CLOUDASTRUCTURE, INC.

Previous wording

Our intelligent AI solution works by identifying objects (faces, license plates, animals, guns, etc.) in video footage so that property managers can quickly search for those objects. Additionally, our AI and Remote Guarding services provide a proactive response to crime. Remote Guarding combines video surveillance, AI analytics, monitoring centers, and security agents (“Remote Guarding”). Based on internal data comparing the total number of actual threatening activity alerts received by our Remote Guards, against all potentially suspicious and threatening activity alerts received by our Remote Guards, on average, from 2023 to the date of this report, our Remote Guarding services deterred over 97% of all threatening activity for our customers. We believe AI security delivers multiple benefits for many property owners, including, without limitation:

Current wording

Our intelligent AI solution works by identifying objects (faces, license plates, animals, guns, etc.) in video footage so that property managers can quickly search for those objects. Additionally, our AI and Remote Guarding services provide a proactive response to crime. Remote Guarding combines video surveillance, AI analytics, monitoring centers, and security agents (“Remote Guarding”). Based on internal data comparing the total number of actual threatening activity alerts received by our Remote Guards, against all potentially suspicious and threatening activity alerts received by our Remote Guards through the first six months of 2025, our Remote Guarding services deterred over 98% of all threatening activity for our customers. We believe AI security delivers multiple benefits for many property owners, including, without limitation:

Previous wording

Total revenue increased $501,148, or 212%, from $236,677 for the three months ended March 31, 2024 compared to $737,825 for the three months ended March 31, 2025. This increase is due to our having 38% more locations using our services during the three months ended March 31, 2025 compared to the same period in 2024. Cloud video surveillance subscriptions increased by 79%, remote guarding increased by 164%, hardware sales increased by 241%, and installation labor sales and other sales increased by 397% over the same period in 2024.

Current wording

Total revenue increased by $793,411, or 267%, from $296,777 for the three months ended June 30, 2024 compared to $1,090,188 for the three months ended June 30, 2025. This increase is due a 58% increase in the number of customers during the three months ended June 30, 2025 compared to the same period in 2024. Cloud video subscriptions increased by 133%, Remote Guarding increased by 151%, hardware sales increased by 863%, and installation labor sales and other sales increased by 167% over the same period in 2024.

Previous wording

Sales and marketing expenses increased by 56% for the three months ended March 31, 2025, compared to the sales and marketing expenses incurred during the three months ended March 31, 2024. This increase in sales and marketing expenses was due to an increase in payroll of $207,000 derived from a one-time bonus paid to employees to compensate for the salary reductions in 2024, and an increase of $105,000 in advertising and marketing expenses. These increases were partially offset by decreases in travel and entertainment expenses, equipment related expenses, and software related costs.

Current wording

Sales and marketing expenses increased by 43% for the three months ended June 30, 2025, compared to the sales and marketing expenses incurred during the three months ended June 30, 2024. This increase in sales and marketing expenses was due to an increase in payroll of $117,816 derived from new hires, an increase of $50,931 in consulting services, and a $39,781 increase in marketing expenses.

Previous wording

As a result of the foregoing, the Company had a net loss of $2.5 million for the three months ended March 31, 2025, compared to net loss of $1.7 million for the three months ended March 31, 2024, a loss increase of approximately 46% for the current period compared to the prior period. Gross profit increased by approximately 1,995%. Gross profit was $330,352 for the three months ended March 31, 2025. For the three months ended March 31, 2024, there was a negative gross profit of $16,555.

Current wording

As a result of the foregoing, the Company had a net loss of $2.0 million for the three months ended June 30, 2025, compared to net loss of $1.85 million for the three months ended June 30, 2024, a loss increase of approximately 9% for the current period compared to the prior period. Gross profit increased by approximately 273%. Gross profit was $402,698 for the three months ended June 30, 2025 and $108,192 for the three months ended June 30, 2024.

Previous wording

Our cost of goods sold increased $154,242, or 61%, from $253,232 for the three months ended March 31, 2024 compared to $407,473 for the three months ended March 31, 2025. This increase was the result of increased sales and completion of more installation projects in the three months ended March 31, 2025 compared to the same period in 2024, partially offset by a decrease of 30% in hosting and data center bandwidth costs, which decrease resulted from our movement of certain hosting services from a third party provider to a data center we operate. Going forward, we expect our hosting and data center bandwith costs to increase with our revenues. Remote guarding costs increased by 104%, hardware costs increased by 252%, and installation labor costs increased by 35% over the same period in 2024.

Current wording

Our cost of goods sold increased $652,083, or 148%, from $441,817 for the six months ended June 30, 2024 compared to $1,093,900 for the six months ended June 30, 2025. This increase was the result of increased sales and completion of more installation projects in the six months ended June 30, 2025 compared to the same period in 2024. Hosting and data center bandwidth costs decreased by 15%, which resulted from our movement of certain hosting services from a third-party provider to a data center we operate. Remote Guarding costs increased by 91%, hardware costs increased by 503%, and installation labor costs increased by 158% over the same period in 2024.

Previous wording

General and administrative expenses increased by 114% for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was primarily due to an increase of $323,000 in payroll derived from a one-time bonus paid to employees to compensate for the salary reductions in 2024, an increase of $87,250 in consulting services, and smaller increases in insurance costs, travel expenses and facility related expenses. Professional services decreased by $62,000.

Current wording

General and administrative expenses increased by 86% for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. This increase was primarily due to an increase of $541,908 in payroll derived from a one-time bonus paid to employees in 2025 to compensate for salary reductions in 2024, an increase of $65,786 in insurance costs (primarily D&O insurance rates being much higher for public companies compared to private companies), and an increase of $16,775 in audit and tax services incurred during the six months ended June 30, 2025 when compared to the same period in 2024.

Previous wording

Research and development (“R&D”) expenses increased by 71% for the three months ended March 31, 2025 compared to the same period in 2024. Payroll increased by $237,000 derived from a one-time bonus paid to employees to compensate for the salary reductions in 2024, and consulting services increased by $16,000.

Current wording

Research and development (“R&D”) expenses increased by 37% for the six months ended June 30, 2025 compared to the same period in 2024. This increase is due to an increase of $257,494 in payroll derived from a one-time bonus paid to employees in 2025 to compensate for salary reductions in 2024 and an increase of $10,252 in equipment purchases during the six months ended June 30, 2025 when compared to the same period in 2024.

Previous wording

Non-cash expenses increased by 60% for the three months ended March 31, 2025 compared to the same period for 2024. This increase is primarily due to an increase of $350,000 in stock option expense, partially offset by a decrease in bad debt expense of $106,000.

Current wording

Non-cash expenses increased by 23% for the six months ended June 30, 2025 compared to the same period for 2024. This increase is primarily due to an increase of $365,559 in stock option expense, partially offset by a decrease in bad debt expense of $130,585 during the six-month period ended June 30, 2025 compared to the same period in 2024.

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024.

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2025 and 2024:

Previous wording

Net cash used in operating activities for the three months ended March 31, 2025 was $2.5 million, which reflects our net loss of $2.5 million and increases in accounts receivable of $340,751, inventory of $16,638, prepaid expenses of $165,381, and deferred revenue of $76,654. Accounts payable decreased by $167,095, and the rest was offset by $627,106 of stock compensation expense and $14,538 of depreciation expense.

Current wording

Net cash used in operating activities for the six months ended June 30, 2025 was $4.3 million, which reflects our net loss of $4.6 million and increases in accounts receivable of $299,839, inventory of $136,867, prepaid expenses of $211,585, and deferred revenue of $164,845. Accounts payable decreased by $474,156, and the rest was offset by $1,183,120 of stock compensation expense and $32,202 of depreciation expense.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2025 was approximately $30,000, which was entirely attributable to purchases of fixed assets, primarily consisting of colocation equipment for our data center.

Current wording

Net cash used in investing activities for the six months ended June 30, 2025 was approximately $150,000, $143,000 attributable to colocation equipment for our Montana data center and $7,000 in computer equipment for some of our new employees.

Previous wording

Our net cash provided by financing activities for the three months ended March 31, 2025 was $9.4 million compared to approximately $0 for the same period in 2024. This increase in cash provided by financing activities is principally attributed to $10.8 million from the issuance of preferred shares, and $83,433 declared in preferred dividends, reduced by approximately $1.5 million in issuance costs.

Current wording

Our net cash provided by financing activities for the six months ended June 30, 2025 was $12.1 million compared to $0 for the same period in 2024. This increase in cash provided by financing activities is principally attributed to $13.7 million from the issuance of preferred shares and $285,000 declared in preferred dividends, reduced by approximately $1.9 million in issuance costs.

Previous wording

On January 29, 2025, we received gross proceeds of $6.3 million through the sale of shares of our Series 1 Convertible Preferred Stock, par value $0.0001 per share (the “Series 1 Preferred) and 720,000 shares of our Class A common stock to Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”), pursuant to the terms of a Securities Purchase Agreement we entered into with Streeterville on November 25, 2024, as subsequently amended (the “Series 1 Purchase Agreement”).

Current wording

On January 29, 2025, we received gross proceeds of $6.3 million through the sale of Series 1 Preferred shares and shares of our Class A common stock to Streeterville, pursuant to the terms of the Series 1 Equity Financing.

Previous wording

On March 25, 2025, we received gross proceeds of $4.5 million through the sale of shares of our Series 2 Convertible Preferred Stock, par value $0.0001 per share (the “Series 2 Preferred) to Streeterville, pursuant to the terms of a Securities Purchase Agreement we entered into with Streeterville on March 21, 2025 (the “Series 2 Purchase Agreement”).

Current wording

On March 25, 2025, and April 14, 2025, we received gross proceeds of $4.5 million and $3.0 million, respectively, through the sale of Series 2 Preferred shares to Streeterville pursuant to the terms of the Series 2 Equity Financing.

Previous wording

See Note 4 to the condensed unaudited financial statements included within this report for additional information regarding the Series 1 Purchase Agreement and the Series 2 Purchase Agreement.

Current wording

See Note 4 to the condensed unaudited financial statements included within this report for additional information regarding the Series 1 Equity Financing and the Series 2 Equity Financing.

Previous wording

As of March 31, 2025, we had approximately $6.9 million of cash on hand and approximately $6.8 million of working capital. We currently expect our current cash will be sufficient to fund operations through at least the first quarter of 2026; however, it is possible we will need additional funding during that period if we are unable to sustain or grow our current revenues or if our expenses increase more than currently anticipated. The Series 2 Purchase Agreement described above gives us the ability to sell additional shares of our Series 2 Preferred to Streeterville, subject to the satisfaction or waiver of several significant conditions set forth in such Series 2 Purchase Agreement. In addition, we have entered into an Equity Purchase Agreement with Atlas Sciences, LLC that gives us the ability to sell shares of our Class A common stock to Atlas Sciences, subject to the satisfaction or waiver of several significant conditions set forth in such Equity Purchase Agreement.

Current wording

As of June 30, 2025, we had approximately $7.7 million of cash on hand and approximately $7.8 million of working capital. We currently expect our current cash will be sufficient to fund operations through at least the second quarter of 2026; however, it is possible we will need additional funding during that period if we are unable to sustain or grow our current revenues or if our expenses increase more than currently anticipated. The Series 2 Equity Financing described above gives us the ability to sell additional shares of our Series 2 Preferred to Streeterville, subject to the satisfaction or waiver of several significant conditions set forth in such Series 2 Equity Financing. In addition, we have entered into an Equity Line with Atlas that gives us the ability to sell shares of our Class A common stock to Atlas, subject to the satisfaction or waiver of several significant conditions set forth in such Equity Line. See Note 4 to the condensed unaudited financial statements included within this report for additional information regarding the Series 2 Equity Financing and the Equity Line.

Previous wording

We currently anticipate that the Series 2 Purchase Agreement and/or the Equity Purchase Agreement will provide us the necessary funding to continue our operations for the next 12 months; however, our ability to sell additional shares of our capital stock pursuant to the Series 2 Purchase Agreement and/or the Equity Purchase Agreement is subject to a number of conditions, many of which are out of our control. As a result, there is no assurance that we will be able to sell additional shares of our capital stock pursuant to either the Series 2 Purchase Agreement and/or the Equity Purchase Agreement. In that case, it would be necessary for us to seek alternative debt or equity financing to fund our operations; however, such alternative financing may only be available at a price and on terms and conditions that would have a material adverse effect on our results of operations and financial condition or may not be available at all.

Current wording

We currently anticipate that the Series 2 Equity Financing and/or the Equity Line will provide us the necessary funding to continue our operations for the next 12 months; however, our ability to sell additional shares of our capital stock pursuant to the Series 2 Equity Financing and/or the Equity Line is subject to a number of conditions, many of which are out of our control. As a result, there is no assurance that we will be able to sell additional shares of our capital stock pursuant to either the Series 2 Equity Financing and/or the Equity Line. In that case, it would be necessary for us to seek alternative debt or equity financing to fund our operations; however, such alternative financing may only be available at a price and on terms and conditions that would have a material adverse effect on our results of operations and financial condition or may not be available at all.

Previous wording

The condensed unaudited financial statements included within this report have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is dependent on our ability to further implement our business plan, raise capital, and generate revenues. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. We have incurred operating losses and negative cash flows from operations since inception. As of March 31, 2025, we had an accumulated deficit of approximately $43.4 million. Management expects to continue to incur operating losses and negative cash flows for the foreseeable future.

Current wording

The condensed unaudited financial statements included within this report have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is dependent on our ability to further implement our business plan, raise capital, and generate revenues. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. We have incurred operating losses and negative cash flows from operations since inception. As of June 30, 2025, we had an accumulated deficit of approximately $45.4 million. Management expects to continue to incur operating losses and negative cash flows for the foreseeable future.