Cloudastructure Strengthens Balance Sheet with Elimination of Variable Conversion Debt Feature and Provides Update on First Quarter 2026 Filing

Rhea-AI Summary

Cloudastructure (NASDAQ: CSAI) announced steps to simplify its capital structure and update accounting treatment ahead of its Q1 2026 Form 10-Q filing.

Key actions include eliminating the variable conversion feature of its Series 2 Convertible Preferred Stock and exchanging 1,170 Series 2 shares for an unsecured promissory note.

The revised, non-cash accounting presentation will affect only balance sheet classification, with no impact on cash, operations, total assets, total liabilities, or net assets.

AI-generated analysis. How Rhea-AI works. Not financial advice.

Positive

• Elimination of Series 2 variable conversion feature supporting permanent equity classification
• Removal of certain change-of-control liquidation provisions from Series 2 terms
• Revised accounting presentation described as non-cash with no impact on net assets

Negative

• Issuance of $1,299,870 unsecured promissory note bearing 9.5% interest
• Exchange Note allows monthly redemptions up to $108,332.50 plus interest from July 30, 2026
• Trigger events on the Exchange Note can lead to default and accelerated repayment

Market Reaction – CSAI

-2.72% $0.39

15m delay

-2.72% Since News

$0.39 Last Price

$0.36 $0.43 Day Range

-$280K Valuation Impact

$10.02M Market Cap

0.9x Rel. Volume

Following this news, CSAI has declined 2.72%, reflecting a moderate negative market reaction. Our momentum scanner has triggered 7 alerts so far, indicating moderate trading interest and price volatility. The stock is currently trading at $0.39. This price movement has removed approximately $280K from the company's valuation.

Data tracked by StockTitan Argus (15 min delayed). Upgrade to Gold for real-time data.

What This Means

The amendment and exchange replacing 1,170 Series 2 preferred shares with a $1,299,870 note and fixi...

Analysis

The amendment and exchange replacing 1,170 Series 2 preferred shares with a $1,299,870 note and fixing conversion at $0.40 simplify capital structure and GAAP equity classification, while an effective $150,000,000 shelf and low short interest frame future funding and volatility considerations.

Key Figures

Series 2 shares exchanged: 1,170 shares Exchange Note principal: $1,299,870 Exchange Note interest rate: 9.5% per annum +5 more

8 metrics

Series 2 shares exchanged 1,170 shares Series 2 Convertible Preferred Stock exchanged for unsecured promissory note

Exchange Note principal $1,299,870 Unsecured promissory note issued to Streeterville in exchange for 1,170 Series 2 shares

Exchange Note interest rate 9.5% per annum Interest on unsecured promissory note maturing July 30, 2027

Monthly redemption cap $108,332.50 per month Maximum monthly redemption amount on Exchange Note starting July 30, 2026

Fixed conversion price $0.40 per share Series 2 Convertible Preferred Stock conversion price in Amended Certificate

Authorized share reduction 500,000,000 to 83,333,334 Proposed cut in authorized share count in 2026 proxy

Reverse split range 1-for-2 to 1-for-200 Proposed reverse stock split ratio range to address Nasdaq bid requirement

Franchise tax $89,000 Approximate Delaware franchise tax for tax year 2025 from proxy statement

Historical Context

5 past events · Latest: Apr 30 (Positive)

Pattern 5 events

Date	Event	Sentiment	24h Move	Catalyst
Apr 30	Customer expansion update	Positive	-0.4%	Highlighted expansion to seven NMHC Top 10 property managers and growth in deployments.
Apr 14	Customer case study	Positive	+5.1%	Reported zero cargo theft over three months and a new Master Service Agreement.
Apr 08	Investor conference invite	Neutral	+2.1%	Announced participation in Water Tower Research virtual investor conference.
Apr 06	AI conference participation	Neutral	-1.0%	Planned appearance at Maxim Group’s AI infrastructure virtual conference.
Apr 01	2025 earnings report	Positive	-5.6%	Reported 2025 results with 271% revenue growth and 304% gross profit growth.

24h Move is the share-price change in the day after each event; other market factors may also have contributed.

Pattern Detected

Recent positive business updates have produced mixed stock reactions, with several strong growth announcements followed by share price declines.

Regulatory & Risk Context

Active S-3 Shelf · $150,000,000 · Short Interest: 2.06%

Shelf Active

Short Interest

2.06% of float

0% 15% 30%+

low as of 2026-06-15 Days to cover: 1.5

Reported short interest was low, indicating limited short-squeeze potential and suggesting positioning is unlikely to be a major independent driver of volatility.

Active S-3 Shelf Registration 2026-02-02

$150,000,000 registered capacity

An effective S-3 shelf, including an ATM component, allows the company to raise primary capital over time, which can strengthen liquidity but also introduces potential future equity dilution.

Key Terms

embedded derivative, liquidation preference, full-ratchet anti-dilution, reverse stock split, +2 more

6 terms

embedded derivative financial

"had previously required the instrument to be accounted for as an embedded derivative"

An embedded derivative is a built-in feature inside a contract—like a bond, loan, or lease—that causes part of the payout to change based on something else, such as a stock price, interest rate, or commodity price. It matters to investors because that hidden feature can add separate risk and volatility to a security’s value and accounting treatment, like finding a removable engine in a car that changes how fast it can go and how much it’s worth.

liquidation preference financial

"limits the liquidation preference to apply only in the event of an actual voluntary"

A liquidation preference is a rule that determines who gets paid first and how much they receive when a company is sold, goes bankrupt, or distributes its assets. It gives certain investors a priority claim—often returning their original investment plus any agreed multiple—before other owners receive money, which shapes how much common shareholders and founders ultimately get; think of it as a front-of-the-line pass that affects payout order and investor returns.

full-ratchet anti-dilution financial

"setting a fixed conversion price of $0.40 per share with full-ratchet anti-dilution"

A full-ratchet anti-dilution provision is a clause in preferred stock financing that adjusts an investor's conversion price if the company later sells shares at a lower price: the earlier investor's price is reset down to the new, lower price regardless of how many new shares are issued. It matters to investors and other shareholders because it preserves the economic ownership percentage for the protected investor after down-rounds; like resetting a coupon's value to match a cheaper sale, it can substantially change who owns what and how future gains are shared.

reverse stock split financial

"authorize a reverse stock split of Class A and Class B common stock at a ratio"

A reverse stock split reduces a company's number of outstanding shares while raising the price per share proportionally, so the total value of each investor's holding is unchanged; a 1-for-10 split turns 100 shares worth $1 each into 10 shares worth $10 each. Companies often do this to regain compliance with an exchange's minimum price rule or to attract investors who avoid very low-priced stocks.

form 10-q regulatory

"did not timely file its Quarterly Report on Form 10-Q for the period ended"

A Form 10-Q is a detailed report that publicly traded companies are required to file with regulators three times a year, providing an update on their financial health and business activities. It is important for investors because it offers timely insights into a company's performance, helping them make informed decisions about buying or selling stocks. Think of it as a regular check-up report that shows how well a company is doing.

nasdaq capital market regulatory

"trading of the Class A Common Stock on the Nasdaq Capital Market"

The Nasdaq Capital Market is a platform where smaller, emerging companies can list their shares for trading by investors. It provides these companies with access to funding and visibility, helping them grow, much like a local marketplace where new vendors can introduce their products to potential customers. For investors, it offers opportunities to discover early-stage companies with growth potential.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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Provides Update on Non-Cash Accounting Classification in Upcoming Q1 2026 Filing

PALO ALTO, Calif., July 06, 2026 (GLOBE NEWSWIRE) -- Cloudastructure, Inc. (NASDAQ: CSAI), a provider of AI-powered surveillance, remote monitoring, and cloud-based security analytics, today announced strengthening its balance sheet and capitalization structure with elimination of variable conversion feature of its Series 2 Convertible Preferred Stock. The Company will host a conference call to discuss first quarter 2026 financial results, and the details will be provided in due course.

Key Highlights:

• Eliminated the variable conversion price feature that previously required derivative accounting treatment, positioning the shares for permanent equity classification going forward.
• Exchanged 1,170 Series 2 shares for an unsecured promissory note.
• The accounting changes are presentation-related only and have no impact on liquidity, operations, or the Company’s underlying economics.
• The Company's upcoming Q1 2026 filing will reflect a revised accounting classification of its preferred stock.
• The revised presentation is non-cash in nature and has no effect on the Company’s cash position, operations, total assets, total liabilities, or net assets.
  
  

“These actions represent another important step in simplifying our capital structure and financial reporting,” said James McCormick, Chief Executive Officer of Cloudastructure. “By establishing a fixed conversion price and exchanging a portion of the preferred shares for a promissory note, we’ve simplified these securities and positioned the remaining Series 2 Preferred Stock for permanent equity classification. Importantly, the accounting presentation reflected in our upcoming filing is non-cash in nature and does not change the underlying economics of our business. With these matters behind us, we can remain focused on executing our growth strategy and creating long-term value for shareholders.”

Series 2 Preferred Stock Amendment

On June 29, 2026, the Company filed an Amended and Restated Certificate of Designations of Preferences and Rights of its Series 2 Convertible Preferred Stock (the “Amended Certificate”) with the Secretary of State of the State of Delaware, following approval by the Company’s Board of Directors and by Streeterville Capital, LLC (“Streeterville”), the sole holder of all outstanding Series 2 shares. The Amended Certificate eliminates the variable conversion price feature that had previously required the instrument to be accounted for as an embedded derivative, removes a provision that could have triggered liquidation payments upon certain change-of-control transactions outside the Company’s control, and limits the liquidation preference to apply only in the event of an actual voluntary or involuntary liquidation, dissolution, or winding up of the Company. The Company expects the amended terms to support classification of the Series 2 shares within permanent stockholders’ equity going forward.

Exchange Agreement with Streeterville

On June 30, 2026, the Company entered into an Exchange Agreement with Streeterville under which Streeterville exchanged 1,170 Series 2 shares for an unsecured promissory note in the original principal amount of $1,299,870 (the “Exchange Note”), issued without any additional consideration paid by Streeterville. The Exchange Note bears interest at 9.5% per annum, matures on July 30, 2027, and, beginning July 30, 2026, may be redeemed by Streeterville at a rate of up to $108,332.50 per month, plus accrued interest. The Exchange Note contains customary trigger events, and if a trigger event is not timely cured, it becomes an event of default under which Streeterville may accelerate repayment of the Note. The 1,170 Series 2 shares exchanged under the agreement were cancelled.

Q1 2026 Financial Results

In preparing its Quarterly Report on Form 10-Q for the first quarter of 2026, the Company identified two accounting classification matters related to its Series 1 Convertible Preferred Stock (fully converted in 2025) and its Series 2 Convertible Preferred Stock. The terms of both securities were fully disclosed at issuance, and the Company’s original accounting treatment was based on third-party analysis that was reviewed by its then-independent auditors. The upcoming filing will reflect a revised, non-cash accounting presentation that affects only the balance sheet classification of these instruments, with no impact on the Company’s cash position, operations, total assets, total liabilities, or net assets.

About Cloudastructure

Headquartered in Palo Alto, California, Cloudastructure's patented, advanced, award-winning security platform utilizes a scalable cloud-based architecture that features cloud video surveillance with proprietary, state-of-the-art AI/ML analytics, and a seamless remote guarding solution. The combination enables enterprise businesses to achieve proactive, end-to-end security, and pairs that platform with an attractive value proposition that eschews proprietary hardware and offers contract-free, month-to-month pricing and unlimited 24/7 support. With Cloudastructure, companies can achieve unparalleled situational awareness in real time and thereby stop crime as it is happening, while simultaneously achieving up to a 75% lower Total Cost of Ownership than other systems. For more information, visit https://www.cloudastructure.com/.

Forward-Looking Statements

Certain statements in this press release may be considered forward-looking, such as statements containing estimates, projections, and other forward-looking information, including statements regarding the expected classification of the Series 2 Convertible Preferred Stock and the anticipated effects of the Amended Certificate and Exchange Agreement. Forward-looking statements are typically identified by words and phrases such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "seek," "should," "will," "would," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target" or the negative of such words and other comparable terminology. However, the absence of these words does not mean that a statement is not forward-looking. Any forward-looking statement expressing an expectation or belief as to future events is expressed in good faith and believed to be reasonable at the time such forward-looking statement is made. However, these statements are not guarantees of future events and involve risks, uncertainties, and other factors beyond our control. Therefore, we caution you against relying on any of these forward-looking statements. Factors that could cause or contribute to such differences include the risks and uncertainties discussed in the reports that the Company has filed with the SEC, such as its Annual Report on Form 10-K. Actual outcomes and results may differ materially from what is expressed in any forward-looking statement. Except as required by applicable law, including U.S. federal securities laws, we do not intend to update any of the forward-looking statements to conform them to actual results or revised expectations.

Media Contact

Kathleen Hannon, Sr. Communications Director
Cloudastructure, Inc.
704.574.3732
Kathleen@cloudastructure.com

Investor Contact

Valter Pinto, Managing Director
KCSA Strategic Communications
212.896.1254
Cloudastructure@KCSA.com

FAQ

What did Cloudastructure (NASDAQ: CSAI) announce on July 6, 2026 about its capital structure?

Cloudastructure announced changes to its preferred stock terms and related accounting. According to Cloudastructure, it eliminated the variable conversion feature of its Series 2 Convertible Preferred Stock and plans a revised, non-cash accounting classification in its upcoming Q1 2026 Form 10-Q filing.

How is Cloudastructure changing the Series 2 Convertible Preferred Stock in 2026?

Cloudastructure amended the terms of its Series 2 Convertible Preferred Stock. According to Cloudastructure, the amendment removes the variable conversion feature, narrows liquidation preference triggers, and is expected to support classification of the Series 2 shares within permanent stockholders’ equity going forward.

What are the terms of Cloudastructure’s $1,299,870 Exchange Note with Streeterville Capital?

Cloudastructure issued an unsecured Exchange Note for $1,299,870 to Streeterville. According to Cloudastructure, the note bears 9.5% interest, matures July 30, 2027, and can be redeemed by Streeterville up to $108,332.50 per month plus accrued interest starting July 30, 2026.

How will Cloudastructure’s Q1 2026 filing change the accounting for its preferred stock?

The Q1 2026 filing will revise accounting classification for Series 1 and Series 2 preferred stock. According to Cloudastructure, the change is non-cash and affects only balance sheet presentation, with no impact on cash, operations, total assets, total liabilities, or net assets.

What happened to the 1,170 Series 2 shares exchanged by Cloudastructure in June 2026?

Cloudastructure exchanged 1,170 Series 2 shares for the unsecured Exchange Note. According to Cloudastructure, Streeterville provided no additional consideration for the note, and the 1,170 Series 2 shares involved in the exchange were cancelled following completion of the transaction.

Does Cloudastructure’s accounting reclassification for Q1 2026 affect its liquidity or operations?

Cloudastructure reports that the accounting reclassification is presentation-related only. According to Cloudastructure, the revised, non-cash treatment for its preferred stock will not affect the company’s liquidity, operations, cash position, total assets, total liabilities, or net assets.