Revision of Previously Issued Financial Statements

In connection with the preparation of these unaudited condensed consolidated interim financial statements for the three months ended March 31, 2026, the Company identified errors in the accounting for the Company's Series 1 Convertible Preferred Stock (the “Series 1 Shares”) and Series 2 Convertible Preferred Stock (the “Series 2 Shares” and, together with the Series 1 Shares, the “Preferred Shares”). The errors relate to two matters:

Error 1 -- Embedded Derivative Bifurcation

The Series 1 Shares and Series 2 Shares each contain an embedded conversion feature with a variable conversion price that, upon the occurrence of specified trigger events, adjusts to a percentage of the lowest volume-weighted average price over a specified lookback period, subject to a floor price. The Company previously accounted for each series of Preferred Shares as a single unit classified entirely within permanent stockholders' equity. Upon further analysis under ASC 815-15, the embedded conversion features fail the indexation criteria of ASC 815-40-15 due to the variable conversion price formula and accordingly are required to be bifurcated and accounted for as compound embedded derivative liabilities measured at fair value, with changes in fair value recognized in earnings each reporting period. No derivative liability was recognized in any previously filed financial statement from inception of each instrument (January 29, 2025 for the Series 1 Shares and March 25, 2025 for the Series 2 Shares) through December 31, 2025. The Series 1 Shares were fully converted during the second quarter of 2025 and accordingly carry a zero derivative liability balance as of December 31, 2025 and March 31, 2026.

Error 2 -- Mezzanine Classification

Separately, each series of Preferred Stock host instrument, after bifurcation of the embedded derivative, contains redemption features that are contingently exercisable upon the occurrence of events not solely within the control of the Company. Under ASC 480-10-S99-3A (ASR 268), the host instruments are required to be classified in temporary equity (mezzanine), presented between liabilities and stockholders' equity on the condensed consolidated balance sheet, rather than within permanent stockholders' equity as previously reported. As the Series 1 Shares were fully converted during the second quarter of 2025, the mezzanine balance for the Series 1 Shares is zero as of December 31, 2025 and March 31, 2026. As of December 31, 2025 and March 31, 2026, there were Series 2 Shares outstanding, which are classified as temporary equity (mezzanine) as of those dates.

Materiality Assessment

Management performed a materiality assessment under SAB Topics 1.M and 1.N (SAB 99 and SAB 108) and concluded that neither error, individually or in the aggregate, was material to any previously filed interim or annual financial statement. Error 1 is an accumulating income statement error; because correcting the cumulative effect in the current period would disproportionately distort the three months ended March 31, 2026, the Company has revised the prior period comparative financial information presented in this Report in accordance with ASC 250-10-45-23. This revision does not represent a restatement of previously issued financial statements. Error 2 is a classification error with no effect on net income, earnings per share, total assets, total liabilities, or net assets; it has been corrected as an immaterial out-of-period reclassification. The prior period financial statements were not and are not considered materially misstated.

The accounting errors described above relate solely to the technical classification of the Preferred Stock on the balance sheet and, with respect to Error 1, to the measurement of the embedded derivative liability. These errors had no impact on the Company’s cash position, liquidity, operating cash flows, revenue, cost of goods sold, operating expenses, or ability to meet its obligations. The revision to correct Error 2 (mezzanine classification) is purely a reclassification within total equity on the balance sheet, with no effect on net income, net loss per share, total assets, total liabilities, or total equity. The revision to correct Error 1 (derivative bifurcation) results in a reclassification of amounts between stockholders’ equity and derivative liabilities and changes the presentation of certain non-cash items within the statement of operations (specifically, the recognition of changes in fair value of derivative liabilities and the reclassification of preferred dividends as deemed dividends below net loss), but does not affect operating loss, cash flows from operations, or the Company’s ability to fund its business. As described in Note 9, subsequent to March 31, 2026, on June 29, 2026, the Company amended and restated the terms of the Series 2 Shares to eliminate the contractual provisions that gave rise to both errors and believes the amended terms support permanent equity classification for the Series 2 Shares on a prospective basis. The Series 1 Shares were converted into our Class A common stock during the second quarter of 2025, and no Series 1 Shares were outstanding as of either December 31, 2025 or March 31, 2026.

Method of Correction

The comparative condensed consolidated balance sheet as of December 31, 2025, the comparative condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2025, the comparative condensed consolidated statement of stockholders' equity for the three months ended March 31, 2025, and the comparative condensed consolidated statement of cash flows for the three months ended March 31, 2025 have been revised to reflect the correction of both errors. The derivative liability fair value at each measurement date was determined using a Monte Carlo simulation model with Level 3 inputs, including 90-day trailing realized equity volatility, estimated sell-rate as a fraction of average daily trading volume, and the contractual floor price. Additionally, the original issue discount on each series of Preferred Stock has been recognized as accretion to the host instrument carrying value in mezzanine, with a corresponding deemed dividend charge to accumulated deficit. The tables below present the effect of the revisions on the affected financial statement line items.

Effect of Revisions on the Condensed Consolidated Balance Sheet as of December 31, 2025

(in thousands) 

Effect of Revisions on the Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2025

(in thousands, except per share data)

Effect of Revisions on the Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2025

(in thousands)

Note: The revisions to the statement of cash flows are reclassifications within the operating activities and between the operating activities and the financing activities. Net cash used in operating activities decreased by $83,000, net cash provided by financing activities decreased by $83,000, while net cash used in investing activities was unchanged.

Effect of Revisions on the Condensed Consolidated Statements of Temporary Equity and Stockholders’ Equity (Deficit) (Unaudited) (As Revised) for the Three Months Ended March 31, 2025

(in thousands)

Effect of Revisions on the Condensed Consolidated Statements of Temporary Equity and Stockholders’ Equity (Deficit) (Unaudited) (As Revised) for the Three Months Ended March 31, 2026

(in thousands)

Reclassification of Operating Expenses

In connection with the preparation of these condensed consolidated interim financial statements, the Company changed the presentation of operating expenses on the condensed consolidated statements of operations. In prior periods, the Company presented stock-based compensation, depreciation, and certain other non-cash charges as a single aggregated line item (“Non-cash expenses”) within operating expenses. Beginning with these financial statements, the Company has allocated these charges to the functional expense categories to which they relate (general and administrative, research and development, sales and marketing, and operations) and has added an operations category to better reflect the Company's current organizational structure. The Company also reclassified certain personnel and overhead costs among functional categories to align with how costs are managed and evaluated by the CODM. This change in presentation provides a more faithful depiction of the nature and function of the Company's operating expenses and is consistent with Regulation S-X, Rule 5-03. Prior period amounts have been reclassified to conform to the current period presentation. Total operating expenses for the three months ended March 31, 2025, were not affected by these reclassifications.

Use of Estimates

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

Emerging Growth Company Status

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

Risks and Uncertainties

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

Cash and Cash Equivalents

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

Receivables and Credit Policy

Trade receivables from customers are uncollateralized customer obligations due under normal trade terms, Trade receivables are stated at the amount billed to the customer. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoice. We routinely assess our outstanding accounts receivable and recorded a reserve for estimated uncollectible accounts of $44,153 and $17,204 at March 31, 2026, and December 31, 2025, respectively.

Inventory

Inventories are stated at the lower of weighted-average cost or net realizable value. Cost includes all expenditures incurred in bringing each product to its present location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

The Company maintains a reserve for obsolescence for estimated excess, slow-moving, or unmarketable inventory based on periodic reviews of inventory levels, historical usage, and future sales forecasts. When the carrying value exceeds net realizable value, a write-down is recorded as a charge to cost of sales, establishing a new, lower cost basis that is not subsequently increased for future recoveries in value.

Property and Equipment

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

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

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

Sales Taxes

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

Segment Reporting

Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker (the “CODM”) in deciding how to allocate resources and assess performance. We have one reportable segment focused on cloud-based AI video surveillance and remote guarding security services. Our CODM, who is our Chief Executive Officer, manages operations on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. For additional information on our segment reporting, see Note 8, Segment Reporting.

Income Taxes

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

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

Reverse Stock Split

On October 24, 2024, we effected a 1-for-6 reverse stock split of all classes of our issued and outstanding capital stock (the “Reverse Stock Split”). All share and per share information is presented after giving effect to the Reverse Stock Split retrospectively for all periods presented. For additional information about the Reverse Stock Split, see Note 7, Reverse Stock Split.

Revenue Recognition

We recognize revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services, net of estimated returns, discounts, and allowances.

To determine revenue recognition for arrangements that an entity determines are within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), we perform the following steps:

(i) identify the contract(s) with a customer,

(ii) identify the performance obligations in the contract,

(iii) determine the transaction price,

(iv) allocate the transaction price to the performance obligations in the contract, and

(v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company generally acts as the principal in its arrangements and records revenue on a gross basis. Our contracts typically do not contain a significant financing component.

Deferred Revenue

Deferred revenue consists of billings or payments received in advance of revenue recognition from the Company’s contracts with customers. The Company primarily generates deferred revenue from annual service subscriptions.

These advance payments are recognized as revenue when control of the promised goods or services is transferred to the customer. Deferred revenue that is expected to be recognized as revenue within the next twelve months is classified as a current liability, while the remaining portion is classified as non-current.

Stock-Based Compensation

The Company applies ASC No. 718, “Compensation-Stock Compensation,” which requires that share-based payment transactions with employees and nonemployees, upon adoption of ASU 2018-07, be measured based on the grant date fair value of the equity instrument and recognized as compensation expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation costs related to employee share options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period. In addition to the requisite service period, the Company also evaluates the performance condition and market condition under ASC 718-10-20. For an award which contains both a performance and a market condition, and where both conditions must be satisfied for the award to vest, the market condition is incorporated into the fair value of the award, and that fair value is recognized over the employee’s requisite service period or nonemployee’s vesting period if it is probable the performance condition will be met. If the performance condition is ultimately not met, compensation costs related to the award should not be recognized (or should be reversed) because the vesting condition in the award has not been satisfied.

The Company will recognize forfeitures of such equity-based compensation as they occur.

Net Loss per Share

Net loss per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares primarily consist of stock options outstanding.

During the periods ended March 31, 2026, and December 31, 2025, the calculation of the effect of dilutive stock options, warrants, and conversion of preferred stock excluded all stock options, warrants, and conversion of preferred stock outstanding during the period due to their anti-dilutive effect.

Under the revised accounting for the Series 2 Shares, the 9.5% preferred return and the original issue discount accretion are accounted for as deemed dividends, which reduce net loss available to common stockholders in the computation of basic and diluted net loss per share. For the three months ended March 31, 2025, deemed dividends related to the Series 2 Shares totaled approximately $301,000. These amounts were previously reported as preferred dividend expense within other income/(expenses) and have been reclassified to deemed dividends below net loss as part of the revision described in Note 2.

Consolidation and Foreign Currency Policies

The financial statements of the Company’s foreign subsidiary are translated into U.S. dollars for consolidation purposes. Assets and liabilities are translated using exchange rates in effect at the balance sheet date. Equity accounts are translated using historical exchange rates in effect at the dates of the related transactions. Income and expense accounts are translated using average exchange rates for the period, unless transaction-specific rates are more appropriate.

Translation adjustments resulting from the application of different exchange rates to assets and liabilities as compared to equity accounts are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity. These translation adjustments are referred to as cumulative translation adjustment (“CTA”). CTA does not affect net income and will remain in accumulated other comprehensive income unless and until the Company substantially liquidates or disposes of its foreign subsidiary, at which time the related CTA balance would be reclassified into earnings in accordance with ASC 830.

Intercompany balances and transactions between the Company and its foreign subsidiary have been eliminated in consolidation. Foreign currency transaction gains and losses related to intercompany balances that are not of a long-term investment nature are recognized in earnings; however, no material gains or losses of this nature were recognized for the year ended December 31, 2025 or the quarter ended March 31, 2026.

The Company is exposed to foreign currency exchange rate risk primarily related to its operations in India. The Company does not currently use derivative instruments to hedge foreign currency exposure. Fluctuations in exchange rates may affect the Company’s consolidated financial position, results of operations, and accumulated other comprehensive income.

Fair Value Measurements

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

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

Fair Value of Bifurcated Derivative Liabilities and Carrying Value of the Host Preferred Stock

With respect to its outstanding Preferred Stock, the Company is required to bifurcate the embedded conversion feature and account for it as a derivative liability measured at fair value at each reporting date, with changes recognized in earnings. The fair value of the bifurcated derivative is estimated using a Monte Carlo simulation model incorporating Level 3 inputs under the ASC 820 fair value hierarchy, including 90-day trailing realized equity volatility, estimated conversion sell-rate as a fraction of average daily trading volume, and the applicable contractual floor price. The Company evaluates the embedded conversion feature for bifurcation under ASC 815-15 at inception and upon any modification of the instrument's terms.

The fair value of the bifurcated derivative at issuance also directly determines the initial carrying value of the host preferred stock instrument, which is measured as cash proceeds received, reduced by the original issue discount, allocated issuance costs, and the derivative fair value. The resulting discount on the host is accreted to the Series 2 Preferred Liquidation Amount over the expected life of the instrument.

Because the derivative valuation and host carrying value share critical assumptions, particularly expected term and equity volatility, changes in those assumptions affect both the fair value of the derivative liability and the accretion pattern recognized on the host instrument and could have a material impact on the Company's condensed consolidated financial statements. The Company classifies the derivative liability as a current liability based on the holder's ability to exercise conversion rights at any time. The host preferred stock instrument is classified in temporary equity (mezzanine) in accordance with ASC 480-10-S99-3A. As of March 31, 2026, the aggregate fair value of the derivative liabilities was $1,392,433 and the net carrying value of the host instruments was $4,199,853. For the quarter ended March 31, 2026, the net change in fair value of the derivative liabilities recognized in earnings was a loss of $127,742, reflecting the period mark-to-market measurement of the bifurcated derivative under Monte Carlo simulation.

The Company measures certain financial instruments at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement. The following tables present information about the Company's financial liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values.

Fair Value Hierarchy

The following table presents the Company's financial liabilities measured at fair value on a recurring basis, categorized by level within the fair value hierarchy: 

Derivative Liability -- Level 3 Fair Value Rollforward

Issuances represent the Day-1 fair value of the compound embedded derivative bifurcated from the host preferred stock instrument at each issuance or PIK dividend date under ASC 815-15. Settlements on conversion represent the derecognition of the derivative liability allocated to converted preferred shares, with the offset recorded to additional paid-in capital. Net (gains) losses represent the change in fair value of the derivative liability recognized in the condensed consolidated statements of operations within "Change in fair value of derivative liabilities."

For the year ended December 31, 2025 (as revised), issuances of $4,764,474 represent the Day-1 bifurcation of compound embedded derivatives on the Series 1 Preferred Stock and the Series 2 Preferred Stock Tranches as well as Series 1 and Series 2 PIK Shares. Settlements of $2,894,390 represent the derecognition of derivative liability on Series 1 Shares and Series 2 Shares converted during 2025. The Series 1 Preferred Stock was fully converted and retired during Q2 2025.

For the three months ended March 31, 2026, issuances of $20,805 represent the day-1 bifurcation of the compound embedded derivative on 75 PIK shares issued January 5, 2026. Settlements of $77,319 represent the derecognition of derivative liability on the conversion of 280 shares of Series 2 Shares.

Significant Unobservable Inputs

The fair value of the compound embedded derivative liability is estimated using an internally developed Monte Carlo simulation model. The significant unobservable inputs used in the Monte Carlo simulation as of March 31, 2026 included 90-day trailing realized equity volatility of 110%, an estimated sell-rate of 20% of average daily trading volume, and a contractual floor price of $0.20 per share. The following table summarizes the significant unobservable inputs and their directional impact on fair value:

Changes in the significant unobservable inputs identified above could materially affect the estimated fair value of the derivative liability. The most significant driver of fair value is the assumed sell-rate, which determines the expected pace of conversion and the resulting dilutive impact on the common stockholders. An increase in the sell-rate assumption from 20% to 30% of ADV would increase the estimated fair value of the derivative liability, while a decrease to 10% of ADV would decrease the estimated fair value. The 90-day trailing realized equity volatility is derived from observable market data but is classified as Level 3 because it is a significant input to a model-based valuation that also relies on unobservable inputs. The contractual floor price of $0.20 per share represents 20% of the Nasdaq Minimum Price as of the most recent Tranche 3 issuance date, as defined in the Certificate of Designations.

Management performed an internal valuation using a Monte Carlo simulation with 100,000 paths per measurement date. The model simulates the daily stock price path, applies the contractual conversion mechanics (including the 88% of lowest 8-business-day VWAP conversion price formula), and estimates the fair value of the embedded conversion feature as the expected present value of the conversion discount. All underlying mathematical formulas, code scripts, and unobservable inputs are available for review by the Company's independent auditors.

Emerging Growth Company Status

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

Cash and Cash Equivalents

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

Receivables and Credit Policy

Trade receivables from customers are uncollateralized customer obligations due under normal trade terms, Trade receivables are stated at the amount billed to the customer. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoice. We routinely assess our outstanding accounts receivable and recorded a reserve for estimated uncollectible accounts of $44,153 and $17,204 at March 31, 2026, and December 31, 2025, respectively.

Property and Equipment

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

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

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

Segment Reporting

Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker (the “CODM”) in deciding how to allocate resources and assess performance. We have one reportable segment focused on cloud-based AI video surveillance and remote guarding security services. Our CODM, who is our Chief Executive Officer, manages operations on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. For additional information on our segment reporting, see Note 8, Segment Reporting.

Income Taxes

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

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

Revenue Recognition

We recognize revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services, net of estimated returns, discounts, and allowances.

To determine revenue recognition for arrangements that an entity determines are within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), we perform the following steps:

(i) identify the contract(s) with a customer,

(ii) identify the performance obligations in the contract,

(iii) determine the transaction price,

(iv) allocate the transaction price to the performance obligations in the contract, and

(v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company generally acts as the principal in its arrangements and records revenue on a gross basis. Our contracts typically do not contain a significant financing component.

Deferred Revenue

Deferred revenue consists of billings or payments received in advance of revenue recognition from the Company’s contracts with customers. The Company primarily generates deferred revenue from annual service subscriptions.

These advance payments are recognized as revenue when control of the promised goods or services is transferred to the customer. Deferred revenue that is expected to be recognized as revenue within the next twelve months is classified as a current liability, while the remaining portion is classified as non-current.

Net Loss per Share

Net loss per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares primarily consist of stock options outstanding.

During the periods ended March 31, 2026, and December 31, 2025, the calculation of the effect of dilutive stock options, warrants, and conversion of preferred stock excluded all stock options, warrants, and conversion of preferred stock outstanding during the period due to their anti-dilutive effect.

Under the revised accounting for the Series 2 Shares, the 9.5% preferred return and the original issue discount accretion are accounted for as deemed dividends, which reduce net loss available to common stockholders in the computation of basic and diluted net loss per share. For the three months ended March 31, 2025, deemed dividends related to the Series 2 Shares totaled approximately $301,000. These amounts were previously reported as preferred dividend expense within other income/(expenses) and have been reclassified to deemed dividends below net loss as part of the revision described in Note 2.

Fair Value Measurements

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

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

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, and requires single reporting entities to comply with the expanded reportable segment disclosures outlined in the ASU. The expanded reportable segment disclosures are intended to enhance certain disclosures surrounding significant segment expenses. This standard became effective for the Company for the annual reporting period ended December 31, 2024, using the retrospective method. The adoption of this standard resulted in additional disclosure but did not have a material impact on our financial position or results of operations. See Note 8, Segment Reporting, for our updated segment presentation.

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