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COMMITMENTS AND CONTINGENCIES | 3 Months Ended
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Mar. 31, 2026
COMMITMENTS AND CONTINGENCIES. |
COMMITMENTS AND CONTINGENCIES |
11. | COMMITMENTS AND CONTINGENCIES
Litigation From time to time, the Company may be involved in lawsuits, claims, investigations, and proceedings consisting of intellectual property, commercial, employment, and other matters, which arise in the ordinary course of business. In accordance with ASC Topic 450, Contingencies, the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. On May 16, 2022, we entered into a merger agreement (the “EdtechX Merger Agreement”) with EdtechX Holdings Acquisition Corp II (“EdtechX”), a Special Purpose Acquisition Company (“SPAC”). The Original Merger Agreement with EdtechX was terminated on June 21, 2023. On July 12, 2024, EdtechX filed a complaint in the Superior Court of the State of Delaware in connection with the termination of the EdtechX Merger Agreement, claiming breaches of contract and the implied covenant of good faith and fair dealing. A trial date has been set for January 20, 2027. The Company believes this lawsuit is without merit and intends to vigorously defend itself against these allegations. The Company has not accrued any amount related to this matter based on the belief that the amount of liability is not currently probable or estimable. On February 9, 2026, Jiangxi Kmax Industrial Co., Ltd. (“KMax”) filed a complaint against zSpace in the United States District Court for the Northern District of California. The complaint arises from a Software Resale License Agreement, dated July 24, 2019, and alleges breach of contract related to unpaid revenue share invoices totaling $557,940 plus interest. The Company has responded denying the allegations and asserting counterclaims based on breach of contract (confidentiality and IP related provisions) and trade secret theft. Plaintiff’s answer is due June 10, 2026. The Company has recorded an account payable of $0.6 million as of March 31, 2026 and December 31, 2025 in connection with this matter. On March 11, 2026, Kmax filed a second complaint against the Company and certain of its current and former officers in the U.S. District Court for the Southern District of New York. The complaint alleged violations of federal securities laws as well as various state common law claims. The allegations arose from Kmax's $15 million investment in the Company’s pre-IPO private placement financings between 2017 and 2019. Kmax sought compensatory and rescissory damages, interest, and costs. In May 2026, Kmax filed a Notice of Voluntary Dismissal pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i), voluntarily dismissing this matter. As of the date of this filing, no further proceedings remain pending with respect to this matter, and the Company has not accrued any amount related thereto. Purchase Obligations The Company has agreements with hardware suppliers to purchase inventory. As of March 31, 2026, the Company had $16.2 million in purchase obligations outstanding.

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