VEEA INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 our historical consolidated financial information, this discussion includes forward-looking information regarding our business, results of operations and cash flows, and contractual obligations and arrangements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from any future results expressed or implied by such forward-looking statements as a result of various factors, including, but not limited to, those discussed in the Company’s most recent Annual Report on Form 10-K filed with the SEC on April 15, 2025. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Veea,” “we”, “us”, “our”, and the “Company” are intended to refer to (i) following the Business Combination, the business and operations of Veea Inc. and its consolidated subsidiaries, and (ii) prior to the Business Combination, Private Veea (the predecessor entity in existence prior to the consummation of the Business Combination) and its consolidated subsidiaries. Throughout this report, the terms “our,” “we,” “us,” “Veea” and the “Company” refer to Veea Inc. 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; ● sell shares of Common Stock under the ELOC Common Stock Purchase Agreement; ● 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.” 24 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 10-K filed with the SEC on April 15, 2025, 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 We are dedicated to simplifying the journey towards creating a world in which virtually everyone and everything is intelligently connected, while bringing applications and AI to the edge of the network. Most service providers, equipment suppliers, system integrators and even hyperscalers have adopted or advocated for similar solutions to various degrees either independently or in collaboration with the Company. However, to our knowledge, we are the first to market with patented technologies that a) bring virtualized data center capabilities to the far edge of the network, commonly referred to as the Device Edge, where all wired and wireless devices connect to the network, b) spawns hyperconvergence of computing, multiaccess communications and storage, c) provides for Cloud-managed applications at the Edge, d) enables machine learning with AI training, inferencing, and agentic AI at the Edge including AI-driven cybersecurity for heterogenous networks. Such networks are given rise through any combination of our developed devices and third-party devices, with CPUs, GPUs, TPUs, DPUs and/or NPUs, that run the Veea Edge Platform Ô software stack. Veea has developed several generations of highly integrated all-in-one devices that incorporate a Linux server, with a virtualized software environment, supporting our patented secured docker containers, together with a Wi-Fi Access Point with a mesh router, a firewall, an IoT gateway, NVMe data storage and 4G/5G modules, referred to as the “VeeaHub” product. With an extensive patent portfolio of approximately 125 granted patents and 25 pending patent applications that cover 26 patent families, our end-to-end Hybrid Edge-Cloud Computing platform represents a new product category that has the potential for wide scale customer adoption in large segments of consumer and enterprise markets. VeeaONE Platform’s products, applications, and services with a distributed computing architecture, offered as a Platform-as-a-Service capability, empower companies to capitalize on the transformative potential of Edge AI, where most of the data from smartphones, tablets, laptops, cameras, sensors, and other devices is generated, with data privacy and sovereignty, reliability, low latency for real-time decisions, bandwidth efficiency, scalability, and reduced costs compared to alternatives. 25 VeeaHub products, about the size of a typical Wi-Fi Access Point, are offered in variety of forms with different capabilities for indoor and outdoor coverage and are both locally- and cloud-managed. Veea Edge Platform architecture and business model, VeeaHub Ò and third-party devices on Veea Edge Platform with Hybrid Edge-Cloud Computing and AI-enabled applications and services resemble the Android OS platform architecture and business model for Android devices. The VeeaONE Platform offers a complement, and in some cases an alternative, to cloud computing by enabling 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. Benefits of the Veea Edge Platform include optimal latency, lower data transport costs, data privacy, security and ownership, Edge AI, as well as “always-on” availability for mission critical applications, and contextual awareness for people, devices and things connected to the Internet. Veea earns revenue primarily from the sale of its VeeaHub® devices, licenses, and subscriptions. Recent Developments Public Offering On August 14, 2025, the Company closed a public offering to purchase up to 9,189,096 shares of common stock and warrants to purchase up to 9,189,096 shares of common stock at a combined offering price of $1.00 per share and accompanying warrant (the “Offering”). The Company received aggregate cash gross process of approximately $6.0 million, before deducting placement agent fees and other offering expenses. The warrants have an exercise price of $1.10 per share, are exercisable immediately and will expire five years from the original issuance date. Included in the aggregate securities issued are 3,239,096 shares of common stock and accompanying warrants that were issued to NLabs in consideration and satisfaction of the NLabs 2025 Notes. The Company intends to use the net proceeds from the Offering for investments in inventory and the Company’s customer support infrastructure and for other working capital and general corporate purposes. Supply Agreement On August 7, 2025, VeeaSystems Inc., a Delaware corporation (“VeeaSystems”), a wholly owned subsidiary of Veea Inc., a Delaware corporation (the “Company”), entered into a certain Framework Agreement for the Licenses, Equipment and Services (the “Supply Agreement”) with RadioMovil Dipsa, S.A. De C.V. (“Telcel”), a Mexican wireless telecommunications company owned by América Móvil, effective August 7, 2025. The Supply Agreement was signed by the parties following the completion of an extensive certification and homologation process with Telcel; and the successful completion of trials with certain Telcel enterprise customers of the Company’s VeeaHub STAX Ò -5G product, incorporating Telcel SIM cards. The Supply Agreement sets forth the general guidelines, terms and conditions that govern the solution implementation and marketing, as well as the provisioning of the services provided by VeeaSystems. Under the agreement, VeeaSystems will supply a comprehensive Platform-as-a-Service solution featuring 5G-based Fixed Wireless Access (FWA) through its VeeaHub STAX Ò -5G device, which incorporates 4G and 5G cellular connectivity, Wi-Fi 6 Access Point, IoT gateway, storage and Linux server capabilities to deliver connectivity with integrated AI-driven cybersecurity services, managed connectivity, and monitoring tools while capable of hosting applications on STAX-5G including third-party application. The parties have agreed to work together in the development of the marketing strategy, branding and promotion of VeeaSystems’s services to Telcel’s customers in Mexico. The agreement provides for an initial term of three years and automatically renews for successive one-year terms, unless either party elects not to renew upon 90-day prior notice. Appointment of Acting Chief Financial Officer On July 15, 2025, Randal V. Stephenson was appointed as the Company’s Acting Chief Financial Officer. Appointment of Acting Chief Revenue Officer On July 15, 2025, Mr. Helder Antunes a current member of the Company’s Board of Directors was appointed acting Chief Revenue Officer. Asset Purchase Transaction with Crowdkeep, Inc. Asset Purchase Agreement On May 13, 2025, the Company entered into an Asset Purchase Agreement (the “APA”) with Crowdkeep, Inc., a Delaware corporation (the “Seller”), pursuant to which, subject to the terms and conditions set forth in the APA, the Company acquired, upon the closing (the “Crowdkeep Closing”, and the date of such Crowdkeep Closing, the “Crowdkeep Closing Date”) certain assets of Seller relating to Seller’s IoT technology platform business (collectively, the “Crowdkeep Assets”), free and clear of any liens other than certain specified liabilities of Seller that are being assumed (collectively, the “Crowdkeep Liabilities” and such acquisition of the Crowdkeep Assets and assumption of the Crowdkeep Liabilities together, the “Crowdkeep Transaction”) in consideration for the issuance to the Seller of 4,065,689 shares of Common Stock (the “Purchase Price”). The APA contains other customary representations, warranties and covenants of the parties. The foregoing summary of the APA is not complete and is qualified in its entirety by reference to the full text of the APA, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference. 26 Note Purchase Agreements and Convertible Promissory Notes On April 17, 2025, and May 13, 2025, the Company and the majority stockholder of the Seller (“Crowdkeep Investor”), entered into two Note Purchase Agreements (the “Crowdkeep Note Purchase Agreements”). Pursuant to the Crowdkeep Note Purchase Agreements, the Crowdkeep Investor loaned to the Company an aggregate of $1,000,000 in two tranches (the “Crowdkeep Loans”), of which $500,000 was provided on April 17, 2025 and $500,000 was provided on May 13, 2025. In connection with the entry into the Crowdkeep Note Purchase Agreements the Company issued to the Crowdkeep Investor unsecured convertible promissory notes (the “Crowdkeep Convertible Notes”). The Crowdkeep Convertible Notes have an aggregate principal amount of $1,000,000, and the interest under the Crowdkeep Convertible Notes accrues at an annual rate of 8%. The maturity date of the Crowdkeep Convertible Notes are April 17, 2026, and May 13, 2026, respectively. Pursuant to the terms of the Convertible Notes, upon an event of default, the outstanding principal amount of the applicable Crowdkeep Convertible Note, plus accrued but unpaid interest, will become immediately due and payable in full. Events of default include failure to pay any principal or interest amounts under the Crowdkeep Convertible Notes, failure to perform covenants in the Crowdkeep Convertible Notes and certain bankruptcy and insolvency conditions of the Company. The Company may prepay all or any portion of the Crowdkeep Convertible Notes at any time. The Crowdkeep Convertible Notes are convertible, in whole or in part, into shares of Common Stock (the “Crowdkeep Conversion Shares”) at the option of the Crowdkeep Investor, at a price per share of $5.00 subject to certain equitable adjustments. The Crowdkeep Convertible Notes will automatically convert on the date that the closing price of the Common Stock is at $7.50 or above for ten (10) consecutive trading days within any consecutive thirty (30) trading day period, equal to the lesser of (i) $7.50 per share and (ii) 20% multiplied by the VWAP (calculated as set forth in the Crowdkeep Convertible Notes) for the prior consecutive thirty (30) trading day period, in each case subject to certain equitable adjustments. The Crowdkeep Note Purchase Agreements and Crowdkeep Convertible Notes include other customary terms and conditions. The above description of the Crowdkeep Note Purchase Agreements and Crowdkeep Convertible Notes are qualified in their entirety by the text of the Form of Note Purchase Agreement and Form of Convertible Note, copies of which are attached hereto as Exhibit 10.2 and 10.3, respectively, and incorporated herein by reference. Lock-Up Agreements In connection with the Crowdkeep APA and the Crowdkeep Note Purchase Agreements, the Seller and the Crowdkeep Investor entered into lock-up agreements pursuant to which the Seller and the Crowdkeep Investor agreed not to effect any sale, distribution or transfer of any of the shares of Common Stock received in the transaction or any Crowdkeep Conversion Shares will be subject to transfer restrictions and restrictions against selling short or hedging the Company’s securities for a period of six (6) months following the applicable closing of the APA or the Crowdkeep Note Purchase Agreement, respectively, subject to certain limited exceptions. The form of lock-up agreement signed by the Seller is herein referred to as the “Crowdkeep Lock-Up Agreement” and the form of lock-up agreement signed by the Investor is herein referred to as the “Crowdkeep Noteholder Lock-Up Agreement.” The Crowdkeep Lock-Up Agreement and the Crowdkeep Noteholder Lock-Up Agreement have substantially similar terms, but the Crowdkeep Lock-Up Agreement provides for distributions by the Seller to the Seller’s stockholders, pro rata based on their ownership of Seller, subject to certain conditions. The foregoing description of the Crowdkeep Lock-Up Agreement and Crowdkeep Noteholder Lock-Up Agreement do not purport to be complete and are qualified in its entirety by the terms and conditions of the form of Crowdkeep Lock-Up Agreement and form of Crowdkeep Noteholder Lock-Up Agreement, copies of which are attached hereto as Exhibit 10.4 and Exhibit 10.5, respectively, and are incorporated herein by reference. 27 Components of Results of Operations Sales, 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”) 28 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. F or the three months ended June 30, 2025 compared to three months ended June 30, 2024 and the six months ended June 30, 2025 compared to three months ended June 30, 2024 The following table sets forth Veea’s unaudited statements of operations data for the three and six months ended June 30, 2025 and 2024, respectively. Veea has prepared the data on a consistent basis with the audited consolidated financial statements as of and for the years ended December 31, 2024 and 2023, included in the Form 10-K filed with the SEC on April 15, 2025. In the opinion of Veea’s management, the unaudited three and six month financial information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data. For the Three Months Ended $ % June 30, 2025 June 30, 2024 Change Revenues, net $ 72,927 $ 40,811 $ 32,116 79 % Cost of Goods Sold 4,587 30,706 $ (26,119 ) -85 % Gross profit 68,340 10,105 Operating Expenses: Product development 53,417 701,946 $ (648,529 ) -92 % Sales and marketing 40,515 292,140 $ (251,625 ) -86 % General and administrative 4,750,744 5,785,051 $ (1,034,307 ) -18 % Depreciation and amortization 144,607 68,465 $ 76,142 111 % Total operating expenses 4,989,283 6,847,602 Loss from operations (4,920,943 ) (6,837,497 ) Other Income (Expense): Other income, net 461 10,075 $ (9,614 ) -95 % Change in fair value of convertible note option liability 730 - $ 730 100 % Change in fair value of warrant liabilities (315,373 ) - $ (315,373 ) 100 % Change in fair value of Earn-Out Share Liability (1,730,000 ) - $ (1,730,000 ) 100 % Other expense (12,635 ) (6,474 ) $ (6,161 ) 95 % Interest expense (433,098 ) (444,174 ) $ 11,076 -2 % Total other income (expense) (2,489,915 ) (440,573 ) Net income (loss) $ (7,410,858 ) $ (7,278,070 ) 29 For the Six Months Ended $ % June 30, 2025 June 30, 2024 Change Revenues, net $ 87,168 $ 57,581 $ 29,587 51 % Cost of Goods Sold 5,150 42,690 $ (37,540 ) -88 % Gross profit 82,018 14,891 Operating Expenses: Product development 171,068 796,169 $ (625,101 ) -79 % Sales and marketing 389,766 378,404 $ 11,362 3 % General and administrative 9,987,637 11,102,408 $ (1,114,771 ) -10 % Depreciation and amortization 204,663 137,381 $ 67,282 49 % Total operating expenses 10,753,134 12,414,362 Loss from operations (10,671,116 ) (12,399,471 ) Other Income (Expense): Other income, net 1,233 12,659 $ (11,426 ) -90 % Change in fair value of convertible note option liability 59,730 - $ 59,730 100 % Change in fair value of warrant liabilities 105,124 - $ 105,124 100 % Change in fair value of Earn-Out Share Liability 8,800,000 - $ 8,800,000 100 % Other expense (27,196 ) (9,310 ) $ (17,886 ) 192 % Interest expense (1,379,581 ) (900,942 ) $ (478,639 ) 53 % Total other income (expense) 7,559,310 (897,593 ) Net income (loss) $ (3,111,806 ) $ (13,297,064 ) Revenue, net The Company generated revenue of $72,927 and $40,811 for the three months ended June 30, 2025 and 2024, and revenue of $87,168 and $57,581 for the six months ended June 30, 2025 and 2024, respectively. Revenue has been principally earned from paid pilots for our VeeaHub ® devices. 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 $26,119, or 85%, in the three months ended June 30, 2025, compared to the three months ended June 30, 2024. Cost of goods sold decreased by $37,540, or 88%, in the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The decrease is primarily related to earning more service based revenue in the quarter as opposed to paid pilots for our VeeaHub ® devices. 30 Product Development Expense Product development expense decreased by $648,529, or 92%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024 and decreased by $625,101, or 79%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The decrease in product development expenses was due to decreased internal development and costs incurred by outside contractors related to products manufactured during the period. Sales and Marketing Expense Sales and marketing expense decreased by $251,625, or 86%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024 and sales and marketing expense increased by $11,362, or 3%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The decrease is primarily due both a reduction in unpaid customer pilots and costs incurred from an outside consulting service. General and Administrative Expense General and administrative expense decreased by $1,034,307, or 18%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024 and decreased by $1,114,771, or 10%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The decrease for the quarter is primarily related to the Company’s continued cost reduction measures. Depreciation and Amortization Depreciation and amortization increased by $76,142, or 111%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024 and increased by $67,282, or 49%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was due to additional amortization for the Crowdkeep technology. Other income, net Other income, net relates to immaterial non-operating transactions incurred during the period. These amounts were immaterial for the three months ended June 30, 2025 and 2024 and six months ended June 30, 2025 and 2024. Change in fair value of derivative liabilities Change in fair value of derivative liabilities is 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 of $59,730 for the six months ended June 30, 2025, was determined using a Black-Scholes option pricing model. The gain on the change in fair value of warrant liabilities of for the six months ended June 30, 2025, was determined based on the trading value of the public warrants. The gain on the change in fair value of the Earn-Out Share Liability of $8,800,000 for the six months ended June 30, 2025, was determined using a Monte Carlo simulation. A significant driver of the changes in fair value was due to the decline in the Company’s stock price. Other expense Other expenses relate to immaterial non-operating expenses incurred during the period. These amounts were immaterial for the three months ended June 30, 2025 and 2024 and six months ended June 30, 2025 and 2024. Interest expense Interest expense decreased by $11,076, or 2%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Interest expense increased by $478,639, or 53%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was due to additional draws on our revolving line of credit. 31 Liquidity and Capital Resources During the three months ended June 30, 2025 and 2024, the Company incurred operating losses of $4.9 million and $6.8 million, respectively, and during the six months ended June 30, 2025 and 2024, the Company incurred operating losses of $10.7 million and $12.4 million, respectively, and had an accumulated deficit of $220.9 million as of June 30, 2025. Since its inception, the Company has incurred significant operating losses and negative cash flows. The Company expects to continue to incur net losses as it continues to grow and scale its business. As of June 30, 2025, the Company had cash of $238,008 and outstanding debt of $20.2 million, of which $750,000 was outstanding under the September 2024 Notes (as defined below), $1.0 million was outstanding under the Crowdkeep Convertible Notes (as defined below), $14.0 million was outstanding under the working capital facility, $2,626,000 was related party debt outstanding under the NLabs 2025 Notes (as defined below), and $1.8 million was outstanding under a notes payable with an inventory vendor. Although the Company has had recurring losses each year since inception, the Company plans to fund its operations and capital funding needs for the next 12 months through a combination of private and public equity and debt offerings, or a combination thereof, including (1) cash proceeds of approximately $6.0 million from the Offering (as defined below), (2) the ELOC Program (as defined below) (3) the expected cash tax refund of up to $1.0 million in respect of the Company’s UK subsidiary’s 2023 and 2024 research and development activities and (4) potential additional investments in the form of debt or equity to fund operating deficits from existing and/or new investors, including related parties, which may include the Company’s CEO and his affiliates. The Company has a reasonable basis to believe it has alleviated substantial doubt regarding its ability to continue as a going concern. Since January 1, 2025, the Company has received approximately $3.2 million in additional loans from related parties and $1.0 million in loans from unrelated parties in connection with the consummation of the acquisition of Crowdkeep. See Note 13 for additional information. 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, 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, changes in fair value of liabilities, 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. 32 The following table provides a reconciliation of net loss to adjusted EBITDA to net loss for the periods presented: For the three Months Ended June 30, 2025 June 30, 2024 ADJUSTED EBITDA: Net loss $ (7,410,858 ) $ (7,278,070 ) Adjustments: Interest expense 433,098 444,174 Depreciation and amortization 144,607 68,465 EBITDA (6,833,153 ) (6,765,431 ) Change in fair value of conversion note option liability (730 ) - Change in fair value of warrant liabilities 315,373 - Change in fair value of Earn Out Shares Liability 1,730,000 - Share-based compensation 389,913 272,179 Transaction costs (10,000 )                       - ADJUSTED EBITDA $ (4,408,597 ) (6,493,252 ) For the six Months Ended June 30, 2025 June 30, 2024 ADJUSTED EBITDA: Net loss $ (3,111,806 ) $ (13,297,064 ) Adjustments: Interest expense 1,379,581 900,942 Depreciation and amortization 204,663 137,381 EBITDA (1,527,562 ) (12,258,741 ) Change in fair value of conversion note option liability (59,730 ) - Change in fair value of warrant liabilities (8,800,000 ) - Change in fair value of Earn Out Shares Liability (105,124 ) - Share-based compensation 439,913 334,774 Transaction costs 25,000               - ADJUSTED EBITDA $ (10,027,503 ) (11,923,967 ) Item 3. Quantitative and Qualitative Disclosures about Market Risk Not Applicable. As a smaller reporting company, we are not required to provide the information required by this Item.