Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated financial statements and the related notes of Latch, Inc. and its subsidiaries included elsewhere in this Form 10-Q. Some of the information contained in this discussion and analysis contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in the section captioned "Risk Factors" in the 2025 Annual Report, as updated in this Form 10-Q, actual results may differ materially from those anticipated in these forward-looking statements. Unless the context otherwise requires, references in this Form 10-Q to "we," "our," "Latch," "DOOR" and the "Company" refer to the business and operations of Latch, Inc. and its consolidated subsidiaries.

Overview

Latch combines access control hardware and smart home technology into one unified platform, connecting access, devices, and property data to improve operations across portfolios, primarily serving the multifamily and student housing markets. In August 2025, we rebranded as DOOR, although our legal name remains Latch, Inc.

Our core offering is built around a proprietary, cloud-based software-as-a-service ("SaaS") platform (the "DOOR Platform"), which powers and manages our suite of smart access control devices (including locks, readers and intercoms) and smart home devices and integrates with other connected devices within a building.

We provide solutions that streamline building management for property owners and operators, offer modern convenience and security for residents and simplify interactions for visitors and service providers. While our foundation remains smart access control, we are actively expanding the DOOR Platform and our device integrations to encompass broader smart home solutions, managing devices such as sensors, thermostats and lighting. This ongoing expansion leverages our established platform to create more connected and efficient buildings as we lay the groundwork for a building intelligence platform, automating and streamlining building operations, including work order management and automation, property maintenance and unit inspections and repairs.

Our customers, which include real estate developers, builders, owners and property managers in the United States and Canada, typically purchase our hardware devices and license our SaaS platform (directly or indirectly through our channel partner network). Residents interact with the DOOR Platform through the DOOR mobile application and its predecessor Latch mobile application (together, the "DOOR App"). Through the DOOR App, residents access common areas and unlock residential doors, provide guest access, manage smart home devices and book services.

Our professional services offerings are integral to ensuring successful deployment of the DOOR Platform and ongoing support for our customers and their residents. This includes connecting our multifamily property customers with our partners for installation of Latch and third-party smart access and smart home hardware, ensuring that solutions are implemented efficiently and correctly.

Complementing our multifamily installation capabilities, our HelloTech, Inc. ("HelloTech") business provides a scalable, nationwide network of skilled independent technicians. HelloTech connects these service providers with residents and property managers seeking a wide range of on-demand technical services, such as TV mounting and smart home device installation and set-up, as well as broader home services, such as furniture assembly and handyman services.

During the nine months ended September 30, 2026, we also provided a comprehensive property management service in and around Boston, Massachusetts, through our subsidiary, DOOR Property Management, LLC ("DPM"). In connection with the Restructuring Plan (as defined below), we discontinued these operations and, on October 30, 2026, completed the sale of substantially all DPM assets to a third-party buyer, including specified property management agreements, three vehicles and other purchased assets. See Note 23. Subsequent Events, in Part I, Item 1. "Financial Statements," for further detail.

We operate as one operating and reporting segment.

Recent Developments

The following developments occurred since June 30, 2026 through the date of filing this Form 10-Q. Each is described in further detail in the notes to our condensed consolidated financial statements included in Part I, Item 1. "Financial Statements," and elsewhere in this Item 2.

Goodwill Impairment. During the third quarter of 2026, we recorded a $13.6 million non-cash goodwill impairment charge, resulting in the full impairment of our remaining goodwill balance. The impairment reflects the market-participant assumptions used in the required fair value assessment. See Note 11. Goodwill and Intangible Assets, Net, in Part I, Item 1. "Financial Statements," for further detail.

Settlement with the SEC. On October 1, 2026, we reached a settlement with the SEC, concluding and resolving the previously disclosed SEC investigation into issues related to our key performance indicators and revenue recognition practices. We agreed to settle with the SEC, without admitting the findings in the administrative order issued by the SEC. The SEC found that we violated Sections 17(a)(2) and 17(a)(3) of the Securities Act and certain reporting, books and records, internal accounting controls and proxy provisions of the Exchange Act. We agreed to cease and desist from future violations of these provisions and to pay a $1.0 million civil monetary penalty in four quarterly installments. We recorded a $1.0 million liability, included in accrued expenses, as of September 30, 2026, and paid the first installment in October 2026. See Note 14. Commitments and Contingencies, in Part I, Item 1. "Financial Statements," and Part II, Item 1A. "Risk Factors."

Derivative Litigation Settlement. On October 6, 2026, the Court granted final approval of the settlement of the consolidated stockholder derivative actions pending in the United States District Court for the Southern District of New York (the "Derivative Actions"). The settlement provides for the implementation of certain corporate governance reforms and our payment of $0.5 million in attorneys' fees, which was accrued as of December 31, 2025 and paid in August 2026. See Note 14. Commitments and Contingencies and Note 23. Subsequent Events, in Part I, Item 1. "Financial Statements," for further detail.

Restructuring Plan and DPM Asset Sale. On August 3, 2026, our Board of Directors authorized a restructuring plan (the "Restructuring Plan") involving a reduction in force and planned exit from the DPM property management business, intended to align our cost structure with our current revenue outlook. On October 30, 2026, we completed the sale of substantially all DPM assets. See Note 22. Restructuring and Note 23. Subsequent Events, in Part I, Item 1. "Financial Statements," for further detail.

Key Business Metrics

We are presenting software revenue (prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP")), total revenue (GAAP), net loss (GAAP) and Adjusted EBITDA (non-GAAP) as key business metrics, as we believe each of those metrics is important in measuring our performance, identifying trends affecting our business, formulating business plans and making strategic decisions that will impact our future operational results.

Our key business metrics are as follows for the periods presented (in thousands):

​

​

​

​

Adjusted EBITDA

To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we have presented in this Form 10-Q Adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similarly titled measures presented by other companies.

We define Adjusted EBITDA as our net loss, excluding the impact of the following items, if applicable: (i) depreciation and amortization expense; (ii) net interest income or expense; (iii) provision for income taxes; (iv) change in fair value of warrant liability, trading securities, or derivative instruments; (v) restructuring costs; (vi) transaction-related costs; (vii) impairment or derecognition of assets; (viii) non-ordinary course legal fees and settlement reserves; (ix) stock-based compensation expense; and (x) gain or loss on extinguishment of debt. The most directly comparable GAAP measure is net loss. We believe excluding the impact of these items in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance. We monitor, and have presented in this Form 10-Q, Adjusted EBITDA because it is a key measure used by our management and Board to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. We believe Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we include in net loss. Accordingly, we believe Adjusted EBITDA provides useful information to investors, analysts and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance.

Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net loss, which is the most directly comparable financial measure calculated and presented in accordance with GAAP. In addition, the expenses and other items that we exclude in our calculations of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA when they report their operating results.

In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of Adjusted EBITDA as a tool for comparison. The following table reconciles Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP (in thousands):

​

Components of Results of Operations

Revenue

Hardware Revenue. We generate hardware revenue primarily from the sale of our portfolio of devices for our smart access and smart home solutions. We sell hardware to customers, which include real estate developers, builders, building owners and property managers, directly or through our channel partners, who act as intermediaries, installers or wholesalers. We recognize hardware revenue when there is evidence a contract exists and control of the hardware has been transferred to the customer. We provide warranties that our hardware will be substantially free from defects in materials and workmanship, generally for a period of one or two years for electronic components depending on the hardware product, and five years for mechanical components. We determine in our sole discretion whether to replace or refund warrantable devices. We record a reserve as a component of cost of hardware revenue based on historical costs of replacement units for returns of defective products.

Software Revenue. We generate software revenue primarily through the license of our SaaS over our cloud-based platform on a subscription-based arrangement. Subscription fees vary depending on the features selected by customers. SaaS arrangements generally have term lengths between one and ten years. When significant discounts are provided to customers on the longer-term software contracts paid in advance, we determined that there is a significant financing component related to the time value of money and therefore have recorded the discount as interest expense, net on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss. Our SaaS is considered a stand-ready performance obligation where customers benefit from the service evenly throughout the service period.

Revenue is recognized ratably over the subscription period beginning when or as control of the promised services is transferred to the customer.

Professional Services Revenue. We generate professional services revenue in three primary ways: (i) by facilitating project-based hardware installation and activation services for enterprise customers; (ii) through fees generated by technology and home services performed for residents and consumers; and (iii) through property management services performed by DPM, for our multifamily building customers.

We facilitate hardware installation and activation services to select customers. The revenues associated with these services are recognized over time based on a percentage of installation performed and completed and represent a transfer of services to a customer under contract.

Through our HelloTech platform, a network of independent contractors provides in-home technology services such as installation, repair, troubleshooting and technical support. Orders placed through the HelloTech platform are recognized as revenue as services are completed over time. We also offer a subscription service through the HelloTech platform that includes discounted home services and other technical support such as 24/7 online support, home technology checkups, and antivirus and password manager software support. Subscription revenues are recognized ratably over the subscription period.

DPM's property management activities include operating DPM customers' buildings, which involves maintenance and repair, construction management, leasing and administrative services. Property management service revenues are recognized ratably over the service period.

Cost of Revenue

Cost of hardware revenue consists primarily of product costs, including manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging costs, warranty costs, assembly costs and warehousing costs, as well as other non-inventoriable costs, including personnel-related expenses associated with supply chain logistics and direct deployment and outsourced labor costs. We expect hardware cost of revenue to move in-line with our hardware revenue. Our hardware costs have been and may continue to be impacted by any supply chain constraints, shipping cost volatility and changes in import tariffs.

Cost of software revenue consists primarily of outsourced hosting costs, other outsourced cloud-based service costs and personnel-related expenses associated with monitoring and managing outsourced hosting service providers.

Cost of professional services revenue consists primarily of (i) third-party installation labor costs and parts and materials associated with deployment of our hardware; (ii) labor costs associated with HelloTech independent technicians and credit card fees; and (iii) costs related to third-party property service providers.

Cost of revenue excludes depreciation and amortization shown in operating expenses.

Operating Expenses

Operating expenses consist of research and development, sales and marketing, general and administrative, and depreciation and amortization expenses. Stock-based compensation expense is included within these operating expense categories. We did not grant any restricted stock units ("RSUs") while our registration statement on Form S-8 under the Securities Act was suspended from August 10, 2022 through April 2, 2026. We resumed granting RSUs under our Form S-8 Registration Statement on April 2, 2026, after we became current with our SEC filings.

Research and Development Expenses. Research and development expenses consist primarily of personnel and related expenses for our employees working on our product, design and engineering teams, including salaries, bonuses, benefits, payroll taxes, travel and stock-based compensation. Also included are non-personnel costs such as amounts paid to our third-party contract manufacturers for tooling, engineering and prototype costs of our hardware products, fees paid to third-party consultants, research and development supplies and rent.

Sales and Marketing Expenses. Sales and marketing expenses consist primarily of personnel and related expenses for our employees working on our sales, customer success, deployment and marketing teams, including salaries, bonuses, benefits, payroll taxes, travel, commissions and stock-based compensation. Also included are non-personnel costs such as marketing activities (trade shows and events, conferences and digital advertising), professional fees, rent and customer support.

General and Administrative Expenses. General and administrative expenses consist primarily of personnel and related expenses for our executive, legal, human resources, finance and IT functions, including salaries, bonuses, benefits, payroll taxes, travel and stock-based compensation. Additional expenses included in this category are non-personnel costs such as legal fees, rent, professional fees, audit fees, bad debt expense and insurance costs.

Depreciation and Amortization Expenses. Depreciation and amortization expenses consist primarily of depreciation expenses related to investments in property and equipment and internally-developed capitalized software.

Total Other Expense, Net

Total other expense, net consists of interest expense associated with the significant financing component of our longer-term software contracts, interest expense associated with our debt financing arrangements, interest income on highly liquid short-term investments, gain or loss on extinguishment of debt and gain or loss on change in fair value of derivative liabilities, warrant liabilities and trading securities.

Interest expense, net is summarized as follows:

​

Income Taxes

The provision for income taxes consists primarily of income taxes related to foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on our deferred tax assets as we have concluded that it is more likely than not that the deferred assets will not be utilized.

Results of Operations

The following tables and accompanying information set forth our historical operating results for the periods indicated. The period-to-period comparison of operating results is not necessarily indicative of results for future periods.

Comparison of three months ended September 30, 2026 and 2025

N.M.: Not meaningful

Revenue

Revenue decreased by $3.3 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease was primarily attributable to a $2.2 million decrease in professional services revenue, driven by (i) a $1.8 million decrease in hardware activation and installation services and (ii) a $0.7 million decrease in property management services resulting from the discontinuation of DPM operations under the Restructuring Plan, partially offset by a $0.3 million increase in HelloTech services revenue. Hardware revenue decreased by $2.0 million due to lower hardware shipment volumes in 2026 compared to 2025, reflecting softer demand in the multifamily market, a more cautious customer spending environment, longer customer purchasing cycles, and changes in our channel partner pricing strategy. These decreases were partially offset by a $1.0 million increase in software revenue due to continued subscription growth.

A limited number of customers have historically accounted for a significant portion of our total revenue and accounts receivable. For the three months ended September 30, 2026, we had one customer that accounted for $1.8 million, or 13%, of total revenue. For the three months ended September 30, 2025, one customer accounted for $5.5 million, or 32%, of total revenue. As of September 30, 2026, the Company had one customer that accounted for $1.5 million, or 17%, of gross accounts receivable, compared to $3.9 million, or 47%, as of December 31, 2025. As of September 30, 2026, the Company had one customer that accounted for $0.6 million, or 37%, of gross unbilled receivables and a second customer that accounted for $0.2 million, or 10%, of gross unbilled receivables. As of December 31, 2025, one customer accounted for $0.7 million, or 36%, of gross unbilled receivables. See Note 7. Fair Value Measurements and Concentrations of Credit Risk, in Part I, Item 1. "Financial Statements." The loss of one or more of these customers, or any other significant customer, or a deterioration in their respective financial condition or payment practices, could have a material adverse effect on our revenue, results of operations, and liquidity.

Cost of Revenue

Cost of revenue decreased by $3.4 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease was primarily attributable to a $1.9 million reduction in professional services costs, driven by (i) a $1.8 million decrease in hardware activation and installation services costs resulting from fewer installation projects and (ii) a $0.4 million decrease in property management services costs resulting from the discontinuation of DPM operations under the Restructuring Plan, partially offset by a $0.3 million increase in HelloTech services costs. Hardware costs decreased by $1.0 million due to lower hardware shipment volumes. Additionally, hardware returns and replacement costs decreased by $0.4 million, primarily due to higher levels of returns in the prior-year period.

Research and Development Expenses

Research and development expenses increased by $1.1 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase was primarily attributable to (i) a $0.8 million increase in compensation expense resulting from a reduction in the capitalization of internally-developed software costs; (ii) a $0.5 million increase in severance costs related to the Restructuring Plan; (iii) a $0.2 million increase in software license and cloud processing costs; and (iv) a $0.1 million increase in stock-based compensation expense. These increases were partially offset by a $0.5 million reduction in third-party expense resulting from reduced contractor utilization, including contractor reductions under the Restructuring Plan.

Sales and Marketing Expenses

Sales and marketing expenses remained relatively unchanged for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. A $0.6 million increase in severance costs related to the Restructuring Plan and a $0.1 million increase in post-installation service costs were offset by a $0.6 million decrease in compensation expense and a $0.1 million decrease in professional and consulting fees resulting from the termination of DPM's management advisory agreement (the "Management Advisory Agreement").

General and Administrative Expenses

General and administrative expenses decreased by $0.5 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease was primarily attributable to (i) a $0.6 million decrease in personnel-related expenses, including lower bonus expense; (ii) a $0.2 million decrease in legal fees; (iii) a $0.1 million

decrease in recruiting expense; and (iv) a $0.1 million decrease in audit and tax fees. These decreases were partially offset by (i) a $0.2 million increase in bad debt expense; (ii) a $0.1 million increase in severance costs related to the Restructuring Plan; and (iii) a $0.1 million increase in insurance expense.

Depreciation and Amortization Expenses

Depreciation and amortization expenses decreased by $0.2 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease was primarily due to lower amortization expense associated with previously capitalized internally-developed software.

Impairment of Goodwill

During the three months ended September 30, 2026, we recorded a $13.6 million goodwill impairment charge resulting from a decline in the estimated fair value of our reporting unit, primarily reflecting lower projected hardware and installation revenue and delays in anticipated customer deployments. The impairment charge reduced the goodwill balance to zero as of September 30, 2026.

Total Other Expense, Net

Total other expense, net was relatively unchanged at $0.3 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. A $0.2 million decrease in interest income resulting from lower average principal investment balances was offset by a $0.2 million decrease in interest expense related to the significant financing component of long-term software contracts.

Comparison of nine months ended September 30, 2026 and 2025

N.M.: Not meaningful

Revenue

Revenue decreased by $6.8 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The decrease was primarily attributable to a $5.4 million decrease in professional services revenue, driven by (i) a $3.8 million decrease in hardware activation and installation services; (ii) a $1.3 million decrease in property management services, including the discontinuation of DPM operations under the Restructuring Plan; and (iii) a $0.3 million decrease in HelloTech services revenue. Hardware revenue decreased by $4.2 million due to lower hardware shipment volumes reflecting softer demand in the multifamily market, a more cautious customer spending environment, longer customer purchasing cycles, and changes in our channel partner pricing strategy. These decreases were partially offset by a $2.8 million increase in software revenue due to continued subscription growth.

A limited number of customers have historically accounted for a significant portion of our total revenue and accounts receivable. For the nine months ended September 30, 2026, we had one customer that accounted for $10.3 million, or 23%, of total revenue. For the nine months ended September 30, 2025, one customer accounted for $17.0 million, or 32%, of total revenue. As of September 30, 2026, the Company had one customer that accounted for $1.5 million, or 17%, of gross accounts receivable, compared to $3.9 million, or 47%, as of December 31, 2025. As of September 30, 2026, the Company had one customer that accounted for $0.6 million, or 37%, of gross unbilled receivables and a second customer that accounted for $0.2 million, or 10%, of gross unbilled receivables. As of December 31, 2025, one customer accounted for $0.7 million, or 36%, of gross unbilled receivables. See Note 7. Fair Value Measurements and Concentrations of Credit Risk, in Part I, Item 1. "Financial Statements." The loss of one or more of these customers, or any other significant customer, or a deterioration in their respective financial condition or payment practices, could have a material adverse effect on our revenue, results of operations, and liquidity.

Cost of Revenue

Cost of revenue decreased by $7.1 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The decrease was primarily attributable to a $4.8 million reduction in professional services costs, driven by (i) a $4.2 million decrease in hardware activation and installation services costs resulting from fewer installation projects and (ii) a $0.9 million decrease in property management services costs, including the discontinuation of DPM operations under the Restructuring Plan, partially offset by a $0.3 million increase in HelloTech services costs. Hardware costs decreased by $3.1 million due to lower hardware shipment volumes. Additionally, hardware returns and replacement costs decreased by $0.4 million, primarily due to higher levels of returns in the prior-year period. These decreases were partially offset by a $1.2 million increase in excess inventory charges, primarily attributable to updated net realizable value estimates for slow-moving product in the second quarter of 2026.

Research and Development Expenses

Research and development expenses decreased by $1.1 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The decrease was primarily attributable to a $2.3 million reduction in third-party expense associated with the wind-down of overlapping engineering contractor transition costs and reduced contractor utilization, and a $0.6 million decrease in personnel-related expenses, including lower bonus expense. These decreases were partially offset by (i) a $0.9 million increase in software license and cloud processing costs; (ii) a $0.5 million increase in severance costs related to the Restructuring Plan; (iii) a $0.3 million increase in compensation expense resulting from a reduction in the capitalization of internally-developed software costs; and (iv) a $0.1 million increase in stock-based compensation expense.

Sales and Marketing Expenses

Sales and marketing expenses increased by $0.3 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase was primarily attributable to a $0.6 million increase in severance costs related to the Restructuring Plan and a $0.3 million increase in post-installation service costs. These increases were partially offset by a $0.4 million decrease in compensation expense and a $0.1 million decrease in professional and consulting fees resulting from the termination of the Management Advisory Agreement.

General and Administrative Expenses

General and administrative expenses decreased by $3.5 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The decrease was primarily attributable to (i) a $2.4 million decrease in legal fees; (ii) a $1.3 million decrease in personnel-related expenses, including lower bonus expense; (iii) a $0.6 million decrease in audit and tax fees; (iv) a $0.4 million decrease in insurance expense; (v) a $0.4 million decrease in software license expense; (vi) a $0.4 million decrease in professional fees primarily related to accounting services; and (vii) a $0.1 million decrease in recruiting expense. These decreases were partially offset by (i) a $1.0 million increase in expense associated with the SEC settlement; (ii) a $0.5 million increase in tax expense due to the benefit of a sales tax refund recognized in the prior-year period; (iii) a $0.3 million increase in bad debt expense; (iv) a $0.2 million increase in stock-based compensation expense; and (v) a $0.1 million increase in severance costs related to the Restructuring Plan.

Depreciation and Amortization Expenses

Depreciation and amortization expenses decreased by $1.0 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The decrease was primarily due to a $0.9 million decrease in amortization expense associated with previously capitalized internally-developed software and a $0.1 million decrease in depreciation expense.

Impairment of Goodwill

During the nine months ended September 30, 2026, we recorded a $13.6 million goodwill impairment charge resulting from a decline in the estimated fair value of our reporting unit, primarily reflecting lower projected hardware and installation revenue and delays in anticipated customer deployments. The impairment charge reduced the goodwill balance to zero as of September 30, 2026.

Total Other Expense, Net

Total other expense, net decreased by $0.4 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The decrease was primarily attributable to a $0.8 million gain on our investment in a privately held company and a $0.7 million decrease in interest expense related to the significant financing component of long-term software contracts. These favorable changes were partially offset by a $0.9 million decrease in interest income resulting from lower average principal investment balances and a $0.1 million loss on the payoff of debt.

Liquidity and Capital Resources

We have incurred losses since our inception. For the nine months ended September 30, 2026 and 2025, we generated a net loss of $33.3 million and $25.7 million, respectively. To date, our principal sources of liquidity have been the net proceeds received as a result of the 2021 business combination (the "2021 Business Combination") and payments received from our customers.

As of September 30, 2026 and December 31, 2025, our unrestricted cash and cash equivalents were approximately $17.6 million and $34.6 million, respectively. We invest a portion of our available cash in U.S. Treasury securities with the objective of preserving principal while maintaining liquidity. These securities are classified as cash equivalents or short-term investments based on their original maturities and applicable accounting criteria.

As of September 30, 2026 and December 31, 2025, we also had approximately $23.0 million and $27.3 million, respectively, in net inventory.

Our short-term liquidity needs primarily consist of working capital for salaries, including sales and marketing and research and development, as well as inventory purchases from our contract manufacturers.

Beginning in the second quarter of 2022, we have incurred significant professional fees, primarily consisting of legal, forensic accounting, management consulting and related advisory services in connection with our 2022-2023 internal investigation (the "Investigation"), the SEC Investigation, the restatement and comprehensive review of our previously issued financial statements, and related accounting and advisory services. We also incurred significant costs in connection with stockholder litigation. During 2026, substantially all of these matters were resolved, including the SEC Investigation, which was formally settled on October 1, 2026. Pursuant to the settlement, we agreed to pay a civil monetary penalty of $1.0 million in four quarterly installments, the first of which was paid in October 2026. The related professional fees have declined significantly, and while we may continue to incur professional fees associated with the resolution of other legal proceedings, we do not expect these costs to continue at historical levels.

Near-Term Liquidity Position

The following risks and uncertainties associated with our liquidity position may adversely affect our ability to sustain our operations as of the date of filing this Form 10-Q:

Due to the risks and uncertainties described above, we continue to monitor our liquidity position. We recognize the challenge of maintaining sufficient liquidity to sustain our operations. However, after giving effect to the minimum cash balance required to be maintained under our revolving credit facility with Truist Bank (the "Credit Facility"), notwithstanding our liquidity position as of the date of filing this Form 10-Q, and while it is difficult to predict our future liquidity requirements with certainty, we believe that our available unrestricted cash and cash equivalents, together with cash flows expected to be generated from operations, will be sufficient to fund our operating cash requirements for at least 12 months beyond the date of filing of this Form 10-Q. This assessment is based on management's current operating plan, which incorporates the anticipated cost savings from the workforce reduction announced in August 2026 under the Restructuring Plan, as well as continued cost discipline, inventory management and liquidity preservation measures. However, this assessment is subject to significant uncertainty, and our actual liquidity needs may differ materially from our current estimates as a result of the risks and uncertainties described above and those described under the section in our 2025 Annual Report titled "Risk Factors," as updated by Part II, Item 1A. "Risk Factors" in this Form 10-Q. If our available resources prove insufficient to fund our operations, we may need to seek additional financing, further reduce operating costs, or take other measures to preserve liquidity. Other significant factors that affect our overall management of liquidity include certain actions controlled by management, such as capital expenditures and acquisitions. See Note 13. Debt and Note 14. Commitments and Contingencies, in Part I, Item 1. "Financial Statements."

In response to the risks and uncertainties described above, we may from time to time seek to refinance existing indebtedness or raise additional capital through equity or debt financing arrangements. However, we can provide no assurance we will be able to secure any outside capital in the future at all, or on terms that are acceptable. Additionally, our securities are currently traded on the OTCID Market. Because of applicable restrictions, there is a minimal public market for our securities, and our ability to raise additional capital may be impaired because of the less liquid nature of the over-the-counter markets. However, our ability to meet our debt service obligations and to fund working capital, capital expenditures, and investments in our business will depend upon our future performance and our ability to access capital markets and refinance such loans, as well as financial, business, and other factors affecting our operations, many of which are beyond our control. These factors include those described above and those described under the section in our 2025 Annual Report titled "Risk Factors," as updated by Part II, Item 1A. "Risk Factors" in this Form 10-Q. We cannot guarantee we will generate sufficient cash flow from operations, or that future borrowings or capital markets transactions will be available, in amounts sufficient to enable us to pay our debt, refinance our existing indebtedness or to fund our other liquidity needs. We have been and are continuing to explore various cost-saving opportunities, and we intend to continue seeking opportunities to generate additional revenue through operations. We plan to continue to closely monitor our cash flow forecast and, if necessary, may implement certain incremental cost savings measures to preserve liquidity. There can be no assurance that we will be successful in our plans described above. If we are unable to effectively implement additional cost reductions, generate additional revenue or refinance existing indebtedness or raise additional capital through equity or debt financing arrangements, we may be forced to delay, reduce or eliminate some or all of our strategic operational efforts and product and service expansion, and our business, financial condition and results of operations could be materially and adversely affected.

Commitments and Contractual Obligations

We are obligated to make payments as part of certain contracts that we have entered into during the normal course of business. In February 2024, following the property management acquisitions, we entered into a three-year Management Advisory Agreement with a partner pursuant to which the partner provided DPM with certain management and advisory services related to DPM's property management business. We paid the partner $0.5 million annually.

On June 26, 2026, DPM entered into a settlement agreement, as described in Note 11. Goodwill and Intangible Assets, Net, pursuant to which the parties terminated the Management Advisory Agreement and resolved the parties' respective obligations thereunder. As a result, we had no remaining obligations under the Management Advisory Agreement as of September 30, 2026.

Indebtedness

On July 15, 2024, we entered into an Amended and Restated Loan and Security Agreement (the "Loan Agreement") with Customers Bank. Pursuant to the Loan Agreement, Customers Bank issued a term loan in the principal amount of $6.0 million (the "Loan"). The Loan Agreement, which was entered into in connection with the acquisition of HelloTech, did not result in our receipt of any loan proceeds. Interest was payable on the Loan at a rate equal to the greater of (a) the prime rate published in The Wall Street Journal or (b) 6.0%, and the maturity date was July 15, 2029 (the "Maturity Date"). Payments under the Loan were interest-only through January 15, 2025. Thereafter, we were required to pay equal monthly installments of principal plus accrued interest until the Maturity Date. There was no penalty for prepayment of the Loan. The fair value of the Loan was $4.6 million as of December 31, 2025. We were in compliance with the covenants under the Loan Agreement at all times through May 11, 2026, when the Loan was repaid in full and the Loan Agreement was terminated.

Pursuant to the Loan Agreement, Customers Bank was granted a security interest in substantially all of our assets, other than intellectual property, and the Loan Agreement contained customary affirmative and negative covenants, including a requirement to maintain a liquidity ratio equal to four times the outstanding principal balance.

On May 11, 2026, DOOR Systems, Inc., our primary operating subsidiary, entered into the Credit Facility with Truist Bank (the "Lender"), providing for borrowings of up to $5.0 million. The Credit Facility matures in May 2028 and bears interest at a variable rate equal to the one-month term Secured Overnight Financing Rate plus 1.75% per annum. The Credit Facility requires monthly interest-only payments, with all principal due at maturity, and includes customary fees, reporting requirements, and events of default.

In connection with entering into the Credit Facility, we borrowed approximately $4.4 million under the Credit Facility to repay all outstanding principal, accrued interest, and fees under the Loan. Upon repayment, all amounts and other obligations under the Loan Agreement were satisfied, and the Loan Agreement and all commitments thereunder were terminated and all liens and security interests previously granted in favor of Customers Bank were released subject to customary payoff documentation, including lien releases and UCC termination statements. No material early termination penalties were incurred. In connection with the repayment, we wrote off $0.1 million of unamortized debt issuance costs related to the Loan, which was recognized as a loss on extinguishment of debt for the nine months ended September 30, 2026.

The Credit Facility is governed by a promissory note (the "Promissory Note") and related loan documents. To secure the Credit Facility, we are required to maintain a minimum cash balance of $5.25 million in a restricted deposit account with the Lender. Borrowings under the Credit Facility are secured by certain of our cash deposit accounts and/or certificates of deposit, including all funds held therein. As of September 30, 2026, this restricted cash balance is classified within other non-current assets on the accompanying Condensed Consolidated Balance Sheets and is not available for general corporate purposes. After giving effect to this restriction, our unrestricted cash and cash equivalents available for working capital and general operating purposes were approximately $17.6 million as of September 30, 2026, compared to approximately $34.6 million (with no restricted cash requirements) as of December 31, 2025. As of September 30, 2026, $5.0 million was outstanding under the Credit Facility, and no amounts remained available for future borrowings.

The Promissory Note contains customary covenants and events of default.

Upon the occurrence of an event of default, the Lender will be able to accelerate the maturity of amounts outstanding under the Credit Facility and exercise other rights and remedies.

On July 15, 2024, in a private placement concurrent with the Loan Agreement, we issued a warrant to Customers Bank to purchase 1,000,000 shares of our common stock. The warrant has an exercise price of $1.25 per share, was exercisable upon issuance and will expire six years from the date of issuance, or July 15, 2030. This warrant remains outstanding.

Warrant Expiration and Sponsor Share Forfeiture

On June 4, 2026, the fifth anniversary of the closing of the 2021 Business Combination, our outstanding public warrants (9,999,967 shares) and private placement warrants (5,333,334 shares), each exercisable at $11.50 per share, expired unexercised in accordance with their terms and no longer represent potential shares of our common stock. On the same date, 738,000 unvested shares held by TS Innovation Acquisitions Sponsor, L.L.C. in connection with the 2021 Business Combination (the "Sponsor Shares") were forfeited because the applicable stock price vesting condition was not achieved prior to June 4, 2026, and such shares are no longer outstanding. Together, these events eliminated potential future dilution of approximately 16.1 million shares, or approximately 9.8% of our shares outstanding immediately prior to these events, with no cash outlay and minimal income statement impact to us. See Note 15. Equity, in Part I, Item 1. "Financial Statements."

Cash Flows

The following table sets forth a summary of our cash flows for the nine months ended September 30, 2026 and 2025 (in thousands):

​

Operating Activities. Net cash used in operating activities for the nine months ended September 30, 2026 decreased by $16.4 million compared to the nine months ended September 30, 2025. The decrease was primarily attributable to a $7.1 million reduction in cash payments related to litigation settlements, net of related insurance recoveries, and a $5.9 million improvement in net loss adjusted for non-cash items. Other favorable changes included a $3.3 million favorable change in deferred revenue, a $1.8 million favorable change in accrued restructuring costs, a $1.6 million favorable change in accounts payable, and a $1.4 million reduction in cash payments for accrued audit fees. These favorable changes were partially offset by a $2.7 million unfavorable change in accounts receivable, a $1.2 million unfavorable change in unbilled receivables, a $0.6 million net unfavorable change in inventory purchases, and a $0.5 million unfavorable change in other non-current assets. Management continues to focus on cost discipline, inventory management and liquidity preservation as it seeks to reduce operating cash usage.

Investing Activities. Net cash provided by investing activities decreased by $1.5 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Cash flows from investing activities primarily consist of the net purchases, sales and maturities of U.S. Treasury securities classified as available-for-sale securities. The decrease was primarily attributable to a $7.9 million decrease in proceeds from sales and maturities of available-for-sale securities, partially offset by a $4.3 million decrease in purchases of available-for-sale securities, $1.7 million of cash proceeds received from the sale of an investment in a private company and a $0.4 million decrease in capitalized internally-developed software.

Financing Activities. Net cash used in financing activities decreased by $0.9 million for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Financing activities in the current period primarily consisted of $5.0 million of proceeds from our Credit Facility, substantially offset by $4.8 million of repayments under the previous Loan Agreement and $0.3 million of tax withholdings on settlement of equity awards.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2026 and December 31, 2025 that had, or were reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors.

Critical Accounting Estimates

Other than changes related to the fair value estimate of our single reporting unit, there have been no material changes to our critical accounting estimates as disclosed in the 2025 Annual Report.

Goodwill

Goodwill is tested for impairment annually as of December 31, or more frequently whenever events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying amount. The impairment test requires management to estimate the fair value of our single reporting unit and compare it to its carrying amount.

During the third quarter of 2026, we identified events and circumstances indicating that it was more likely than not that the fair value of the reporting unit was below its carrying amount. These factors included lower hardware revenue, installation revenue, and reductions in and delays to certain customer deployments, which contributed to lower forecasted revenue and long-term operating performance compared with the forecasts used in the December 31, 2025 annual goodwill impairment test. Accordingly, the Company performed an interim quantitative goodwill impairment test as of September 30, 2026.

To determine the fair value of our reporting unit, estimated fair value is calculated as our business enterprise value ("BEV"), plus cash and cash equivalents and restricted cash, less debt. The Company utilized an income approach based on a discounted cash flow ("DCF") methodology to estimate the BEV of the reporting unit. The DCF analysis requires significant judgment and assumptions, including projected revenue growth, operating margins, working capital requirements, terminal growth rate and discount rate. Changes in these assumptions can materially affect the estimated fair value of the reporting unit.

The DCF analysis resulted in an estimated BEV of approximately $6.7 million. After adjusting for the estimated cash, cash equivalents and restricted cash of approximately $22.9 million and debt of approximately $5.0 million, the estimated fair value of the reporting unit was approximately $24.6 million. The estimated fair value was less than the carrying amount of the reporting unit by approximately $14.6 million. Because the excess of the carrying amount over estimated fair value exceeded the remaining carrying amount of goodwill, the Company recognized a goodwill impairment charge of approximately $13.6 million during the three months ended September 30, 2026, representing the entire remaining goodwill balance. The impairment reflects the market-participant assumptions used in the required fair value assessment, which differ from the assumptions in our internal operating plan. Following the impairment, no goodwill remained recorded as of September 30, 2026.

Recent Accounting Pronouncements

See Note 21. Recently Issued Accounting Standards, in Part I, Item 1. "Financial Statements," for information about recent accounting pronouncements.