CLOUDASTRUCTURE, INC. 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-42494

CLOUDASTRUCTURE, INC.

(Exact name of registrant as specified in its charter)

Delaware		87-0690564
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

228 Hamilton Rd., Palo Alto, CA		94301
(Address of principal executive offices)		(Zip Code)

	(650) 644-4160
	(Registrant’s telephone number, including area code)

	NONE
	(Former name or former address, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
Class A Common Stock	CSAI	Nasdaq Capital Market

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ☐	Accelerated Filer ☐	Non-Accelerated Filer ☒	Smaller Reporting Company ☒
			Emerging Growth Company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with a new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


	Class		Outstanding as of July 31, 2025
	Class A Common Stock		17,891,370
	Class B Common Stock		147,305

CLOUDASTRUCTURE, INC.

TABLE OF CONTENTS

			Page No.

PART I.		FINANCIAL INFORMATION	3

	Item 1.	Financial Statements	3

		Condensed Unaudited Balance Sheets at June 30, 2025 and December 31, 2024	3

		Condensed Unaudited Statements of Operations for the Three and Six Months Ended June 30, 2025 and June 30, 2024	4

		Condensed Unaudited Statements of Shareholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2025 and June 30, 2024	5

		Condensed Unaudited Statements of Cash Flows for the Six Months Ended June 30, 2025 and June 30, 2024	7

		Notes to Unaudited Condensed Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26

	Item 4.	Controls and Procedures	26

PART II.		OTHER INFORMATION	27

	Item 1.	Legal Proceedings	27

	Item 1A.	Risk Factors	27

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

	Item 5.	Other Information	28

	Item 6.	Exhibits	28

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

CLOUDASTRUCTURE, INC.

Balance Sheets

(in thousands, except share and per share numbers)


	June 30,			December 31,
	(Unaudited)
	2025			2024
ASSETS
Current assets:
Cash and cash equivalents	$	7,733		$	52
Accounts receivable		496			196
Inventory		385			249
Other current assets		249			38
Total current assets		8,864			535

Non-current assets:
Fixed assets, net		198			80
Intangible assets, net		–			–

TOTAL ASSETS	$	9,062		$	615

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	154		$	629
Accrued expenses		–			–
Preferred dividends payable		194			–
Deferred revenue		654			489
Total current liabilities		1,002			1,118

TOTAL LIABILITIES		1,002			1,118

Stockholders’ equity:
Class A common stock, $0.0001 par value; 250,000,000 shares authorized; 17,441,920 and 14,020,543 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively		2			1
Class B common stock, $0.0001 par value; 100,000,000 shares authorized; 147,305 and 571,011 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively		–			–
Preferred Stock, $0.0001 par value; 150,000 shares authorized; 6,687 and 0 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively		–			–
Additional paid-in capital		53,478			40,351
Accumulated deficit		(45,420	)		(40,856	)
TOTAL STOCKHOLDERS’ EQUITY		8,060			(503	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	9,062		$	615

See accompanying notes to the financial statements.

CLOUDASTRUCTURE, INC.

Statement of Operations
(in thousands, except share and per share numbers)


	Three Months Ended June 30,						Six Months Ended June 30,
	(Unaudited)						(Unaudited)
	2025			2024			2025			2024

Revenues	$	1,090		$	297		$	1,828		$	533
Cost of goods sold		686			189			1,094			442
Gross profit (loss)		404			108			734			92

Operating expenses:
General and administrative		636			390			1,349			723
Research and development		379			365			985			719
Sales and marketing		728			506			1,540			1,026
Non-cash expenses		581			590			1,217			987
Total operating expenses		2,324			1,852			5,091			3,455

Loss from operations		(1,921	)		(1,743	)		(4,356	)		(3,363	)

Other income/(expenses), net:
Interest income		73			31			82			74
Preferred Dividends		(162	)		–			(285	)		–
State & sales taxes		(1	)		–			(4	)		(1	)
SEC settlements		–			(140	)		–			(279	)

Net loss	$	(2,011	)		(1,852	)	$	(4,564	)		(3,569	)

Basic and diluted (loss) per share of Class A and Class B common stock	$	(0.14	)	$	(0.13	)	$	(0.31	)	$	(0.26	)

See accompany notes to the financial statements.

CLOUDASTRUCTURE, INC.

Statements of Shareholders’ Equity (Deficit)
(in thousands, except share and per share numbers)


	Three Months Ended June 30, 2025
	(Unaudited)
	Common Stock, Class A				Common Stock, Class B					Preferred Stock					Additional Paid-in		Accumulated			Total Shareholders’ Equity
	Shares		Amount		Shares			Amount		Shares			Amount		Capital		Deficit			(Deficit)
Balance as of March 31, 2025		15,423,725	$	1		487,677		$	–		8,285		$	–	$	50,254	$	(43,410	)	$	6,846
Issuances of Class A, Class B, and Preferred shares, net of issuance costs		2,018,195		1		(340,372	)		–		(1,598	)		–		2,668		–			2,668
Stock-based compensation		–		–		–			–		–			–		556		–			556
Net loss		–		–		–			–		–			–		–		(2,011	)		(2,011	)
Balance as of June 30, 2025		17,441,920	$	2		147,305		$	0		6,687		$	–	$	53,478	$	(45,420	)	$	8,060

See accompanying notes to the financial statements.


	Three Months Ended June 30, 2024
	(Unaudited)
	Common Stock, Class A					Common Stock, Class B				Additional Paid-in			Accumulated			Total Shareholders’ Equity
	Shares			Amount		Shares		Amount		Capital			Deficit			(Deficit)
Balance as of March 31, 2024		13,921,455			8		674,469	$	–	$	39,272		$	(36,038	)	$	3,242
Issuances of Class A and Class B shares, net of issuance costs		(4,370	)		–		–		–		(51	)		–			(51	)
Stock-based compensation		–			–						540						540
Net loss		–			–		–		–		–			(1,852	)		(1,852	)
Balance as of June 30, 2024		13,917,085		$	8		674,469	$	–	$	39,761		$	(37,890	)	$	1,879

See accompanying notes to the financial statements.

CLOUDASTRUCTURE, INC.

Statements of Shareholders’ Equity (Deficit)
(in thousands, except share and per share numbers)


	Six Months Ended June 30, 2025
	(Unaudited)
	Common Stock, Class A				Common Stock, Class B					Preferred Stock				Additional Paid-in		Accumulated			Total Shareholders’ Equity
	Shares		Amount		Shares			Amount		Shares		Amount		Capital		Deficit			(Deficit)
Balance as of December 31, 2024		14,020,543	$	1		571,011		$	–		–	$	–	$	40,351	$	(40,856	)	$	(503	)
Issuances of Class A, Class B, and Preferred shares, net of issuance costs		3,421,377		1		(423,706	)		–		6,687		–		11,944		–			11,945
Stock-based compensation		–		–		–			–		–		–		1,183		–			1,183
Net loss		–		–		–			–		–		–		–		(4,564	)		(4,564	)
Balance as of June 30, 2025		17,441,920	$	2		147,305		$	–		6,687	$	–	$	53,478	$	(45,420	)	$	8,060

See accompanying notes to the financial statements.


	Six Months Ended June 30, 2024
	(Unaudited)
	Common Stock, Class A				Common Stock, Class B					Additional Paid-in			Accumulated			Total Shareholders’ Equity
	Shares		Amount		Shares			Amount		Capital			Deficit			(Deficit)
Balance as of December 31, 2023		13,804,788	$	8		753,857		$	–	$	38,994		$	(34,321	)	$	4,682
Issuances of Class A and Class B shares, net of issuance costs		112,297		–		(79,388	)		–		(51	)		–			(51	)
Stock-based compensation		–		–		–			–		818			–			818
Net loss		–		–		–			–		–			(3,569	)		(3,569	)
Balance as of June 30, 2024		13,917,085	$	8		674,469		$	–	$	39,761		$	(37,890	)	$	1,879

See accompanying notes to the financial statements.

CLOUDASTRUCTURE, INC.

Statements of Cash Flow
(in thousands)


	Six Months Ended June 30,
	(Unaudited)
	2025			2024
Cash Flows from Operating Activities
Net Loss	$	(4,564	)	$	(3,569	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		32			38
Stock-based compensation		1,183			818

Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable		(300	)		152
(Increase) Decrease in other current assets		(349	)		83
Increase (Decrease) in accounts payable		(474	)		74
Increase (Decrease) in accrued expenses		–			55
Increase (Decrease) in deferred revenue		165			76
Net Cash Used in Operating Activities		(4,306	)		(2,274	)

Cash Flows from Investing Activities
Purchase of fixed assets		(150	)		(16	)
Acquisition of intangible assets		–			–
Net Cash Used in Investing Activities		(150	)		(16	)
Cash Flows from Financing Activities
Proceeds from issuances of Preferred shares		13,750			–
Increase in preferred dividends payable		285			–
S1 filing costs		(1,898	)		(51	)
Net Cash Provided by Financing Activities		12,137			(51	)

Net Change in Cash		7,681			(2,341	)

Cash at Beginning of Period		52			4,042
Cash at End of Period	$	7,733		$	1,701

See accompanying notes to the financial statements.

CLOUDASTRUCTURE, INC.

Notes to the Interim Condensed Financial Statements
(Unaudited)

Note 1 - Nature of Operations

Cloudastructure, Inc. (“Cloudastructure,” “we,” “us,” “our” or the “Company”) was formed on March 28, 2003, as a corporation organized under the laws of the State of Delaware and is headquartered in Palo Alto, California. We are a technology service provider that focuses on intelligent devices and software for physical security applications. Since inception, we have relied primarily on financing activities, including an offering under Regulation A of the Securities Act of 1933, as amended (the “Securities Act”), and the sale of preferred stock, to fund our operations.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accounting and reporting policies of the Company conform to generally accepted accounting principles in the United States of America (“U.S. GAAP”). The unaudited condensed financial statements included within this report have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. The unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes for the year ended December 31, 2024 included in our Annual Report on Form 10-K.

In the opinion of management, the accompanying unaudited condensed financial statements contain all the adjustments necessary to present fairly our financial condition as of June 30, 2025 and December 31, 2024, and the results of operations for the three-month periods and six-month periods ended June 30, 2025 and 2024. The results of operations for the six-month period ended June 30, 2025 are not necessarily indicative of the results to be expected for the full year.

Reverse Stock Split

On October 24, 2024, we effected a 1-for-6 reverse stock split of all classes of our issued and outstanding capital stock (the “Reverse Stock Split”). All share and per share information is presented after giving effect to the Reverse Stock Split retrospectively for all periods presented. For additional information about the Reverse Stock Split, see Note 6, Reverse Stock Split.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). Under Section 107 of the JOBS Act, emerging growth companies are permitted to use an extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards that have different effective dates for public and private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company, or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the footnotes thereto. Actual results could differ from those estimates.

Risks and Uncertainties

We have a limited operating history. Our business and operations are sensitive to general business and economic conditions in the United States. A host of factors beyond our control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn or otherwise, inflation, changes in regulations or restrictions on imports, tariffs, competition or changes in consumer taste. These adverse conditions could affect our financial condition and our results of operations.

Cash and Cash Equivalents

We consider short-term, highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash consists of funds held in our checking account. We maintain our cash with a major financial institution located in the United States, which we believe to be creditworthy. The Federal Deposit Insurance Corporation insures balances up to $250,000, but at times we may maintain balances in excess of the federally insured limits.

Receivables and Credit Policy

Trade receivables from customers are uncollateralized customer obligations due under normal trade terms. Trade receivables are stated at the amount billed to the customer. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoice. We routinely assess our outstanding accounts receivable and recorded a reserve for estimated uncollectible accounts of $7,235 and $5,816 at June 30, 2025, and December 31, 2024, respectively.

Sales Taxes

Various states impose a sales tax on our sales to non-exempt customers. We collect the sales tax from customers and remit the entire amount to each respective state. Our accounting policy is to exclude the tax collected and remitted to the states from revenue and cost of sales.

Property and Equipment

Property and equipment are recorded at cost if the expenditure exceeds $2,500. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are expensed as incurred. When equipment is retired or sold, the cost and related accumulated depreciation are eliminated from the balance sheet accounts and the resultant gain or loss is reflected in income.

Depreciation is provided using the straight-line method, based on useful lives of the assets, which range from three to five years depending on the asset type.

We review the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker (the “CODM”) in deciding how to allocate resources and assess performance. We have one reportable segment focused on cloud-based AI video surveillance and remote guarding security services. Our CODM, who is our Chief Executive Officer, manages operations on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. For additional information on our segment reporting, see Note 7, Segment Reporting.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. When fair value measurements are used, valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs.

U.S. GAAP has established a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Level 1 inputs consist of quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the related asset or liability. Level 3 inputs are unobservable inputs related to the asset or liability.

Income Taxes

We determine deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

We have incurred taxable losses since inception but are current in our tax filing obligations. We are not presently subject to any income tax audit in any taxing jurisdiction.

Revenue Recognition

We recognize revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), we perform the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Revenue from subscription contracts with customers is recognized ratably over the period that commences on the subscription start date and ending on the date the subscription term expires. Revenue from door and video services is generally recognized at the completion of the professional services. Revenue from sales hardware is generally recognized at time of delivery.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of purchase price over the fair value of identifiable net assets of businesses acquired. Our indefinite-lived intangible asset consists of assets acquired from Visionful Holding Inc. (“Visionful”) and in connection with our acquisition of Infrastructure Proving Grounds (“IPG”). We assess goodwill for impairment annually in the fourth quarter, or more frequently if events or circumstances indicate a potential impairment.

During the fourth quarter of 2023, following a thorough assessment of goodwill for impairment, management determined that goodwill attributed to Visionful and IPG had become impaired due to underutilization of the acquired assets in revenue generation and on December 31, 2023, a non-cash loss on impairment was recorded reflecting goodwill impairment charges totaling $1.67 million. Despite this impairment, the technology acquired remains the property of Cloudastructure and retains potential for future utilization.

Liquidity

Our future needs for liquidity will depend on a variety of factors, including, without limitation, our ability to generate cash flows from operations and the timing and availability of net proceeds from any future financing activities that we may conduct. Economic uncertainty, fluctuating interest rates, market volatility, slowdowns in transaction volume, delays in financing from banks and other lenders and other negative trends may, in the future, adversely impact our ability to timely access potential sources of liquidity. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.

On November 25, 2024, we entered into a Securities Purchase Agreement, as subsequently amended on January 16, 2025, January 29, 2025, and February 14, 2025, and as modified by a Waiver Agreement on April 1, 2025 (as amended and modified, the “Series 1 Equity Financing”), with Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”), pursuant to which we issued and sold 6,300 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. The Series 1 Equity Financing closed on January 29, 2025 and resulted in aggregate gross proceeds to the Company of $6.3 million.

On March 21, 2025, we entered into a second Securities Purchase Agreement, as supplemented by a Supplemental Terms Agreement dated April 11, 2025 and as modified by a Waiver Agreement dated April 11, 2025 (as supplemented and modified, the “Series 2 Equity Financing”) with Streeterville, pursuant to which we may issue and sell, subject to the terms and conditions of the Series 2 Securities Financing, up to $40.0 million of our Series 2 Convertible Preferred Stock, par value $0.0001 per share (the “Series 2 Preferred” and, together with the Series 1 Preferred, the “Preferred Stock”) to Streeterville at a price of $1,000 per share. On March 25, 2025, at the initial closing of the Series 2 Equity Financing, we sold 4,500 shares of Series 2 Preferred to Streeterville, for an aggregate purchase price of $4.5 million. On April 10, 2025, we sold an additional 3,000 shares of Series 2 Preferred Stock to Streeterville for an aggregate purchase price of $3.0 million.

On November 25, 2024, we also entered into an Equity Purchase Agreement, as modified by a Waiver Agreement dated April 11, 2025 (as modified, the “Equity Line”) with Atlas Sciences, LLC, a Utah limited liability company (“Atlas”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Atlas will purchase up to an aggregate of $50.0 million of our Class A common stock over the 24-month term of the Equity Line.

Our ability to continue as a going concern is dependent on our ability to further implement our business plan. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The 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 the uncertainties described above.

We believe that the Series 2 Equity Financing and the Equity Line, together with our cash on hand and anticipated cash flows from operations, will be sufficient to address any going concern uncertainties and will be sufficient to meet our liquidity and capital resource requirements to ensure that we are able to meet our obligations and continue operations for at least one year from the issuance date of these financial statements.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, and requires single reporting entities to comply with the expanded reportable segment disclosures outlined in the ASU. The expanded reportable segment disclosures are intended to enhance certain disclosures surrounding significant segment expenses.

This standard became effective for the Company for the annual reporting period ended December 31, 2024, using the retrospective method. The adoption of this standard resulted in additional disclosure but did not have a material impact on our financial position or results of operations. See Note 7, Segment Reporting, for our updated segment presentation.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosure” (“ASU 2023-09”). ASU 2023-09 is effective for public entities for fiscal years beginning after December 15, 2024, and interim periods in fiscal years beginning after December 15, 2025, and establishes new income tax requirements in addition to modifying and eliminating certain existing requirements. Under ASU 2023-09, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation and further disaggregate income taxes paid. The Company is currently evaluating the impact of the new standard on our financial statements.

Note 3 – Basic and Diluted Loss Per Share

The number of shares used to calculate basic and diluted loss per share for the six-month periods ended June 30, 2025, and 2024 were as follows:


	Six Months Ended June 30,
	2025		2024
Class A common stock		17,441,920		13,917,085
Class B common stock		147,305		674,469
Preferred stock		6,687		–
Total		17,595,912		14,591,554

For the six months ended June 30, 2025 and 2024, approximately 16.1 million and 14.3 million shares, respectively, issuable upon the exercise or conversion of stock options, convertible notes, and warrants outstanding were excluded from the calculation of diluted loss per share because such amounts were antidilutive.

Note 4 – Share Capital

Regulation A Equity Financings

Between 2020 and 2023, the Company sold units consisting of two shares of Class A common stock and one warrant to purchase one share of Class A common stock pursuant to Regulation A under the Securities Act (“Regulation A”). The warrants were immediately exercisable and expired 18 months from the date of issuance. Pursuant to these Regulation A offerings, the Company issued a total of 12.1 million shares of Class A common stock and 5.3 million warrants for aggregate gross proceeds of $38.9 million.

The following table is a summary of the outstanding Class A common stock warrants at December 31, 2024 and June 30, 2025:

Warrants at Exercise Price of $4.50

Warrants at Exercise Price of $7.20

Warrants at Exercise Price of $9.00

Total Warrants

Outstanding at December 31, 2024

–

15,262

4,317

Issued

–

Expired

–

15,262

4,317

Exercised

–

Outstanding at June 30, 2025

–

Preferred Stock Financings

On November 25, 2024, we entered into the Series 1 Equity Financing with Streeterville, pursuant to which we issued and sold 6,300 shares of our Series 1 Preferred, and 720,000 shares of our Class A common stock to Streeterville. The Series 1 Equity Financing closed on January 29, 2025 and resulted in aggregate gross proceeds to the Company of $6.3 million.

On March 21, 2025, we entered into the Series 2 Equity Financing with Streeterville pursuant to which we may issue and sell, subject to the terms and conditions of the Series 2 Equity Financing, up to $40.0 million of our Series 2 Preferred to Streeterville. On March 25, 2025, at the initial closing of the Series 2 Equity Financing, we issued and sold 4,500 shares of Series 2 Preferred to Streeterville, for an aggregate purchase price of $4.5 million.

Pursuant to the terms of the Series 2 Equity Financing, Streeterville will also have, for a period ending on the later of (i) March 25, 2027, and (ii) the date on which it no longer holds any Preferred Stock, the right, but not the obligation, to reinvest up to an additional $4.0 million into the Company in one or more tranches (of at least $100,000) at its election (the “Reinvestment Right”). The Reinvestment Right supersedes and replaces the reinvestment right granted to Streeterville in connection with the Series 1 Equity Financing. In addition, Streeterville will have the right, for a period ending six months after it no longer holds any Preferred Stock or is not otherwise owed any obligations from us, to participate in up to 30% of the amount sold in any debt or equity financing that we consummate (the “Participation Right”). The Participation Right supersedes and replaces the participation right granted to Streeterville in connection with the Series 1 Equity Financing.

On April 10, 2025, we sold an additional 3,000 shares of Series 2 Preferred to Streeterville for an aggregate purchase price of $3.0 million. Streeterville agreed that its remaining Reinvestment Right was reduced to $3.0 million following this sale of Series 2 Preferred.

During the six months ended June 30, 2025, Streeterville exercised its right to convert an aggregate of 6,375 shares of Series 1 Preferred into 1,465,608 shares of Class A common stock and an aggregate of 1,360 shares of Series 2 Preferred into 506,762 shares of Class A common stock. In addition, during the six months ended June 30, 2025, we issued Streeterville 75 shares of Series 1 Preferred and 7 shares of Series 2 Preferred as payment in kind of accrued dividends on the shares of Series 1 Preferred and Series 2 Preferred, respectively, held by Streeterville.

Equity Line Financing

On November 25, 2024, we also entered into an Equity Line with Atlas, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Atlas will purchase up to an aggregate of $50.0 million of our Class A common stock over the 24-month term of the Equity Line. In consideration of Altas’s commitment to purchase shares pursuant to the Equity Line, we issued 143,472 shares of our Class A common stock to Atlas on February 6, 2025. On July 9, 2025, we issued an additional 229,662 shares of Class A common stock to Atlas pursuant to the Equity Line as a result of the decline in the market price of our Class A common stock since signing the Equity Line.

Stock-Based Compensation

The following summarizes stock option activity for the three months ended June 30, 2025:

Schedule of option activity
	Number of Options		Exercise Price Range		Weighted-Average Exercise Price
Options outstanding at December 31, 2024		15,978,736		$0.024 - 2.70	$	1.46
Granted		562,500		1.86 - 6.75		6.40
Canceled		415,015		0.02 - 2.70		0.56
Exercised		–		–		–
Options outstanding at June 30, 2025		16,126,221		$0.024 - 6.75	$	1.66

Our Board of Directors grants options to our employees under the terms of our Amended and Restated Stock Option Plan. Granted options are exercisable into shares of the Company’s Class A or Class B common stock, vest over four years, with an initial one-year cliff vesting, and expire ten years from the date of grant.

The fair value of the options was estimated on the grant date using the Black-Scholes option pricing model and relying on the following assumptions: (i) the estimated fair value of the underlying stock on the measurement date; (ii) the expected term in years; (iii) the expected volatility; and (iv) the discount rate.

Note 5 – Related Party Transactions

The following transactions occurred between related parties; therefore, there can be no guarantee that the terms, conditions, interest rates, or prices were transacted at an arm’s-length rate.

Aircraft Lease

On September 1, 2023, the Company and Cloud Transport Operations LLC (“Cloud Transport”) entered into a dry lease agreement (the “Dry Lease”) for a Cessna T210N Turbo Centurion plane. The Dry Lease allows the Company to lease the plane for $350 per hour plus insurance and maintenance costs. Rick Bentley (“Bentley”), the Company’s Founder and its Chief Executive Officer at the time the Dry Lease was signed, has an indirect ownership interest in Cloud Transport. In addition, also effective September 1, 2023, the Company and Hydro Hash, Inc. (“HH”) entered into a side agreement related to the Dry Lease, pursuant to which HH agreed, in exchange for use of the plane, to cover 40% of the insurance and maintenance costs for the plane under the Dry Lease. Mr. Bentley is the Chairman and a significant stockholder of HH. On March 25, 2025, the Company exercised its right to cancel the Dry Lease by providing 120 days notification of termination.

Issuance of Shares for Note Receivable

On February 20, 2020, we issued 250,000 shares of Class A common stock to Mr. Bentley in exchange for a promissory note in the principal amount of $6,000. The note receivable matures in February 2030 and bears interest at the rate of 1.86% per annum. As of June 30, 2025, this note has accrued interest totaling $599.36.

Data Center Lease

On January 1, 2024, we entered into a month-to-month lease agreement (the “Lease”) with HH to rent space for an additional data center. Under the terms of the Lease, we pay $1,800 per month for the rental of space, power and high-speed internet access. This is currently one-half the rate that we pay for equivalent services in our Santa Clara facility.

Note 6 – Reverse Stock Split

Our board of directors and stockholders each approved a 1-for-6 reverse stock split of all classes of the Company’s issued and outstanding capital stock. On October 24, 2024, we filed an amended and restated certificate of incorporation with the State of Delaware to immediately effectuate the Reverse Stock Split. All share and per share information are presented after giving effect to the Reverse Stock Split retrospectively for all periods presented.

Note 7 – Segment Reporting

We operate as one operating segment focused on cloud-based AI video surveillance and remote guarding security services. Operating segments are defined as components of an enterprise for which separate financial information is available for evaluation by the CODM in deciding how to allocate resources and assess performance. Our CODM evaluates our financial information and resources and assesses the performance of these resources on a consolidated basis. There is no expense or asset information supplemental to the information disclosed in these financial statements that is regularly provided to the CODM. The allocation of resources and assessment of performance of the operating segment is based on net income as shown in our statement of operations. The CODM considers net income in the annual forecasting process and reviews actual results when making decisions about allocating resources. Since we operate as one operating segment, financial segment information, including profit or loss and asset information, can be found in these financial statements.

Schedule of segment information
	Surveillance Segment						Surveillance Segment
	Three Months ended June 30,						Six Months ended June 30,
	2025			2024			2025			2024
Revenue		1,090			297			1,828			533
Less:
COGS		686			189			1,094			442
R&D		379			365			985			719
Sales & Marketing		728			506			1,540			1,026
G&A		636			390			1,349			723
Non Cash Expenses		581			590			1,217			987
Other (settlements, interest, etc.)		90			108			167			206

Segment net income/(loss)		(2,012	)		(1,852	)		(4,524	)		(3,569	)

Reconciliation of profit or loss
Adjustments and reconciling items		–			–			–			–
Consolidated net income/(loss)		(2,012	)		(1,852	)		(4,524	)		(3,569	)

Note 8 – Subsequent Events

Equity Financings

On July 2, 2025, pursuant to the terms of our Series 2 Preferred shares, we issued Streeterville an additional 163 shares of Series 2 Preferred as dividend payments.

India Subsidiary

The Company is in the process of establishing a wholly owned subsidiary in India. The subsidiary will run the Company’s remote guarding operations. This will enable the Company to have direct control of our remote guards, their training, and better be able to manage our costs as remote guarding continues to grow in importance to the Company’s business

Management’s Evaluation

Management has evaluated subsequent events to determine if events or transactions occurring after the balance sheet date through the date the financial statements were issued require potential adjustment to or disclosure in the financial statements and has concluded that all such events or transactions that would require recognition or disclosure have been recognized or disclosed.

CLOUDASTRUCTURE, INC.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that can involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “can,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future”, “goal,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements contained in this report may include, but are not limited to, statements about:

the implementation of our business model and our strategic plans for our business, product, services and technology;

our commercialization and marketing capabilities and strategy;

our ability to establish or maintain collaborations or strategic relationships or obtain additional funding;

our competitive position;

the scope of protection that we able to establish and maintain for intellectual property rights covering our products, services and technology;

developments and projections relating to our competitors and our industry;

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements;

our ability to access additional financing to support our operations; and

the impact of new or existing laws and regulations on our business and strategy.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate, and financial trends that we believe may affect our business, financial condition, results of operations, and prospects, but these forward-looking statements are not guarantees of future performance or development. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this report, whether as a result of any new information, future events, or otherwise.

There are a number of risks, uncertainties, and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this report, including, among others, those factors set forth in the “Risk Factors” section of our Annual Report on Form 10-K, as updated by information filed in our Forms 10-Q and Forms 8-K. A non-exhaustive summary of principal risk factors that make investing in our securities risky and may cause actual results to differ materially are set forth below:

Our technology continues to be developed, and it is unlikely that we will ever develop our technology to a point at which no further development is required;

If our security measures are breached or unauthorized access to individually identifiable biometric or other personally identifiable information is otherwise obtained, our reputation may be harmed, and we may incur significant liabilities;

Our collection, processing, use and disclosure of individually identifiable biometric or other personally identifiable information is subject to evolving and expanding privacy and security regulations;

Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees;

Privacy and data security laws and regulations could require us to make changes to our business, impose additional costs on us and reduce the demand for our software solutions;

Issues raised by the use of artificial intelligence (including machine learning) in our platforms may result in reputational harm or liability or affect our ability to operate profitably and sustainably;

We operate in a highly competitive industry that is dominated by multiple very large, well-capitalized market leaders and is constantly evolving;

Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products;

We rely on other companies to provide certain hardware and software solutions for our products;

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives;

Intellectual property rights do not necessarily address all potential threats to our competitive advantage;

We have a limited operating history, which may make it difficult for you to evaluate our current business and predict our future success and viability;

We have historically operated at a loss, which has resulted in an accumulated deficit;

We anticipate sustaining operating losses for the foreseeable future;

We will require substantial additional capital to finance our operations;

Raising additional capital may cause dilution to our existing stockholders;

We have a substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenue;

An active trading market for our Class A common stock may not be sustained, and the market price of shares of our Class A common stock may be volatile;

Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our Class A common stock;

Our internal computer systems, or those of any of our manufacturers, contractors, consultants, collaborators or potential future collaborators, may fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data or personal data, which could result in additional costs, loss of revenue, significant liabilities, harm to our brand and material disruption of our operations; and

Our operations are vulnerable to interruption by fire, severe weather conditions, power loss, telecommunications failure, terrorist activity, pandemics/epidemics and other events beyond our control, which could harm our business.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q.

Overview

Cloudastructure, Inc. (“Cloudastructure,” “we,” “us,” “our” or the “Company”) was formed under the laws of the State of Delaware on March 28, 2003. We provide an award-winning cloud-based artificial intelligence (“AI”) video surveillance and Remote Guarding (as described below) service built on AI and machine learning platforms.

We operated as a small Silicon Valley startup until early 2021 when we raised over $35 million in funding under Regulation A of the Securities Act of 1933, as amended (the “Securities Act”). With these funds we quickly built a sales, marketing and support structure and achieved a degree of early success in the property management space. As of the date of this report, we have contracts in place with five of the top 10 property management companies on the National Multifamily Housing Council’s (“NMHC’s”) 2024 NMCH 50 list (Greystar Real Estate Partners, Avenue5 Residential, LLC, Cushman & Wakefield, BH Management Services, LLC and FPI Management, Inc.). Our cloud-based solutions allow our customers to provide real-time safety and security solutions for their properties, as well as easily manage security across all of their locations. As of the date of this report, we are focused on expanding into more of our existing top tier customer locations and acquiring additional customers in the property management (“proptech”) space, and we anticipate entering into additional markets in 2025 and 2026.

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:

Deterring crime and improving overall safety

Improving occupancy rates and rental rates; and

Reducing onsite guard costs and lowering insurance rates

As of the date of this report, we are the only seamless, cloud-based, AI surveillance and Remote Guarding solution on the market of which we are aware. We also believe that our solution is more affordable and easier to use than the various solutions that our competitors offer. Our Remote Guarding service bridges the line between AI and human intelligence. AI has the ability to monitor all cameras at the same time and all of the time, a task from which humans would fatigue. When the AI detects an event occurring, the Remote Guards are notified. The Remote Guards can then determine if escalation is required. With real-time human intervention, our Remote Guarding service can turn video surveillance from a forensic tool, used after a crime has been committed, into a real time crime prevention tool. This has the potential to greatly increase value for our customers.

Components of Results of Operations

Net Revenues

Our net revenues primarily consist of revenues generated from subscriptions to our core business services (cloud video surveillance and remote guarding), revenues generated from hardware sales, and revenue generated from installation services.

We bill cloud video surveillance and remote guarding according to the number of camera views. Hardware mainly includes cloud video recorders, surveillance cameras, and horn speakers kept in inventory. Installation services include the labor needed to set in place said hardware and software.

We recognize revenue when a customer obtains control of promised goods or services. Typically, our customers pay up front annually for our services and sign subscription and remote guarding agreements governing the terms of service. In those instances, revenue is recognized ratably over the period that commences on the subscription start date and ending on the date the subscription term expires. Some of our customers require monthly billing arrangements, in which case revenue is recognized on a monthly basis. Revenue generated from sales of hardware is generally recognized at time of delivery. Revenue generated from installation services is generally recognized at the completion of the professional services.

Cost of Goods Sold

Cost of goods sold primarily consists of hosting costs, the costs of equipment sold, installation costs and the costs of the operations department.

Operating Expenses

Operating expenses consist of general and administrative expenses, which are primarily salaries, professional fees, consulting costs and expenses related to the administrative functions of the Company, research and development expenses, which consist primarily of product development costs and salaries, and sales and marketing expenses, which represent public relations, advertising and direct marketing costs, as well as the associated personnel costs.

Results of Operations

Comparison of the three months ended June 30, 2025 to the three months ended June 30, 2024

Net Revenues

The majority of our net revenues for the three months ended June 30, 2025 were comprised of subscription revenue generated from our core business services (cloud video surveillance and remote guarding) and hardware sales.

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.

The following table summarizes our revenue by service line:

	Three Months Ended June 30,
	2025		2024
Cloud Video Surveillance	$	151,323	$	64,991
Remote Guarding	$	137,509	$	54,777
Hardware	$	454,596	$	47,187
Other (installation, door subscriptions, etc.)	$	346,760	$	129,822
	$	1,090,188	$	296,777

Cost of Goods Sold

Our cost of goods sold increased $497,841, or 264%, from $188,586 for the three months ended June 30, 2024 compared to $686,427 for the three months ended June 30, 2025. This increase was the result of increased sales and completion of more installation projects in the three months ended June 30, 2025 compared to the same period in 2024. Hosting and data center bandwidth costs increased by 4%, Remote Guarding costs increased by 79%, hardware costs increased by 1,114%, and installation labor costs increased by 314% over the same period in 2024.

The following table summarizes our cost of goods sold:

	Three Months Ended June 30,
	2025		2024
Hosting and Data Center Bandwidth	$	68,389	$	65,701
Remote Guarding	$	45,455	$	25,350
Hardware	$	256,494	$	21,135
Installation Labor	$	316,089	$	76,399
	$	686,427	$	188,586

Operating Expenses

Our operating expenses for the three months ended June 30, 2025 and June 30, 2024 were as follows:

	Three Months Ended June 30,
	2025		2024
General and administrative	$	636	$	390
Research and development	$	379	$	365
Sales and marketing	$	728	$	506
Non-cash expenses (stock comp, depreciation, bad debt, etc)	$	581	$	590
	$	2,324	$	1,852

General and administrative expenses increased by 63% for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. This increase was primarily due to an increase of $131,346 in payroll mainly derived from bonuses paid, and an increase of $87,635 in legal, audit and tax services fees.

Research and development (“R&D”) expenses increased by 4%. This increase is mainly due to equipment purchases and travel expenses incurred in the three-month period ended June 30, 2025.

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.

Non-cash expenses decreased by 2% for the three months ended June 30, 2025 compared to the same period for 2024. This decrease is primarily due to a decrease of $24,886 in bad debt expense, partially offset by an increase in stock option expense of $16,037 during the three-month period ended June 30, 2025 compared to the same period in 2024.

Net Loss

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.

Comparison of the six months ended June 30, 2025 to the six months ended June 30, 2024

Net Revenues

Total revenue increased by $1,294,559, or 243%, from $533,454 for the six months ended June 30, 2024 compared to $1,828,013 for the six months ended June 30, 2025. This increase is due to a 60% increase in the number of customers during the six months ended June 30, 2025 compared to the same period in 2024. Cloud video subscriptions increased by 106%, Remote Guarding increased by 157%, hardware sales increased by 454%, and installation labor sales and other sales increased by 223% over the same period in 2024.

The following table summarizes our revenue by service line:

	Six Months Ended June 30,
	2025		2024
Cloud Video Surveillance	$	266,719	$	129,287
Remote Guarding	$	242,651	$	94,585
Hardware	$	765,835	$	138,341
Other (installation, door subscriptions, etc.)	$	552,807	$	171,241
	$	1,828,013	$	533,454

Cost of Goods Sold

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.

The following table summarizes our cost of goods sold:

	Six Months Ended June 30,
	2025		2024
Hosting and Data Center Bandwidth	$	128,438	$	150,341
Remote Guarding	$	89,138	$	46,713
Hardware	$	428,624	$	71,076
Installation Labor	$	447,700	$	173,687
	$	1,093,900	$	441,817

Operating Expenses

Our operating expenses for the six months ended June 30, 2025 and June 30, 2024 were as follows:

	Six Months Ended June 30,
	2025		2024
General and administrative	$	1,349	$	723
Research and development	$	985	$	719
Sales and marketing	$	1,540	$	1,026
Non-cash expenses (stock comp, depreciation, bad debt, etc)	$	1,217	$	987
	$	5,091	$	3,455

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.

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.

Sales and marketing expenses increased by 50% for the six months ended June 30, 2025, compared to the sales and marketing expenses incurred during the six months ended June 30, 2024. This increase is due to an increase of $324,688 in payroll mainly derived from a one-time bonus paid to employees in 2025 to compensate for salary reductions in 2024, as well as the cost of new hires in the first half of 2025. Consulting expenses also increased by $56,459, and marketing expenses increased by $144,695 during the six months ended June 30, 2025 when compared to the same period in 2024.

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.

Net Loss

As a result of the foregoing, the Company had a net loss of $4.6 million for the six months ended June 30, 2025, compared to net loss of $3.6 million for the six months ended June 30, 2024, a loss increase of approximately 27% for the current period compared to the prior period. Gross profit increased by approximately 701%. Gross profit was $734,112 in the six months ended June 30, 2025 and $91,637 for the six months ended June 30, 2024.

Off-Balance Sheet Arrangements

As of the date of this report, we have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Liquidity and Capital Resources

Overview

From inception, we have funded our operations principally through the net proceeds from sales of our capital stock and to a lesser extent from cash flows generated from operating activities.

Summary of Cash Flows

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

	Six Months Ended June 30,
(in thousands)	2025			2024
Net cash (used in) operating activities		(4,306	)		(2,274	)
Net cash (used in) investing activities		(150	)		(16	)
Net cash provided by financing activities		12,137			(51	)
Cash and cash equivalents at end of period		7,681			(2,341	)

Operating Activities

We continue to experience negative cash flows from operations as we expand our business. Our cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as product and service development and selling, general and administrative. Our operating cash flows are also affected by our working capital needs to support growth and fluctuations in personnel-related expenditures, accounts payable and other current assets and liabilities.

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.

Investing Activities

Our investing activities have consisted primarily of business combinations and the purchases of assets and equipment. We have invested in assets and equipment to support our headcount growth.

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.

Financing Activities

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.

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.

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.

On April 3, 2025, pursuant to the respective terms of our Series 1 Preferred shares and our Series 2 Preferred shares, we issued Streeterville an additional 75 shares of Series 1 Preferred and an additional 7 shares of Series 2 Preferred as dividend payments.

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.

On July 2, 2025, pursuant to the respective terms of our Series 1 Preferred shares and our Series 2 Preferred shares, we issued Streeterville an additional 163 shares of Series 2 Preferred as dividend payments.

Funding Requirements

We anticipate incurring additional losses for the foreseeable future, and we may never become profitable. We expect our operating expenses to continue to increase as we expand our business, particularly as we continue development of our existing and new products and services. In addition, we expect to continue to incur additional costs and expenses associated with being a public company.

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.

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.

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.

We have based the foregoing estimates on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we expect. We have a planning and budgeting process in place to monitor our operating cash requirements, including amounts projected for capital expenditures, which are adjusted as our future funding requirements change. These funding requirements include, but are not limited to, our product and service development, our general and administrative requirements, and the costs of operating as a public company, and are offset by our ability to generate revenue from operations and the availability of equity or debt financing.

Contractual Obligations and Commitments

In addition to ongoing capital expenditures and working capital needs to fund operations over the next 12 months, our contractual obligations to make future payments primarily relate to our operating lease obligations, capital lease obligations and insurance obligations, all of which are governed by agreements with month-to-month terms, and which are generally terminable after a notice period at any time. We purchase equipment, software and inventory necessary to conduct our operations on an as-needed basis.

During the three months ended June 30, 2024, we had an outstanding obligation to the SEC pursuant to the terms of a final settlement reached with the SEC on September 27, 2023. See “Business—Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2024, for additional details regarding the settlement. This obligation was paid in full on August 9, 2024. We do not have any other long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). As an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not emerging growth companies, and we have elected to take advantage of those exemptions. For so long as we remain an emerging growth company, we will not be required to:

have an auditor attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);

submit certain executive compensation matters to Member advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding Member vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding Member vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; or

disclose certain executive compensation related items, such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means that an emerging growth company can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. We have elected to take advantage of the extended transition period. Since we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If we were to subsequently elect to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.

We will remain an emerging growth company for up to the last day of the fiscal year following the fifth anniversary of our direct listing on Nasdaq, or until the earliest of: (i) the last date of the fiscal year during which we had total annual gross revenues of $1.235 billion or more; (ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iii) the date on which we are deemed to be a “large accelerated filer” as defined under Rule 12b-2 under the Exchange Act.

We do not believe that being an emerging growth company will have a significant impact on our business. Also, even once we are no longer an emerging growth company, we still may not be subject to auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act unless we meet the definition of a large accelerated filer or an accelerated filer under Section 12b-2 of the Exchange Act.

Critical Accounting Estimates

Our accounting and recording policies are in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

Our significant accounting policies are described in “Note 2 — Summary of Significant Accounting Policies.” Many of these accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our financial statements. On a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we believe to be reasonable under the circumstances. These estimates are subject to change in the future if underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates. The recent accounting changes that may potentially impact our business are described under “Recent Accounting Pronouncements” in “Note 2 — Summary of Significant Accounting Policies.”

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, and as a result are not required to provide the information required by this Item.

Item 4. Controls and Procedures.

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 on such evaluation, our principal executive officer and principal financial officer have concluded that as of June 30, 2025, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

CLOUDASTRUCTURE, INC.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be party to litigation arising in the ordinary course of business. As of June 30, 2025, we are not subject to any material legal proceedings nor, to the best of our knowledge, are any material legal proceedings pending or threatened against us.

Item 1A. Risk Factors.

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, 2024. There have been no material changes in our risk factors from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

	(a)	On April 11, 2025, the Company sold 3,000 shares of its Series 2 Preferred to Streeterville for aggregate gross proceeds of $3.0 million. This sale was not registered under the Securities Act, or the securities laws of any state, and was made in reliance on the exemption from registration under the Securities Act afforded by Section 4(a)(2) and Rule 506 of Regulation D promulgated thereunder. The Series 2 Preferred shares are convertible into shares of our Class A common stock on the terms and subject to the limitations and conditions set forth in the Certificate of Designations of Preferences and Rights of Series 2 Convertible Preferred Stock (the “Series 2 Certificate of Designations”), filed with the Secretary of State of the State of Delaware on March 24, 2025. At any time and from time to time, the holder of Series 2 Preferred shares may convert such shares into a number of whole shares of Class A common stock (rounded up to the nearest whole share) equal to the Conversion Amount (defined below), divided by the Conversion Price (defined below). · The “Conversion Amount” means the number of shares of Series 2 Preferred being converted, multiplied by the then-current stated value. The original stated value per share of Series 2 Preferred is $1,111; provided that, upon an event of default (as determined pursuant to the Series 2 Certificate of Designations), the stated value automatically increases by 10%. · The “Conversion Price” means a fixed price of $10 per share of Class A common stock; provided that (i) if the Company issues any shares of Class A common stock (or any warrant, option, or other right to receive shares of Class A common stock, other than the shares of Series 1 Preferred) at a price per share lower than such fixed price, the Conversion Price will automatically be reduced to such lower price, and (ii) following an event of default (as determined pursuant to the Series 2 Certificate of Designations) or a Trigger Event (as defined below), the Conversion Price will be the lesser of the fixed price described in this sentence and 88% of the lowest daily volume-weighted average price (VWAP) during the eight business day period prior to the applicable measurement date, but not lower than a floor price equal to 20% of the Minimum Price, as defined in Nasdaq Rule 5635 calculated as of the most recent date on which shares of Series 2 Preferred were issued. A “Trigger Event” includes (i) the Company’s receipt of a letter of non-compliance from Nasdaq or similar correspondence, (ii) the average market capitalization of the Company’s outstanding shares of Class A common stock during any three business day period after April 1, 2025 is less than $125.0 million, and (iii) in any quarter beginning with the first calendar quarter of 2025, the Company’s stockholder equity is less than $2.5 million, net loss is greater than $1.0 million, or net sales are less than $0.5 million. Notwithstanding the foregoing, no shares of Series 2 Preferred may be converted into shares of Class A common stock if such conversion would result in the holder of the shares of Series 2 Preferred being converted either (i) individually having beneficial ownership of more than 4.99% of the total number of outstanding shares of Class A common stock, or (ii) together with its affiliates, having beneficial ownership of more than 9.99% of the total number of outstanding shares of Class A common stock. The foregoing summary is qualified in its entirety by reference to the Series 2 Equity Financing.
	(b)	Not applicable.

	(c)	Issuer purchases of equity securities: None.

Item 5. Other Information.

	(a)	Not applicable.

	(b)	Not applicable.

	(c)	Adoption or Termination of Rule 10b5-1 or non-Rule 10b5-1 Trading Arrangements

During the quarter ended June 30, 2025, no director or officer adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K, except as follows:


Name and Title	Date Adopted	Character of Trading Arrangement	Aggregate No. of Shares of Class A Common Stock to be Sold Pursuant to Trading Arrangement	Duration
James McCormick, CEO	06/11/2025	Rule 10b5-1 Trading Arrangement	Up to 440,709	09/01/2026
Greg Smitherman, CFO	06/11/2025	Rule 10b5-1 Trading Arrangement	Up to 500,000	09/01/2026
Gregory Rayzman, CTO	06/11/2025	Rule 10b5-1 Trading Arrangement	Up to 360,000	09/01/2026
Lauren O’Brien, CRO	06/13/2025	Rule 10b5-1 Trading Arrangement	Up to 742,000	09/01/2026

Each trading arrangement marked as a “Rule 10b5-1 Trading Arrangement” is intended to satisfy the affirmative defense of Rule 10b5-1(c), as amended.

Item 6. Exhibits.

The following exhibits (listed by number corresponding to the Exhibit Table as Item 601 in Regulation S-K) are filed with this report:


3.1	Second Amended and Restated Bylaws of Cloudastructure, Inc. (incorporated by reference to Exhibit 3.1 of the Form 10-Q filed by Cloudastructure, Inc. on July 3, 2025).

10.1	Waiver Agreement between Cloudastructure, Inc. and Streeterville Capital, LLC, dated April 1, 2025 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Company on April 1, 2025).

10.2	Waiver Agreement between Cloudastructure, Inc. and Streeterville Capital, LLC, dated April 11, 2025 (incorporated by reference to Exhibit 10.1 to the Form 8-K/A filed by the Company on April 17, 2025).

10.3	Supplemental Terms Agreement between Cloudastructure, Inc. and Streeterville Capital, LLC, dated April 11, 2025 (incorporated by reference to Exhibit 10.2 to the Form 8-K/A filed by the Company on April 17, 2025).

10.4	Waiver Agreement between Cloudastructure, Inc. and Atlas Sciences, LLC, dated April 11, 2025 (incorporated by reference to Exhibit 10.3 to the Form 8-K/A filed by the Company on April 17, 2025).

31	Certifications.

	(a)	Certificate of the Chief Executive Officer of Cloudastructure, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

	(b)	Certificate of the Chief Financial Officer of Cloudastructure, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

32	Certifications.

	(a)	Certificate of the Chief Executive Officer of Cloudastructure, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

	(b)	Certificate of the Chief Financial Officer of Cloudastructure, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).


101	Interactive Data File formatted in iXBRL (Inline eXtensible Business Reporting Language).

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104	Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document).

CLOUDASTRUCTURE, INC.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CLOUDASTRUCTURE, INC.

Date: August 14, 2025	By:	/s/ James McCormick
		James McCormick
		Chief Executive Officer
		(Principal Executive Officer)

Date: August 14, 2025	By:	/s/ Greg Smitherman
		Greg Smitherman
		Chief Financial Officer
		(Principal Financial Officer and
		Principal Accounting Officer)