What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-04-15 compared with 2025-04-15 · 554 added, 443 removed, 133 unchanged (88% of the section changed)

14 unchanged sentences

Combination) and its consolidated subsidiaries.

this report, the terms “our,” “we,” “us,” “Veea” and the “Company” refer

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 (AP) 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 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.

Veea Edge 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.

VeeaHub products, about the size

of a typical Wi-Fi Access Point (AP), 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 Veea Edge 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.

leading technology, telecom,

Veea earns revenue primarily

from the sale of its VeeaHub® devices, licenses and subscriptions.

On September 13, 2024 Plum Acquisition Corp.

PLMI), a special purpose acquisition company, Private 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 Private Veea was completed and the separate corporate existence of Plum Merger Sub ceased, with Private Veea as the surviving corporation

becoming a wholly owned subsidiary of Plum.

Following the Closing, Plum changed its name from “Plum Acquisition Corp.

“Veea Inc.” and Private 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 Private Veea

in many respects.

Under this method of accounting, Plum was treated as the “acquired”

company for financial reporting purposes.

For accounting purposes, Private Veea was deemed to be the accounting acquirer in the transaction

and, consequently, the transaction was treated as a recapitalization of Private Veea (i.e., a capital transaction involving the issuance

of stock by Plum for the stock of Private Veea).

Accordingly, the consolidated assets, liabilities and results of operations of Private

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 Private Veea in future reports.

The net assets of Private Veea were recognized at carrying value, with no goodwill or other

intangible assets recorded.

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 Private 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”).

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

In addition, each Investor received as a transfer from NLabs immediately prior to the Financing Closing a number of shares of

Private Veea’s Series A-1 Preferred Stock that upon the Closing became a number of registered shares of our common stock equal to

such Investors’ original principal note amount divided by $7.50 (the “Transferred Shares”).

2,000,000 Transfer Shares

were delivered to Investors at the Financing Closing.

The Note Purchase Agreements include customary registration rights.

The Transferred Shares were recorded at a fair value of $21.6 million

on the Company’s consolidated financial statements, which reflected a significant discount to the face amount of the September 2024

Notes, In addition to the cash received at the Financing Closing, one of the Investors committed to purchase approximately $13.6 million

(the “Commitment Amount”) of September 2024 Notes, on or prior to November 15, 2024, which date was subsequently extended

to December 15, 2024.

On December 31, 2024, the Company and the Investor entered into a mutual Settlement and Release Agreement pursuant

to which the Company agreed to terminate the Investor’s obligation to purchase a note in the Commitment Amount and provided for

a mutual release of claims, in exchange for a payment to the Company of an aggregate amount of approximately $5.4 million, which amount

includes payments previously made to the Company in respect of the Commitment Amount.

As the Company received approximately $1.5 million

of the total expected $15 million proceeds at the Financing Closing, a proportional amount (approximately $19.5 million) of the substantial

discount had been deferred and recorded as a deferred financing asset on the Company’s consolidated financial statements.

31, 2024, the deferred financing assets was reversed on the Company’s consolidated financial statements.

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 accrue 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 of the September 2024 Notes 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.

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 our 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 our 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.

As of December 31, 2024 $250,000 in aggregate principal amount of the September 2024 Notes,

together with associated interest, had automatically converted upon the occurrence of a Brokerage Transfer.

Line of Credit

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

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 VeeaONE platform ☐ software stack.

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 (AP) 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 123 granted patents and 32 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

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.

products, about the size of a typical Wi-Fi Access Point (AP), are offered in variety of forms with different capabilities for indoor

and outdoor coverage and are both locally- and cloud-managed.

VeeaONE platform architecture and business model, VeeaHub ☐ and third-party

devices on VeeaONE platform with Hybrid Edge-Cloud Computing and AI-enabled applications and services resemble the Android OS platform

architecture and business model for Android devices.

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.

of the VeeaONE 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.

of Listing Application

In response to the Nasdaq deficiency notices received by the Company

on September 29, 2025, on March 27, 2026, the Company submitted an application to transfer the listing of its Listed Securities from The

Nasdaq Global Market to The Nasdaq Capital Market.

In connection with the submission to transfer the Company’s listing, the Company

requested a second period of 180 calendar days, or until September 30, 2026, to regain compliance with the Minimum Bid Price Requirement

for continued listing.

On April 7, 2026, Nasdaq Staff approved the Company’s request

to transfer the listing of the Company’s publicly traded securities from The Nasdaq Global Select Market to The Nasdaq Capital Market.

The transfer took effect at the opening of business on April 9, 2026 and did not have any immediate effect on trading in the Listed Securities.

The Listed Securities continue to trade uninterruptedly under the symbol “VEEA” and “VEEAW”, respectively.

Nasdaq Capital Market operates in substantially the same manner as The Nasdaq Global Market, and companies on The Nasdaq Capital Market

must meet certain financial and corporate governance requirements to qualify for continued listing.

As a result of the transfer to The Nasdaq Capital Market, Nasdaq granted

the Company a second period of 180 calendar days, or until September 28, 2026, to regain compliance with the minimum bid price requirement

for continued listing.

To regain compliance, the closing bid price of the Company’s shares must meet or exceed $1.00 per share for

a minimum of 10 consecutive business days on or prior to September 28, 2026.

Nasdaq’s determination to grant the additional 180-day

compliance period was in part based on, among other things, the Company meeting the continued listing requirements of The Nasdaq Capital

Market with the exception of the minimum bid price requirement, and the Company having provided written notice of its intention to cure

the deficiency during the additional compliance period, including by effecting a reverse stock split if necessary.

Following Nasdaq’s

approval of the extended compliance period, the Company intends to continue to actively monitor the minimum bid price requirement and,

as appropriate, will consider available options to resolve any deficiencies and regain compliance, including by effecting a reverse stock

split if necessary.

Issuance and Designation of Series A Preferred

In connection with the Company’s application to transfer its

listing to The Nasdaq Capital Market, to ensure the Company’s compliance with the listing requirements of The Nasdaq Capital Market,

on March 30, 2026, the Company entered into separate conversion agreements with each of NLabs and 83 rd Street LLC (“ 83 rd

Street ”) pursuant to which (i) NLabs agreed to convert (x) $16,876,400 principal and accrued interest of outstanding under certain

promissory notes evidencing loans made by NLabs to the Company (the “ NLabs 2025 Notes ”) into 168,764 shares of Series

A preferred stock, par value $0.0001 per share, of the Company (“ Series A Preferred ”) and (y) $2,000,000 of the accrued

rent owed to it in respect of the 164 East 83rd Street office lease into 20,000 shares of Series A Preferred and (ii) 83 rd

Street agreed to convert $2,323,600 of the accrued rent owed to it in respect of the 166 East 83rd Street office lease into 23,236 shares

of Series A Preferred.

Under the terms of the conversion agreements, NLabs and 83 rd Street are each entitled to certain registration

rights with respect to the shares of common stock issuable upon conversion of shares of the Series A Preferred.

In connection with the conversion, on March 30, 2026, the Company filed

a Certificate of Designation of Series A Convertible Preferred Stock (the “ Certificate of Designation ”) with the Secretary

of State of the State of Delaware to designate Series A Preferred.

Each share of Series A Preferred is entitled to vote on an as converted

basis along with the common stock, and holders of Preferred Stock are entitled to receive dividends that are economically equivalent to

any dividends declared with respect to the common stock.

Each share of Series A Preferred is convertible into 198 shares of common stock,

at the option of the holder.

share of Series A Preferred is entitled to vote on an as converted basis along with the common stock, and holders of Series A Preferred

are entitled to receive dividends that are economically equivalent to any dividends declared with respect to the common stock.

each share of Series A Preferred is convertible into common stock, at the option of the holder, in an amount equal to a price per share

of $100 (as adjusted for certain stock splits) divided by $0.503.

Issuance of Warrants to NLabs

On March 30, 2026, in connection with the execution of the note conversion

agreement and in consideration of NLabs’s entering into the note conversion agreement, the Company and NLabs entered into the No.

1 Amendatory Agreement to the NLabs 2025 Notes, pursuant to which (i) the face amount of each NLabs 2025 Note was amended to adjust such

face amount, prior to conversion, to equal the “Adjusted Face Amount” of such NLabs 2025 Notes reflected on Schedule I thereof and (ii) the Company

issued to NLabs a warrant to purchase 33,551,486 shares of the common stock at an exercise price of $0.503 per share (the “ NLabs

2026 Warrants ”).

On February 17, 2026, Private Veea, entered into a Loan Agreement (the

“ Secured Term Loan Agreement ”) with Pasadena Private Lending, Inc.

(the “ Secured Lender ”), pursuant

to which the Secured Lender agreed to extend, on the terms provided in the Secured Term Loan Agreement, a secured term loan facility in

an aggregate principal amount of up to $10,550,000.

The initial loan amount of $5,500,000 (the “ Initial Term Loan Amount ”)

was borrowed by Private Veea on February 17, 2026 (the “ Initial Secured Loan Closing Date ”) and is evidenced by a promissory

note, dated the Initial Secured Loan Closing Date (the “ Secured Term Loan Note ”).

The Initial Term Loan Amount matures

on the fifth anniversary of the Initial Secured Loan Closing Date and bears interest at a rate per annum equal to the prime rate (subject

to a floor of 5.75%) plus an applicable margin of 4.50% (subject to adjustment based on the balance in the Cash Collateral Account defined

Interest is payable monthly in arrears.

Principal is payable in monthly installments of $58,000 commencing March 17, 2027, with

any remaining outstanding principal and accrued interest due at maturity.

VeeaSystems intends to use the loan proceeds for general corporate

and working capital purposes.

Veea has the ability, by written notice to the Secured Lender at any time prior to the one-year anniversary of the Initial Secured Loan

Closing Date, to request that the Initial Term Loan Amount be increased by additional term loans (the “ Accordion Term Loans ”

and collectively with the Initial Loan Amount, the “ Secured Loans ”) in an aggregate principal amount $2,500,000 each,

with the total Accordion Term Loans not to exceed $5,000,000.

The making of the Accordion Term Loans are subject to the conditions provided

in the Secured Loan Agreement;

and, once made, will be subject to the same terms and conditions as the Initial Loan Amount, including,

without limitation, with respect to interest rate, maturity, guaranties, and security.

Private Veea’s obligations

under the Secured Term Loan Agreement are separately guarantied (a) by the Company (b) jointly and severally by Allen Salmasi, Chairman

and Chief Executive Officer of the Company, and his spouse (the “Individual Guarantors”), and (iii) the

domestic subsidiaries of Private Veea.

Private Veea’s obligations are secured by first-priority liens and securities interests

in favor of the Secured Lender by (i) a pledge by the Company of 100% of the issued and outstanding equity interests of VeeaSystems,

(ii) a pledge by Private Veea of 100% of the issued and outstanding equity interests of each of its domestic subsidiaries.

Lender has further been granted first-priority liens and securities interest in (i) substantially all of Private Veea’s personal

property, including accounts receivable, inventory, equipment, intellectual property, investment property, general intangibles, deposit

accounts, and proceeds thereof) .

Further, until

such time as Private Veea achieves a Debt Service Coverage Ratio (as defined in the Secured

Term Loan Agreement) of at least 3.0 to 1.0, tested as of the most recently completed fiscal quarter end, Private Veea is

required to maintain a minimum aggregate balance equal to the greater of (i) $550,000 and (ii) 10% of the then outstanding aggregate

principal amount of the Secured Term Loans, in cash, liquid securities, and marketable securities, in a reserve account (the “ Cash

Collateral Account ”).

The Secured Term Loan Agreement

contains customary affirmative and negative covenants, including without limitation, on indebtedness, liens, fundamental changes, asset

sales, investments, and restricted payments.

Further (i) commencing on the Initial Secured Loan Closing Date until June 30, 2027, (x)

Private Veea is required to maintain a “Maximum Total Liabilities to Total Tangible Assets” (as defined in the Secured Term

Loan Agreement) of no greater than 70.00%;

and (y) the Individual Guarantors maintain “Liquidity” (as defined in the Secured

Term Loan Agreement) in an amount greater than or equal to 2x the outstanding principal amount of the Secured Term Loans and (ii) thereafter,

Private Veea is required to maintain (x) a “Senior Debt to EBITDA Ratio” (as defined in the Secured Term Loan Agreement) of

no greater than 3.00 to 1.00 and (y) a minimum “Debt Service Coverage Ratio” (as defined in the Secured Term Loan Agreement)

of at least 2.00 to 1.00.

The covenants are each tested quarterly.

Secured Term Loan Agreement and the Secured Term Loan Note contain customary events of default, including payment defaults, covenant

defaults, breaches of representations and warranties, cross-defaults to other material indebtedness, bankruptcy events affecting Private

Veea or the Company, material judgments, and change of control.

Upon the occurrence of an event of default, the Secured Lender may accelerate

the Secured Term Loans and exercise remedies against the collateral, including foreclosure on the pledged equity interests and the personal

property collateral.

Lion Private Placement

Lion Note Purchase Agreement

On January 14, 2026, the Company and White Lion entered into the White

Lion Note Purchase Agreement.

Pursuant to the White Lion Note Purchase Agreement, the Company agreed to issue, and White Lion agreed to

purchase, at one or more closings, on the terms and conditions contained in the White Lion Note Purchase Agreement, unsecured promissory

notes in the aggregate funded amount of up to $2,500,000 and the White Lion Warrants to purchase shares of the Company’s common

The first closing occurred on January 14, 2026 at which the Company issued, and White Lion purchased, a White Lion Note with a

face amount of $555,556 and warrant to purchase 990,099 shares of common stock with an exercise price of $0.505 per share.

closing, the Company received cash proceeds of $475,000, net of original issuance discount and certain transaction expenses.

The White Lion Notes mature 12-months from the date of issuance and

accrue interest at an annual rate of five (5) percent per annum.

The White Lion Notes are convertible, in whole or in part, into shares

of common stock at the option of White Lion, at a price per share equal to the lesser of (i) $0.75 per share and (ii) 90% of the lowest

VWAP (calculated as set forth in the White Lion Notes) for the prior consecutive ten (10) trading-day period, in each case subject to

certain equitable adjustments.

The White Lion Notes contain ownership limitations pursuant to which White Lion does not have the right

to exercise any portion of its White Lion Notes if it would result in White Lion (together with its affiliates) beneficially owning more

than 4.99% (or, at the election of White Lion, 9.99%) of the outstanding common stock.

The White Lion Notes are repayable by the Company

at any time, in whole or in part, without premium or penalty, other than the White Lion Notes issued at the first closing.

Upon an event

of default, the outstanding principal amount of the outstanding White Lion Notes, plus accrued but unpaid interest will become immediately

due and payable in full.

Events of default include, among others, failure to pay any principal or interest amounts under the White Lion

Notes, failure to perform covenants in the White Lion Notes and certain bankruptcy and insolvency conditions of the Company.

Under the terms of the White Lion Note Purchase Agreement, the Company

agreed to sell at each closing, in addition to a White Lion Note one accompanying White Lion Warrant at a price per share equal to the

common stock’s closing price on such closing date, subject to certain adjustments.

The White Lion Warrants expire five years from

the date of issuance.

The White Lion Warrants, contain ownership limitations pursuant to which White Lion does not have the right to exercise

any portion of such warrants if it would result in White Lion (together with its affiliates) beneficially owning more than 4.99% (or,

at the election of White Lion, 9.99%) of the outstanding common stock.

The Company may elect, by written notice to White Lion, (the “ Call

Notice ”), to cause White Lion to exercise its unexercised White Lion Warrants, at the then effective exercise price, at any

time that (i) all shares of common stock underlying the White Lion Warrants are fully registered for resale pursuant to an effective registration

statement and (ii) the closing price of the common stock has been greater than $3.00 per share for at least thirty (30) consecutive trading

days preceding the date of the Call Notice.

Concurrently with the White Lion Note Purchase Agreement, the Company

entered into a related Registration Rights Agreement (the “ White Lion 2026 RRA ”) with White Lion, pursuant to which

the Company agreed to file, within 60 days following the first closing on January 14, 2026, a Registration Statement with the SEC registering

for resale by White Lion of the number of the shares of common stock underlying the White Lion Notes and the White Lion Warrants.

White Lion 2026 RRA also contains usual and customary damages provisions for failure to file and failure to have the Registration Statement

declared effective by the SEC within the time periods specified therein.

The White Lion Note Purchase Agreement, the White Lion Notes,

the White Lion Warrants, and the White Lion 2026 RRA include other customary terms and conditions.

White Lion - Equity Line of Credit

On December 2, 2024, the Company entered into a common stock purchase

agreement (“Common Stock Purchase Agreement”) and related registration rights agreement (the “White Lion Registration

Rights Agreement”) with White Lion Capital, LLC ( “White Lion”).

Pursuant to the Common Stock Purchase Agreement, the

Company has the right, but not the obligation, to direct White Lion to purchase up to 25,000,000 shares of Common Stock, subject to certain

limitations and conditions as described below (the "ELOC Program") at a purchase price equal to (i) 96.5% of the volume weighted

average stock price for the three consecutive business days after a purchase notice is given, (ii) 98% of the volume weighted average

stock price on the day a notice is delivered, or (iii) the lowest traded price for a given purchase date.

The Company controls the timing and amount of any sales to White Lion,

which depended on a variety of factors including, among other things, market conditions, the trading price of the Company’s common

stock, and determinations by the Company as to appropriate sources of funding for its business and operations.

However, White Lion’s

obligation to purchase shares is subject to certain conditions, including the daily trading volume of the Company’s stock.

instances, the Company may not sell shares of its common stock under the Purchase Agreement if it would result in White Lion and its affiliate

beneficially owning more than 4.99% of its outstanding voting power or shares of common stock at any one point in time, or the aggregate

number of shares of common stock would not exceed 19.99% of the voting power of the issued and outstanding common.

As of December 31, 2024, the Company had sold no shares under the ELOC

agreement (as amended, the “ ELOC Purchase Agreement ”) and related registration rights agreement (the “ White

Lion 2025 RRA ”) with White Lion.

Pursuant to the ELOC Purchase Agreement, the Company has the right, but not the obligation,

to direct White Lion to purchase up to $25.0 million in aggregate gross purchase price of newly issued shares of common stock, subject

to certain limitations and conditions as described below (the “ ELOC Program ”), at a purchase price equal to (i) 96.5%

of the volume weighted average stock price for the three consecutive business days after a purchase notice is given, (ii) 98% of the volume

weighted average stock price on the day a notice is delivered, or (iii) the lowest traded price for a given purchase date.

Company controls the timing and amount of any sales to White Lion, which depends on a variety of factors including, among other things,

market conditions, the trading price of the Company’s common stock, and determinations by the Company as to appropriate sources

of funding for its business and operations.

However, White Lion’s obligation to purchase shares is subject to certain conditions,

including the daily trading volume of the Company’s common stock.

In all instances, the Company may not sell shares of its common

stock under the ELOC Purchase Agreement if it would result in White Lion and its affiliate beneficially owning more than 4.99% of its

outstanding voting power or shares of common stock at any one point in time, or the aggregate number of shares of common stock would

not exceed 19.99% of the voting power of the issued and outstanding common stock.

the year ended December 31, 2025, the Company issued 27,498 shares of common stock as a commitment fee (the “ ELOC Commitment

Shares ”) to White Lion in payment of its commitment fee and sold 240,500 shares to White Lion under the ELOC Program for aggregate

proceeds of $604,426, with the stock price of shares purchased by the White Lion ranging from $1.79 per share to $3.31 per share.

fair value of the ELOC Commitment Shares was $25,000, which pursuant to ASC 815, was recorded in transaction costs in the consolidated

statement of operations and comprehensive loss of the Company for the year ended December 31, 2025.

Further, the ELOC Purchase Agreement

provided for the issuance of additional Commitment Shares to White Lion if the Company failed to sell at least $1,000,000 in gross proceeds

to the White Lion by the sixth-month anniversary of signing of the ELOC Purchase Agreement.

White Lion has agreed that during the term of the ELOC Purchase Agreement,

neither it nor any of its affiliates will engage in any short sales or hedging transactions involving the common stock.

Effective of June

2, 2025, the Company and White Lion amended the ELOC Purchase Agreement effective of June 2, 2025 to provide for (i) an extension of the

time period for the determination as to whether White Lion is entitled to additional ELOC Commitment Shares to December 15, 2025 and (ii)

an increase the gross proceeds sold under the ELOC Purchase Agreement to $1,250,000.

On January 14, 2026, the Company and White Lion further

amended the ELOC Purchase Agreement (a) to provide for an extension of the ELOC Commitment Period from December 2, 2026 to June 30, 2027

and (b) to amend the provision relating to the issuance by the Company of additional ELOC Commitment Shares to White Lion such that White

Lion is entitled to additional shares in amounts equal to (i) $25,000 at the time of the ELOC Amendment No.

2, (ii) $50,000, if the Company

has not sold to White Lion under the ELOC Purchase Agreement an aggregate of $1,250,000 in gross proceeds of common stock through April

15, 2026, and (iii) $25,000, if the Company has not sold to White Lion under the ELOC Purchase Agreement an aggregate of $1,500,000 in

gross proceeds of common stock through June 30, 2026.

The number of shares of common stock issued in each instance is determined by dividing

the dollar value of the shares of common stock to be issued by the average VWAP of the common stock for the ten-day trading period immediately

prior to the issuance date.

of Line of Credit

On January 5, 2026, the Company repaid in full its line of credit (the

“ Line of Credit ”) with JP Morgan Chase (the “ JPM ”) by making a cash payment to JPM of $14,076,218,

representing the total outstanding principal and interest due as of January 5, 2026.

See “ Certain Relationships and Related Person

Transactions - NLabs Demand Note ” for more information.

Executive Management Changes

On April 13, 2026, the Company entered into a transition agreement

with Janice K.

Smith, the Executive Vice President and Chief Operating Officer.

Pursuant to the agreement, effective as of April 30, 2026,

Smith will step down from her current roles as the Executive Vice President and Chief Operating Officer of the Company and will serve

as Senior Operations Advisor commencing on April 30, 2026 and ending on December 31, 2026.

Smith will be entitled certain equity awards

and cash bonus.

See “ Item 11.

Executive Compensation - Existing NEO Employment Agreements – Smith Transition Agreement.

of Results of Operations

30 unchanged sentences

classify our operating expenses into the following categories:

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.

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.

Product development

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

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.

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

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.

consists of impairment charges related to our in-process research and development (“IPR&D”)

of Operations

3 unchanged sentences

the year ended December 31, 2025 compared to year ended December 31, 2024:

$ (8,930,370 )

of Goods Sold

profit (loss)

Year Ended December 31,

Cost of goods sold

Operating Expenses:

1 unchanged sentence

Sales and marketing

General and administrative

Transaction costs including those incurred with contingent Earn-out Share

and amortization

operating expenses

General and administrative, net

Transaction costs

(55,013,544 )

Depreciation and amortization

Total operating expenses

Loss from operations

1 unchanged sentence

(84,077,550 )

Other Income and (Expense):

Interest income

Other income (expense):

Other income, net

UK R&D Tax Credit

Loss on initial issuance

of convertible note

$ (1,770,933 )

Change in fair value of conversion note option liability

fair value of warrant liabilities

Loss on initial issuance of convertible note

Change in fair value of convertible note option liability

Change in fair value of warrant liabilities

Change in fair value of Earn-out Share Liability

(25,023,600 )

Other expense

Interest expense

other income and expense

Total other income

$ (6,660,038 )

$ (47,547,768 )

Company generated revenue of $141,760 and $9,072,130 for the years ended December 31, 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.

Company generated revenue of approximately $0.2 million and approximately $0.1 million for the years ended December 31, 2025 and 2024,

respectively.

Revenue has been principally earned from paid pilots for our VeeaHub ® devices.

focus over the past several years has been on field testing and refining our product to meet customer needs as well as market developments.

6 unchanged sentences

of Goods Sold

Cost of goods sold decreased by $383,512, or 82%, in the year ended

December 31, 2024 compared to the year ended December 31, 2023.

The decrease is immaterial as it is related to the costs incurred to generate

our revenue earned from paid pilots for our VeeaHub ® devices.

of goods sold remained materially consistent for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

the lack of a material fluctuation in Revenue, net, management would not expect a significant fluctuation in Cost of goods sold.

Development Expense

development expense increased by $679,903, or 98%, in the year ended December 31, 2024 compared to the year ended December 31, 2023.

The increase in product development expenses was due to increased internal development and additional costs incurred of outside contractors

related to software development and product manufacturing during the period.

development expense decreased by approximately $1.0 million, or 76%, from approximately $1.4 million for the year ended December 31,

2024 to approximately $0.3 million for the year ended December 31, 2025.

The decrease in product development expenses was due to decreased

internal development costs during the period.

and Marketing Expense

and marketing expense increased by $596,205, or 277%, in the year ended December 31, 2024 compared to the year ended December 31, 2023.

The year-to-date increase was due primarily to an increase in customer evaluations and fees paid to third-party marketing firm during

Sales and marketing expense

decreased by approximately $0.5 million, or 57%, from approximately $0.8 million for the year ended December 31, 2024 to approximately

$0.3 million for the year ended December 31, 2025.

The decrease is primarily due to a reduction in unpaid customer pilots.

and Administrative Expense

General and administrative expense increase by $9.4 million, or 55%,

in the year ended December 31, 2024 compared to the year ended December 31, 2023.

The increase is primarily related to a $6.3 million

increase to share based compensation, $1.2 million for employee benefits and other office related expenditures, $0.7 million increase

related to professional fees, a the foreign exchange gain of $0.7 million and a $0.5 million increase in our inventory reserve for the

year ended December 31, 2024 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.

General and administrative expense

decreased by approximately $9.0 million, or 34%, from approximately $26.6 million for the year ended December 31, 2024 to approximately

$17.7 million for the year ended December 31, 2025.

The decrease is primarily due to a decline in share-based compensation expense as

compared to the prior year of approximately $6.8 million.

costs including those incurred with Earn-Out Share Liability

the closing of the Business Combination, holders of certain capital stock of Private 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.

Under accounting principles, the Company’s obligation to issue the earnout shares is recorded as

a contingent liability (the “Earn-Out Share Liability”).

The initial value of the Earn-out Share Liability of

approximately $55 million is recorded as a transaction cost within operating expenses.

The fair value of the Earn-out Share

Liability was estimated using Monte Carlo simulation utilizing assumptions related to the contractual term of the instruments,

estimated volatility, and current interest rates and the price of our Common Stock on the Closing Date and at December 31, 2024.

significant driver of the value of the earnout at the close of the Business Combination was our closing stock price on

September 13, 2024 which was $12.00 per share and our closing stock price on December 31, 2024 was $3.81 per share.

Additionally,

the Company incurred approximately $1.4 million of professional fees relating to the Business Combination.

costs were primarily incurred during the year ended December 31, 2024 associated with the contingent earn-out share liability during

No material transaction costs were expected by management during the year ended December 31, 2025.

and Amortization

and amortization decreased by $544,431, or 67%, in the year ended December 31, 2024 compared to the year ended December 31, 2023.

decrease was due to certain intangibles reaching the end of their useful lives.

R&D Tax Credit

increase is related to the receipt of an R&D tax credit of $1.3 million received by the Company’s UK subsidiary.

on initial issuance of September 2024 Notes

loss on initial measurement of the September 2024 Notes was $1,770,993 is recorded as a transaction cost within operating expenses.

Depreciation and amortization

increased by approximately $0.3 million, or 131%, from approximately $0.3 million for the year ended December 31, 2024 to approximately

$0.6 million for the year ended December 31, 2025.

The increase was due to additional amortization for the technology assets acquired

from Crowdkeep, Inc.

Other income,

net relates to immaterial non-operating transactions incurred during the period.

These amounts were immaterial for the years ended December

31, 2025 and 2024.

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 earnout shares at balance

The gain on the change in fair value of conversion note option liability was $840,933 for the year ended December 31, 2024

was determined using a Black-Scholes option pricing model.

The loss on the change in fair value of warrant liabilities was $200,124 for

the year ended December 31, 2024 was determined based on the trading value of the public warrants.

The loss on the change in fair value

of the Earn-out Share Liability was $38.0 million for the year ended December 31, 2024 was determined using a Monte Carlo simulation.

A significant driver of the value of the earnout at the close of the Business Combination was our closing stock price on December 31,

2024 which was $3.81.

These derivative instruments were entered into in 2024 related to the Business Combination.

Change in fair value of derivative

liabilities is comprised of the fair value adjustments to the convertible note option liability, SPAC Private Placement Warrants, the

Earn-Out Share Liability, and the 2025 Investors Warrants at balance sheet date.

The loss on the change in fair value of conversion note

option liability of $60 thousand for the year ended December 31, 2025, was determined using a Black-Scholes option pricing model.

gain on the change in fair value of the SPAC Private Placement Warrants of $0.4 million for the year ended December, 2025, was determined

based on the trading value of the public warrants and the Black-Scholes option pricing model.

The gain on the change in fair value of

the Earn-Out Share Liability of $13.0 million for the year ended December 31, 2025, was determined using a Monte Carlo simulation of

100,000 simulations.

A significant driver of the changes in fair value was due to the decline in the Company’s stock price.

expenses relate to immaterial non-operating expenses incurred during the period.

1 unchanged sentence

31, 2025 and 2024.

expense decreased by $3.5 million, or 66%, in the year ended December 31, 2024 compared to the year ended December 31, 2023.

was due to loans coming to term or being converted into equity.

expense increased by approximately $0.4 million, or 22%, from approximately $1.8 million for the year ended December 31, 2024 to approximately

$2.2 million for the year ended December 31, 2025.

The increase was due to additional draws on our revolving line of credit and new related

party notes entered throughout the year ended December 31, 2025.

and Capital Resources

To date, we have financed our operations primarily through private

placements of equity securities and debt to related parties.

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

As of December 31, 2024 and 2023, we had an accumulated deficit of $217.8 million and $170.3 million, respectively.

of December 31, 2024 and 2023, we had cash of $1.7 million and $6.0 million, respectively.

As of December 31, 2024 we had $13.9 million

outstanding debt, of which approximately $1.2 million was outstanding under the September 2024 Notes and $12.7 million was outstanding

under our working capital facility.

the year ended December 31, 2024 compared to the year ended December 31, 2023, the Company has incurred net losses of $47.5 million and

$15.6 million, respectively, and had an accumulated deficit of $217.8 million as of December 31, 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.

Although we have incurred recurring losses each

year since our inception, 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, including, (1) available cash proceeds from equity sales under the ELOC Program, (2) cash

proceeds from a substantial strategic investment anticipated to close in the second quarter of 2025, and (3) savings from planned expense

reduction measures.

Taking into account these plans as well as (1) the expected cash tax

refund of up to $2.0 million in respect of the Company’s UK subsidiary’s 2023 and 2024 research and development activities,

(2) the anticipated refund by June 30, 2025, of up to $5.0 million of the Company’s prepayment for purchased inventory and (3) potential

additional investments in the form of debt or equity to fund operating deficits from existing investors, including related parties, which

may include the Company’s CEO and his affiliates, the Company expects it will be able to fund its operations over the next twelve

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.

During the years ended December 31, 2025 and 2024, the Company incurred

operating losses of approximately $18.8 million and $84.1 million, respectively, and had an accumulated deficit of $224.5 million as of

December 31, 2025.

Since its inception, it has incurred significant operating losses and negative cash flows.

As of December 31, 2025,

it had cash of approximately $0.1 million and outstanding debt of $19.8 million, of which $750,000 was outstanding under those unsecured

convertible promissory notes issued by the Company and Private Veea to certain unaffiliated accredited investors pursuant to certain note

purchase agreements entered into with such investors simultaneously with the Closing of the Business Combination for the sale of such

notes (the “ September 2024 Notes ”), $1.0 million was outstanding under the Crowdkeep Convertible Notes, $14.0 million

was outstanding under the working capital facility, $2.3 million was outstanding under a related party note payable, and $1.8 million

was outstanding under a notes payable with an inventory vendor.

The Company plans to fund its operations and capital funding needs

for the next 12 months with revenue generated from operations, including anticipated revenue generated under the Framework Agreement for

the Licenses, Equipment and Services (the “ Supply Agreement ”) that the Company entered into with RadioMovil Dipsa,

(“ Telcel ”), a Mexican wireless telecommunications company owned by América Móvil, effective

August 7, 2025, and using proceeds from its existing financing arrangements under the ELOC Purchase Agreement, its new secured term loan

facility with Pasadena Private Lending (as described above) and note purchase agreement with White Lion.

Further, the Company could pursue

other equity and debt financing from new or existing investors, including related parties, which may continue to include the Company’s

CEO and his affiliates.

Our principal sources of

liquidity are proceeds from the issuance of notes, convertible notes, related party notes, and the issuance of common stock.

use of capital continues to be to invest for the long-term growth of the business.

We regularly evaluate our cash and capital structure,

including the size, pace, and form of capital return to stockholders.

The following table presents

cash flows for the years ended December 31, 2025 and 2024, respectively:

Year ended December 31,

Net cash used in operating activities

$ (15,227,760 )

$ (25,595,008 )

Net cash used in investing activities

Net cash provided by financing activities

Cash used in operating activities

for the year ended December 31, 2025 was driven by our net loss of approximately $6.7 million and the Change in the fair value of our

earn-out liability of approximately $13.0 million.

This was offset by approximately $0.6 million of depreciation and amortization, approximately

$1.2 million of the amortization of debt issuance costs, and approximately $1.1 million of share based compensation.

This loss was further

offset by approximately $3.0 million of changes in working capital, which primarily consisted of cash provided by accounts payable and

accrued liabilities of approximately $3.4 million and $0.5 million, respectively, due to the timing in payments of vendors, which was

offset by cash used in operating activities pertaining to inventory purchases of approximately $0.7 million and payments relating to the

Company’s operating leases of approximately $0.1 million.

Cash used in operating activities

for the year ended December 31, 2024 was driven by our net loss of approximately $47.5 million and the change in the fair value of our

earn-out liability of approximately $38.0 million.

This was offset by approximately $0.3 million of depreciation and amortization, approximately

$0.3 million of the amortization of debt issuance costs, the initial loss on the earn-out liability of approximately $53.6 million, and

approximately $6.7 million of share based compensation.

This loss was further increased by approximately $1.2 million of changes in working

capital, which primarily consisted of cash provided by the timing of payment of accrued interest of approximately $1.4 million which was

offset by cash used in operating activities relating to inventory purchases of approximately $0.1 million, the timing of purchases of

other current assets of approximately $0.4 million and the timing of vendor payments associated with the Company’s accounts payable

and accrued liability balances of approximately $1.3 million, and payments relating to the Company’s operating leases of approximately

$0.8 million.

Cash used in investing activities

for the years ended December 31, 2025 and 2024 relate to the Company’s investment in patents and long-lived assets.

Cash provided by financing activities

Cash provided by financing

activities for the year ended December 31, 2025 was driven by approximately $1.3 million of proceeds from the Company’s revolving

line of credit, approximately $5.5 million of proceeds from the issuance of related party notes, approximately $1.0 million of proceeds

from the issuance of convertible notes, approximately $0.8 million from the issuance of common shares under the Company’s equity

line of credit, and approximately $4.3 million from the issuance of the Company’s common shares.

Cash provided by financing

activities for the year ended December 31, 2024 was driven by approximately $3.7 million of proceeds from the Company’s revolving

line of credit, approximately $5.3 million of proceeds from the issuance of related party notes, approximately $1.5 million of proceeds

from the issuance of convertible notes, approximately $1.1 million of proceeds from the reverse recapitalization transaction, and approximately

$10.0 million of proceeds from the issuance of the Company’s common shares.

Financial Measures

21 unchanged sentences

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

the Year Ended

For the year ended

ADJUSTED EBITDA

(loss) Income

$ (6,660,038 )

$ (47,547,768 )

R&D tax credit

and amortization

UK R&D tax credit

Interest expense

Depreciation and amortization

(46,716,996 )

on initial issuance of September 2024 Notes

in fair value of conversion note option liability

in fair value of warrant liabilities

in fair value of Earn-out Shares Liability

Other income, net

Other expense

Loss on initial issuance of convertible note

Change in fair value of conversion note liability

Change in fair value of warrant liabilities

Change in fair value of earn out share liability

(13,016,400 )

costs incurred with contingent Earn-out Share Liability

compensation expense

(38,040,000 )

Transaction costs

Share-based compensation

ADJUSTED EBITDA

$ (17,052,610 )

Critical Accounting Policies and Estimates

Our management's discussion and analysis

of financial condition and results of operations is based on our consolidated financial statements which have been prepared

in accordance with GAAP.

In preparing our financial statements, we make estimates, assumptions, and judgments that can have a significant

impact on our reported revenue, results of operations, and net income or loss, as well as on the value of certain assets and liabilities

on our balance sheet during and as of the reporting periods.

These estimates, assumptions, and judgments are necessary because future

events and their effects on our results of operations and the value of our assets cannot be determined with certainty and are made

based on our historical experience and on other assumptions that we believe to be reasonable under the circumstances.

These estimates

may change as new events occur or additional information is obtained, and we may periodically be faced with uncertainties, the outcomes

of which are not within our control and may not be known for a prolonged period of time.

Because the use of estimates is inherent in the

financial reporting process, actual results could differ from those estimates.

We believe that the assumptions and estimates

associated with the following critical accounting policies involve significant judgment and thus have the most significant potential

impact on our Consolidated Financial Statements.

Revenue Recognition

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.

Most contracts with customers are to provide distinct products or services within a single contract.

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.

Revenue from all sales types is recognized at

the transaction price - the amount management expects to be entitled to in exchange for transferring goods or providing services.

price is calculated as selling price net of variable consideration which may include estimates for future returns, price protection, warranties,

and other customer incentive programs based upon the Company’s expectation and historical experience.

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

Revenue from hardware sales is recognized at a

point-in-time, which is generally at the point in time when products have been shipped, right to payment has been obtained and risk of

loss has been transferred.

Certain of the Company’s product’s performance obligations include proprietary operating system

software, which typically is not considered separately identifiable.

Therefore, sales of these products and the related software are considered

one performance obligation.

The Company has service arrangements where net

sales are recognized over time.

These arrangements include a variety of post-contract support service offerings, which are generally recognized

over time as the services are provided, including maintenance and support services, and professional services to help customers maximize

their utilization of deployed systems.

A contract liability for deferred revenue is recorded when consideration is received or is unconditionally

due from a customer prior to transferring control of goods or services to the customer under the terms of a contract.

Deferred revenue

balances typically result from advance payments received from customers for product contracts or from billings in excess of revenue recognized

on services arrangements.

The Company values inventory at the lower of cost

or net realizable value.

Cost is computed using standard cost which approximates actual cost on a first-in, first-out basis.

At each reporting

period, the Company assesses the value of its inventory and writes down the cost of inventory to its net realizable value, if required,

for estimated excess or obsolescence.

Factors influencing these adjustments include changes in future demand forecasts, market conditions,

technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration, and quality

The write down for excess or obsolescence is charged to the provision for inventory, which is a component of cost of goods sold

in the Company’s consolidated statements of operations and comprehensive loss.

At the point of the loss recognition, a new, lower

cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase

in that newly established cost basis.

Fair Value of Equity-Based Awards

We estimate the fair value of stock option awards

granted using the Black-Scholes option pricing model, which uses as inputs the fair value of our common stock and subjective assumptions

we make, including expected stock price volatility, the expected term of the award, the risk-free interest rate, and expected dividends.

Due to the lack of company-specific historical and implied volatility data, we base the estimate of expected stock price volatility

on the historical volatility of a representative group of publicly traded companies for which historical information is available.

historical volatility is generally calculated for a period of time commensurate with the expected term assumption.

We use the simplified

method to calculate the expected term for options granted to employees and directors.

We utilize this method as we do not have sufficient

historical exercise data to provide a reasonable basis upon which to estimate the expected term.

The risk-free interest rate is based

treasury instrument whose term is consistent with the expected term of the stock options.

The expected dividend yield is assumed

to be zero, as we have never paid dividends and do not have current plans to pay any dividends on our Common Stock.

As there was no public market for Private Veea’s

common stock prior to the closing of the Business Combination, the estimated fair value of our common stock was previously approved by

our Board of Directors, with input from management, as of the date of each award grant, considering our most recently available independent

third-party valuations of Private Veea’s common stock and its board of directors’ assessment of additional objective and subjective

factors deemed relevant that may have changed from the date of the most recent valuation through the date of the grant.

Fair Value of Certain Debt and Liability Instruments,

and the Fair Value Option of Accounting

When financial instruments contain various embedded

derivatives which require bifurcation and separate accounting of those derivatives apart from the host instruments, if eligible, GAAP

allows issuers to elect the fair value option (“FVO”) of accounting for those instruments.

The FVO allows the issuer to account

for the entire financial instrument, including accrued interest, at fair value with subsequent remeasurements of that fair value recorded

through the statements of operations.

We elected the FVO of accounting for the September 2024 Notes, including contingently issuable common

stock and accrued interest, as discussed in Note 3, Summary of Significant Accounting Policies and Note 4, Reverse Recapatialization

to the accompanying consolidated financial statements included elsewhere in this Annual Report.

The September 2024 Notes, which include the related

contingently issuable common stock, contain embedded derivatives, which require bifurcation and separate accounting under GAAP, for which

the Company elected the FVO for the September 2024 Notes.

The September 2024 Notes and accrued interest at their stated interest rates

were initially recorded at fair value as liabilities on the consolidated balance sheets and are subsequently re-measured at fair value

at the end of each reporting period presented within the consolidated financial statements.

The changes in the fair value of the September

2024 Notes are recorded in changes in fair value of convertible debt, included as a component of other income and expenses, net, in the

consolidated statements of operations.

The change in fair value related to the accrued interest components is also included within the

single line of change in fair value of September 2024 Notes on the consolidated statements of operations.

See additional information on

valuation methodologies and significant assumptions used in Note 7, Debt and Note 11, Fair Value Measurement to the accompanying

consolidated financial statements included elsewhere in this Annual Report.

The Earn-out Share Liability

Certain shareholders of the Company are eligible to

receive up to 4.5 million earnout shares of the Company's common stock, contingent upon the fulfillment of certain milestones.

is deemed achieved if, at any time within ten years following the Business Combination, (i) the volume-weighted average price of the Company's

$ (22,066,194 )

Accounting Policies and Estimates

management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements

which have been prepared in accordance with GAAP.

In preparing our financial statements, we make estimates, assumptions, and judgments

that can have a significant impact on our reported revenue, results of operations, and net loss, as well as on the value of certain assets

and liabilities on our balance sheet during and as of the reporting periods.

These estimates, assumptions, and judgments are necessary

because future events and their effects on our results of operations and the value of our assets cannot be determined with certainty

and are made based on our historical experience and on other assumptions that we believe to be reasonable under the circumstances.

estimates may change as new events occur or additional information is obtained, and we may periodically be faced with uncertainties,

the outcomes of which are not within our control and may not be known for a prolonged period of time.

Because the use of estimates is

inherent in the financial reporting process, actual results could differ from those estimates.

believe that the assumptions and estimates associated with the following critical accounting policies involve significant judgment and

thus have the most significant potential impact on our Consolidated Financial Statements.

Company recognizes revenue based on the satisfaction of distinct obligations to transfer goods and services to customers.

generates revenue from hardware sales and the sale of licenses and subscriptions.

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.

from all sales types is recognized at the transaction price - the amount management expects to be entitled to in exchange for transferring

goods or providing services.

Transaction price is calculated as selling price net of variable consideration which may include estimates

for future returns, price protection, warranties, and other customer incentive programs based upon the Company’s expectation and

historical experience.

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.

from hardware sales is recognized at a point-in-time, which is generally at the point in time when products have been shipped, right

to payment has been obtained and risk of loss has been transferred.

Certain of the Company’s product’s performance obligations

include proprietary operating system software, which typically is not considered separately identifiable.

Therefore, sales of these products

and the related software are considered one performance obligation.

Company has service arrangements where net sales are recognized over time.

These arrangements include a variety of post-contract support

service offerings, which are generally recognized over time as the services are provided, including maintenance and support services,

and professional services to help customers maximize their utilization of deployed systems.

A contract liability for deferred revenue

is recorded when consideration is received or is unconditionally due from a customer prior to transferring control of goods or services

to the customer under the terms of a contract.

Deferred revenue balances typically result from advance payments received from customers

for product contracts or from billings in excess of revenue recognized on services arrangements.

Company values inventory at the lower of cost or net realizable value.

Cost is computed using standard cost which approximates actual

cost on a first-in, first-out basis.

At each reporting period, the Company assesses the value of its inventory and writes down the cost

of inventory to its net realizable value, if required, for estimated excess or obsolescence.

Factors influencing these adjustments include

changes in future demand forecasts, market conditions, technological changes, product life cycle and development plans, component cost

trends, product pricing, physical deterioration, and quality issues.

The write down for excess or obsolescence is charged to the provision

for inventory, which is a component of cost of goods sold in the Company’s consolidated statements of operations and comprehensive

income (loss).

At the point of the loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes

in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Value of Equity-Based Awards

estimate the fair value of stock option awards granted using the Black-Scholes option pricing model, which uses as inputs the fair value

of our common stock and subjective assumptions we make, including expected stock price volatility, the expected term of the award, the

risk-free interest rate, and expected dividends.

The historical volatility is generally calculated for a period of time commensurate

with the expected term assumption.

We use the simplified method to calculate the expected term for options granted to employees and directors.

We utilize this method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the

expected term.

The risk-free interest rate is based on a U.S.

treasury instrument whose term is consistent with the expected term of

the stock options.

The expected dividend yield is assumed to be zero, as we have never paid dividends and do not have current plans to

pay any dividends on our common stock.

As there was no public market for Private Veea’s common stock

prior to the Closing of the Business Combination, the estimated fair value of our common stock was previously approved by our Board of

Directors, with input from management, as of the date of each award grant, considering our most recently available independent third-party

valuations of Private Veea’s common stock and its board of directors’ assessment of additional objective and subjective factors

deemed relevant that may have changed from the date of the most recent valuation through the date of the grant.

Value of Certain Debt and Liability Instruments, and the Fair Value Option of Accounting

financial instruments contain various embedded derivatives which require bifurcation and separate accounting of those derivatives apart

from the host instruments, if eligible, GAAP allows issuers to elect the fair value option (“FVO”) of accounting for those

The FVO allows the issuer to account for the entire financial instrument, including accrued interest, at fair value with

subsequent remeasurements of that fair value recorded through the statements of operations.

We elected the FVO of accounting for the

September 2024 Notes, including contingently issuable common stock and accrued interest, as discussed in Note 3, Summary of Significant

Accounting Policies and Note 4, Reverse Recapitalization to the accompanying consolidated financial statements included elsewhere

in this Annual Report.

September 2024 Notes, which include the related contingently issuable common stock, contain embedded derivatives, which require bifurcation

and separate accounting under GAAP, for which the Company elected the FVO for the September 2024 Notes.

The September 2024 Notes and

accrued interest at their stated interest rates were initially recorded at fair value as liabilities on the consolidated balance sheets

and are subsequently re-measured at fair value at the end of each reporting period presented within the consolidated financial statements.

The changes in the fair value of the September 2024 Notes are recorded in changes in fair value of convertible debt, included as a component

of other income and expenses, net, in the consolidated statements of operations.

The change in fair value related to the accrued interest

components is also included within the single line of change in fair value of September 2024 Notes on the consolidated statements of

See additional information on valuation methodologies and significant assumptions used in Note 7, Debt and Note 11,

Fair Value Measurement to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Earn-out Share Liability

Certain shareholders of the Company are eligible to receive up to 4.5

million earnout shares of the Company’s common stock, contingent upon the fulfillment of certain milestones.

Each earnout is deemed

achieved if, at any time within ten years following the Business Combination, (i) the volume-weighted average price of the Company’s

common stock reaches or exceeds either $12.50 or $15.00, in each case, for any twenty trading days within a thirty trading day period

12 unchanged sentences

See additional information on valuation methodologies and significant assumptions used in Note 2,

Summary of Significant Accounting Policies and Note 4, Reverse Recapatialization , to the accompanying consolidated financial

Summary of Significant Accounting Policies and Note 4, Reverse Recapitalization , to the accompanying consolidated financial

statements included elsewhere in this Annual Report.

Goodwill represents the excess of the aggregate purchase

consideration over the fair value of the net assets acquired.

Goodwill is reviewed for impairment on an annual basis, or more frequently

if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired.

In conducting its annual impairment

test, the Company first reviews qualitative factors to determine whether it is more likely than not that the fair value of the reporting

unit is less than its carrying amount.

If factors indicate that the fair value of the reporting unit is less than its carrying amount,

the Company performs a quantitative assessment, and the fair value of the reporting unit is determined by analyzing the expected present

value of future cash flows.

If the carrying value of the reporting unit continues to exceed its fair value, the fair value of the reporting

unit’s goodwill is calculated and an impairment loss equal to the excess is recorded.

The Company’s goodwill was recorded

in connection with an acquisition consummated by Private Veea in June 2018.

See additional information on valuation methodologies and

significant assumptions used in Note 3, Summary of Significant Accounting Policies and Note 6 , Goodwill and Intangible Assets ,

to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Impairment of Long-Lived Assets

Long-lived assets with finite lives consist primarily

of property and equipment, operating lease right-of-use assets, and intangible assets which are reviewed for impairment whenever events

or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held

and used is measured by a comparison of the carrying amount of an asset to the undiscounted future net cash flows expected to be generated

by the asset.

If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized

by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

See additional information on valuation methodologies

and significant assumptions used in Note 3, Summary of Significant Accounting Policies and Note 6 , Goodwill and Intangible Assets ,

to the accompanying consolidated financial statements included elsewhere in this Annual Report.

Recently Adopted Accounting Pronouncements

See Note 3, Summary of Significant Accounting Policies

to the accompanying consolidated financial statements included elsewhere in this Annual Report for a description of recently adopted accounting

Recently Issued Accounting Pronouncements

See Note 3, Summary of Significant Accounting Policies

to the accompanying consolidated financial statements included elsewhere in this Annual Report for a description of certain recently issued

accounting standards which may impact our financial statements in future reporting periods.

represents the excess of the aggregate purchase consideration over the fair value of the net assets acquired.

Goodwill is reviewed for

impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill

may be impaired.

In conducting its annual impairment test, the Company first reviews qualitative factors to determine whether it is more

likely than not that the fair value of the reporting unit is less than its carrying amount.

If factors indicate that the fair value of

the reporting unit is less than its carrying amount, the Company performs a quantitative assessment, and the fair value of the reporting

unit is determined by analyzing the expected present value of future cash flows.

If the carrying value of the reporting unit continues

to exceed its fair value, the fair value of the reporting unit’s goodwill is calculated and an impairment loss equal to the excess

The Company’s goodwill was recorded in connection with an acquisition consummated by Private Veea in June 2018.

additional information on valuation methodologies and significant assumptions used in Note 2, Summary of Significant Accounting Policies

and Note 6 , Goodwill and Intangible Assets , to the accompanying consolidated financial statements included elsewhere in this

Annual Report.

of Long-Lived Assets

assets with finite lives consist primarily of property and equipment, operating lease right-of-use assets, and intangible assets which

are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future

net cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated future undiscounted cash

flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

See additional information on valuation methodologies and significant assumptions used in Note 2, Summary of Significant Accounting

Policies and Note 6 , Goodwill and Intangible Assets , to the accompanying consolidated financial statements included elsewhere

in this Annual Report.

Issued Accounting Pronouncements

Note 2, Summary of Significant Accounting Policies to the accompanying consolidated financial statements included elsewhere in this Annual

Report for a description of certain recently issued accounting standards which may impact our financial statements in future reporting

Adopted Accounting Pronouncements

Note 2, Summary of Significant Accounting Policies to the accompanying consolidated financial statements included elsewhere in

this Annual Report for a description of recently adopted accounting standards.

Issued Accounting Pronouncements

Note 2, Summary of Significant Accounting Policies to the accompanying consolidated financial statements included elsewhere in

this Annual Report for a description of certain recently issued accounting standards which may impact our financial statements in future

reporting periods.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation

S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting

company,” as defined by Rule 229.10(f)(1) under the Securities Act.

to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as

it is a “smaller reporting company,” as defined by Rule 229.10(f)(1) under the Securities Act.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis