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 June 30, 2026, due to the material weakness in internal control over financial reporting described below.

Material Weakness

As previously reported in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, in connection with the preparation of the condensed consolidated interim financial statements for that quarter, 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 and separately account for embedded conversion features as derivative liabilities and incorrectly classified the preferred stock host instruments in permanent stockholders' equity rather than in temporary equity (mezzanine).

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.

Notwithstanding this material weakness, management has concluded that the condensed consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented, in conformity with U.S. generally accepted accounting principles.

Remediation

Management, under the oversight of the Audit Committee of the Board of Directors, is continuing to implement the remediation plan described in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 to address the material weakness. Additionally, as described in Note 5, on June 29, 2026, the Company amended and restated the terms of the Series 2 Convertible Preferred Stock to eliminate the contractual provisions that gave rise to the accounting classification errors, and believes the amended terms support permanent equity classification on a prospective basis. This action, while not itself a remediation of the control deficiency, eliminates the ongoing financial statement risk from the instrument.

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. Management continues to anticipate 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.