obligations.

As of March 31, 2026 and December 31, 2025, the Company has $2.6 million and $2.2 million in deferred revenue. As of March 31, 2026 approximately $2.3 million of the balance is expected to be earned within the next 12 months and $0.3 million to be earned within the next 13 to 33 months.

As of December 31, 2025 approximately $1.9 million of the balance was expected to be earned within the next 12 months and $0.3 million to be earned within the next 13 to 24 months.

As of March 31, 2026 and December 31, 2025, the Company hadno contract assets.

Inventory, net

As of March 31, 2026 and December 31, 2025, inventory, net of reserve, consisted of the following (in thousands):

Prepaid and other current assets

Prepaid expenses and other current assets consisted of the following at March 31, 2026 and December 31, 2025 (in thousands):

Accrued expenses and other liabilities

Accrued expenses and other current liabilities consisted of the following at March 31, 2026 and December 31, 2025 (in thousands):

As of March 31, 2026 and December 31, 2025, debt and related party debt is comprised of the following (in thousands):

All issuance costs related to the convertible debt issued during the three months ended March 31, 2026 were expensed as incurred.

As of March 31, 2026, future principal payments for long-term debt, including the current portion, are summarized as follows (in thousands):

During the three months ended March 31, 2026 and 2025, the Company capitalized $31,000 and $30,500, respectively (rounded to thousands), of debt discount and issuance costs on term loans incurred.

Series P Preferred Stock

On January 27, 2026, the Company filed a Certificate of Designations of Series P Convertible Preferred Stock (the “Series P COD”) with the Secretary of State of the State of Delaware. The Series P COD established a new series of preferred stock designated as “Series P Convertible Preferred Stock” (the “Series P Preferred Stock”) and authorized the issuance of up to 5,000,000 shares of Series P Preferred Stock, par value $0.00001 per share. As of March 31, 2026,1,500,000 shares of Series P Preferred Stock issued and outstanding.

Each share of Series P Preferred Stock has a stated value of $2.00, subject to adjustment as set forth in the Series P COD (the “Stated Value”). Holders of Series P Preferred Stock are entitled to receive cumulative dividends at a rate of eighteen percent (18%) per annum, payable annually. Dividends accrue and compound annually and are payable solely in additional shares of Series P Preferred Stock.

In the event of any liquidation, dissolution, or winding-up of the Company, or a Change of Control Transaction (as defined in the Series P COD), holders of Series P Preferred Stock are entitled to receive, prior to any distribution to holders of junior securities, an amount per share equal to the Stated Value plus any accrued and unpaid dividends.

The Series P Preferred Stock votes together with the Company’s common stock on an as-converted basis. Additionally, as long as any shares of Series P Preferred Stock remain outstanding, the Company cannot take certain actions without the affirmative vote of the holders of a majority of the outstanding Series P Preferred Stock. These actions include, among others: (a) adversely altering the rights of the Series P Preferred Stock; (b) creating any class of stock senior to or pari passu with the Series P Preferred Stock; or (c) amending the Company’s Certificate of Incorporation in a manner that adversely affects the holders.

Beginning on the third anniversary of the Original Issue Date (as defined in the Series P COD), holders may opt to convert their shares of Series P Preferred Stock into shares of common stock. The conversion rate is determined by dividing the Stated Value (plus accrued unpaid dividends) by the “Conversion Price.” The initial “Conversion Price” was the Stated Value ($2.00) and is subject to adjustment for stock splits, reverse stock splits, stock dividends, and similar events. In connection with the reverse stock split of the Company’s common stock effective April 20, 2026, the Conversion Price was proportionately adjusted from $2.00 to $50.00 in accordance with Section 5(c) of the Series P COD. All outstanding shares of Series P Preferred Stock will automatically convert into shares of common stock on the fifth anniversary of the Original Issue Date. For the automatic conversion occurring on the fifth anniversary of the Original Issue Date, the conversion rate is the lower of (y) the Conversion Price and (z) 80% of the 90-Day VWAP of the Company’s common stock. As a result of the Reverse Stock Split on April 20, 2026, the Series P Preferred Stock is convertible into 60,000 shares of common stock, subject to future adjustments.

The Series P Preferred Stock may not be converted if such conversion would result in the holder (together with its affiliates) beneficially owning in excess of 4.99% of the Company’s outstanding common stock. A holder may increase or decrease this limitation upon notice to the Company, up to a maximum of 9.99%, provided that any increase will not be effective until the 61st day after such notice. The Company is prohibited from issuing shares of common stock upon conversion of the Series P Preferred Stock if such issuance would breach the Company’s obligations under the rules of Nasdaq, unless shareholder approval is obtained.

Classification and Measurement

In accordance with ASC 480-10-25-14, the Company determined that the Series P Preferred Stock should be classified as a liability and recorded at fair value as a non-current liability as of March 31, 2026 on the condensed consolidated balance sheet. This classification reflects the embedded obligation to issue a variable number of common shares upon automatic conversion, based predominantly on a measure other than the fair value of the Company’s equity shares (the lower of the Conversion Price or 80% of the 90-Day VWAP of the Company’s common stock).

The Series P Preferred Stock is measured at fair value at each reporting date, with changes in fair value recognized in earnings. The fair value measurement incorporates the present value of all contractual cash flows, including accrued PIK dividends at the 18% stated rate through the Required Conversion date. No separate dividend accrual is recognized.

In accordance with ASC 480-10-25-14, the Company determined that the changes in fair value of the Series P Preferred Stock liability during the periods presented were primarily attributable to changes in the price of the Company’s common stock and the discount rate used in the valuation model, rather than changes in the Company's own credit risk. Accordingly, the change in fair value was recognized in consolidated net loss rather than other comprehensive income (loss). The net impact for the three months ended March 31, 2026 and 2025, was a gain of approximately $0.4 million and $0, respectively.

Term Debt

Fiza Amendment

The Company hasthree 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 Senior Secured Convertible Note Financing, 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 Initial Senior Secured Convertible Note (as defined below). 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.

On March 22, 2026, the Company and Fiza entered into an Amendment No. 4 (the “Fiza Amendment”) to Loan and Security Agreement dated July 11, 2024 (as amended, the “Fiza Loan Agreement”). Pursuant to the Fiza Amendment, the parties agreed to a moratorium on the payment of interest by the Company pursuant to the Fiza Loan Agreement until December 31, 2026 (the “Moratorium Period”). During the Moratorium Period, interest will continue to accrue on the outstanding principal balance at the applicable interest rate and will be deferred and capitalized (added to the outstanding principal balance) on each corresponding accrual date. Following the Moratorium Period, the Company shall continue monthly interest-only payments to Fiza pursuant to the terms of the Fiza Loan Agreement.

Itria Refinancing

On March 19, 2026, the Company, entered into a new Loan and Security Agreement the (“New Loan Agreement”) with Itria Ventures LLC (the “Lender”) in connection with the refinancing of all of its outstanding debt with the Lender. 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 thetwo existing Loan and Security Agreements with the Lender dated August 20, 2025, which hadoriginal principal amounts of $1,000,000 each. In connection with this refinancing, the Company, the Lender, and the Company’s existing Senior Lender, entered into an amended intercreditor agreement (the “Intercreditor Agreement”) to maintain the subordinated status of the New Loan, pursuant to which, among other things, Itria subordinated its security interest in the assets of the Company to the security interest of the Senior Lender and agreed to certain covenants limiting its ability to declare an event of default under the New Loan Agreement.

The Company may prepay the New Loan 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 New Loan is prepaid within the first 12 months of the term. The New Loan is secured by a second priority lien on substantially all of the Company’s assets and is guaranteed by the Company’s two wholly owned subsidiaries -- zSpace Technologies (Shanghai) Ltd. and zSpace K.K. The New Loan Agreement contains standard representations, warranties and affirmative covenants, including relating to use of proceeds and information rights.

In addition, the New Loan Agreement contains certain customary negative covenants, including that the Company may not incur additional indebtedness other than certain permitted indebtedness. The New Loan Agreement also contains customary events of default, including, but not limited to, upon non-payment, the occurrence of material adverse changes to the Company’s business, or bankruptcy. Upon the occurrence of an event of default, the applicable interest rate would increase by five percentage points and the Lender may declare the outstanding principal and accrued interest immediately due and payable.

Additional Senior Secured Convertible Note Financing

On March 16, 2026, the Company entered into an amendment (the “Amendment”) to the Securities Purchase Agreement dated April 11, 2025 (the “Note SPA”) providing for, among other things, multiple closings pursuant to the Note SPA, rather than a total of two closings (collectively, the “Senior Secured Convertible Note Financing”).

In addition, the Company and the investor (the “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”). 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.

The Additional Senior Secured Convertible Note is substantially similar to the form of the original Senior Secured Convertible Note issued by the Company on April 11, 2025 to the Senior Lender in the principal amount of $13,978,495 (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.

Conversion of Principal and Interest amounts into Common Stock

During the three months ended March 31, 2026, the Company reduced its obligations under the Initial Senior Secured Convertible Note by $1.8 million through the conversion of principal and interest into 278,374 shares of common stock at conversion prices ranging between $3.00 per share to $15.00 per share.

In accordance with ASC 825-10-45-5, the Company determined that the changes in fair value of the Note during the periods presented were primarily attributable to changes in market interest rates and the discount rate used in the valuation model, rather than changes in the Company's own credit risk. Accordingly, the change in fair value was recognized in net income rather than other comprehensive income. The net impact for the three months ended March 31, 2026 and 2025, was a loss of approximately $2.6 million and $0, respectively.

The Company has shares reserved and available for future issuance of common stock as follows as of the periods indicated:

Reverse Stock Split

On March 13, 2026, stockholders of the Company, holding shares of outstanding common stock of the Company, took action by written consent and without a meeting pursuant to Section 228 of the Delaware General Corporation Law and the Company’s Amended and Restated Certificate of Incorporation and Bylaws (the “Written Consent”). The Written Consent: (i) authorized the Company’s board of directors to effect a reverse split of the Company’s issued and outstanding Common Stock (the “Reverse Stock Split”) in a ratio of no less than 1-for-15 and no more than 1-for-25 (the “Range”); (ii) authorized the Board of Directors of the Company to determine whether or not to effect a reverse stock split and to determine the exact ratio of a reverse stock split within the Range, each as determined by the Board of Directors in its discretion at any time prior to March 23, 2027; and (iii) approved the form of amendment to the Amended and Restated Certificate of Incorporation effecting a reverse stock split and the subsequent filing thereof with the Secretary of State of the State of Delaware.

On April 16, 2026, the Company filed a Certificate of Amendment (the “Certificate of Amendment”) to the Company’s Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of its issued common stock, par value$0.00001 per share (“common stock”), in the ratio of 1-for-25 (the “Reverse Stock Split”), to be effective at 11:59 p.m., eastern time, on April 20, 2026. As of the effective time of the Reverse Stock Split, every 25 issued and outstanding shares of the Company’s common stock was automatically reclassified intoone issued and outstanding share of the Company’s common stock, with any fractional shares being rounded up to the next whole share. Proportionate adjustments were made to the number of shares of common stock underlying the Company’s outstanding equity awards, warrants, the number of shares issuable under its equity incentive plans and other existing agreements, as well as the exercise or conversion price, as applicable.

All references to common stock, restricted stock units, warrants, preferred stock, and options to purchase common stock share data, per share data and related information contained in the unaudited condensed consolidated financial statements and the accompanying notes have been retroactively adjusted to reflect the effect of the Reverse Stock Split.

Equity incentive plans

As of March 31, 2026, the Company had adopted three equity incentive plans in 2007 (the “2007 Plan”), 2017 (the “2017 Plan”) and 2024 (the “2024 Plan, and together with the 2007 Plan and the 2017 Plan, the “Stock Plans”) to provide for the grant of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units and other stock or cash-based awards to our directors, employees, non-employee directors and service providers. Equity awards are granted with an exercise price per share equal to at least the estimated fair value of the underlying common stock on the date of grant. The vesting period is determined through individual award agreements. Awards generally expire 10 years from the date of grant.

As of March 31, 2026, a total of 347,695 shares were authorized for issuance under the Stock Plans. As of March 31, 2026,300,760 shares have been granted or issued under the Stock Plans, leaving 46,935 shares available for future awards. As of December 31, 2025, there were 239,208 shares granted under the 2007 Plan and the 2017 Plan. The shares available for issuance under the 2024 Plan may consist, in whole or in part, of authorized and unissued shares or reacquired shares. Shares from the 2024 Plan which are forfeited due to employee termination or expiration are returned to the share pool. Similarly, shares from the 2024 Plan which are withheld upon exercise to provide for the exercise price and/or taxes due and shares repurchased by the Company are also returned to the pool.

Since December 6, 2024, we have not granted and do not intend to grant any further awards under the 2007 Plan or the 2017 Plan.

Time-Based Restricted Stock

Time-based restricted stock units (RSUs) granted to employees under the 2024 Plan typically vest overone tothree years and are subject to forfeiture if employment terminates prior to the vesting or lapse of restrictions, as applicable. RSUs are not considered outstanding Common Stock until they vest. The value of RSUs is determined by the stock price on the grant date.

The following table summarizes the activity related to RSUs subject to time-based vesting requirements for the three months ended March 31, 2026:

As of March 31, 2026, total unrecognized stock-based compensation cost for RSUs was approximately $7.3 million which is expected to be recognized on a straight-line basis over a weighted average period of 1.4 years. The intrinsic value of RSUs as of March 31, 2026 was$0.1 million.

Determination of fair value of stock options

As of March 31, 2026 and December 31, 2025, the Company had approximately 0.2 million options outstanding under the 2007 Plan and the 2017 Plan. As of March 31, 2026 and December 31, 2025, all options outstanding were granted solely with time-based vesting requirements.

A summary of the Company’s stock option plan and the changes during the period ended March 31, 2026 is presented below:

(1) The Company’s closing stock price as of March 31, 2026 is $2.85 per share. As all outstanding options have an exercise price greater than the closing price, there does not exist any intrinsic value as of March 31, 2026.

As of March 31, 2026, there was no significant unrecognized stock-based compensation cost for stock options granted.

Stock-based compensation included in the condensed consolidated statements of operations was as follows:

The Company estimates an annual effective tax rate of (0.07)% for the year ending December 31, 2026 as the Company incurred losses for the three months ended March 31, 2026 and expects to continue to incur losses through the remainder of the fiscal year ending December 31, 2026, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2026. Therefore, no federal or state income taxes are expected outside of state minimum tax payments. The effective rate during this period includes income tax benefits and exclusions associated with convertible debt interest and changes in valuation allowances related to future deductible temporary differences.

Due to the Company’s history of losses since inception, there is not enough evidence at this time to support that the Company will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company does not currently believe that realization of its deferred tax assets is more likely than not. As of March 31, 2026, the Company hasno uncertain tax positions that require the establishment of a reserve.

Net loss per common share (“EPS”) is presented for both Basic EPS and Diluted EPS. Basic EPS is based on the weighted-average number of common shares outstanding during the period. Diluted EPS is based on the weighted-average number of common shares and common shares equivalents outstanding during the period. Diluted shares outstanding includes the dilutive effect of in-the-money options and convertible securities. The dilutive effect of such equity awards is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options and the amount of compensation cost for future service that has not yet been recognized are collectively assumed to be used to repurchase shares. Diluted EPS for

convertible securities is calculated using the ‘if-converted’ method, assuming all convertible securities outstanding during the period were converted into common stock at the beginning of the reporting period, resulting in an adjustment to both the numerator net loss and denominator (weighted average shares outstanding) to reflect the potential dilution from such conversions.

When an entity has a loss from operations, including potential shares in the denominator of diluted per share computations will generally be anti-dilutive, even if the entity has net income after adjusting for discontinued operations. That is, including potential shares in the denominator of the earnings per share calculation for a loss-making entity will generally decrease the loss per share and, therefore, those shares should be excluded from calculations of diluted earnings per share.

In computing the net loss available to common shareholders, adjustments to the carrying value of preferred shares as a result of a modification accounted for as an extinguishment during a period should be subtracted or added to the net loss in arriving at the net loss available to common shareholders.

The following data show the amounts used in computing EPS and the effect on income and the weighted average number of shares for the three months ended March 31, 2026 and 2025:

For the three months ended March 31, 2026 and 2025, the following items have been excluded from the computation of diluted net loss per share because the effect of including these would have been anti-dilutive:

Gulf Islamic Investments Holding, LLC (“GII”)

In connection with the hiring in 2023 of the Company’s Chief Financial Officer, Erick DeOliveira, the Company has expensed and accrued $0.2 million as of March 31, 2026 with a related party, GII, for recruitment fees paid on the Company’s behalf by GII.

Litigation

From time to time, the Company may be involved in lawsuits, claims, investigations, and proceedings consisting of intellectual property, commercial, employment, and other matters, which arise in the ordinary course of business. In accordance with ASC Topic 450,Contingencies, the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

On May 16, 2022, we entered into a merger agreement (the “EdtechX Merger Agreement”) with EdtechX Holdings Acquisition Corp II (“EdtechX”), a Special Purpose Acquisition Company (“SPAC”). The Original Merger Agreement with EdtechX was terminated on June 21, 2023. On July 12, 2024, EdtechX filed a complaint in the Superior Court of the State of Delaware in connection with the termination of the EdtechX Merger Agreement, claiming breaches of contract and the implied covenant of good faith and fair dealing. A trial date has been set for January 20, 2027. The Company believes this lawsuit is without merit and intends to vigorously defend itself against these allegations. The Company has not accrued any amount related to this matter based on the belief that the amount of liability is not currently probable or estimable.

On February 9, 2026, Jiangxi Kmax Industrial Co., Ltd. (“KMax”) filed a complaint against zSpace in the United States District Court for the Northern District of California. The complaint arises from a Software Resale License Agreement, dated July 24, 2019, and alleges breach of contract related to unpaid revenue share invoices totaling $557,940 plus interest. The Company has responded denying the allegations and asserting counterclaims based on breach of contract (confidentiality and IP related provisions) and trade secret theft. Plaintiff’s answer is due June 10, 2026. The Company has recorded an account payable of $0.6 million as of March 31, 2026 and December 31, 2025 in connection with this matter.

On March 11, 2026, Kmax filed a second complaint against the Company and certain of its current and former officers in the U.S. District Court for the Southern District of New York. The complaint alleged violations of federal securities laws as well as various state common law claims. The allegations arose from Kmax's $15 million investment in the Company’s pre-IPO private placement financings between 2017 and 2019. Kmax sought compensatory and rescissory damages, interest, and costs. In May 2026, Kmax filed a Notice of Voluntary Dismissal pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i), voluntarily dismissing this matter. As of the date of this filing, no further proceedings remain pending with respect to this matter, and the Company has not accrued any amount related thereto.

Purchase Obligations

The Company has agreements with hardware suppliers to purchase inventory. As of March 31, 2026, the Company had $16.2 million in purchase obligations outstanding.

**12.**MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

For the three months ended March 31, 2026 and 2025, there wereno individual customers which represented 10% or more of the Company’s total revenue.

As of March 31, 2026, one customer accounted for approximately 12% of the Company’s accounts receivable. As of December 31, 2025, one customer accounted for approximately 11% of the Company’s accounts receivable.

The Company maintains a qualified 401(k) plan (the “401(k) Plan”) which allows participants to defer from 0% to 100% of cash compensation. The 401(k) Plan allows employees to contribute on a pretax and after-tax basis to a Traditional and Roth 401(k). The 401(k) Plan allows employees who meet the age requirements and reach the 401(k) Plan contribution limits to make catch-up contributions (which are eligible for matching contributions). Employee contributions are limited to a maximum annual amount as set periodically by the Internal Revenue Code. The Company matches pretax and Roth employee contributions up to $2,000 per participant annually and all matching contributions vest immediately. The matching contributions to the 401(k) Plan totaled approximately $0.1 million for both of the three months ended March 31, 2026 and 2025.

The Company’s chief operating decision maker is its chief executive officer who reviews financial information presented on a consolidated basis for the purposes of making operating decisions, assessing financial performance, and allocating resources. The Company’s chief operating decision maker reviews segment performance and allocates resources based upon revenues and expenses. As the Company has onlyone reportable segment, revenues and expenses are reported only on a consolidated basis. The measure of segment assets is reported in the balance sheet as total consolidated assets.

The following table presents selected financial information about revenues, expenses and net loss for the three months ended March 31, 2026 and 2025 for the Company’sone reportable segment:

Management has evaluated subsequent events and has determined that there were no subsequent events that required recognition or disclosure in the financial statements as of and for the period ended March 31, 2026, except as follows.

Settlement of trade payable balance

On April 13, 2026, the Company entered into an agreement to settle a vendor dispute related to an outstanding payable. Under the terms of the agreement, the Company agreed to a final payment of $0.1 million to settle a previously recorded liability of $0.7 million. The Company will record the $0.6 million difference in the unaudited condensed consolidated statement of operations for the three months ending June 30, 2026.