Veea Inc.: Form 10-Q for the period ended Sep 30, 2024

The following discussion and analysis of the financial condition and results of operations of Veea should be read together with our audited consolidated financial statements and unaudited consolidated condensed financial statements. In addition to historical information, the following discussion contains forward-looking statements. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.” Certain amounts may not foot due to rounding, and all figures presented are in thousands.

Throughout this report, the terms “our,” “we,” “us,” and the “Company” refer to Veea Inc. following the closing of the consummation of the business combination among Veea Inc. (“Legacy Veea”), Plum Acquisition Corp. I (“Plum”) and Plum SPAC Merger Sub, Inc. (the “Business Combination”), the term “Legacy Veea” refers to Veea Inc. prior to the closing of the Business Combination and the term “Private Veea” refers to VeeaSystems Inc. after the closing of the Business Combination.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995, including statements regarding, among other things, the plans, strategies and prospects, both business and financial, of the Company. These statements are based on the beliefs and assumptions, whether or not identified in this Quarterly Report, of the management of the Company. Although the Company believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements may be preceded by, followed by or include the words “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “project,” “scheduled,” “seek,” “should,” “will” or similar expressions, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about the ability of the Company to:

• failure to maintain adequate operational and financial resources or raise additional capital or generate sufficient cash flows;
• risks related to its current growth strategy and the Company’s ability to generate revenue and become profitable;
• market acceptance of its platform and products;
• the length and unpredictable nature of its sales cycles;
• Veea’s reliance on distribution and partnering arrangements and third-party manufacturers;
• cybersecurity incidents, security vulnerabilities, and real or perceived errors, failures, defects, or bugs in its platforms or products;
• the ability to maintain the listing of our Common Stock and the warrants on Nasdaq, and the potential liquidity and trading of such securities;
• our public securities’ potential liquidity and trading;
• the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably and retain its key employees;
• our success in retaining or recruiting, or changes required in, our officers, key employees or directors following the completion of the Business Combination, and our ability to attract and retain key personnel;
• macroeconomic conditions; and
• each of the other factors detailed under the section entitled “Risk Factors.”

Forward-looking statements are provided for illustrative purposes only and are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that the factors discussed under the heading “Risk Factors” and elsewhere in this Quarterly Report and as disclosed on the Form S-4/A filed with the SEC on May 13, 2024, could affect the future results of the Company, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements in this Quarterly Report.

In addition, the risks described under the heading “Risk Factors” in this Quarterly Report are not exhaustive. Other sections of this Quarterly Report describe additional factors that could adversely affect the businesses, financial conditions, or results of operations of the Company. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can the Company assess the impact of all such risk factors on the business of the Company, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to the Company or persons acting on their behalf are expressly qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In addition, this Quarterly Report contains statements of belief and similar statements that reflect the beliefs and opinions of the Company on the relevant subject. These statements are based upon information available to the Company as of the date of this Quarterly Report, and while the Company believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that the Company has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements

Company Overview

The Company is a provider of edge computing and communications devices (i.e., “VeeaHub” devices), applications and services hosted on its edge Platform-as-a-Service (“ePaaS”). Veea Edge Platform ePaaS is an end-to-end platform that is both locally- and cloud-managed. VeeaHubÒ products are converged computing and communications (i.e., hyperconverged) indoor and outdoor devices, about the size of a Wi-Fi Access Point (AP), that provide for networking and computing solutions for AI-assisted applications and solutions at the edge where people, places, and things connect to the network.

Veea Edge Platform provides for highly secure connectivity, computing, and IoT solutions through full stack platform for digital transformation of industries as well as unserved or underserved communities that lack Internet connectivity and essential applications and services. It further enables the formation of highly secure, but easily accessible, private clouds and networks across one or multiple user(s) or enterprise location(s) across the globe. We have redefined and simplified edge computing and connectivity with Veea Edge Platform, easily deployable products that fully integrate hardware, system software, technologies, and edge applications. We are demonstrating, globally, that the Platform enables our partners and customers to champion digital transformations in multiple vertical markets.

Through our innovative Veea Edge Platform, we have created a new product category that brings cloud capabilities close to the user, as an alternative to cloud computing, with benefits in optimal latency, lower data transport costs, data privacy, security and ownership, Edge AI, “always-on” availability at the edge for mission critical applications, and contextual awareness for people, devices and things connected to the Internet. The Company was recognized in 2023 by Gartner for the innovativeness and capabilities of our Veea Edge Platfom and was named a Leading Smart Edge Platform in 2023 and a Cool Vendor in Edge Computing in 2021. Veea was named in Market Reports World’s its research report published in October 2023 as one of the top 10 Edge AI solution providers alongside of IBM, Microsoft, Amazon Web Services (“AWS”) among others.

Veea earns revenue primarily from the sale of its VeeaHubÒ devices, licenses and subscriptions. Veea incurred net losses of approximately $33.3 million and $46.4 million for the three and nine months ended September 30, 2024, respectively; net income and losses of approximately $2.0 million and $9.4 million for the three and nine months ended September 30, 2023, respectively.

Veea generated net revenue of approximately $51,000 and $108,000 for the three and nine months ended September 30, 2024, respectively, approximately $9,000 and $40,000 for the three and nine months ended September 30, 2023, respectively. Other than revenue generated from the license of AdEdge™ in 2023, revenue has been immaterial for all periods presented and represented revenue earned from paid pilots for our VeeaHubÒ devices.

Veea was founded in 2014 by Allen Salmasi, our Chief Executive Officer and a pioneering wireless technology leader. Mr. Salmasi helped to drive industry transformation through his contributions to the development of CDMA/TDMA-based OmniTRACS, the largest mobile satellite messaging and position reporting system with integrated IoT solutions during the 1980s and in the 1990s; 2G/3G technology and products at Qualcomm in 1990s; 4G technology and products at NextWave during the 2000s, and hyper-converged edge computing and communications during the 2010s; and beyond with Veea. At Veea, Mr. Salmasi has assembled a talented and experienced management and engineering team that includes former senior executives of leading technology, telecom, SaaS, and wireless companies that possess a deep understanding of wireless technologies, mesh networking and edge computing.

Recent Developments

Business Combination

On September 13, 2024 Plum Acquisition Corp. I. (“Plum”) (NASDAQ: PLMI), a special purpose acquisition company, Legacy Veea consummated its previously announced Business Combination. In connection with the consummation of the Business Combination (the “Closing”) (i) Plum de-registered from the Register of Companies in the Cayman Islands by way of continuation out of the Cayman Islands and into the State of Delaware, migrating to and domesticating as a Delaware corporation (the “Domestication”), and (ii) the merger (the “Merger”) of Plum Merger Sub with and into the Legacy Veea was completed and the separate corporate existence of Plum Merger Sub ceased, with Legacy Veea as the surviving corporation becoming a wholly owned subsidiary of Plum. Following the Closing, Plum changed its name from “Plum Acquisition Corp. I” to “Veea Inc.” and Legacy Veea changed its name from “Veea Inc.” to “VeeaSystems Inc.”

The Business Combination was accounted for as a “reverse recapitalization,” with no goodwill or other intangible assets recorded, in accordance with GAAP. A reverse recapitalization did not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of the financial statements of Legacy Veea in many respects.

Under this method of accounting, Plum was treated as the “acquired” company for financial reporting purposes. For accounting purposes, Legacy Veea was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Legacy Veea (i.e., a capital transaction involving the issuance of stock by Plum for the stock of Legacy Veea). Accordingly, the consolidated assets, liabilities and results of operations of Legacy Veea became the historical financial statements of the combined company, and Plum’s assets, liabilities and results of operations were consolidated with the Company’s beginning on the acquisition date. Operations prior to the Business Combination were presented as those of Legacy Veea in future reports. The net assets of Legacy Veea were recognized at carrying value, with no goodwill or other intangible assets recorded.

Private Placements

Simultaneously with the closing of the Business Combination, the Company and Private Veea issued convertible notes under note purchase agreements (the “Note Purchase Agreements”) with certain accredited investors unaffiliated with Plum and Legacy Veea (each, an “Investor”) for the sale of unsecured subordinated convertible promissory notes (the “September 2024 Notes”) as part of a private placement offering of up to $15 million in purchase price for such September 2024 Notes in the aggregate (the “Financing Closing”). The Company received $1.45 million in proceeds from the issuance of its convertible promissory note with a commitment from a convertible note purchaser for the remaining unfunded amount of $13.55, which is to be funded on or prior to November 15, 2024, subsequently extended to December 15, 2024. In addition to a September 2024 Note, each Investor received as a transfer from NLabs immediately prior to the Financing Closing a number of shares of Legacy Veea Series A-1 Preferred Stock that upon the Closing became a number of registered shares of Common Stock equal to such Investors’ loan amount under their respective notes divided by $7.50 (the “Transferred Shares”).

The Company and Private Veea are co-borrowers under each September 2024 Note (together, the “Borrowers”) and are jointly responsible for the obligations to each Investor thereunder. Each September 2024 Note has a maturity date of 18 months after the Financing Closing but is prepayable in whole or in part by the Borrowers at any time without penalty. The outstanding obligations under each September 2024 Note accrues interest at a rate equal to the Secured Overnight Financing Rate plus 2% per annum, adjusted quarterly, but interest is only payable upon the maturity date of the September 2024 Note as long as there is no event of default thereunder. Each September 2024 Note is unsecured and expressly subordinated to any senior debt of the Borrowers. The September 2024 Notes and the Note Purchase Agreements do not include any operational or financial covenants for the Borrowers. Each September 2024 Note includes customary events of default for failure to pay amounts due on the maturity date, for failure to otherwise comply with the Borrowers’ covenants thereunder or for Borrower insolvency events, in each case, with customary cure periods, and upon an event of default, the Investor may accelerate all obligations under its September 2024 Note and the Borrowers will be required to pay for the Investor’s reasonable out-of-pocket collection costs.

The outstanding obligations under each September 2024 Note are convertible in whole or in part into shares of Common Stock (the “Conversion Shares”) at a conversion price of $7.50 per share (subject to equitable adjustment for stock splits, stock dividends and the like with respect to the Common Stock after the Financing Closing) (the “Conversion Price”) at any time after the Financing Closing at the sole election of the Investor. The outstanding obligations under each September 2024 Note will automatically convert at the Conversion Price if (i) the Company or its subsidiaries consummate one or more additional financings for equity or equity-linked securities for at least $20 million in the aggregate or makes one or more significant acquisitions valued in the aggregate (based on the consideration provided by the Company and its subsidiaries) to be at least $20 million, (ii) the Investors holding a majority of the aggregate outstanding obligations under the September 2024 Notes expressly agree to convert all obligations under the September 2024 Notes or (iii) the Common Stock trades with an average daily VWAP of at least $10.00 (subject to equitable adjustment for stock splits, stock dividends and the like with respect to the Common Stock after the Financing Closing) for ten (10) consecutive trading days. The obligations under each September 2024 Note will also automatically convert in connection with a Brokerage Transfer, as described below.

The September 2024 Notes and the Conversion Shares are subject to a lock-up for a period of 6 months after the Financing Closing (subject to early release for a liquidation, merger, share exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their equity holdings in the Company for cash, securities or other property, and subject to customary permitted transfer exceptions). The Transferred Shares are not be subject to any lock-up restrictions, but for a period of 6 months after the Closing they will be separately designated by SPAC’s transfer agent and kept as book entry shares on the transfer agent’s records and will not be eligible to be held by Depository Trust Company (“DTC”) without the Investor first notifying the Company of its intent to transfer any such Transferred Shares to a brokerage account and/or to be held by DTC or another nominee (a “Brokerage Transfer”). If the Investor provides such notice or otherwise has any Transferred Shares subject to a Brokerage Transfer within 6 months after the Closing, a portion of the outstanding obligations under such Investor’s Note will automatically convert into a number of Conversion Shares equal to the number of Transferred Shares subject to such Brokerage Transfer, and the lock-up period for such Conversion Shares will be extended for an additional 6 months to 12 months after the Financing Closing.

The Note Purchase Agreements include customary registration rights.

Equity Line of Credit

On November 15, 2024, the Company and White Lion Capital, LLC (“White Lion”) signed a term sheet providing for the issuance by the Company to White Lion of up to $25 million of shares of the Company’s common stock. The Company anticipates closing the transactions contemplated by the term sheet on or about November 20, 2004. At the closing, the Company and White Lion will enter into a common stock purchase agreement (the “Common Stock Purchase Agreement”) and related registration rights agreement (the “White Lion Registration Rights Agreement”). Pursuant to the Common Stock Purchase Agreement, the Company has the right to sell to White Lion up to the lesser of (i) 25,000,000 shares of common stock (“ELOC Shares) and (ii) the Purchase Notice Limit (as defined in the Common Stock Purchase Agreement), subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement. As of the Issuance Date, the Company has not filed a Registration Statement on Form S-1 registering the resale of the ELOC Shares. The Company expects to utilize proceeds from the Common Stock Purchase Agreement for working capital and other general corporate purposes. Subject to the terms of the Common Stock Purchase Agreement, the Company will have the right from time to time at its sole discretion until the 24th month following signing of the Common Stock Purchase Agreement, to direct White Lion to purchase up to a specified maximum number of shares of common stock as set forth in the Common Stock Purchase Agreement by delivering written notice to White Lion prior to the commencement of trading on any trading day. The Company will control the timing and amount of any sales of the common stock to White Lion. Actual sales of shares to White Lion under the Common Stock Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, and the trading price of the common stock.

Components of Results of Operations

Revenue, net

The Company recognizes revenue based on the satisfaction of distinct obligations to transfer goods and services to customers. The Company generates revenue from hardware sales and the sale of licenses and subscriptions. The Company applies a five-step approach as defined in ASC 606, Revenue from Contracts with Customers, in determining the amount and timing of revenue to be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when a corresponding performance obligation is satisfied. Most contracts with customers are to provide distinct products or services within a single contract. However, if a contract is separated into more than one performance obligation, the total transaction price is allocated to each performance obligation in an amount based on the estimated relative standalone selling price.

For licenses of technology, recognition of revenue is dependent upon whether the Company has delivered rights to the technology, and whether there are future performance obligations under the contract. Revenue from non-refundable upfront payments is recognized when the license is transferred to the customer and the Company has no other performance obligations. Revenue for licenses delivered under a subscription model having terms between one and twelve-months are recognized over-time. Subscription revenue is generated through sales of monthly subscriptions. Customers pay in advance for the licenses and subscriptions. Revenue is initially deferred and is recognized using the straight-line method over the term of the applicable subscription period.

Cost of Goods Sold

Cost of goods sold consists primarily of the cost of finished goods, components purchased for manufacturing and freight. Cost of goods sold also includes third-party vendor costs related to cloud hosting fees.

Operating Expenses

We classify our operating expenses into the following categories:

• Product development expenses. Product development expenses primarily consist of employee compensation, employee benefits, stock-based compensation related to technology developers and product management employees, as well as fees paid for outside services and materials.
• Sales and marketing expenses. Sales and marketing expenses consist of compensation and other employee-related costs for personnel engaged in selling, marketing and sales support functions. Selling expenses also include marketing and the costs associated with customer evaluations. The Company does not currently incur advertising costs.
• General and administrative expenses. General and administrative expenses consist of compensation expense (including stock-based compensation expense) for employees and executive management, and expenses associated with finance, tax, and human resources. General and administrative expenses also includes transaction costs, expenses associated with facilities, information technology, external professional services, legal costs and settlement of legal claims and other administrative expenses.
• Depreciation and amortization: Depreciation and amortization expense consists of depreciation of Veea’s property and equipment and amortization of Veea’s patents and other intellectual property.
• Impairment: Impairment consists of impairment charges related to our in-process research and development (“IPR&D”)

Results of Operations

The following tables set forth the results of our operations for the periods presented, as well as the changes between periods. The period-to-period comparison of financial results is not necessarily indicative of future results.

For the three months ended September 30, 2024 compared to year ended September 30, 2023

The following table sets forth Veea’s unaudited statements of operations data for the three and nine months ended September 30, 2024 and 2023, respectively. Veea has prepared the three and nine-month data on a consistent basis with the audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022 included in the Form S-4/A filed with the SEC on May 13, 2024. In the opinion of Veea’s management, the unaudited three- and nine-month financial information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data.

For the nine months ended September 30, 2024 compared to year ended September 30, 2023

34

Revenue, net

The Company generated revenue of $50,683 and $9,009,254 for the three months ended September 30, 2024 and 2023, respectively. The Company generated revenue of $108,264 and $9,040,359 for the nine months ended September 30, 2024 and 2023, respectively. Revenue has been principally earned from paid pilots for our VeeaHub® devices. The decrease was due to $9 million income recognized in connection with the license of AdEdge™ in 2023.

Our focus over the past several years has been on field testing and refining our product to meet customer needs as well as market developments. As a result of these efforts, we expect revenue to grow over the next several quarters through the sales of our hardware, licenses and subscriptions. We are especially focused in four principal market opportunities: 1) Digital Equity and Inclusion, 2) Energy and Sustainability solutions for Smart Buildings and Climate Smart Agriculture, 3) Convergence of Fixed, Wireless, and 5G Networks, and 4) Smart Retail and Smart Warehouses.

Cost of Goods Sold

Cost of goods sold decreased by approximately $9,310, or 38%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Cost of goods sold increased by $10,524, or 22%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase is immaterial as it is related to the costs incurred to generate our revenue earned from paid pilots for our VeeaHub® devices.

Product Development Expense

Product development expense increased by $170,997, or 92%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Product development expense increased by $476,327, or 70%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in product development expenses was due to increased internal development and additional costs incurred by outside contractors related to products manufactured during the period.

Sales and Marketing Expense

Sales and marketing expense decreased by $57,006, or 41%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Sales and marketing expense increased by $160,211, or 54%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. In the third quarter, management had reduced efforts in marketing as the focus was on the Business Combination completion. The year-to-date increase was due primarily to an increase in customer evaluations and fees paid to third-party marketing firm during the period.

General and Administrative Expense

General and administrative expense decreased by $3.2 million, or 62%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. General and administrative expense increased by $0.6 million, or 5%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease for the quarter is primarily related to the foreign exchange gain of $1.8 million for the three months ended, as well as a reclassification of $1.4 million of transaction related expenses out of G&A in the period the Business Combination occurred. The year-to-date overall increase was primarily due to an increase in net foreign exchange losses, as well as an increase in professional and consulting fees relating to the Business Combination.

Transaction costs including those incurred with contingent earn-out liability

Following the closing of the Business Combination, holders of certain capital stock of Legacy Veea immediately prior to the closing will have the contingent right to receive up to 4.5 million additional shares of the Company’s common stock if certain trading-price based milestones of the Company’s common stock are achieved or a change of control transaction occurs during the ten-year period following the Closing. The initial value of the contingent earn-out share liability of $53.6 million for the three and nine months ended September 30, 2024 is recorded as a transaction cost within operating expenses. The fair value of the earn-out liabilities was estimated using Monte Carlo simulation utilizing assumptions related to the contractual term of the instruments, estimated volatility, the price of the Common Stock and current interest rates. A significant driver of the value of the earn-out at the close of the Business Combination was our closing stock price on September 13, 2024 which was $12.00. Additionally, the Company incurred approximately $1.4 million of professional fees relating to the Business Combination.

Depreciation and Amortization

Depreciation and amortization decreased by $7,588, or 10%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Depreciation and amortization decreased by $529,195, or 72%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was due to certain intangibles reaching the end of their useful lives.

Other income, net

Other income, net relates to immaterial non-operating transactions incurred during the period. These amounts were immaterial for the three and nine months ended September 30, 2024 and 2023.

UK R&D Tax Credit

The increase is related to the receipt of an R&D tax credit of $1.2 million received by the Company’s UK subsidiary.

Loss on initial issuance of convertible note

The loss on initial measurement of the convertible note was $1,770,993 for the three and nine months ended September 30, 2024. The Convertible Note Payable was entered into in September 2024.

Change in fair value of derivative liabilities

Change in fair value of derivative liabilities comprised of the fair value adjustment to the conversion option, Private Warrants, and earn-out shares at balance sheet date. The gain on the change in fair value of conversion note option liability was $797,500 for the three and nine months ended September 30, 2024 was determined using a Black-Scholes option pricing model. The loss of the change in fair value of warrant liabilities was $220,373 for the three and nine months ended September 30, 2024 was determined based on the trading value of the public warrants. The loss on the change in fair value of earn out share liability was $24.8 million for the three and nine months ended September 30, 2024 was determined using a Monte Carlo simulation. A significant driver of the value of the earn-out at the close of the Business Combination was our closing stock price on September 30, 2024 which was $6.50. These derivative instruments were entered into in September 2024 related to the Business Combination.

Other expense

Other expenses relate to immaterial non-operating expenses incurred during the period. These amounts were immaterial for the three and nine months ended September 30, 2024 and 2023.

Interest expense

Interest expense decreased by $1.3 million, or 75%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Interest expense decreased by $3.1 million, or 69%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The decrease was due to loans coming to term or being converted into equity.

Liquidity and Capital Resources

To date, we have financed our operations primarily through private placements of equity securities and debt to. We plan to fund our operations and capital funding needs through a combination of private and public equity and debt offerings, or a combination thereof. Since our inception, we have incurred significant operating losses and negative cash flows. As of September 30, 2024 and December 31, 2023, we had an accumulated deficit of $216.9 million and $170.3 million, respectively.

As of September 30, 2024 and December 31, 2023, we had cash of $2.8 million and $6.0 million, respectively. As of September 30, 2024, we had $14.15 million outstanding debt, of which approximately $1.45 million was outstanding under the Note Purchase Agreement and $12.7 million was outstanding under our working capital facility.

During the nine months ended September 30, 2024 and 2023, the Company has incurred net losses of $46.6 million and $9.4 million, respectively, and had an accumulated deficit of $216.9 million as of September 30, 2024. The Company expects to continue to incur net losses as it continues to grow and scale its business. Historically, the Company’s activities have been financed through private placements, of equity securities and debt to related parties.

At the Closing of the Business Combination, the Company converted approximately $16 million of related party debt to equity concurrently; and received $1.45 million in proceeds from the issuance of its convertible promissory note with a commitment from an Investor for the remaining unfunded amount of approximately $13.6 million, which is to be funded on or prior to November 15, 2024, subsequently extended to December 15, 2024. Following the Closing, the Company received approximately $1.1 million of proceeds from Plum’s trust account and received a cash tax refund approximately $1.2 million in respect to the Company’s UK subsidiary’s R&D activities. Taking into account the cash proceeds received to date, the anticipated funding of the remaining convertible note commitment, the proceeds receivable under the $25 million Equity Line of Credit with White Lion Capital, LLC and the anticipated return by year end of the Company’s $5 million downpayment for certain inventory purchased from iFREE Group Holdings Limited and, the Company expects it will be able to funds its operations over the next twelve months. The Company may seek additional funding through debt or other equity financing arrangements, implement incremental expense reduction measures or a combination thereof to continue financing its operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use Adjusted EBITDA, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may differ from similarly titled measures used by other companies, is presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Adjusted EBITDA

The primary financial measure we use is Adjusted EBITDA. EBITDA is defined as net (loss) income, before interest, taxes, depreciation, and amortization. We define Adjusted EBITDA as net (loss) income excluding income tax provision, interest expense, net of interest income from related party loans, depreciation and amortization, stock-based compensation expense and non-core expenses/losses (gains), including transaction-related costs, litigation-related costs, management fees, change in fair value of warrant liability, change in fair value of earn-out share liabilities and other expense, which includes asset impairments. Our management uses this measure internally to evaluate the performance of our business and this measure is one of the primary metrics by which our internal budgets are based. We exclude the above items as some are non-cash in nature, and others are non-recurring that they may not be representative of normal operating results. This non-GAAP financial measure adjusts for the impact of items that we do not consider indicative of the operational performance of our business. While we believe that this non-GAAP financial measure is useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for the related financial information prepared and presented in accordance with GAAP.

The following table provides a reconciliation of net loss to adjusted EBITDA to net loss for the periods presented:

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and supervision of our Chief Executive Officer and our Chief Operating Officer and Interim Chief Financial Officer, have evaluated our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and our Chief Operating Officer and Interim Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Operating Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our third fiscal quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are a smaller reporting company and accordingly we are not required to provide information required by this Item.

You should carefully consider the risk factors included in our Registration Statement on Form S-4, filed with the SEC on May 13, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.