What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-19 compared with 2025-03-28 · 324 added, 344 removed, 386 unchanged (63% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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To the shareholders and the Board of Directors of MultiSensor AI Holdings, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of MultiSensor AI Holdings, Inc.

(the "Company") as of December 31, 2025, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of MultiSensor AI Holdings, Inc.

as of December 31, 2025, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the entity’s management.

Our responsibility is to express an opinion on the entity’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We have served as the Company's auditor since 2025.

/s/ WEAVER AND TIDWELL, L.L.P.

March 19, 2026

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of MultiSensor AI Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of MultiSensor AI Holdings, Inc.

(the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, statements of changes in shareholders' equity, and statements of cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of MultiSensor AI Holdings, Inc.

(the "Company") as of December 31, 2024, the related consolidated statement of operations, statement of changes in shareholders' equity, and statement of cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the financial statements, the Company is developing its customer base and has not completed its efforts to establish a stabilized source of revenue sufficient to cover its expenses.

The Company has suffered net losses, negative cash flows from operations, and negative net working capital;

which raises substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The 2024 financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in the 2024 financial statements, the Company was developing its customer base and had not completed its efforts to establish a stabilized source of revenue sufficient to cover its expenses.

The Company suffered net losses, negative cash flows from operations, and negative net working capital;

which raised substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters were also described in the 2024 financial statements.

The financial statements did not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

March 28, 2025

We have served as the Company's auditor since 2021.

We began serving as the Company’s auditor in 2021.

In 2025 we became the predecessor auditor.

MultiSensor AI Holdings, Inc.

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Cash and cash equivalents

Trade accounts receivable, net of allowances of $ 35 and $ 180 , respectively

Trade accounts receivable, net of allowance for credit losses of $ 17 and $ 35 , respectively

Inventories, current

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Other noncurrent assets

Liabilities and shareholders’ deficit

Liabilities and shareholders’ equity

Current liabilities

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Contract liabilities

Line of credit

Related party promissory note

Legacy SMAP promissory notes

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Contract liabilities, noncurrent

Convertible notes, noncurrent

Deferred tax liabilities, net

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Commitments and contingencies (Note 14)

Shareholders’ equity (deficit)

Shareholders’ equity

Common stock, $ 0.0001 par value;

300,000,000 shares authorized as of December 31, 2024 and 2023 and 30,526,052 and 11,956,823 shares issued and outstanding as of December 31, 2024 and 2023, respectively

300,000,000 shares authorized as of December 31, 2025 and December 31, 2024, and 80,304,531 and 30,526,052 shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

Accumulated deficit

Total shareholders’ deficit

Total liabilities and shareholders’ deficit

Total shareholders’ equity

Total liabilities and shareholders’ equity

The accompanying notes are an integral part of these consolidated financial statements.

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Operating loss

Interest expense

Interest expense (income), net

Change in fair value of convertible notes

Tariff refund

Change in fair value of warrants liabilities

Loss on financing transaction

Other expenses, net

Other expense (income), net

Loss before income taxes

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Shareholders’

Class A Common Stock

Balance at December 31, 2022

Conversion of shareholder promissory note

Conversion of convertible notes

Financing transaction shares

Issuance of common stock

Merger recapitalization

Deferred transaction costs

Equity-based compensation transactions, net

Balance at December 31, 2023

Balance at January 1, 2024

Conversion of debt

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Balance at December 31, 2024

Equity-based compensation transactions, net

Issuance of common stock

Issuance of Pre-funded warrants

Conversion of Pre-funded warrants

Settlement of vendor liability

Balance at December 31, 2025

The accompanying notes are an integral part of these consolidated financial statements.

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Operating Activities:

Adjustments to reconcile net loss to net cash:

(used in) provided by operating activities

Bad debt expenses

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Inventory impairment

Non-cash lease expense

Deferred income tax expense (benefit)

Non-cash lease activity

Bad debt expenses (recoveries)

Deferred income tax (income) expense

Share-based compensation

Non-cash PIK interest

Other (income) expenses, net

Loss (gain) on disposal of equipment

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Change in fair value of warrants liabilities

Other (income) expense, net

Change in fair value of convertible notes

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Trade accounts receivable

Deferred transaction costs

Other current assets

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Income taxes payable

Contract liability

Contract liabilities

Other current liabilities

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Accrued expenses

Other noncurrent liabilities

Net cash used in operating activities

Contract liabilities, noncurrent

Net cash provided by (used in) operating activities

Investing Activities:

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Proceeds from sale of equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

Financing Activities:

Proceeds from lines of credit

Repayments of lines of credit

Proceeds from promissory notes

Proceeds from issuances of common stock and Pre-funded warrants

Tax payments associated with equity-based compensation transactions

Repayments of promissory notes

Proceeds from issuance of common stock

Proceeds from Equity Line of Credit issuances

Merger recapitalization

Net cash provided by financing activities

Repayments of lines of credit

Net cash provided by (used in) financing activities

Net increase/(decrease) in cash, cash equivalents, and restricted cash equivalents

Cash, cash equivalents, and restricted cash equivalents beginning of year

Cash, cash equivalents, and restricted cash equivalents end of the year

Cash, cash equivalents, and restricted cash equivalents beginning of period

Cash, cash equivalents, and restricted cash equivalents end of the period

Reconciliation of cash, cash equivalents and restricted cash equivalents at end of period:

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Restricted cash equivalents included in other current assets

Cash, cash equivalents, and restricted cash equivalents end of the year

Cash, cash equivalents, and restricted cash equivalents end of the period

Supplemental cash flow information:

Interest paid

Income taxes paid

Non-cash investing and financing transactions

Conversion of promissory notes

Income tax paid, net of refunds received

Non-cash investing and financing activities:

Settlement of vendor liability with share issuance

Sale of equipment

Conversion of convertible notes

Conversion of Legacy SMAP loan into common stock

Conversion of Legacy SMAP promissory loan into common stock

Shares issued for Equity Line of Credit commitment fee

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Notes to Consolidated Financial Statements

( Dollars in thousands )

( Dollars in thousands except per share amounts )

Note 1 — Organization and Business Operations

MultiSensor AI Holdings, Inc.

(“MSAI,” “the Company,” “we” or “our”) and its wholly owned subsidiaries provide turnkey predictive maintenance and process control solutions, which combine cutting edge imaging and sensing technologies with AI-powered enterprise software.

Our software leverages a continuous stream of data from thermal imaging, visible imaging, acoustic imaging, vibration sensing, and laser sensing devices to provide comprehensive, real-time condition monitoring for a customer’s critical assets, processes, and manufactured outputs.

Our cloud and edge solutions are deployed by organizations to protect critical assets across a wide range of industries including distribution & logistics, manufacturing, and oil & gas.

In tandem with these solutions, we provide various services for our customers including training, calibration, and repair.

(“MSAI,” “the Company,” “we” or “our”) and its wholly owned subsidiaries builds and deploys integrated condition monitoring and early threat detection solutions through a unified edge-to-cloud software architecture, delivering AI-powered connected intelligence and analytics for asset reliability and performance.

The Company’s platform integrates multiple sensing modalities such as thermal, visual and vibration to detect mechanical, electrical and other modes of asset failure, enabling organizations operating high-throughput, automation-rich and power-dense facilities to protect uptime, enhance safety and extend the useful life of their most critical assets.

The Company is domiciled in Delaware and is a C corporation for tax purposes.

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The registration statement for Legacy SMAP’s initial public offering (“IPO”) was declared effective on October 18, 2021 (the “Effective Date”).

On October 21, 2021, Legacy SMAP consummated the IPO of 11,500,000 units (the “Units” and, with respect to the Common stock included in the Units being offered, the “public shares”) at $ 10.00 per Unit, including the full exercise of the underwriters’ over-allotment of 1,500,000 units, generating gross proceeds to Legacy SMAP of $ 115,000 .

Simultaneously with the consummation of the IPO, Legacy SMAP consummated the private placement of 675,000 Units at a price of $ 10.00 per Unit to the Sponsor and the representative of the underwriters and/or certain of their designees or affiliates, generating gross proceeds to Legacy SMAP of $ 6,750 .

Transaction costs for Legacy SMAP’s IPO amounted to $ 2,823 , consisting of $ 2,300 of underwriting commissions and $ 523 of other offering costs.

Of these transaction costs, $ 2,687 was charged to temporary equity and $ 137 was charged to additional paid-in capital.

Legacy SMAP generated non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.

On October 21, 2021, Legacy SMAP consummated the IPO.

Business Combination Agreement and Related Financing

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Pursuant to the terms of the Business Combination Agreement, a merger of Legacy SMAP and Legacy ICI was effected by the merger of Merger Sub with and into Legacy ICI, with Legacy ICI surviving the Merger as a wholly-owned subsidiary of Legacy SMAP.

As a result of the consummation of the Business Combination, Legacy SMAP changed its name from “SportsMap Tech Acquisition Corp.” to “Infrared Cameras Holdings, Inc.” (“ICI”).

In February 2024, ICI changed its name to MultiSensor AI Holdings, Inc.”

Pursuant to the Business Combination Agreement, at the effective time of the Business Combination, (i) each outstanding share of Legacy ICI common stock was converted into the right to receive a number of shares of Company common stock equal to the Exchange Ratio (as defined below), and (ii) each Legacy ICI option, restricted stock unit, restricted stock award that was outstanding immediately prior to the closing of the Business Combination (and by its terms did not terminate upon the closing of the Business Combination) remained outstanding and (x) in the case of options, represented the right to purchase a number of shares of Company common stock equal to the number of shares of Legacy ICI’s common stock subject to such option multiplied by the Exchange Ratio used for Legacy ICI common stock (rounded down to the nearest whole share) at an exercise price per share equal to the exercise price per share for such option divided by the Exchange Ratio (rounded up to the nearest whole cent) and (y) in the case of restricted stock units and restricted stock awards, represented a number of shares of Company common stock equal to the number of shares of Legacy ICI’s common stock subject to such restricted stock unit or restricted stock award multiplied by the Exchange Ratio (rounded down to

the nearest whole share).

The Exchange Ratio was 10.2776 of a share of Company common stock per fully diluted share of Legacy ICI common stock.

On December 19, 2023, the Company received $ 2,137 held in Legacy SMAP’s trust account net of redemptions.

Transaction costs related to the issuance of the trust shares were $ 3,910 .

As a result of the consummation of the Business Combination, Legacy SMAP changed its name from “SportsMap Tech Acquisition Corp.” to “Infrared Cameras Holdings, Inc.”.

In February 2024, Infrared Cameras Holdings, Inc changed its name to MultiSensor AI Holdings, Inc.”

Note 2 — Summary of Significant Accounting Policies

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All intercompany transactions and balances have been eliminated upon consolidation.

As a result of Legacy ICI being the accounting acquirer in the Merger, the financial reports filed with the SEC by the Company subsequent to the Merger are prepared as if ICI is the accounting predecessor of the Company.

The historical operations of Legacy ICI are deemed to be those of the Company.

Thus, the financial statements included reflect (i) the historical operating results of Legacy ICI prior to the Merger;

(ii) the consolidated results of the Company, following the Merger on December 19, 2023;

(iii) the assets and liabilities of Legacy ICI at their historical cost;

and (iv) the Company’s equity structure for all periods presented.

Reclassifications

The Company has reclassified certain prior-year amounts to conform to the current-year presentation.

Going Concern

These consolidated financial statements have been prepared in accordance with U.S.

GAAP assuming the Company will continue as a going concern.

The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company’s liquidity has improved with the Public Equity Offering and Private Placement Equity Offering (see Note 11), which both closed in July 2024.

However, the Company is still developing its customer base and has not completed its efforts to establish a stabilized source of revenue sufficient to cover its expenses.

The Company has suffered net losses, negative cash flows from operations, and negative net working capital.

The Company will continue to incur losses or limited income in the future.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

In response to these conditions, the Company will continue to pursue obtaining additional liquidity which may include raising additional funds from investors (in the form of debt, equity, or equity-like instruments), reducing operating expenses and increasing revenues.

However, these plans are subject to market conditions, and are not within the Company’s control, and therefore, cannot be deemed probable.

As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

The consolidated 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.

Use of Estimates

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Actual results may differ materially from those estimates.

Significant estimates reflected in the condensed consolidated financial statements include, but are not limited to revenue recognition, inventory classification, useful life of fixed assets, allowance for credit losses, warranty reserves, amortization of internal-use software, share-based compensation, contingencies and income taxes.

Customer Concentration

For the twelve months ended December 31, 2024, three customers accounted for 25 %, 11 % and 11 % or $ 1,840 , $ 817 and $ 799 of total net revenue, which is recorded under the entity’s one operating segment.

Significant estimates reflected in the consolidated financial statements include, but are not limited to revenue recognition, inventory classification, useful life of fixed assets, allowance for credit losses, warranty reserves, amortization of internal-use software, share-based compensation, contingencies and income taxes.

The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

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Accounts receivables are stated at net realizable value.

The allowance for doubtful accounts is determined through an evaluation of the aging of the Company’s accounts receivable balances, and considers such factors as the customer’s creditworthiness, the customer’s payment history and current economic conditions.

A provision is recognized to bad debt expense and the allowance for doubtful accounts for accounts determined to be uncollectible.

Bad debt written-off and any recovery of bad debt write-off is applied to the allowance for doubtful accounts.

The allowance for credit losses is determined through an evaluation of the aging of the Company’s accounts receivable balances, and considers such factors as the customer’s creditworthiness, the customer’s payment history and current economic conditions.

A provision is recognized to bad debt expense and the allowance for credit losses for accounts determined to be uncollectible.

Bad debt written-off and any recovery of bad debt write-off is applied to the allowance for credit losses.

The cost of inventory is determined using the weighted-average cost method and includes costs incurred to purchase and distribute inventory.

Inventory is stated at the lower of cost and net realizable value (“NRV”).

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Estimated Useful Life

25 - 39 years

Computer equipment

Furniture and fixtures

Machinery and equipment

Machinery, equipment and demo

Internal-use software

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● Recognize revenue when or as the Company satisfies a performance obligation.

Hardware Revenue

The Company sells a dynamic range of advanced infrared cameras, optical gas imaging cameras and acoustic imagers, designed and manufactured by us or through various partnerships with other manufacturers.

In accordance with the Company’s sales policy, the Company does not accept returns of hardware once sold.

The Company’s sensor hardware covers a large range of the electromagnetic and mechanical spectrums, encompassing visible-light imagers, shortwave, midwave, and longwave infrared imagers, ultraviolet imagers, acoustic imagers, and tunable diode laser emitter-detector pairs for laser absorption spectrometry.

The Company's infrared cameras are available in multiple configurations, from lower resolution models suitable for basic equipment monitoring to high-resolution cameras that provide detailed thermal images crucial for detecting subtle anomalies in complex machinery.

Each camera model also offers different field of view options, enabling precise targeting and comprehensive coverage, essential for effective predictive maintenance.

Revenue is recognized when control of the hardware is transferred to the customer.

Software Revenue

MSAI Connect is an innovative, cloud-based, AI-Powered software, that revolutionizes predictive asset reliability and process control in industrial environments.

This technology harnesses the power of continuous data inputs from advanced thermal imaging, acoustic imaging, visible imaging, and vibration sensing hardware solutions, which are strategically placed in customer's facilities to continuously monitor the health and performance of a customer's critical equipment and processes.

MSAI Connect is a subscriptions service and is generally contracted for a period of 12 months .

Annual subscription payments are generally collected in advance and revenue is recognized ratably over the subscription period.

MSAI Edge is an “on premises” software.

Seamlessly integrating with existing operational systems, MSAI Edge utilizes advanced thermal imaging, acoustic imaging, visible imaging, and vibration sensing hardware solutions strategically deployed throughout facilities.

This setup enables continuous monitoring of critical equipment and processes, delivering real-time insights into their health and performance, and is readily integrated into existing operational and business intelligence systems.

MSAI Edge is sold as both a term-based software license which generally provides access to the software for a period of 12 months and as a perpetual license.

In accordance with the Company’s sales policy, the Company does not accept returns of hardware once sold after a ten day return window.

MSAI Connect is an innovative platform that enables predictive asset reliability and process control in industrial environments, available both as cloud-based subscription service and as an on-premises deployment.

MSAI Connect, when deployed and connected to the cloud, is a subscription service and is contracted for a period of 12 to 48 months .

Subscription payments are generally collected in advance and revenue is recognized ratably over the subscription period.

MSAI Connect, when deployed on-premises, is sold as both a term-based software license, which generally provides access to the software for a period of 12 months and as a perpetual license.

Revenue for the software licenses are recognized upfront upon delivery of the software license.

The Company performs condition-based monitoring and preventive maintenance inspection services.

The Company also performs calibrations and maintenance on hardware for our customers along with training services.

Services derived from inspections, calibrations, maintenance and training are recognized at a point in time when service is provided to the client.

The Company offers installation services that cover on-site hardware mounting, sensor commissioning, and connectivity into the MSAI Connect platform.

MSAI Solution Architects configure camera views, assists with establishing initial alerting thresholds and defining regions of interest so customers can quickly realize the full benefits of the MSAI Connect platform.

The Company also performs

calibrations and maintenance on hardware.

The Company previously performed training through August 2025 and inspections through September 2025.

Services are recognized at the point in time when service is completed.

Costs to Obtain Contracts

The Company’s costs to obtain contracts, primarily commissions to its salesforce, are capitalized when the period of benefit is longer than a year.

These costs are amortized over the requisite period of benefit.

When the period of benefit is less than one year, the costs are expensed as incurred.

Contracts with Multiple Performance Obligations

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Contract Liabilities

Contract liabilities also include customer prepayments consisting of advances from customers related to hardware, subscriptions, and services for which the Company has not yet recognized revenue.

Contract liabilities include advances from customers related to hardware, subscriptions, and services for which the Company has not yet recognized revenue.

Software Development Costs

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These capitalized costs consist of internal compensation-related costs and external direct costs incurred during the application development stage.

Capitalized software development costs is included in property, plant and equipment and is amortized over 5 years on the straight-line method once development is complete.

Capitalized software development costs is included in property, plant and equipment and is amortized on the straight-line method once development is complete.

Impairment of Long-Lived Assets

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We use incremental borrowing rates based on information available at the commencement date to determine the present value of our lease payments.

The Company leases relate to its corporate office and production facilities.

We elected the practical expedient to exclude leases with terms of 12 months or less in which we are not reasonably certain that our renewal option will be exercised from the balance sheet and recognize expense on a straight-line basis over the lease term.

Share-Based Compensation

Compensation expense related to share-based transactions is measured at fair value on the grant date.

We recognize share-based compensation expense for awards with only service conditions on a straight-line basis over the requisite service period.

We recognize share-based compensation expense for awards with market conditions and awards with performance conditions on a straight-line basis over the requisite service period for each separately vesting portion of the award.

We recognize share-based compensation expense for awards with performance conditions when it is probable that the performance condition will be achieved.

We account for forfeitures of all share-based payment awards when they occur.

The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Taxes .

The Company recognizes share-based compensation expense for awards with only service conditions on a straight-line basis over the requisite service period.

The Company recognizes share-based compensation expense for awards with market conditions and awards with performance conditions on a straight-line basis over the requisite service period for each separately vesting portion of the award.

The Company recognizes share-based compensation expense for awards with performance conditions when it is probable that the performance condition will be achieved.

The Company accounts for forfeitures of all share-based payment awards when they occur.

The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Taxes (“ASC 740”).

The income tax accounting guidance results in two components of income tax expense:

current and deferred.

Current income tax expense

reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues.

Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues.

The Company recognizes a net deferred tax asset or liability based on the tax effects of the differences between the book and tax basis of assets and liabilities.

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The Company does not have any uncertain tax positions that require recognition or measurement in the Company’s consolidated financial statements.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations.

Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet.

ASC 740, “Income Taxes,” requires the Company to reduce its deferred tax assets by a valuation allowance if, based on the weight of the available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statements of operations.

Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheets.

ASC 740 requires the Company to reduce its deferred tax assets by a valuation allowance if, based on the weight of the available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or a portion of the deferred tax assets will not be realized.

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Recently Adopted Accounting Standards

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” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The Company adopted ASU 2023-07 during the year ended December 31, 2024.

See Note 18 for further details.

Recently Issued Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topics 740):

Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09 to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the potential effect that the updated standard may have on our financial statement disclosures.

The Company adopted ASU 2023-09 for the year ended December 31, 2025 on a prospective basis and accordingly, the Company’s income tax disclosures for the year 2024 have not been recast under this guidance.

Recently Issued Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03 that requires disaggregation of specific expense categories in disclosures within the footnotes to the consolidated financial statements on an annual and interim basis.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

We are currently evaluating the potential effect that the updated standard may have on our consolidated financial statement disclosures.

In September 2025, the FASB issued ASU No.

2025-06 that amends certain aspects of the accounting for and disclosure of software costs under ASC 350-40.

The new standard is effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods.

Early adoption is permitted.

The new standard may be applied prospectively, retrospectively, or via a modified prospective transition method.

The Company is currently evaluating the impact of this new standard on our consolidated financial statements and related disclosures.

Note 3 — Reverse Recapitalization

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Legacy ICI was the accounting acquirer and Legacy SMAP was the accounting acquiree for financial reporting purposes.

Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Legacy ICI with the Merger being treated as the equivalent of ICI issuing stock for the net assets of Legacy SMAP, accompanied by a recapitalization.

Accordingly, for accounting purposes, the consolidated financial statements of the Company represent a continuation of the financial statements of Legacy ICI with the Merger being treated as the equivalent of ICI issuing stock for the net assets of Legacy SMAP, accompanied by a recapitalization.

The net assets of Legacy SMAP are stated at historical cost, with no goodwill or other intangible assets recorded.

Operations prior to the Merger are presented as those of Legacy ICI.

The following table reconciles the elements of the Merger to the consolidated statement of cash flows for the year ended December 31, 2023:

Recapitalization and associated transactions

fees to underwriters and advisors

Net cash due to Merger recapitalization

Issuance of Financing notes

Net cash received from Financing transaction and Merger recapitalization

For the year ended December 31, 2023, the Company incurred transaction costs related to the Business Combination of approximately $ 7,595 which are included as a reduction in APIC on the consolidated statements of changes in shareholders’ equity.

Pursuant to the Business Combination Agreement, at the effective time of the Merger each outstanding share of Legacy ICI common stock ( 804,194 shares) were converted into common stock of the Company based on the Exchange Ratio described in Note 1.

Under the Business Combination Agreement, the surviving company would have been obligated under certain circumstances to issue 2.4 million shares of common stock following the Business Combination.

The earnout provision under the Business Combination Agreement was subsequently cancelled on March 7, 2024.

Note 4 — Revenue

The following table summarizes the Company’s revenue disaggregated by type of product and service:

Total revenue

Year Ended December 31,

Total revenue, net

The Company’s sales policy is not to accept returns of hardware once sold after a ten day return window.

However, in the first quarter of 2024, the Company recorded a sales return of $ 2,880 , which was a reduction against revenue.

This sales return was related to a transaction with a long-standing customer who also was a launch customer for the Company’s MSAI Connect platform.

There is no sales return reserve as of December 31, 2025 and December 31, 2024.

Customer Concentration

For the year ended December 31, 2025, one customer accounted for 36 %, or $ 2,008 of total net revenue, which is recorded under the entity’s one operating segment.

For the year ended December 31, 2024, three customers accounted for 25 %, 11 % and 11 % or $ 1,840 , $ 817 and $ 799 of total net revenue, which is recorded under the entity’s one operating segment.

Contract Liabilities

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Current contract liabilities were $ 1,255 and $ 483 and non-current contract liabilities were $ 751 and $ 83 as of December 31, 2025 and December 31, 2024, respectively.

The change in contract liabilities is primarily related to additional subscription sales, offset by revenue recognition over the subscription term, which is generally 12-months.

The change in contract liabilities is primarily related to additional subscription sales, offset by revenue recognition over the subscription term, which is generally 12 to 48 months.

Accounts Receivables Allowance

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Note 5 — Property, Plant and Equipment

The following table summarizes our property, plant and equipment:

Computer equipment

Furniture and fixtures

equipment, and demo

The following table summarizes the Company’s property, plant and equipment:

Machinery, equipment and demo

Internal-use software

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Depreciation expense was $ 1,299 and $ 1,140 for the years ended December 31, 2025, and 2024, respectively.

During the twelve months ended December 31, 2024, the Company disposed of certain aged or inoperable assets, primarily in the Machinery and equipment category, resulting in a loss on disposal of $ 322 .

During the year ended December 31, 2024, the Company disposed of certain aged or inoperable assets, primarily in the Machinery, equipment and demo category, resulting in a loss on disposal of $ 322 .

The related loss is recorded under Loss (gain) on asset disposal within the Consolidated Statements of Operations.

Note 6 — Other Current Assets

The following table summarizes our other current assets:

The following table summarizes the Company’s other current assets:

Prepaid expenses

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Total other current assets

During the twelve months ended December 31, 2024, the Company recorded a write-down of a deposit of $ 930 with a vendor.

In Q3 2024, we determined specific events, including the reorganization of the vendor, which has indicated that the carrying amount of the deposit might not be recoverable or provide future economic benefit to the Company.

The related loss is recorded under Other loss within the Condensed Consolidated Statements of Operations.

During the year ended December 31, 2025, the Company renegotiated its contract with the Company’s corporate credit card provider.

As a result of this renegotiation, as of December 31, 2025, the Company is required to maintain $ 100 , a decrease of $ 50 from December 31, 2024, to collateralize the Company's corporate credit cards.

These funds are held in a money market fund invested in government-backed securities.

Although the investment qualifies as a cash equivalent, the funds are not available for general use.

As a result, these funds are classified as restricted cash equivalents under the caption Other current assets on the Consolidated Balance Sheets.

During the year ended December 31, 2024, the Company recorded a write-down of a deposit of $ 930 with a vendor.

In the third quarter of 2024, the Company determined specific events, including the reorganization of the vendor, which indicated that the carrying amount of the deposit might not be recoverable or provide future economic benefit to the Company.

The related loss is recorded under Other loss within the Consolidated Statements of Operations.

Note 7 — Inventories

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Total inventories

The Company recorded an inventory impairment of $ 2,272 and $ 1,689 for the twelve months ended December 31, 2024 and 2023, respectively.

The impairment recorded during the twelve months ended December 31, 2024 was primarily related to thermal cameras specifically designed for medical applications that have been unable to be converted to alternative applications for which there is customer demand.

The impairment recorded during the twelve months ended December 31, 2023 was related to temperature reference products that were not expected to be sold based on customer demand and market conditions.

The Company recorded an inventory impairment of $ 511 and $ 2,272 for the year ended December 31, 2025 and 2024, respectively.

The impairment recorded during the year ended December 31, 2025, was primarily related to drone-related sensor payloads and accessories.

In November 2025, the Company’s management made the strategic decision to cease marketing, development, and sale of drone related product offerings.

The impairment recorded during the year ended December 31, 2024 was primarily related to thermal cameras specifically designed for medical applications that have been unable to be converted to alternative applications for which there is customer demand.

These impairments were recorded under Inventory impairment within the Consolidated Statements of Operations.

Note 8 — Accrued Expense

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Note 9 — Debt

Lines of Credit

On January 22, 2023, the Company entered into an asset-based revolving credit agreement with B1 Bank.

The line of credit provided an aggregate revolving credit commitment of $ 3,000 , subject to a borrowing base consisting of eligible accounts receivable and inventory.

The Line of Credit included borrowing capacity available for letters of credit and revolving loans available for working capital and other general corporate purposes.

The maturity date was January 22, 2024.

During the first half of 2023 the Company borrowed $ 900 , which was repaid in December 2023.

The Line of Credit agreement has since lapsed and has not been renewed.

There was no outstanding debt balance associated with the Line of Credit as of both December 31, 2024, and 2023.

Line of Credit

In December 2023, the Company entered into a line of credit agreement with First Insurance Funding.

There was an outstanding balance of $ 622 as of December 31, 2023.

During the twelve-month period ended December 31, 2024, the Company fully paid off and closed the line of credit.

During the year ended December 31, 2024, the Company fully paid off and closed the line of credit.

There was no outstanding balance on the line of credit as of December 31, 2025 and December 31, 2024.

Promissory Notes

In June 2020, the Company issued a promissory note to its majority shareholder in an amount of $ 29,718 .

On May 31, 2023, the Company completed the conversion of the outstanding principal and accrued and unpaid interests of the shareholder promissory note into shares of Class A Common Stock.

At the time of conversion, the total face value of the shareholder promissory note was $ 18,501 , comprising $ 18,247 in principal and $ 254 in accrued interest.

In exchange for the contribution of the shareholder promissory note, the

Company issued 142,028 shares of its Class A Common Stock to the creditor, in accordance with ASC 405-20-40, “Liabilities - Extinguishments of Liabilities - Derecognition”.

No cash was exchanged as part of this transaction.

In August 2022, the Company borrowed $ 1,000 under an unsecured non-interest-bearing promissory note with a related party to fund short-term working capital needs.

The promissory note shall be payable in full on any future date on which the lender demands repayment.

On December 19, 2023, in connection with the Business Combination, the promissory note was exchanged for an equal amount of Financing Notes which resulted in loss on the extinguishment of debt of $ 594 recorded under loss on financing transaction within the Consolidated Statements of Operations.

In 2022, the Company borrowed $ 200 under an unsecured promissory note with a related party to fund short-term working capital needs.

There was an outstanding balance of $ 200 , as of December 31, 2023.

The promissory note was fully paid off during Q1 2024, leaving no balance outstanding as of December 31, 2024.

In June 2023, the Company borrowed $ 375 under an unsecured promissory note to fund short-term working capital needs.

There was an outstanding balance of $ 375 as of December 31, 2023, which was fully paid off during Q3 2024, leaving no balance outstanding as of December 31, 2024.

The promissory note incurred $ 59 in interest during the twelve-month period ended December 31, 2024

In the year ended December 31, 2024, the Company repaid the promissory note in full.

As a result, there was no outstanding balance as of December 31, 2025 and December 31, 2024.

In June 2023, the Company borrowed $ 375 under an unsecured promissory note to fund short-term working capital needs, which was fully repaid in July 2024.

As a result, there was no outstanding balance as of December 31, 2025 and December 31, 2024.

In December 2023, the Company borrowed $ 200 under an unsecured non-interest-bearing promissory note with Legacy SMAP to fund short-term working capital needs.

There was an outstanding balance of $ 200 , as of December 31, 2023.

The $ 200 promissory note was converted into shares of Common Stock at a price of $ 3.33 per share.

In the year ended December 31, 2024, the promissory note was converted into shares of the Company’s Common Stock, at a price of $ 3.33 per share.

As a result, there was no outstanding balance as of December 31, 2025 and December 31, 2024.

In April, May and November 2023, Legacy SMAP secured operational working capital of $ 1,524 .

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provided that the Company has the right to extend the repayment date for up to 12 months thereafter in the event that the minimum cash transaction is not met or would not be met but for such extension.

The minimum cash transaction proceeds were not met at the closing of the Business Combination, and as such, the Company has elected to extend repayment of the promissory notes beyond closing.

On December 19, 2023, in connection with the Business Combination, $ 1,324 of the promissory notes were exchanged for an equal amount of financing notes which resulted in loss on the extinguishment of debt of $ 787 recorded under loss on financing transaction within the Consolidated Statements of Operations.

As of December 31, 2024, the balance outstanding was $ 172 .

Convertible Notes

In January 2023, the Company issued unsecured Convertible Notes with several accredited private investors in an aggregate principal amount of $ 150 .

The Convertible Notes were converted to equity on December 19, 2023, as part of the Business Combination.

The minimum cash transaction proceeds were not met at the closing of the Business Combination, and as such, the Company elected to extend repayment of the promissory notes beyond closing.

On December 19, 2023, in connection with the Business Combination, $ 1,324 of the promissory notes were exchanged for an equal amount of financing notes (the “Financing Notes”).

As of December 31, 2024, the balance outstanding was $ 172 , which was repaid during the year ended December 31, 2025.

As a result, there was no outstanding balance as of December 31, 2025.

Financing Notes

On December 19, 2023, in connection with the Business Combination, the Company issued the Financing Notes to several accredited private investors in an aggregate principal amount of $ 6,805 , including $ 2,324 of which were issued in exchange for other debt instruments as described above.

There was outstanding balance of $ 5,695 as of December 31, 2023.

During the twelve months ending December 31, 2024, $ 6,170 of the Financing Notes were converted into shares of Common Stock for 949,663 shares of Common Stock, which included 41,016 shares to a related party.

The Company issued an additional 492,500 shares of Common Stock to the converted principal balance of the Financing Notes which resulted in a loss of $ 1,381 recorded under Loss on Financing Transaction within the Consolidated Statements of Operations.

On December 19, 2023, in connection with the Business Combination, the Company issued the Financing Notes to several accredited private investors in an aggregate principal amount of $ 6,805 .

During the year ended December 31, 2024, the Financing Notes were converted into shares of Common Stock The converted principal balance of the Financing Notes resulted in a loss of $ 1,381 recorded under Loss on Financing Transaction within the Consolidated Statements of Operations.

Note 10 — Share-Based Compensation

In October 2020, the Company implemented the 2020 Equity Incentive Plan, pursuant to which the Company may grant stock options to employees and non-employees.

On December 19, 2023, the Business Combination triggered accelerated vesting of all outstanding stock options.

In December 2023, the Company implemented the 2023 Incentive Award Plan, pursuant to which the Company may grant stock options, stock appreciation rights, and restricted stock to employees and non-employees.

In June 2025, our shareholders approved an amendment to the Company’s 2023 Incentive Award Plan to increase the number of shares of Common Stock by 3,400,000 shares reserved for issuance pursuant to awards.

Stock Options

On October 9, 2020, the Company implemented the 2020 Equity Incentive Plan, pursuant to which the Company’s Board of Directors may grant stock options to employees and non-employees.

Stock options could be granted under the Plan with an exercise price equal to the share’s fair value at the grant date.

On December 19, 2023, the Business Combination triggered accelerated vesting of

all outstanding stock options.

The options expire ten years after issuance.

Total share-based compensation expense related to stock options recognized in selling, general and administrative expenses in 2023 was $ 1,197 .

The grant date fair value of each option award is estimated on the date of grant using the Black-Scholes- Merton option-pricing model based on the following weighted average assumptions:

Valuation assumptions:

Exercise price per share*

Expected term (in years)

Expected share volatility

Expected dividend yield

Risk free rate

*Adjusted for the Exchange Ratio as a result of the Business Combination.

During the twelve-months ended December 31, 2024, no option awards were granted and 182,006 option awards were forfeited.

There was no expense related to stock options for the years ended December 31, 2025 and December 31, 2024.

During the year ended December 31, 2025, no option awards were granted and 632,832 option awards were forfeited.

As of December 31, 2025, 305,348 option awards remained outstanding with a weighted average exercise price of $ 6.67 .

During the year ended December 31, 2024, no option awards were granted and 182,006 option awards were forfeited.

As of December 31, 2024, 938,180 option awards remained outstanding with a weighted average exercise price of $ 6.62 .

Restricted Stock Units

In December 2023, the Company granted 1,886,166 Transaction RSU Awards to certain employees.

These RSUs were assigned a fair value of $ 6.82 , which is based on the fair value of the Company’s common stock on the date of the grant.

In April 2024, the Company granted 1,382,909 Transaction RSU Awards to certain employees upon the effectiveness of the Form S-8.

These RSUs were assigned a fair value of $ 2.26 , which is based on the fair value of the Company’s common stock on the date of the grant.

Each Transaction RSU Award is to be settled in twelve substantially equal monthly installments starting on the date following the first anniversary of the closing of the Business Combination.

In December 2024, the Company settled 100,433 shares net of 171,990 shares withheld to cover taxes.

In August 2024, the Company granted 150,000 restricted stock units at a weighted average price of $ 2.17 , which was based on the fair value of the Company’s common stock on the date of the grant.

The following table summarizes the Company’s RSU activity during the year ended December 31, 2025 and 2024.

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Non-vested at January 1, 2024

Nonvested at December 31, 2023

( 3,370,634 )

Nonvested at December 31, 2024

The Company recognized total share-based compensation expense related to RSUs of $ 3,161 and $ 12,864 for the twelve-month periods ended December 31, 2024 and 2023, respectively, under Share-based compensation expense on the Condensed Consolidated Statements of Operations.

Equity Grants

During the twelve-month period ended December 31, 2024, the Company granted non-employee directors a total of 101,559 shares at a weighted average price of $ 2.18 .

The fair value was based on the Company’s common stock on the date of the grants.

Company recognized a total share-based compensation expense related to Board of Directors equity grants of $ 221 for the twelve-month period ended December 31, 2024 under Share-based compensation expense on the Consolidated Statements of Operations.

Non-vested at December 31, 2024

( 1,118,706 )

Non-vested at December 31, 2025

During the years ended December 31, 2025 and 2024, the Company granted to employees 2,214,062 and 150,000 restricted stock units (“RSUs”) at a weighted average price of $ 1.41 and $ 2.17 , respectively.

The grant price for RSU awards was the closing price of our Common Stock on the day immediately prior to the grant, consistent with the Company’s policies.

RSUs to employees granted in the first quarter of 2025 primarily vested one -fourth of the award value on the date of grant, with the remaining restricted shares vesting in equal installments annually, while those granted in the second, third, and fourth quarters vest in equal installments annually on January 1st of each year beginning January 1, 2027.

The Company recognized share-based compensation expense related to RSUs of $ 1,234 and $ 3,161 for the year ended December 31, 2025 and 2024, respectively under Share-based compensation expense on the Consolidated Statements of Operations.

During the year ended December 31, 2025, 619,615 unvested RSUs were forfeited, resulting in reversal of $ 149 of Share-based compensation expense previously recognized on the Consolidated Statements of Operations.

As of December 31, 2025, total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock units was $ 1,291 , which is expected to be recognized over the remaining weighted-average vesting period of 2.5 years .

During the years ended December 31, 2025 and 2024, the Company’s non-employee directors earned $ 310 and $ 221 , respectively, in compensation for their service on the board, which resulted in the issuance of 542,882 shares granted under the 2023 Incentive Award Plan.

These grants are recognized as Share-based compensation expense on the Consolidated Statements of Operations.

During the year ended December 31, 2025, the Company agreed to settle sales commissions owed to certain members of our salesforce in RSUs, which resulted in the issuance of 118,456 shares granted under the 2023 Incentive Award Plan.

The Company recorded $ 121 for these commissions recognized as Share-based compensation expense in the Consolidated Statements of Operations.

In December 2023, the Company granted 1,886,166 Transaction RSU Awards to certain employees.

These RSUs were assigned a fair value of $ 6.82 , which is based on the fair value of the Company’s common stock on the date of the grant.

In April 2024, the Company granted 1,382,909 Transaction RSU Awards to certain employees upon the effectiveness of the Form S-8.

These RSUs were assigned a fair value of $ 2.26 , which is based on the fair value of the Company’s common stock on the date of the grant.

Each Transaction RSU Award was to be settled in twelve substantially equal monthly installments starting on the date following the first anniversary of the closing of the Business Combination.

In December 2024, the Company settled 100,433 shares and withheld 171,990 shares to cover taxes.

During the year ended December 31, 2025, the Company completed the remaining eleven monthly installments, settling 1,819,203 shares and withholding 1,177,449 shares to cover taxes.

Note 11 — Shareholders’ Equity

Total authorized capital stock of the Company as of December 31, 2024, is 300,000,000 shares of common stock.

As of December 31, 2024, and December 31, 2023, there were 30,526,052 and 11,956,823 shares of common stock issued and outstanding and no shares of preferred stock issued or outstanding, respectively.

Total authorized capital stock of the Company as of December 31, 2025, is 300,000,000 shares of common stock and 10,000,000 shares of preferred stock, par value of $ 0.0001 per share.

As of December 31, 2025, there were 80,304,531 shares of common stock issued and outstanding and no shares of preferred stock issued or outstanding.

Equity Line of Credit

On April 16, 2024, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with B.

On April 16, 2024, we entered into that certain purchase agreement (the “Purchase Agreement”) with B.

Riley Principal Capital II, LLC (“B.

Riley”), pursuant to which, upon the terms and subject to the satisfaction of the conditions contained in the Purchase Agreement, we have the right, in our sole discretion, to sell to B.

Riley up to $ 25,000 of shares of the Common Stock (subject to certain limitations contained in the Purchase Agreement), from time to time during the term of the Purchase Agreement through a Market Open Purchase or an Intraday Purchase on any Purchase Date (each term as defined in the Purchase Agreement).

Sales of Common Stock pursuant to the Purchase Agreement, and the timing of any sales, are solely at our option, and we are under no obligation to sell any securities to B.

Riley under the Purchase Agreement (such transaction, the “B.

Riley Transaction”).

The Company evaluated this common stock purchase agreement to determine whether they should be accounted for considering the guidance in ASC 815-40, “Derivatives and Hedging - Contracts on an Entity’s Own Equity” (“ASC 815-40”) and concluded that it is an equity-linked contract that does not qualify for equity classification, and therefore requires fair value accounting as a derivative.

The Company has analyzed the terms of the freestanding purchased put right and has concluded that it had insignificant value as of December 31, 2024.

Pursuant to the terms of the Purchase Agreement, at the time the Purchase Agreement and the Registration Rights Agreement, as defined below, were signed, the Company issued 171,821 shares of common stock, to B.Riley as consideration for its commitment to purchase shares of the Company’s common stock under the Purchase Agreement.

The cost of this on the effective date of the equity line of credit (“ELOC”) was $ 500 and component of Other (Income) Expenses, Net in the accompanying Consolidated Statements of Operations.

Under the terms of the Common Stock Purchase Agreement, if the aggregate proceeds received by B.

Riley from its resale of the Commitment Shares is less than $ 500 then, upon notice by B.

Riley, the Company must pay the difference between $ 500 , and the aggregate proceeds received by B.

Riley from its resale of the Commitment Shares.

On December 31, 2024, the fair market value of the Commitment Shares was $ 316 .

Therefore, the Company’s make-whole obligation was $ 184 , and this amount was recorded in Other Current Liabilities in the accompanying Consolidated Balance Sheets.

The change in the fair value of the make-whole obligation is recorded as a component of Other (Income) Expenses, Net in the accompanying Consolidated Statements of Operations.

On January 8, 2025, B.Riley notified the Company that it had sold the Commitment Shares, which resolved the liability.

Through December 31, 2024, the Company utilized the B.

Riley Committed Equity Facility to sell 23,999 shares of Common Stock for cash proceeds totaling $ 58 .

Offering costs associated with these transactions were recorded as Other (Income) Expenses, Net in the Consolidated Statements of Operations for the twelve months ended December 31, 2024 and in operating activities in the Consolidated Statements of Cash Flow.

Pursuant to the Purchase Agreement, we have the right, but not the obligation, to sell to B.

Riley up to $ 25,000 worth of Common Stock (the “Purchase Shares”) over the term of the Purchase Agreement, beginning only after certain conditions set forth in the Purchase Agreement have been satisfied.

In accordance with the Purchase Agreement, on April 16, 2024, we issued shares of our Common Stock to B.

Riley as consideration for its commitment to purchase the Purchase Shares under the Purchase Agreement (the “Commitment Shares”).

Under the terms of the Purchase Agreement, in certain circumstances, we may be required to pay B.

Riley up to $ 500 (or 2.0 % of the total commitment value under the Purchase Agreement), in cash, as a “make-whole” payment to the extent the aggregate amount of cash proceeds, if any, received by B.

Riley from the resale of the Commitment Shares prior to certain times set forth in the Purchase Agreement, is less than $ 500 , in exchange for B.

Riley returning to us for cancelation all of the Commitment Shares we originally issued to B.

Riley upon execution of the Purchase Agreement that were not previously resold.

On January 8, 2025, B.

Riley notified the Company that it had sold the Commitment Shares, which resolved the liability.

Accordingly, $ 185 was recorded in Other expense (income), net in the Consolidated Statements of Operations for the year ended December 31, 2025.

Through December 31, 2025 and 2024, the Company utilized the B.

Riley Committed Equity Facility to sell 1,791,732 and 23,999 shares of Common Stock for cash proceeds totaling $ 4,657 and $ 58 , respectively.

Effective February 2, 2026, the Company terminated the Purchase Agreement.

At the Market Sales Agreement

On March 28, 2025, we entered into an at market issuance sales agreement (the “2025 Sales Agreement”) with B.

Riley Securities, Inc., as sales agent or principal (“B.

Riley Securities”), as sales agent or principal, pursuant to which the Company could offer and sell shares of the Company’s Common Stock, having an aggregate market value of up to $ 8,625 from time to time through B.

Riley Securities.

Riley Securities is entitled to compensation at a fixed commission rate of the gross sales price of the shares of Common Stock sold pursuant to the 2025 Sales Agreement.

Through December 31, 2025, 151,072 shares were sold under the 2025 Sales Agreement for cash proceeds totaling $ 116 .

Effective February 2, 2026, the Company terminated the 2025 Sales Agreement.

2025 Private Placement

On October 24, 2025, the Company entered into a securities purchase agreement (the “2025 Purchase Agreement”) with 325 Capital, LLC (“325 Capital”) and certain other accredited investors signatory thereto (collectively with 325 Capital, the “Investors”), pursuant to which it agreed to sell to the Investors (i) 34,229,826 shares of Common Stock at a purchase price of $ 0.409 per share and (ii) the warrants (the “2025 Warrants”) to purchase up to 68,459,652 shares of Common Stock (collectively, the “2025 Private Placement”), with an exercise price of $ 0.409 per share, for an aggregate purchase price of $ 14,000 before deducting placement agent fees and offering expenses.

The 2025 Purchase Agreement and the 2025 Warrants provide that each Investor’s beneficial ownership of Common Stock, including after taking into account the full exercise of such Investor’s 2025 Warrant, shall in no event exceed 49.5 % of the issued and outstanding Common Stock (the “Maximum Ownership Limitation”).

In the event that an Investor’s 2025 Warrant is not exercisable for shares of Common Stock due to the beneficial ownership of such Investor exceeding the Maximum Ownership Limitation, the applicable 2025 Warrant will be exercisable for shares of the Company’s Series A Convertible Preferred Stock, par value $ 0.0001 per share, that are convertible into an equivalent number of shares of Common Stock for which the 2025 Warrant is exercisable.

The 2025 Warrants will expire seven years from the date of issuance.

At the initial closing of the Private Placement on October 30, 2025, the Company issued to the Investors 6,970,890 shares of Common Stock, and 2025 Warrants to purchase up to 13,941,780 shares of Common Stock, for gross proceeds of $ 2,851 before deducting placement agent fees and offering expenses.

On December 23, 2025, the final closing occurred and the Company issued 27,258,936 shares of Common Stock and 2025 Warrants to purchase up to 54,517,872 shares of Common Stock to the Investors and the remaining $ 11,149 in gross proceeds before deducting placement agent fees and offering expenses.

Total transaction costs paid to advisors, professional services, and other vendors related to the 2025 Private Placement were $ 1,418 and were recorded as a reduction of additional paid in capital.

2025 Registered Direct Offering

On November 4, 2025, the Company entered into a common stock purchase agreement with a single institutional investor, pursuant to which the Company agreed to issue and sell (i) 4,595,000 shares (the “2025 Registered Direct Shares”) of the Company’s Common Stock and (ii) pre-funded warrants (the “2025 Pre-Funded Warrants”) to purchase up to 6,100,000 shares of Common Stock (the “2025 Pre-Funded Warrant Shares”) in a registered direct offering (the “2025 Registered Direct Offering”).

The 2025 Registered Direct Shares, 2025 Pre-Funded Warrants and 2025 Pre-Funded Warrant Shares are registered pursuant to an effective shelf registration statement on Form S-3 (File No.

333-284437), and a base prospectus and prospectus supplement relating to the 2025 Registered Direct Offering, in each case filed with the SEC.

The offering price was $ 1.35 per share of Common Stock and $ 1.3499 per Pre-Funded Warrant, which is the price of each share of Common Stock sold in the 2025 Registered Direct Offering, minus the $ 0.0001 exercise price per 2025 Pre-Funded Warrant.

The 2025 Registered Direct Offering closed on November 5, 2025, and resulted in gross proceeds to the Company of approximately $ 14,400 , before deducting advisory fees and other offering expenses payable by the Company.

Following the delivery of exercise notices to the Company on November 5, 2025 and November 6, 2025, the 2025 Pre-Funded Warrants were exercised in full.

Total transaction costs paid to advisors, professional services, and other vendors related to the Registered Direct Offering were $ 921 and were recorded as a reduction of additional paid in capital.

2024 Public Equity Offering

On July 1, 2024, the Company consummated a public offering (the “Public Offering”) of 6,250,000 shares of common stock, par value $ 0.0001 per share.

The common stock was sold at a public offering price of $ 1.60 per share less the underwriting discount.

In connection with the Public Offering, the underwriters were granted a 45-day option from the date of the prospectus to purchase up to 937,500 additional shares of Common Stock at the public offering price, less the underwriting discount.

On June 28, 2024, the underwriters fully exercised the over-allotment option.

On July 1, 2024, we consummated a public offering (the “2024 Public Offering”) of 6,250,000 shares of Common Stock, which was sold at a public offering price of $ 1.60 per share.

In connection with the 2024 Public Offering, the underwriters were granted a 45-day option from the date of the prospectus to purchase up to 937,500 additional shares of Common Stock at the public offering price, less the underwriting discount, and on June 28, 2024, the underwriters fully exercised the over-allotment option.

Gross proceeds from the Public Offering were $ 11,500 before deducting underwriting discounts, commissions and offering expenses of $ 1,853 .

Private Placement Equity Offering

On June 27, 2024, the Company entered into a placement agency agreement for the private placement (the “2024 Private Placement”) of (i) 2,772,561 shares of common stock (the “Placement Shares”);

and (ii) pre-funded warrants to purchase up to 6,602,439 shares of common stock (the “Pre-Funded Warrants”).

The purchase price of the Placement Shares was $ 1.60 per share and the purchase

price of each Pre-Funded Warrant was $ 1.5999 .

2024 Private Placement

On July 1, 2024, we issued and sold in a private placement (the “2024 Private Placement”) (i) 2,772,561 shares (the “Placement Shares”) and (ii) pre-funded warrants to purchase 6,602,439 shares of Common Stock (the “Pre-Funded Warrants”) for aggregate gross proceeds of $ 15,000 before deducting placement agent fees and offering expenses.

The purchase price of the Placement Shares was $ 1.60 per share, and the purchase price of each Pre-Funded Warrant was $ 1.5999 .

The exercise price for each share of Common Stock issuable upon exercise of the Pre-Funded Warrants is $ 0.0001 per share.

The closing of the 2024 Private Placement occurred simultaneously with the closing of the Public Offering on July 1, 2024.

Upon the closing of the 2024 Private Placement, the Company entered into a voting agreement, dated as of July 1, 2024, with certain stockholders of the Company representing greater than 50% of the issued and outstanding Common Stock of the Company (prior to the Public Offering and 2024 Private Placement) to support an authorization by the Company’s stockholders for the Company to issue the share of Common Stock underlying the Pre-Funded Warrants in accordance with applicable Nasdaq rules.

On August 23, 2024, the proposal was voted upon and approved by our stockholders, and on September 24, 2024, the holders of the pre-funded warrants exercised their warrants in exchange for Common Stock.

Gross proceeds from the 2024 Private Placement were $ 15,000 before deducting underwriting discounts, commissions and offering expenses of $ 2,418 .

The Pre-Funded Warrants were not exercisable unless or until approved by the Company’s stockholders, are not subject to any redemption provision and, once exercisable, can be exercised for cash or on a cashless basis at the discretion of the holder.

The Pre-Funded Warrants do not have any voting rights but have the right to participate in any dividends or distributions made by the Company.

On June 27, 2024, we also entered into a securities purchase agreement (the “Securities Purchase Agreement”) with 325 Capital (collectively with its affiliates, the “Purchaser”), pursuant to which the Purchaser agreed to purchase all of the Placement Shares and Pre-Funded Warrants offered in the 2024 Private Placement.

Pursuant to the Securities Purchase Agreement, we have made the following corporate governance changes, which are to remain in effect for so long as the Purchaser beneficially owns at least 10.0 % of the then-outstanding shares of Common Stock:

● our board of directors (the “Board”) appointed a representative of the Purchaser as a member of the Board and as a member of the Board’s compensation and nominating and corporate governance committees;

● the Board established a new finance committee consisting of four independent directors, with the purpose of improving the Company’s operational and financial performance, including evaluating the Company’s budgets, capital allocation practices and policies and review of strategic alternatives, and making recommendations to the Board on the foregoing matters;

● the Board amended the Amended and Restated Bylaws of the Company to permit any single director to be able to call a special meeting of the Board and bring forward business at any regular or special meeting of the Board.

On September 24, 2024, the holders of the Pre-Funded Warrants exercised their warrants in exchange for Common Stock.

Note 12 — Earnings (loss) per Share

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The following table summarizes the computation of basic and diluted earnings (loss) per share:

Basic and Diluted Net loss attributable to common stockholders

Year Ended December 31,

Basic and diluted net loss attributable to common shareholders

Weighted average number of shares:

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Diluted - common Stock

Basic Net loss per share attributable to common stockholders

Diluted Net loss per share attributable to common stockholders

The table above does not include (i) up to 8,625,000 shares of new Common Stock that will be issuable upon exercise of the Company’s outstanding public warrants at an exercise price of $ 11.50 per share for cash, (ii) up to 506,250 shares of new Common Stock that will be issuable upon exercise of the Company’s outstanding private warrants at an exercise price of $ 11.50 per share, (iii) up to 340,250 shares of Common Stock that will be issuable upon exercise of the Financing Warrants at an exercise price of $ 11.50 per share for cash, (iv) shares of Common Stock that will be issuable upon the exercise of Company’s Options, (v) 1,728,986 shares of Common Stock underlying the Company’s RSU Awards that were vested at January 1, 2024 but not issued as of December 31, 2024, (vi) 1,267,667 shares of Common Stock underlying the Company’s RSU Awards that were vested at April 1, 2024 but not issued as of December 31, 2024 or (vii) 150,000 RSU awards issued under the 2023 Incentive Award Plan.

Basic net loss per share attributable to common shareholders

Diluted net loss per share attributable to common shareholders

The table above does not include the following potential anti-dilutive shares:

(i) up to 8,625,000 shares of Common Stock that will be issuable upon exercise of the Company’s outstanding public warrants at an exercise price of $ 11.50 per share for cash, (ii) up to 506,250 shares of Common Stock that will be issuable upon exercise of the Company’s outstanding private warrants at an exercise price of $ 11.50 per share, (iii) up to 340,250 shares of Common Stock that will be issuable upon exercise of the financing warrants at an exercise price of $ 11.50 per share for cash, (iv) shares of Common Stock that will be issuable upon the exercise of Company’s outstanding stock options, (v) 1,795,200 performance stock units committed via employment agreements but unissued as of December 31, 2025, (vi) up to 68,459,652 shares of Common Stock that will be issuable upon the exercise of the 2025 Warrants at an exercise price of 0.409 per share for cash.

Note 13 — Related Party Transactions

2025 Private Placement

Please refer to the discussion in Note 11 regarding 325 Capital’s participation in the 2025 Private Placement.

325 Capital and its affiliates beneficially own more than 5.0 % of the Company’s outstanding Common Stock.

In addition, Daniel M.

Friedberg, who is a Managing Member of 325 Capital, serves on the Company’s board of directors.

Related Party Promissory Notes

Please refer to the discussion in Note 9 regarding promissory notes with related parties.

The Company leases its corporate office and one production facility from its majority shareholder under two operating lease agreements.

The Company paid the majority shareholder total lease payments $ 105 and $ 163 for the years ended December 31, 2024, and 2023, respectively.

Note 14 — Leases

Operating leases

The Company leases consist of operating leases related to corporate offices and production facilities.

Supplemental Consolidated Balance Sheet information for operating leases on December 31, 2024, and 2023, is as follows:

Right-of-use assets, net

Right-of-use liabilities, current

Components of operating lease cost for the twelve months ending December 31, 2024, and 2023:

Components operating lease cost

Operating lease cost

Short-term leases

For the years ended December 31, 2024, and 2023, the Company incurred operating lease expense totaling $ 196 and $ 174 , respectively, and operating lease expense was recognized on a straight-line basis over the term of the lease.

Remaining operating lease term and discounted rates as of December 31, 2024, and 2023, are as follows:

Weighted-average remaining lease term (years)

Weighted-average discount rate

Supplemental cash flow information related to leases for the twelve months ending December 31, 2024, and 2023, is as follows:

Right of use assets obtained in exchange for lease liabilities

Cash paid for amounts included in the measurement of lease liabilities

Operating lease payments

Maturities of operating lease liabilities for continuing operations are as follows:

For the twelve months ending December 31,

Total operating lease payments

imputed interest

Present value of operating lease liabilities

The Company leases its corporate office and production facility from a related party.

As of July 29, 2025, the lessor no longer qualifies as a related party under the applicable accounting guidance, and payments made after that date do not constitute related party transactions.

Total related party cash payments for the leases were $ 54 and $ 105 for the year ended December 31, 2025 and 2024, respectively.

Note 14 — Commitments and Contingencies

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Note 15 — Income taxes

Income (loss) before provision for or (benefit from) income taxes for the years ended December 31, 2025 and December 31, 2024 are as follows:

Year Ended December 31,

Total income (or loss) before income tax expense (or benefit)

The components of the provision (benefit) for income taxes for the years ended December 31, 2025 and 2024 were as follows:

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Total income tax provision

Significant deferred tax assets (liabilities) follow:

Deferred tax assets:

Accruals, Others

UNICAP & Inventoriable Costs

Inventory impairment

Accruals, other

Interest carryforward

Financial Instruments

Net operating losses

Financial instruments

Intangibles & start-up costs

UNICAP & inventoriable costs

Book tax depreciation

Valuation allowance

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Prepaid expense

Other (leases)

Method change

Book tax depreciation

1 unchanged sentence

Deferred tax (liabilities) assets, net

The total provision (benefit) for income taxes for the years ended December 31, 2024, and 2023 varies from the federal statutory rate as a result of the following:

The total provision (benefit) for income taxes for the years ended December 31, 2025 varies from the federal statutory rate as a result of the following:

Federal statutory tax rate

State and local income taxes, net of federal income tax effect 1

Changes in valuation allowances

Nontaxable or nondeductible items

Share-based payment awards

Loss on transaction

Other adjustments

Amended return benefit

Prior year deferred true-up

Other adjustments

Effective tax rate

1 Texas is the state that contributes to the majority of the tax effect in this category.

The total provision (benefit) for income taxes for the years ended December 31, 2024 varies from the federal statutory rate as a result of the following:

Loss before income tax expense

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As a result of the Company’s evaluation of both the positive and negative evidence, the Company determined it does not believe it is more likely than not that its deferred tax assets will be utilized in the foreseeable future and has recorded a valuation allowance.

For the year ended December 31, 2025, the Company recognized an income tax benefit primarily driven by the change in valuation allowance.

For the year ended December 31, 2024, the Company recognized an income tax benefit primarily driven by federal tax refunds.

For the year ended December 31, 2023, the Company recognized income tax expense because of a true-up on the federal tax payable and interest on late payment of the federal tax payable.

During 2024, the Company determined that it experienced an ownership change as defined under Internal Revenue Code Section 382.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”).

The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and business interest expense limitation.

ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted.

As a result, the Company evaluated the legislation and determined it did not have a material effect on the provision for income taxes for the year ended December 31, 2025.

During 2025 and 2024, the Company determined that it experienced an ownership change as defined under Internal Revenue Code Section 382.

The result of the ownership change is subjecting tax attributes to an annual limitation which includes the utilization of the Company's net operating losses.

As a result of the merger with Legacy SMAP, the Company acquired a federal net operating loss tax attribute.

In addition, as a result of the merger with Legacy SMAP, the Company acquired a federal net operating loss tax attribute.

These net operating losses are fully limited under section 382.

The Company will continue to monitor ownership changes throughout future periods.

Changes in the valuation allowance are as follows:

Changes in the valuation allowance were as follows:

Balance, beginning of the year

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The Company intends to continue maintaining a valuation allowance on its deferred tax assets until there is sufficient evidence to support reversal of all or some portion of these allowances.

The Company reported U.S.

net operating loss carryforwards of $ 30,797 and state net operating loss carryforward of $ 39,677 .

The Company reported gross U.S net operating loss carryforwards of $ 44,875 and state net operating loss carryforward of $ 57,333 .

For federal income tax purposes the $ 44,875 of net operating losses will not expire.

For state income tax purposes, the Company has $ 51,294 of net operating losses which are subject to expiration.

The carryforward life for the net operating losses is dependent on the rules for each jurisdiction and therefore the losses are subject to expiration with the earliest year being 2037 and the latest year being 2044.

The Company experienced an ownership change on July 1, 2024, and as a result both federal and state net operating losses before that date are subject to 382 limitations.

In addition, the Company also had U.S.

interest limitation carryforwards of $ 133 with an indefinite expiration date.

The carryforward life for the state net operating losses is dependent on the rules for each jurisdiction and therefore the state losses are subject to expiration with the earliest year being 2032 and the latest year being 2045.

The Company experienced an ownership change on July 1, 2024 and believes an ownership change occurred in 2025, however, the exact date of such ownership change has not yet been determined.

As a result both federal and state net operating losses before that date are subject to 382 limitations.

The following table summarizes cash for income taxes paid:

All other state

Income taxes, net of amounts refunded

The Company recognizes interest and penalties related to unrecognized tax benefits within Income tax expense (benefit) in the Consolidated Statement of Operations.

There were no unrecognized tax benefits or activity for the years ended December 31, 2025 and 2024.

The Company recognizes interest and penalties related to unrecognized tax benefits within the provision for income taxes in the consolidated statement of operation and as of December 31, 2024, and 2023.

We file income tax returns in the U.S.

as well as in various states and the Company notes that the earliest year open to examination is 2020.

The Company files income tax returns in the U.S.

as well as in various states and notes that the earliest year open to examination is 2021.

The Company is not currently under examination by any major tax jurisdiction.

Note 17 — Fair Value Measurements

The Company’s financial instruments consist of cash and cash equivalents, accounts receivables and accounts payables, where the carrying amount approximates fair value due to the short-term nature of each instrument.

The fair value of the Company’s outstanding warrants as of December 31, 2024, and 2023 was $ 10 and $ 49 , respectively, and was classified as Level 3 within the fair value hierarchy.

Fair Value Assumption – Warrants

December 31, 2024

Exercise Price

Maturity date

Fair Value Assumption – Warrants

December 31, 2023

Exercise Price

Maturity date

The Financing Notes (see Note 9) which were converted to equity during the twelve months ending December 31, 2024, were valued as of December 31, 2023 using a probability-weighted expected return method (“PWERM”) based on the probabilities of different potential outcomes for the note.

The fair value of the convertible note was determined using the following significant unobservable inputs.

The fair value of the Financing Notes as of December 31, 2023 is $ 5,695 and is classified as Level 3 within the fair value hierarchy.

Fair Value Assumption – Financing Note

December 31, 2023

Discount rate

Maturity date

Note 16 — Segments and geographical information

The Company has one reportable and operating segment, the manufacturing and distributing of sensor-based systems, software, and services.

The Company has one reportable and operating segment.

The Company holds 99 % of its assets within the United States.

The Company derives revenue primarily in North America and manages the business activities on a consolidated basis.

The following table summarizes revenue based upon the customers’ country of origin:

The following table summarizes revenue based upon the customers’ shipping addresses:

Year Ended December 31,

United States

2 unchanged sentences

The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer.

The CODM uses consolidated net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the segment or

into other parts of the entity, such as for acquisitions.

The CODM uses consolidated net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the segment or into other parts of the entity, such as for acquisitions.

Net income is used to monitor budget versus actual results and to perform competitive analysis through benchmarking to competitors.

1 unchanged sentence

The table below summarizes the significant expense categories regularly reviewed by the CODM for the years ended December 31, 2025, and 2024:

See the consolidated financial statements for other financial information regarding the Company’s operating segment.

Year ended December 31,

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Provision for income taxes

See the consolidated financial statements for other financial information regarding the Company’s operating segment.

Note 17 — Subsequent Events

On January 7, 2025, the Company sold 1,581,213 shares of the Company’s common stock via the Company’s Equity Line of Credit (see Note 11).

As a result of such sales, the Company received net proceeds of $ 4,324 .

On March 13, 2026, the Company entered into an at market issuance sales agreement (the “2026 Sales Agreement”) with Roth Capital Partners, LLC and H.C.

Wainwright & Co., LLC as sales agents or principals (the “Agents”), under which the Company may offer and sell shares of the Company’s Common Stock having an aggregate market value of up to $ 60,000 from time to time through the Agents.

The Company intends to use the net proceeds from sales of Common Stock under the 2026 Sales Agreement, if any, for working capital and general corporate purposes.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data