CLOUDASTRUCTURE, INC.

This report should be read in conjunction with Part I – Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, as supplemented by the risk factors disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026. There have been no material changes in our risk factors from those previously disclosed, except as set forth below, which update and supersede the corresponding risk factors in our prior filings.

We have identified a material weakness in our internal control over financial reporting, which could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

As previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, and as further described in Part I, Item 4 of this report, we identified a material weakness in our internal control over financial reporting related to the accounting for complex equity-linked financial instruments. 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 our annual or interim financial statements will not be prevented or detected on a timely basis.

We are implementing remediation measures as described in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026. However, we cannot assure you that these measures will be sufficient to remediate the material weakness or prevent future material weaknesses. 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 we currently expect will not occur before December 31, 2026.

If we are unable to remediate the material weakness in a timely manner, or if we identify additional material weaknesses or significant deficiencies in our internal controls, our ability to produce timely and accurate financial statements may be impaired, which could adversely affect investor confidence, our stock price, and our ability to access the capital markets. The existence of a material weakness could also increase the risk that we may need to revise previously issued financial statements and could subject us to litigation or regulatory proceedings.

There is a risk that our Class A common stock may be delisted from Nasdaq, which would adversely affect the liquidity and market price of our Class A common stock and our ability to raise capital.

Our Class A common stock is listed on The Nasdaq Capital Market. To maintain our listing, we must satisfy certain continued listing requirements, including a minimum bid price of $1.00 per share under Nasdaq Listing Rule 5550(a)(2) and maintenance of a minimum Market Value of Listed Securities (“MVLS”) of at least $5 million under Nasdaq Listing Rule 5550(a)(6).

As previously disclosed, on February 17, 2026, we received a notification from The Nasdaq Stock Market LLC ("Nasdaq") that we were not in compliance with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). On July 31, 2026, we effected a 1-for-30 reverse stock split of our Class A common stock, which was intended to increase the per-share trading price of our Class A common stock to regain compliance with the minimum bid price requirement. On August 14, 2026, Nasdaq confirmed that we had regained compliance with Listing Rule 5550(a)(2) because the closing bid price of our Class A common stock was at $1.00 per share or greater for 10 consecutive business days from July 31 through August 13, 2026, and that the matter was closed. Although we have regained compliance with the minimum bid price requirement, there can be no assurance that we will maintain compliance on a sustained basis. If the closing bid price of our Class A common stock falls below $1.00 per share for 30 consecutive business days, Nasdaq would issue a new deficiency notice. A reverse stock split may not result in a stock price that is proportionate to the reduction in shares outstanding over the long term.

In addition, on July 22, 2026, the SEC approved Nasdaq’s proposed Listing Rule 5550(a)(6), which requires all companies listed on The Nasdaq Capital Market to maintain a minimum MVLS of at least $5 million on a continuous basis. MVLS is calculated as the consolidated closing bid price of a share multiplied by the number of shares listed on Nasdaq or another national securities exchange. Under the new rule, if a company’s MVLS falls below $5 million for 30 consecutive business days, Nasdaq will issue a Staff Delisting Determination and immediately suspend trading in the company’s securities and commence delisting proceedings. Unlike other continued listing deficiencies, there is no cure or compliance period to regain the $5 million MVLS level, a request for a Hearings Panel review does not automatically stay the suspension of trading, and the Hearings Panel’s authority to grant relief is limited. On August 6, 2026, the SEC stayed the approval order pending further review of the rule; accordingly, as of the date of this report, the MVLS requirement has not yet taken effect. However, if the SEC lifts the stay and the rule becomes operative, the Company’s ability to maintain compliance with the MVLS requirement would depend on its stock price and the number of shares listed on Nasdaq. As of June 30, 2026, the Company’s estimated MVLS was approximately $5.7 million. Following the 1-for-30 reverse stock split effected July 31, 2026, the number of listed shares was reduced to approximately 833,075, and the Company’s MVLS will be directly affected by the post-split trading price of our Class A common stock. If the MVLS rule becomes operative, even a modest decline in our stock price could cause our MVLS to fall below the $5 million threshold, triggering immediate suspension and delisting proceedings without any opportunity to cure.

If our Class A common stock were to be delisted from Nasdaq, trading in our shares would likely be conducted in the over-the-counter market, which typically involves less liquidity, wider bid-ask spreads, and reduced analyst coverage. A delisting would also likely trigger events of default or trigger events under our outstanding Exchange Note (see Notes 5 and 9 to the financial statements), impair our ability to raise capital through equity or debt financings (including pursuant to our existing Equity Line and ATM Facility), adversely affect the market price of our Class A common stock, and reduce investor confidence.

In addition, on June 30, 2026, the Company issued the Exchange Note to Streeterville in the original principal amount of $1,299,870. The Exchange Note contains events of default that include, among other things, the delisting of our Class A common stock from Nasdaq. If a delisting were to occur, Streeterville could accelerate the Exchange Note, and the outstanding balance would automatically increase by 10%. As of the date of this report, Streeterville has exercised its first monthly redemption right, reducing the outstanding principal balance to approximately $1,191,538 plus accrued interest. The monthly redemption rights of up to $108,332.50 (plus accrued interest) per calendar month will require the Company to make cash payments or issue shares of Class A common stock to Streeterville, which could be dilutive to existing stockholders, particularly if our stock price declines. These obligations, combined with the Company’s limited cash resources, create additional liquidity risk.