In connection with the preparation of the Company’s consolidated financial statements for the year ended December 31, 2025, the Company engaged a specialist to conduct a sales and use tax nexus study. Management concluded that the Company had a historical state sales and use tax liability related to prior periods. The Company is required and subject to collect and remit sales and use tax in state and local jurisdictions where it has economic and physical nexus. During the year ended December 31, 2025, the Company determined that a sales tax liability existed and estimated a liability for sales transactions processed in jurisdictions where it had not previously reported.

The liability includes an estimate for each state, to account for any penalties and interest that is due on the base tax amount owed. The error resulted in an understatement of accrued expenses for state and local sales tax, including related interest and penalties, in the condensed consolidated financial statements as of and for the three months ended March 31, 2025. As a result of correcting this liability, general and administrative expenses and interest expense were increased in the affected periods, resulting in a one-time, non-recurring increase in reported expenses for the three months ended March 31, 2025. The Company is in the process of finalizing remediation of the underlying sales tax obligations.

In addition to the errors related to sales tax liabilities, the Company identified that revenue was overstated and current portion of contract liabilities and contract liabilities, less current portion were understated related to extended warranties for the three months ended March 31, 2025. The errors related to the Company's accounting for extended warranty contracts sold at a discount in conjunction with its products. When extended warranties were sold at a discounted price, the Company did not allocate the discount proportionally across all performance obligations in the contract in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers.

Specifically, ASC 606 requires that a discount present in a contract be allocated proportionally across all performance obligations based on their relative standalone selling prices, unless specific criteria are met to allocate the discount entirely to one or more performance obligations. The Company incorrectly absorbed the entire discount within the extended warranty performance obligation rather than allocating a proportionate share of the discount to the other performance

obligations in the contract. This caused the transaction price allocated to the extended warranty to be understated and the transaction price allocated to the other performance obligations to be overstated, resulting in revenue being recognized on the other performance obligations in excess of the amounts that should have been allocated to them. Consequently, revenue was overstated and contract liabilities associated with the extended warranty was understated for the three months ended March 31, 2025.

The following table presents the impact of the restatement on the Company’s previously issued Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2025.


(in thousands, except per share data)		For the three months ended March 31, 2025
Unaudited Condensed Consolidated Statement of Comprehensive Loss	Notes	As Previously Reported		Adjustment		As Restated
Revenue	(i)	$	9,342	$	(9)	$	9,333
Gross Margin		7,384		(9)		7,375
General and administrative	(ii)	4,467		376		4,843
Total Operating Expenses		6,398		376		6,774
Operating Income (Loss)		986		(385)		601
Interest expense	(iii)	(1,852)		(57)		(1,909)
Total Other Expense		(6,662)		(57)		(6,719)
Net Loss		(5,676)		(442)		(6,118)
Total Comprehensive Loss		(5,676)		(442)		(6,118)
Net Loss per share: basic and diluted		$	(0.66)	$	(0.05)	$	(0.72)

(i) The $9 thousand decrease in revenue for the three months ended March 31, 2025, is related to the adjustment to revenue associated with extended warranties.

(ii) The $0.4 million increase in general and administrative expenses for the three months ended March 31, 2025, is related to the adjustment for estimated state and local sales tax expense and for the related penalties on outstanding sales tax balances.

(iii) The $57 thousand increase in interest expense for the three months ended March 31, 2025, is related to the adjustment for estimated interest on outstanding state and local sales tax balances.

The Company maintains a full valuation allowance against its net deferred tax assets. Accordingly, the restatement adjustments resulted in no net income tax benefit or expense for any period presented, and the effective tax rate is unchanged.