Part I. Financial Information [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations and comprehensive loss, statements of temporary redeemable preferred stock and stockholders' deficit, and cash flows, along with detailed notes explaining the company's business, accounting policies, debt, equity, and other financial components [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' deficit at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $12,137 | $13,532 | | Total Liabilities | $34,433 | $28,220 | | Total Stockholders' Deficit | $(22,296) | $(14,688) | | Cash, cash equivalents and restricted cash | $1,390 | $4,864 | | Convertible debt (current & noncurrent) | $10,943 | $— | - Total assets decreased by **$1,395 thousand**, while total liabilities increased by **$6,213 thousand**, leading to a larger stockholders' deficit of **$7,608 thousand** as of June 30, 2025, compared to December 31, 2024[13](index=13&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net loss Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $7,459 | $7,503 | $14,218 | $15,344 | | Gross profit | $3,174 | $3,033 | $6,380 | $5,735 | | Total operating expenses | $9,503 | $6,562 | $18,093 | $20,653 | | Loss from operations | $(6,329) | $(3,529) | $(11,713) | $(14,918) | | Net loss | $(6,102) | $(4,746) | $(11,934) | $(16,993) | | Comprehensive loss | $(6,161) | $(4,709) | $(12,065) | $(16,882) | | Net loss per common share – basic and diluted | $(0.27) | $(27.73) | $(0.52) | $(98.57) | - Net loss increased by **$1,356 thousand (29%)** for the three months ended June 30, 2025, but decreased by **$5,059 thousand (30%)** for the six months ended June 30, 2025, compared to the respective prior periods[16](index=16&type=chunk) - Revenue slightly decreased by **1%** for the three-month period and by **7%** for the six-month period year-over-year[16](index=16&type=chunk) [Condensed Consolidated Statements of Temporary Redeemable Preferred Stock and Stockholders' Deficit](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Temporary%20Redeemable%20Preferred%20Stock%20and%20Stockholders'%20Deficit) This section details changes in the company's temporary redeemable preferred stock and stockholders' deficit, reflecting equity transactions and net losses Changes in Stockholders' Deficit (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Stockholders' Deficit | $(22,296) | $(140,003) | | Stock based compensation (Six Months Ended) | $2,828 | $7,350 | | Net loss (Six Months Ended) | $(11,934) | $(16,993) | | Issuance of common stock for note conversions (Six Months Ended June 30, 2025) | $1,532 | $— | - The total stockholders' deficit significantly reduced from **$(140,003) thousand** as of June 30, 2024, to **$(22,296) thousand** as of June 30, 2025, primarily due to the conversion of preferred stock to common stock and other equity activities[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,567) | $(5,688) | | Net cash used in investing activities | $(15) | $(7) | | Net cash provided by financing activities | $8,275 | $5,742 | | Net decrease in cash, cash equivalents and restricted cash | $(3,474) | $(156) | | Cash, cash equivalents and restricted cash, end of period | $1,390 | $2,972 | - Net cash used in operating activities increased significantly to **$(11,567) thousand** for the six months ended June 30, 2025, from **$(5,688) thousand** in the prior year, primarily due to net loss and changes in operating assets and liabilities[241](index=241&type=chunk) - Net cash provided by financing activities increased to **$8,275 thousand**, driven by **$13,000 thousand** in proceeds from convertible debt, partially offset by **$6,780 thousand** in debt repayments[245](index=245&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [1. Description of Business and Basis of Presentation](index=9&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) This section describes the company's core business activities and the accounting principles used in preparing its financial statements - zSpace, Inc. develops full-service augmented reality/virtual reality (AR/VR) solutions for K-12 education and career technical education, generating revenue from hardware sales and recurring software subscriptions[24](index=24&type=chunk) - The Company has incurred net losses of **$6.1 million** and **$11.9 million** for the three and six months ended June 30, 2025, respectively, and negative cash flows from operations of **$11.6 million** for the six months ended June 30, 2025[28](index=28&type=chunk) - These recurring losses and negative cash flows raise substantial doubt about the Company's ability to continue as a going concern for at least twelve months from the issuance date[30](index=30&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the key accounting principles, methods, and estimates applied in the preparation of the financial statements - The Company is an emerging growth company (EGC) and has elected to use the extended transition period for complying with new or revised accounting standards[34](index=34&type=chunk) - Convertible debt is measured at fair value using the fair value option under ASC 825, with changes recognized in earnings, simplifying accounting by eliminating the need to bifurcate embedded derivatives[41](index=41&type=chunk) Fair Value Hierarchy for Financial Instruments (in thousands) | (in thousands) | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | **As of June 30, 2025:** | | | | | | Money market funds | $158 | $— | $— | $158 | | Convertible debt subject to credit risk analysis | $— | $10,943 | $— | $10,943 | | **As of December 31, 2024:** | | | | | | Money market funds | $3,228 | $— | $— | $3,228 | [3. Revenue](index=17&type=section&id=3.%20REVENUE) This section details the company's revenue recognition policies and disaggregates revenue by recognition method and product/service type - The Company accounts for revenue in accordance with ASC Topic 606, recognizing revenue as performance obligations are satisfied, which involves identifying contracts, performance obligations, transaction price, and allocation[43](index=43&type=chunk) Revenue Disaggregation by Recognition Method (in thousands) | Recognition Method | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Point in time | $7,110 | $7,066 | $13,478 | $14,436 |

[Press Release Introduction](index=1&type=section&id=Press%20Release%20Introduction) zSpace announced its financial results for Q2 and H1 2025, highlighting its position as a leader in AR/VR education solutions [Company Announcement](index=1&type=section&id=Company%20Announcement) zSpace, a leader in augmented and virtual reality solutions for education, announced its financial results for the three and six months ended June 30, 2025 - zSpace (NASDAQ: ZSPC), a leader in augmented and virtual reality solutions for education, announced its financial results for the three and six months ended June 30, 2025[1](index=1&type=chunk) [CEO's Strategic and Operational Review](index=1&type=section&id=CEO%27s%20Strategic%20and%20Operational%20Review) CEO reviewed strategic progress, new products, and customer engagement despite macroeconomic headwinds [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Paul Kellenberger highlighted strategic progress including the launch of Career Explorer, expanded customer engagement, and accelerated AI Assistant development. Despite macroeconomic challenges and shifting education funding, zSpace believes its solutions align with state-level autonomy and workforce development, positioning it for sustained momentum and long-term growth - zSpace successfully launched its new Career Explorer application, expanded customer engagement with major deployments in New York and California, and accelerated development of its AI Assistant[2](index=2&type=chunk) - Despite macroeconomic conditions and shifting U.S. education funding policies, zSpace believes it is uniquely positioned to sustain momentum, aligning with growing state-level autonomy and workforce development priorities[2](index=2&type=chunk) [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Q2 2025 highlights: flat revenue, increased gross margin, higher net loss, and product achievements [Financial Summary Highlights](index=1&type=section&id=Financial%20Summary%20Highlights) For Q2 2025, zSpace reported flat revenue year-over-year at $7.5 million, an increase in gross margin to 43% (up 213 basis points), and an increased net loss of ($6.1) million compared to ($4.7) million in the prior year period Q2 2025 Financial Summary Highlights | Metric | Q2 2025 | Q2 2024 | Change | | :---------------- | :------ | :------ | :----- | | Revenue | $7.5 million | $7.5 million | 0% | | Gross margin | 43% | 40% | +213 bps | | Net loss | ($6.1) million | ($4.7) million | (29.8%) | [Recent Business Achievements](index=1&type=section&id=Recent%20Business%20Achievements) In Q2 2025, zSpace received the Future's Best of Show Award for its zSpace Imagine headset-free AR/VR laptop, unveiled the Career Explorer™ application with Career Coach AI™, and recognized Upper Bucks County Technical School as a zSpace School of Distinction for integrating AR/VR technology in CTE - zSpace Imagine headset-free AR/VR laptop solution won the Future's Best of Show Award at ISTELive 25, marking the second consecutive year for this recognition[4](index=4&type=chunk) - Unveiled Career Explorer™ application at ISTELive 25, an innovative AR/VR tool for grades 5–8 to explore high-demand careers, featuring Career Coach AI™ for personalized guidance[4](index=4&type=chunk) - Upper Bucks County Technical School (UBCTS) was named a zSpace School of Distinction for leadership in integrating immersive AR/VR technology into Career and Technical Education (CTE)[4](index=4&type=chunk) [Detailed Second Quarter 2025 Financial Results](index=2&type=section&id=Detailed%20Second%20Quarter%202025%20Financial%20Results) Detailed Q2 2025 financial results analyze revenue, gross margin, operational metrics, expenses, and balance sheet [Revenue and Gross Margin Performance](index=2&type=section&id=Revenue%20and%20Gross%20Margin%20Performance) Q2 2025 revenue remained flat at $7.5 million due to funding uncertainty and delivery delays. Gross margins increased to 43% (up 213 basis points) driven by improved hardware cost profiles and more Company-owned software content. Excluding specific shipping costs and software license write-offs, the gross margin would have been 46% - Revenue in the second quarter of 2025 was **$7.5 million**, flat compared to the second quarter of 2024, primarily due to funding uncertainty and delays in committed order delivery[5](index=5&type=chunk) - Gross margins increased by **213 basis points to 43%** in Q2 2025, driven by improvements in hardware cost profiles and more Company-owned software content[5](index=5&type=chunk) - Excluding **$0.1 million** of shipping costs and **$0.2 million** of software license write-offs, the gross margin for Q2 2025 would have been **46%**[7](index=7&type=chunk) [Key Operational Metrics Analysis](index=2&type=section&id=Key%20Operational%20Metrics%20Analysis) Annualized Contract Value (ACV) of renewable software grew 11% year-over-year to $10.9 million. Net Dollar Revenue Retention (NDRR) for customers with over $50,000 ACV was 131%. However, bookings significantly decreased by 54% year-over-year to $7.2 million Key Operational Metrics | Metric | Value (June 30, 2025) | YoY Change | | :-------------------------- | :-------------------- | :--------- | | Annualized Contract Value (ACV) | $10.9 million | +11% | | Net Dollar Revenue Retention (NDRR) | 131% | N/A | | Bookings (Q2 2025) | $7.2 million | -54% | [Operating Expenses and Net Loss](index=2&type=section&id=Operating%20Expenses%20and%20Net%20Loss) Operating expenses, excluding stock-based compensation, increased to $7.7 million in Q2 2025 from $6.5 million in Q2 2024. This contributed to an increased net loss of ($6.1) million in Q2 2025, compared to ($4.7) million in the prior year Operating Expenses and Net Loss | Metric | Q2 2025 | Q2 2024 | | :------------------------------------ | :---------- | :---------- | | Operating expenses (excl. stock-based comp) | $7.7 million | $6.5 million | | Net loss | ($6.1) million | ($4.7) million | [Balance Sheet Overview](index=2&type=section&id=Balance%20Sheet%20Overview) As of June 30, 2025, zSpace held $1.4 million in cash, cash equivalents, and restricted cash, a decrease from $3.0 million as of June 30, 2024 Cash Position | Metric | June 30, 2025 | June 30, 2024 | | :------------------------------------ | :-------------- | :-------------- | | Cash, cash equivalents and restricted cash | $1.4 million | $3.0 million | [Corporate Information and Disclosures](index=2&type=section&id=Corporate%20Information%20and%20Disclosures) Corporate information details conference call, company profile, metric definitions, forward-looking statements, and contacts [Conference Call Details](index=2&type=section&id=Conference%20Call%20Details) zSpace will host a conference call on Thursday, August 14, 2025, at 5:00 p.m. ET / 2:00 p.m. PT with its CEO and CFO to discuss the financial results. A live webcast and replay will be available on the investor relations website - A conference call will be hosted on **Thursday, August 14, 2025, at 5:00 p.m. ET / 2:00 p.m. PT**[11](index=11&type=chunk) - The call will feature CEO Paul Kellenberger and CFO Erick DeOliveira[11](index=11&type=chunk) - A live webcast and replay will be available on the Events and Presentations section of zSpace's investor relations website[11](index=11&type=chunk)[12](index=12&type=chunk) [About zSpace, Inc.](index=3&type=section&id=About%20zSpace%2C%20Inc.) zSpace, Inc. (NASDAQ: ZSPC) provides innovative AR/VR experiences for STEM, CTE, and career readiness programs, trusted by over 3,500 educational institutions. Headquartered in San Jose, California, the company holds over 70 patents and its "learning by doing" solutions have been shown to enhance learning and student test scores - zSpace, Inc. (NASDAQ: ZSPC) delivers innovative augmented and virtual reality (AR/VR) experiences for STEM, CTE, and career readiness programs[13](index=13&type=chunk) - The company is trusted by over **3,500 school districts**, technical centers, community colleges, and universities[13](index=13&type=chunk) - zSpace holds over **70 patents**, and its hands-on 'learning by doing' solutions have been shown to enhance learning and drive higher student test scores[13](index=13&type=chunk) [Key Metric Definitions (Non-GAAP)](index=3&type=section&id=Key%20Metric%20Definitions%20%28Non-GAAP%29) This section defines key operational metrics used by zSpace to evaluate its business: Bookings (customer orders indicating future revenue), Annualized Contract Value (ACV) of active renewable software licenses, and Net Dollar Revenue Retention (NDRR) for customers with over $50,000 ACV. These are non-GAAP measures, provided as supplemental information for investors - **Bookings:** An internal operational measure representing customer orders with hardware, software, and service components, indicating future revenue[15](index=15&type=chunk) - **Annualized Contract Value (ACV):** An internal operational measure used to monitor the ability to retain and grow the customer base for renewable software licenses[16](index=16&type=chunk) - **Net Dollar Revenue Retention (NDRR):** An internal operational measure calculated by comparing current period ACV from prior period customers (with at least **$50,000 ACV**) to their prior period ACV, including upsells and net of contraction/attrition

Core Insights - zSpace reported its financial results for the second quarter and first half of 2025, highlighting strategic progress despite macroeconomic challenges [1][2] Financial Performance - Revenue for Q2 2025 was $7.5 million, unchanged from Q2 2024, amid funding uncertainties and order delivery delays [4][7] - Gross margin increased by 213 basis points to 43% compared to 40% in Q2 2024, attributed to better hardware cost profiles and more company-owned software content [4][7] - Net loss for Q2 2025 was ($6.1) million, compared to a net loss of ($4.7) million in Q2 2024 [9][7] - Operating expenses, excluding stock-based compensation, rose to $7.7 million in Q2 2025 from $6.5 million in Q2 2024 [9] Business Highlights - The launch of the Career Explorer application and the acquisition of Second Avenue Learning were significant milestones for zSpace [2] - zSpace's zSpace Imagine headset-free AR/VR laptop solution won the Future's Best of Show Award at ISTELive 25, marking the second consecutive year for this recognition [7] - The Career Explorer application is designed for students in grades 5–8 to explore high-demand careers through immersive simulations [7] Customer Metrics - Annualized Contract Value (ACV) of renewable software increased by 11% year-over-year to $10.9 million as of June 30, 2025 [8] - Net Dollar Revenue Retention (NDRR) was 131% for customers with over $50,000 of ACV, indicating strong customer retention and growth [8] Balance Sheet - As of June 30, 2025, zSpace had approximately $1.4 million in cash and cash equivalents, down from $3.0 million a year earlier [10] - Total liabilities were $34.4 million, a decrease from $42.8 million as of June 30, 2024 [20]

SAN JOSE, Calif., Aug. 05, 2025 (GLOBE NEWSWIRE) -- zSpace (NASDAQ: ZSPC) ("zSpace" or the "Company"), a leader in immersive learning, today announced that Chinle Unified School District, located in the heart of the Navajo Nation, is transforming student learning by integrating zSpace into classrooms. Through this partnership, students now have access to hands-on STEM experiences and career exploration opportunities that were previously out of reach. Spanning over 4,200 square miles in Arizona's high desert ...

Core Viewpoint - zSpace plans to release its financial results for the second quarter of 2025 on August 14, 2025, after market close [1] Group 1: Financial Results Announcement - zSpace will host a conference call on August 14, 2025, at 5:00 p.m. ET to discuss the second quarter results, featuring CEO Paul Kellenberger and CFO Erick DeOliveira [2] - A live webcast of the conference call will be available on zSpace's investor relations website, and a replay will be accessible for a limited time [2] Group 2: Company Overview - zSpace, Inc. specializes in augmented and virtual reality (AR/VR) experiences aimed at enhancing STEM, CTE, and career readiness programs [3] - The company is trusted by over 3,500 educational institutions, including school districts and universities, to provide immersive learning experiences [3] - zSpace holds over 70 patents and its solutions have been shown to improve learning outcomes, as evidenced by a study published in the Journal of Computer Assisted Learning in 2021 [3]

Core Insights - zSpace has been awarded the Future's Best of Show Award at ISTE 2025 for its headset-free AR/VR laptop solution, zSpace Imagine, in the Primary Education category, marking the second consecutive year of recognition [1] - The award highlights zSpace's commitment to providing transformative technology for K–12 education, higher education, and workforce development [1] Company Overview - zSpace, Inc. specializes in augmented and virtual reality (AR/VR) experiences aimed at enhancing learning in STEM, Career and Technical Education (CTE), and career readiness programs [5] - The company is trusted by over 3,500 educational institutions, including school districts, technical centers, community colleges, and universities [5] - zSpace holds over 70 patents and focuses on hands-on learning experiences that improve student engagement and test scores [5] Product Details - zSpace Imagine is the first AR/VR laptop designed specifically for primary education, offering immersive learning experiences without the need for headsets [3] - The device features a stylus-enabled, glasses-free 3D display, allowing students to engage with STEM and core subjects in interactive ways [3] Awards and Recognition - The Best of Show Awards are evaluated by industry experts based on innovation, feature set, reliability, and performance [2] - zSpace's previous award in 2024 recognized its innovative Career Readiness Solution, which includes Career Coach AI™ [1][4]

Core Insights - zSpace is launching the zSpace Career Explorer™ application, an AR/VR tool aimed at preparing students for high-demand careers starting in the 2025–2026 school year [1][2] - The application is designed for grades 5–8 and focuses on career exploration in skilled trades and other high-demand fields [2][3] - zSpace Career Coach™, an AI-powered assistant, provides personalized career guidance within the Career Explorer application [4][6] Features and Functionality - The Career Explorer application includes interactive simulations for various careers such as welding, vehicle maintenance, robotic programming, and basic medical procedures [3][8] - Each simulation is set in realistic environments and includes dynamic career profiles detailing skills, responsibilities, salary ranges, and educational pathways [3][8] - The AI-powered Career Coach allows students to ask questions, explore related careers, and export transcripts for review, offering tailored guidance based on user interactions [4][8] Company Background - zSpace, Inc. is a leader in AR/VR experiences, focusing on STEM, CTE, and career readiness programs, and is trusted by over 3,500 educational institutions [7][8] - The company holds over 70 patents and emphasizes hands-on learning experiences that enhance student engagement and knowledge retention [7][9]

Core Insights - zSpace is participating in the ISTE Live 25 Conference from June 30 to July 2, 2025, showcasing its latest educational solutions [1] - The company is debuting the Career Explorer app, designed to help students explore high-demand careers through immersive experiences [3] - Nicole Heaver has been recognized as the 2025 zSpace Educator of the Year for her innovative use of zSpace technology in her classroom [6] Product Highlights - The Career Explorer app will be available for the 2025-2026 school year, providing interactive career exploration tools [3] - zSpace is expanding its AR/VR content library with new lessons in STEM, CTE, and career exploration, along with success stories from educators [4] - The zSpace Imagine solution is designed for elementary education, offering an AR/VR experience without the need for headsets, featuring interactive 3D content and a precision stylus [5] Educational Impact - The featured session at the conference will discuss integrating design thinking and extended reality for sustainable educational models, particularly in rural areas [4] - zSpace's solutions are trusted by over 3,500 educational institutions, enhancing learning experiences that may be dangerous or impractical with traditional methods [8] - A study published in the Journal of Computer Assisted Learning indicates that zSpace's hands-on learning solutions can lead to higher student test scores [9]

Core Insights - zSpace has been recognized for its innovative AR/VR solutions in education, particularly at Upper Bucks County Technical School (UBCTS), which has been named a zSpace School of Distinction [1][7] - The initiative began in 2020 to address learning loss during the pandemic and has successfully integrated immersive technology into career and technical education (CTE) [2][3] Group 1: Implementation and Impact - UBCTS's Executive Director, Dr. Michael Herrera, introduced zSpace's platform to enhance student engagement and workforce readiness during the pandemic [2][3] - Instructor Patrick Chrinko transformed the automotive lab into an interactive environment, allowing students to engage with complex systems before working on physical vehicles [3][4] - The AR/VR teaching model has proven to be more efficient and engaging compared to traditional methods, enabling students to simulate tool use and diagnose virtual system malfunctions [4] Group 2: Recognition and Advocacy - UBCTS has become a model for integrating immersive technology in CTE, enhancing curriculum, improving safety, and supporting recruitment efforts [5][6] - The school showcases its technology to prospective students and policymakers, demonstrating the value of immersive learning in preparing future workforces [6] - The recognition of UBCTS and Mr. Chrinko serves as a blueprint for other educational institutions to embrace innovation in teaching [7] Group 3: Company Overview - zSpace, Inc. provides AR/VR experiences that enhance STEM and CTE programs, trusted by over 3,500 educational institutions [9] - The company holds over 70 patents and focuses on hands-on learning solutions that improve student outcomes, as evidenced by research published in 2021 [9]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $6.8 million, down 14% year-over-year, primarily due to hardware revenues declining by 26% [5][11] - Software and services revenue increased by 11% year-over-year, contributing to improved gross profit and margins [5][11] - Gross profit for the quarter was $3.2 million, up 19% year-over-year, with gross margins improving to 47.4%, up 13 percentage points from 34.5% in the prior year [12][13] Business Line Data and Key Metrics Changes - Hardware revenues decreased significantly, while software and services revenues showed growth, indicating a strategic shift towards higher-margin offerings [11][12] - Bookings for the quarter were $8.3 million, down 6% year-over-year, with a notable 78% decline in international bookings excluding China [12] Market Data and Key Metrics Changes - The U.S. market saw a 4% growth in bookings, contrasting with a significant decline in international markets [12] - The company ended the quarter with $9.7 million in unfulfilled orders, reflecting challenges in funding sources for end users [12] Company Strategy and Development Direction - The company is focusing on enhancing its digital platform through strategic acquisitions, including BlocksCAD and Second Avenue Learning, to improve content capabilities and software offerings [6][8][9] - The transition to the Inspire II laptop is aimed at driving cost efficiencies and protecting gross margins [6] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding future opportunities despite ongoing volatility in the education market and uncertainty around funding sources [10][19] - The company refrained from providing formal financial guidance for the year due to the unpredictable operating environment [20] Other Important Information - Operating expenses for the quarter were $7.6 million, an increase of 11% year-over-year, with stock-based compensation recorded at $1 million [17] - A $20 million convertible financing facility was closed, with $13 million funded, providing liquidity for acquisitions and corporate purposes [18] Q&A Session Summary Question: Update on sales cycle and funding uncertainty - Management confirmed that the sales cycle for K-12 has extended to 75-90 days, with ongoing high uncertainty in funding sources [24][26] Question: Impact of tariffs on BOM costs - Current tariffs are at 20%, with plans to pass these costs to customers, while the new Inspire II model has a lower BOM cost, improving hardware profitability [37][40] Question: Integration of recent acquisitions - The integration of BlocksCAD is complete, while Second Avenue Learning is in progress, with positive feedback on both [44][46] Question: Feedback on the Imagine product and CTE adoption - Initial feedback on the Imagine product has been positive, with strong adoption in advanced application areas within CTE [47][49] Question: Bookings pattern and backlog health - The company noted a non-linear bookings pattern, with strong performance in the U.S. market, and confirmed that the software backlog remains healthy [55][61]