v3.25.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2025
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS

15 - FAIR VALUE MEASUREMENTS

 

Recurring Fair Value Measurements

 

Warrant liability

 

The Company’s initial value of the warrant liability was based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets and classified as level 3. The subsequent measurement of the Private Warrants is classified as Level 2 because these warrants are economically equivalent to the Public Warrants, based on the terms of the Private Warrant agreement, and as such their value is principally derived by the value of the Public Warrants. Significant deviations from these estimates and inputs could result in a material change in fair value. During the six months ended June 30, 2025, there were no transfers amongst level 1, 2, and 3 values during the period.

 

The conversion feature of the Convertible Promissory Notes is measured at fair value using a Monte Carlo model that fair values the conversion option.

The following table presents fair value information as of June 30, 2025 and December 31, 2024, of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

 

June 30, 2025  Total   Level 1   Level 2   Level 3 
Private warrant liability  $735,870   $
      -
   $735,870   $
-
 
Convertible note option liability   270    
-
    
-
    270 
Earn-out share liability   6,760,000    
-
    
-
    6,760,000 
Total  $7,496,140    
-
    735,870    6,760,270 

 

December 31, 2024  Total   Level 1   Level 2   Level 3 
Assets                
Money Market Funds  $
-
   $
    -
   $
-
   $
-
 
Liabilities                    
Private warrant liability   840,994    
-
    840,994    
-
 
Convertible note option liability   60,000    
-
    
-
    60,000 
Earn-out Share Liability   15,560,000    
-
    
-
    15,560,000 
Total  $16,460,994    
-
    840,994    15,620,000 

 

Convertible Note Option Liability

 

The Company established the initial fair value for the convertible note option liability as of September 13, 2024, which was the date the Convertible Note was executed. As of June 30, 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.

 

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:

 

   June 30,
2025		   December 31,
2024		 
Stock Price  $1.83   $3.81 
Expected term (years)   0.70    1.2 
Volatility   95%   75.0%
Risk-Free Rate   4.16%   4.18%
Interest rate   6.45%   6.49%

 

   Six months
ended
June 30,
2025		 
Balance, beginning of period  $60,000 
Change in fair value   (59,730)
Balance, end of period  $270 

 

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:

 

   Six months
ended
June 30,
2025		 
Balance, beginning of period  $15,560,000 
Change in fair value   (8,800,000)
Balance, end of period  $6,760,000 

 

The key inputs for the Earn-out Share Liability were as follows:

 

   June 30,
2025		   December 31,
2024		 
Stock Price  $1.83   $6.5 
Expected term (years)   9.2    10 
Volatility   80%   75.0%
Risk-Free Rate   4.19%   3.81%