CLOUDASTRUCTURE, INC.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated, as of the end of the period covered by this Report, the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2026, due to the material weakness in internal control over financial reporting described below.

Material Weakness in Internal Control over Financial Reporting

In connection with the preparation of these condensed consolidated interim financial statements, management identified a material weakness in the Company's internal control over financial reporting relating to the accounting for complex equity-linked financial instruments. Specifically, the Company did not maintain sufficient technical accounting resources with the expertise necessary to evaluate the classification of embedded features under ASC 815-15, the indexation criteria under ASC 815-40-15, and the mezzanine classification requirements under ASC 480-10-S99-3A. As a result, the Company failed to bifurcate the embedded conversion feature of its Preferred Stock as a derivative liability and failed to classify the host instrument in temporary equity (mezzanine) from the instrument's inception in January 2025. The errors, which were identified by the Company during the preparation of this Report, persisted across four quarterly and one annual reporting period without detection by any management control.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The structural nature of the deficiency, arising from the absence of qualified technical accounting resources rather than a one-time process failure, creates a reasonable possibility that a material misstatement could result from similar instruments in the future. Management has concluded that this deficiency constitutes a material weakness.

Remediation Plan

Management, under the oversight of the Audit Committee of the Board of Directors, has designed and is implementing a remediation plan to address the material weakness described above. The plan is intended to address the root cause of the deficiency, specifically, the absence of sufficient qualified technical accounting resources capable of evaluating complex equity-linked instruments under applicable accounting standards. The remediation plan includes the following actions:

Process and Control Design

Governance and Oversight

The material weakness will not be considered remediated until the applicable remedial controls have operated for a sufficient period of time and management has concluded that these controls are operating effectively, which management expects will require operation through at least two consecutive quarterly reporting cycles. Management currently anticipates that the material weakness will be remediated no earlier than December 31, 2026. There can be no assurance these remediation measures will be successful or that additional actions will not be required.

Changes in Internal Control over Financial Reporting

Other than the remediation measure described above, there have been no changes in our internal control over financial reporting during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.