Company: VEEAW
Filing Date: 2025-05-21
Form Type: 10-Q
Source: 0001213900-25-046124
Chunk: 33

Company: VEEA INC.
Filing Date: 2025-05-21
Form: 10-Q
Item: Part I, Item 1
Chunk 33
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 the Convertible Note was executed. As
of March 31, 2025, the fair value was remeasured using an option pricing model. The option pricing model was used to value the convertible
note option liability for the initial periods and subsequent measurement periods.

19

The convertible note option liability
was classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs. The key inputs into the option pricing
model for the convertible note option liability were as follows:

    March 31,  2025  
    December 31, 2024 
  
    Stock Price 
    $1.49  
    $3.81 
  
    Expected term (years) 
     0.95  
     1.2 
  
    Volatility 
     80.0% 
     75.0%
  
    Risk-Free Rate 
     4.05% 
     4.18%
  
    Interest rate 
     6.41% 
     6.49%

    Three months
ended March 31, 
2025 
  
    Balance, beginning of period 
    $60,000 
  
    Change in fair value 
     (59,000)
  
    Balance, end of period 
    $1,000 

Earn-out Share Liability

Following the closing of the Business
Combination, holders of certain capital stock of Private Veea immediately prior to the closing have the contingent right to receive up
to 4.5 million additional shares of Common Stock if certain trading-price based milestones of the Common Stock are achieved or a change
of control transaction occurs during the ten-year period following the Closing. The Company’s obligation to issue the earn out shares
is recorded as a contingent liability (the “Earn-out Share Liability”) in the Company’s financial statements. The initial
value of the contingent Earn-out Share Liability of $53.6 million was recorded as a transaction cost within operating expenses. The fair
value of the Earn-out Share Liability was estimated using a Monte Carlo simulation utilizing assumptions related to the contractual term
of the instruments, estimated volatility, the price of the Common Stock, and current interest rates.

The following table presents the changes
in fair value of the earn-out liability:

    Three months ended  March 31, 2025 
  
    Balance, beginning of period 
    $15,560,000 
  
    Change in fair value 
     (10,530,000