Part I. Financial Information Item 1. Financial Statements (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 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, 202413 Condensed Consolidated Statements of Operations and Comprehensive Loss 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 periods16 - Revenue slightly decreased by 1% for the three-month period and by 7% for the six-month period year-over-year16 Condensed Consolidated Statements of Temporary Redeemable Preferred Stock and Stockholders' Deficit 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 activities20 Condensed Consolidated Statements of Cash Flows 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 liabilities241 - 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 repayments245 Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements 1. Description of Business and Basis of Presentation 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 subscriptions24 - 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, 202528 - 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 date30 2. Summary of Significant Accounting Policies 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 standards34 - 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 derivatives41 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 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 allocation43 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 |
zSpace Inc(ZSPC) - 2025 Q2 - Quarterly Report