Annual Report for Fiscal Year Ending December 31, 2024 (Form 20-F)

Item 5. Operating and Financial Review and Prospects

You should read the following discussion of our operating and financial review and prospects together with our consolidated financial statements included in Item 18 in this annual report.

The following discussion and analysis contain forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of factors, including, but not limited to, those under Item 3. D "Risk Factors" and elsewhere in this annual report.

In this section, the "Company", "we," "us," "our" and "Rezolve" refer to Rezolve Limited and its subsidiaries prior to the consummation of the Pre-Closing Demerger and to Rezolve AI plc (f.k.a. Rezolve AI Limited) and its subsidiaries following the consummation of the Pre-Closing Demerger.

Overview

We are recognized2 to stand at the vanguard of the mobile commerce industry, providing an engagement platform, powered by cutting-edge artificial intelligence and machine learning. This platform empowers retailers, brands, and manufacturers to create robust, dynamic connections with consumers, transcending barriers of location and device, whether they are mobile or desktop. Harnessing the potential of AI, our platform fosters unprecedented mobile engagement, aiding businesses in their quest to reach their consumers in innovative ways. By leveraging the capabilities of mobile devices and personal computers-from cameras and microphones to location services and wireless connectivity-we bring the commercial experience directly into consumers' hands. The hallmark of our platform is the integration of AI-driven systems, which simplify and enhance the purchasing process. Our technology enables merchants to understand their customers intent, provide the most relevant and helpful information to assist with their product selection and then enables them to complete transactions, access information, or contribute donations with a single tap on their device screen, depending on the context. This streamlined, seamless interaction, facilitated by the power of artificial intelligence, ensures an effortless and intuitive consumer experience. Since, the launch of our pilot platform, we believe we have harnessed the transformative potential of artificial intelligence, redefining the landscape of mobile commerce and engagement. As we continue to innovate, we remain committed to driving forward the digital commerce industry, shaping a future where technology and commerce intersect seamlessly for the benefit of both businesses and consumers.

2Please see Rezolve Press Release dated July 25, 2023, available at https://www.rezolve.com/investors/britainsbrain-heralds-new-era-of-commerce-enabled-ai/

Our platform allows for mobile engagement with merchants using our software to extend their business to consumers' mobile devices and computers in innovative ways. By using a mobile device's camera, microphone, location awareness, Bluetooth or Wi-Fi capabilities, our platform enables a user to make purchases, request information or make donations with only one tap on their screen, in certain circumstances. We deployed our pilot platform (which was developed prior to the Pre-Closing Demerger) in 2017.

We expect to commercialize the Rezolve platform in quarter 2 of 2025, initially in Europe and the USA. Revenues from braincommerce are also forecast to begin in Q2 2025, increasing significantly in Q3 and Q4 2025. We also expect to generate revenues in Q4 2025 in South America and the Asia. We expect revenues to increase in 2026 through our signed partner agreements with Microsoft, Google and others. For additional information regarding the partner agreements, see "-Partner Agreements".

Rezolve was incorporated in England and Wales as a private limited company on January 5, 2023 under the name Rezolve Group Limited with company number 14573691 and changed its name on June 5, 2023 to Rezolve AI Limited. Rezolve Limited was incorporated in England and Wales as a private limited company on September 11, 2015 under the name Soul Seeker Limited with company number 09773823. Rezolve Limited changed its name in February 2016 to Powa Commerce Limited and to Rezolve Limited in March 2016. On March 28, 2025, the Company altered its legal status under English law from a private limited company and re-registered as a public limited company. In connection with the re-registration as a public limited company, the Company changed its name from Rezolve AI Limited to Rezolve AI plc.

We currently derive our revenue through the transaction fees based on sales of ticketing for La Liga football events in Spain.

Management has assessed whether they believe there are events or conditions that give rise to doubt the ability of the Company to continue as a going concern for a period of twelve months after the preparation of the consolidated financial statements. The assessment includes knowledge of the Company's subsequent financial position, the estimated economic outlook and identified risks and uncertainties in relation there to.

As a result of our losses and our projected cash needs combined with our current liquidity level, the Company's ability to continue as a going concern is contingent upon successful execution of management's intended plan over the next twelve months to improve the Company's liquidity and profitability, which includes, without limitation:

Key Factors Affecting Our Performance

We believe our future performance will depend on many factors, including the following:

Components of our Results of Operations

Revenues

We generate transaction revenues through the sale of ticketing of football events using our technology with La Liga in Spain.

Our future strategy focuses on providing a technology platform to merchants in order to facilitate outreach to consumers. Triggers are generated when our platform prompts customer's mobile devices to interact with merchants using geo-zones, audio and image watermarks, beacons and QR codes. Merchants are billed on a monthly basis for the services rendered.

Operating Expenses

Operating expenses consist of cost of revenues, employee benefit expenses, consultancy expense, sales and marketing expenses, business development expenses, general and administrative expenses, and depreciation and amortization.

Interest expense

Interest expense consists primarily of costs associated with short term debt and convertible debt.

Other Non-Operating Income (Expense)

Other non-operating income/ (expense), net consists of foreign exchange loss and research and development credits. Foreign exchange loss primarily consists of the revaluation of local currency bank ledger balances not denominated in U.S. dollars. Research and development credits primarily consists of activities related to government tax incentives on technology spent on certain operational activities in UK.

Income Tax Benefit

Income tax benefit consists primarily of the realization of a deferred tax liability, net of current income taxes payable related to the jurisdictions in which we conduct business. Our effective tax rate is affected by tax rates in jurisdictions and the relative amounts of income we earn in those jurisdictions, changes in the valuation of our deferred tax assets and liabilities, applicability of any valuation allowances, and changes in tax laws in jurisdictions in which we operate. We have not recognized any deferred tax assets in any of the periods under review.

Results of Operations for years ended December 31, 2024 and 2023

The following tables set forth our consolidated statements of operations for the years ended December 31, 2024 and December 31, 2023:

Comparison of the years ended December 31, 2024 and 2023

Revenues

The following shows total revenues from ticketing transactions for the year ended December 31, 2024, as compared to the year ended December 31, 2023:

The increase in revenue from $145,051 for the year ended December 31, 2023 as compared to $187,788 for the year ended December 31, 2024 is attributable to increased transaction revenues through the sale of ticketing of football events using our technology with La Liga in Spain.

Operating Expenses

The following shows operating expenses for the year ended December 31, 2024, as compared to the year ended December 31, 2023:

Percentages have been rounded for presentation purposes and may differ from unrounded results.

Cost of Revenues

Cost of revenues have remained unchanged at $34,053, for the year ended December 31, 2024 compared to $34,791 for the year ended December 31, 2023.

Sales and Marketing Expenses

Sales and marketing expenses decreased by $0.45 million, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This was primarily due lower share-based payments expense related to a decrease in the number of stock options granted to employees within sales and marketing during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

General and Administrative Expenses

General and Administrative expenses increased by $113.44 million, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This was primarily due to an increase in share-based payments expenses of $60.5 million from 2023 to 2024 related to stock options granted to DBLP Sea Cow Ltd during the year ended December 31, 2024. DBLP Sea Cow Ltd is wholly legally owned by Dan Wagner, Chief Executive Officer of Rezolve. An increase of $34.2 million in legal and professional fees incurred as a result of the Pre-Closing Demerger transaction and the Business Combination transaction with Armada Acquisition Corp. I. also contributed to the increase in general and administrative expenses during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Other operating expenses

Other operating expenses decreased by $0.90 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 . The higher operating expenses during the year ended December 31, 2023 as compared to the year ended December 31, 2024 was driven by higher impairment charges related to loan receivables from Swipeby and Moneymatic recognized in 2023 as compared to 2024.

Depreciation and Amortization Expenses

Depreciation and amortization expenses remained materially unchanged at $225,251, for the year ended December 31, 2024 compared to $242,436 for the year ended December 31, 2023.

Other Income and Expenses

The following shows interest expense and other non-operating income and expenses for the year ended December 31, 2024, as compared to the year ended December 31, 2023:

Interest expense increased by $5.77 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023. This was primarily due to interest expense of $6.99 million on the senior secured convertible notes and unsecured convertible loans. Refer to the Liquidity and Resources section below for more information.

The net gain on derivatives of $19.00 million is primarily due to the remeasurement of a derivative asset and derivative liabilities at fair value through profit and loss. The derivative asset pertains to an option held by the Company to convert a promissory note payable to Northland Securities. The Company had The outstanding derivative liabilities as at December 31, 2024 were triggered by conversion features embedded in promissory notes held by investors Cohen & Company Financial Management LLC, J.V.B. Financial Group and Northlands Securities. The Company previously did not bifurcate the embedded conversion features as derivatives due to the lack of an underlying share price prior to the Company's acquisition of Armada and listing of its Ordinary Shares on the NASDAQ. Refer to the Liquidity and Resources section below for more information.

The loss on extinguishment of $44.33 million is primarily due to an agreement entered into by the Company, Apeiron Investment Group Ltd. and Bradley Wickens, the beneficial holders of the majority of senior secured convertible notes to amend

the conversion price of approximately $41,892,080 of their outstanding senior secured convertible notes to $2 per ordinary share. Apeiron Investment Group Ltd. and Bradley Wickens exercised their option to convert all their outstanding senior secured convertible notes which resulted in the recognition of a debt conversion expense of $39,658,290, equal to the fair value of the ordinary shares given up less the carrying value of the debt including accrued interest. Refer to the Liquidity and Resources section below for more information.

Other non-operating (income) expense increased to $1.33 million for the year ended December 31, 2024, as compared to $0.13 million year ended December 31, 2023. This was primarily due a foreign exchange gain of $1.33 million during year ended December 31, 2024 as compared to a foreign exchange loss of $0.38 million during the year ended December 31, 2023. The Company's exposure to currencies other than its functional currency of the US Dollar, changed during the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to events such as the board of directors decision to abandon operations in China completely and the Business Combination transaction with Armada Acquisition Corp. I.

Operating Losses

Operating losses increased to $138.04 million for the year ended December 31, 2024, as compared to $26.01 million for the year ended December 31, 2023. This was primarily due to the increase in general and administrative expenses as detailed above.

Non-GAAP financial measures

Key Business Metrics

In addition to information related to our financial performance, we regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions. We discuss revenues below under "-Components of Results of Operations." Period-on-period revenues growth, EBITDA and total number of merchants are discussed immediately below the following table.

The following financial metrics are used by management to monitor and analyze the operational performance of our business.

EBITDA

EBITDA is a non-GAAP financial measure. We define EBITDA as net income (loss) adjusted for interest expense, income tax, depreciation of property and equipment and amortization of acquired intangibles. EBITDA should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. Although it is frequently used by investors and securities analysts in their evaluations of companies, EBITDA has limitations as an analytical tool, including:

We compensate for the inherent limitations associated with using EBITDA through disclosure of these limitations, presentation of the Rezolve Financial Statements in accordance with GAAP and reconciliation of EBITDA and to the most directly comparable GAAP measure, net income (loss).

The table below provides a reconciliation of our net income (loss) to EBITDA (non GAAP):

We have booked transaction-related costs in each of the years ended December 31, 2024 and 2023. PCAOB audit and U.S. legal counsel costs for the periods under review have been accrued as incurred in the year ended December 31, 2024.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as EBITDA adjusted for unrealized foreign exchange gains (losses), impairment of goodwill and other assets, business development expenses, warrants issued and share-based

compensation. Although it is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, including:

We compensate for the inherent limitations associated with using Adjusted EBITDA through disclosure of these limitations, presentation of the Rezolve Financial Statements in accordance with GAAP and reconciliation of Adjusted EBITDA and to the most directly comparable GAAP measure, net income (loss).

Rezolve believes that the presentation of adjusted EBITDA provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition, results of operations and the valuation of the Company.

Adjusted EBITDA is used by management to understand and track underlying earnings performance by excluding one-time and non-recurring costs. The Company believe it is appropriate to exclude these costs from Adjusted EBITDA as they relate to:

Internally adjusted EBITDA and contribution margin by reportable segment are significant measures used by management for purposes of:

Expenses

The table below provides a reconciliation of our net income (loss) to Adjusted EBITDA (non-GAAP):

Total Number of Merchants

In the future, we believe that the size of our merchant base will be an indicator of our market penetration and that the number of merchants that we transact with within a period will be an indicator of the growth of our business. We expect to calculate the number of merchants for each period as the total number of separate merchants we transacted with during the period.

Employee share based compensation

As of December 31, 2023, 9,513,181 restricted employee shares were outstanding due to an unofficial and unapproved equity incentive plan. These shares par value of £0.0001 per share were unpaid by the employees. The employee shares had significant restrictions including management's and or the board's rights to cancel the shares any time, restrictions on right to transfer, to vote and cumulative dividends. There were no vesting conditions including service conditions in relation to the shares issued. Considering the restrictions imposed on these shares, these shares were considered to be ungranted to the employees. The amount receivable for these employee shares and such employee shares issued were adjusted from the share subscription receivable and number of ordinary shares, respectively in the Company's consolidated statement of changes in shareholder's deficit as of and for the year ended December 31, 2023. The articles of incorporation of the Company were amended to remove these restrictions prior to the completion of the Pre-Closing Demerger transaction. The removal of these restrictions triggered a "grant date" as defined in ASC 718. As there were no vesting conditions, the shares were fully vested at grant date. The Company recognized a share-based payment expense of $18,836,099 during the year ended December 31, 2024 using a fair value of ordinary shares of $1.98. The fair value of the ordinary shares was estimated using a recent funding of the Company, historical discounts to share prices following an initial public offering through a Special Purpose Acquisition Corp ("SPAC"), while also considering the risk that the Company may not successfully close its Business Combination with Armada or complete the Demerger. The valuation used an estimated discount for lack of marketability using an average from the results of a Black-Scholes Protective Put Option Analysis, Asian Put Option Analysis and the Finnerty Put Option Analysis.

Management has assessed whether they believe there are events or conditions that give rise to doubt the ability of the Company to continue as a going concern for a period of twelve months after the preparation of the consolidated financial statements. The assessment includes knowledge of the Company's subsequent financial position, the estimated economic outlook and identified risks and uncertainties in relation.

As a result of our losses and our projected cash needs combined with our current liquidity level, the Company's ability to continue as a going concern is contingent upon successful execution of management's intended plan over the next twelve months to improve the Company's liquidity and profitability, which includes, without limitation:

Furthermore, the review of the strategic plan and budget, including expected developments in liquidity and capital from definitive agreements entered into, were considered. As of the date of issuance of these consolidated financial statements, the Company has a further $234.4 million remaining on the Standby Equity Purchase Agreement ("SEPA") capital commitment facility with YA II PN, LTD ("YA"), a Cayman Island exempt limited company. The SEPA is a share subscription facility which was signed and executed on February 23, 2023 and amended and restated on February 2, 2024 to provide for, inter alia, Rezolve AI Limited joining as a party to the agreement and the subscription by YA of a promissory convertible note ("YA Agreement", note 7.6). The Company may continue to seek capital through the issuance of equity securities using the remaining undrawn capital commitment facility. Consequently, it has been concluded that adequate resources and liquidity to meet the cash flow requirements for the next twelve months are present, and it is reasonable to apply the going concern basis as the underlying assumption for the consolidated financial statements. The Company's plan includes the items noted above as well as securing external financing which may include raising debt or equity capital. These plans are not entirely within the Company's control including our ability to raise sufficient capital on favorable terms.

In 2024, we financed our operations in large part with cash flows from financing activities through cash proceeds from issuance of convertible debt, short term-debt and a rights issue.

Short-term debt to related parties

Unsecured interest free loans taken from related parties DBLP Sea Cow Ltd of $447,067 and Daniel Wagner of $4,655,144 are repayable on demand.

In March 2023, the Company obtained two unsecured convertible loans from a related party (Igor Lychagov) consisting of $2,000,000 and €2,000,000. Each loan bears a borrowing fee of $660,000 and €660,000, respectively, which has been recorded in interest expense in the year ended December 31, 2023. The loans were due to mature on July 31, 2023 or at the option of the investor, can be converted into ordinary shares of the Company including the accrued borrowing fees at a conversion rate of 0.50 to the Company's share price at listing after completing any reorganization. The loans were not repaid by the maturity date at which until further terms and conditions were negotiated such as extended repayment terms or conversion into ordinary shares of the Company, the Company was in default of the two unsecured convertible loans and the loans remained repayable on demand at December 31, 2023. On January 26, 2024, the two unsecured convertible loans were added to the Company's senior secured convertible notes (note 8.3). The loan principal and accrued borrowing fees were rounded to a sum of $8,000,000. The key terms of the loan amendment include that of the senior secured convertible notes, as noted below:

On December 5, 2024, all $8,000,000 of the senior secured convertible notes in favor of Igor Lychagov were converted into ordinary shares of the Company at a conversion price of $7 per ordinary share.

Ordinary shares payable

On May 25, 2023, the Company offered to all existing investors and employees of the Company an advanced subscription agreement for ordinary shares of the Company at a discount from the pre-close equity value of the Company per share ("the Rights Issue") in connection with its business combination with Armada Acquisition Corp I. The Company issued 11,052,716 ordinary shares in December 2024 to subscribers of the rights issue. On January 24, 2025, the Company issued a further 171,429 ordinary shares to a subscriber of the rights issue to whom they were owed ordinary shares payable as at December 31, 2024.

Convertible debt

In connection with the Business Combination Agreement, on December 16, 2021, Rezolve Limited entered into a secured convertible loan note instrument, as amended and restated on November 21, 2022 and May 23, 2023 and as further amended on December 18, 2023, December 29, 2023 and January 26, 2024 (the "Loan Note Instrument"). Upon the closing of the Pre-Closing Demerger, the Loan Note Instrument was novated to Rezolve and was secured by a debenture over the assets of Rezolve. As of December 5, 2024, there was outstanding an aggregate amount of approximately $49 million of convertible notes (the "Convertible Notes") outstanding under the Loan Note Instrument.

On December 5, 2024, pursuant to the terms of the Loan Note Instrument, one of the holders of the Convertible Notes converted all of his approximately $8 million of outstanding Convertible Notes at a conversion price of $7 per ordinary share.

On December 17, 2024, the Company, Apeiron Investment Group Ltd. and Bradley Wickens, the beneficial holders of the majority of Convertible Notes entered into an agreement (the "Agreement") to amend the Loan Note Instrument (the "Amendment") and that the beneficial holders shall procure that the registered nominees holding their Convertible Notes provide the necessary consents to the Amendment. Pursuant to the Amendment, the conversion price with respect to approximately $41 million of outstanding Convertible Notes was revised to equal $2 per ordinary share.

In December 2024, all of the remaining Convertible Note holders elected to convert. As of December 31, 2024, $0.4 million of the Convertible Notes remained outstanding under the Loan Note Instrument.

Short term convertible debt to a related party

A Short term convertible debt to a related party of $132,269 was also added to the Company's senior secured convertible note including $125,000 of convertible debt and $7,269 of interest.

Share-based payment liability

On October 7, 2021, the Group acquired Jaymax International Service Inc. ("Jaymax") (later renamed to "Rezolve Taiwan Limited"). As part of the acquisition of Jaymax, the Company agreed to issue $1,400,000 in Rezolve ordinary share to Jaymax's former owner for completion of a 3-year noncompete period which began on the October 7, 2021. The cost of the share-based payment is considered to have vested immediately upon commencement of the non-compete period as the Company's assumption is that it is more likely than not that the former owner will not breach the non-compete agreement. The share-based payment liability is to be settled by a fixed dollar amount of shares and therefore represents a liability in accordance with ASC 480. As at December 31, 2023, the liability has been measured at fair value using a discounted cash-flow model and a market participant borrowing rate of 10.8%. At December 31, 2024 the liability is equal its present value of $1,400,000 as the term of the non-compete agreement ended on October 7, 2024. The Company has yet to settle it in ordinary shares as at December 31, 2024.

Convertible Promissory notes

Yorkville Standby Equity Purchase Agreement

On February 23, 2023, Rezolve Limited entered into a $250 million standby equity purchase agreement with YA II PN, LTD ("YA"), a Cayman Islands exempt limited company, which was amended and restated on February 2, 2024 to provide for, inter alia, Rezolve AI Limited joining as a party to the agreement ("YA Agreement"). Pursuant to the YA Agreement, Rezolve has the right to sell to YA up to $250,000,000 Ordinary Shares, subject to certain limitations and conditions set forth in the YA Agreement, from time to time during the term of the YA Agreement.

In connection with the amendment and restatement of the YA Agreement, on February 2, 2024, Rezolve Limited and Rezolve issued a convertible note with a total principal amount of $2.5 million (the "YA Note") to YA, pursuant to the terms of a convertible promissory note instrument entered into by Rezolve Limited and Rezolve ("YA Note Instrument").

On September 6, 2024, YA and Rezolve amended and restated the YA Agreement (the "Second A&R YA Agreement") to incorporate an additional prepaid advance arrangement pursuant to which YA committed to provide Rezolve with prepaid advances in an aggregate original principal amount of an additional Seven Million Five Hundred Thousand Dollars ($7,500,000), payable in three tranches, with the first tranche in an original principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000) that was funded as part of the Second YA Note (as defined below), the second tranche in an original principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000) that was funded as part of the Second YA Note and the third tranche in an original principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000) that was funded as part of the Third YA Note (as defined below). The Second A&R YA Agreement superseded the original agreement.

In connection with the execution of the Second A&R YA Agreement, YA and Rezolve also entered into a second amendment to convertible promissory note and acknowledgement (the "YA Note Amendment" and the YA Note, as amended by the YA Note Amendment, the "Amended YA Note") whereby certain terms of the YA Note were amended. In particular, the YA Note Amendment extended the Maturity Date of the YA Note to September 11, 2025, provides that for purposes of determining the Triggered Principal Amount, the term "Other Notes" will not include the additional promissory notes issuable pursuant to the Second A&R YA Agreement, and reduced the floor price to $0.25 per share.

Also in connection with the Second A&R YA Agreement, on September 9, 2024, Rezolve issued YA a promissory note in the principal amount of $5,000,000 (the "Second YA Note"), reflecting the first and second tranche of the prepaid advances, and on November 29, 2024, upon effectiveness of the F-1 Registration Statement originally filed with the U.S. Securities and Exchange Commission on September 6, 2024, and declared effective on November 27, 2024, Rezolve issued YA a promissory note in the principal amount of $2,500,000 (the "Third YA Note", and together with the Amended YA Note and Second YA Note, the "YA Notes").

In December 2024, the Company received the Noteholder's request to convert of all of the principal and interest outstanding under the YA Notes. In connection therewith, the Company issued an aggregate of 4,310,208 Ordinary Shares (including in payment of a fee to YA) in December 2024. A loss on extinguishment of $4,175,791 was recognized. As of December 31, 2024, $2,705,929 in principal and interest was outstanding, which was subsequently settled in 1,413,946 Ordinary Shares on February 5, 2025, and no further amounts remain outstanding.

Promissory notes

In February 2024, certain persons (including Apeiron Investment Group Ltd and certain related parties of Rezolve) entered into Subscription Agreements to subscribe for the Promissory Notes with a total principal amount of $2,877,319 in consideration for an advance by each subscriber to Rezolve Limited the "Net Investment Amount".

The Promissory Notes were issued during the course of February, 2024, pursuant to the terms of the Promissory Note Instruments.

With effect from the completion of the Pre-Closing Demerger, the rights and obligations of Rezolve Limited under the Subscription Agreements and the Promissory Note Instruments were novated to Rezolve AI plc.

Pursuant to the Promissory Note Instruments, the Promissory Notes will mature on the date falling 6 months from the date of their issue (or as extended at the option of the noteholder) unless an event of default occurs that triggers an acceleration of the repayment obligation, and bears interest of 10% per annum (except if an event of default has occurred and is continuing, an 18% interest rate will apply). The Promissory Notes are freely transferable in whole or in part, subject to the terms of the Promissory Notes Instrument.

The Promissory Notes are convertible into ordinary shares in Rezolve AI plc. The noteholders may elect to convert all or part of the amount outstanding under their Promissory Note into ordinary shares at the Conversion Price, however subject to the conversion limitation whereby the issue of Ordinary Shares upon conversion would not exceed the Exchange Cap (unless Rezolve shareholders have approved such issuances, or if Rezolve is permitted to follow (and has elected to do so) its home country practices instead of the stockholder approval requirements of Nasdaq Rule 5635).

Rezolve has the right to redeem early a portion or all amounts outstanding under the Promissory Notes pursuant to a Redemption Notice, provided that on the date of the Redemption Notice the VWAP of the ordinary shares in Rezolve AI plc is less than the Promissory Note Conversion Fixed Price. Upon such early redemption of a Promissory Note, and in addition to the principal and interest outstanding, a redemption premium of 10% of the principal amount being redeemed is payable to the noteholder. Upon receipt of a Redemption Notice, the noteholder shall have 10 trading days to elect to convert all or any portion of the Promissory Note.

Following the public listing of the ordinary shares in Rezolve AI plc, if a "Promissory Note Trigger Event" occurs (being where (i) the daily VWAP is less than the Floor Price for five (5) trading days during a period of seven (7) consecutive trading days (the "Promissory Note Floor Price Trigger"), or (ii) Rezolve AI plc has issued in excess of 99% of the ordinary shares available under the Exchange Cap unless Rezolve AI plc shareholders have approved such issuances, or if Rezolve AI plc is permitted to follow (and has elected to do so) its home country practices instead of the stockholder approval requirements of Nasdaq Rule 5635) (the "Promissory Note Exchange Cap Trigger")), then Rezolve AI plc shall make monthly payments equal to 25% of the original principal of such Promissory Note per month (or, if lesser, the then outstanding principal of the Promissory Note) plus a payment premium of 10% of the principal amount being paid, plus any accrued and unpaid interest as of each payment date, with such monthly payment obligation to cease if any time after the date of a Promissory Note Trigger Event, (i) in the event of a Promissory Note Floor Price Trigger, the daily VWAP is greater than 110% of the Floor Price for any 5 of 7 consecutive trading days, or the date Rezolve AI plc reduces the Floor Price (in accordance with its rights to do so under the Promissory Note Instruments), or (ii) in the event of an Exchange Cap Trigger, the date Rezolve AI plc has obtained stockholder approval to increase the number of ordinary shares under the Exchange Cap (or if the Exchange Cap no longer applies), unless a subsequent Promissory Note Trigger Event occurs.

On December 30, 2024, the Company repaid $1,472,231 of principal and interest to noteholders and related persons. As at December 31, 2024, certain noteholders and related parties have agreed to convert an aggregate of $1,189,096 of principal and interest into 425,288 Ordinary Shares. The outstanding balance at December 31, 2024 is $406,238, which the Company intends to settle by conversion into Ordinary Shares.

Cohen & Company Financial Management LLC

On August 14, 2024 Rezolve AI issued a promissory note to pay to Cohen & Company Financial Management LLC ("Cohen") as an agent for Armada, in the principal sum of $3,144,883 (the "Original Amount"), with the Original Amount, the accrued interest thereon and other amounts due and payable (unless prepaid earlier or converted into shares of common stock) on August 14, 2027 (the "Maturity Date'). The note bears interest at 4.95% per annum. Starting from January 31, 2025, upon Cohen's request, Rezolve AI shall pay Cohen the principal amount plus all of the accrued interest in increments of 1/18 of the outstanding principal amount (the "Amortization Payment") on a date determined by Cohen (a "Payment Date") until the Original Amount has been paid in full prior to or on the Maturity Date or, if earlier, upon acceleration, of prepayment of the note in accordance with the terms of the note. At the option of the Company, the Amortization Payments shall be made in cash or in shares of common stock of Rezolve AI, based on the price described in the promissory note. From and after January 15, 2025, Cohen shall have the right, at Cohen's sole option, on any business day, to convert at the conversion price described in the note all or any portion of the outstanding principal amount of the note up to an amount described in the note. The promissory note was settled on February 10, 2025 by issuing ordinary shares, and no further amounts remain outstanding.

Advisors loans

The Company issued the following promissory notes to financial advisors which were contingently on the close of the Business Combination with Armada:

Northland Securities

On July 30, 2024 the Company issued a promissory note to Northland Securities, Inc. ("Northland") for an amount of $5,141,250 and agreed to pay interest on the principal amount outstanding from time to time from July 30, 2024 until the note is fully paid, at the rate of 10% per annum, compounded annually. The timing and repayment amounts under the note will depend on the amounts of financing raised by the Company and its direct and indirect parent companies after completion of the Business Combination. If more than (a) $25,000,000 in proceeds is raised while the note is outstanding, 50% of the outstanding principal and all accrued and unpaid interest on the note shall become immediately due and payable and (b) if more than $50,000,000 in gross proceeds is raised, all of the outstanding principal and all accrued and unpaid interest shall become immediately due and payable. In the event that the Company and its direct and indirect parent companies after completion of the Business Combination have less than $20,000,000 in cash, cash equivalents and marketable securities as of December 31, 2024, the Company may, at its option, on or before March 31, 2025, convert all but $1,135,000 into shares of the Company's common stock at a price of $10.00 per share. In the event the Company and its direct and indirect parent companies after completion of the Business Combination have $20,000,000 or more in cash, cash equivalents and marketable securities as of any time on or prior to December 31, 2025, Northland may, at its option on or prior to June 30, 2026, sell any or all of the shares of the Company's common stock received pursuant to the prior sentence to the Company at a price of $10.00 per share. The note was entered into in full satisfaction of the cash payments otherwise due to Northland by the Company at the time of closing and which are described above. All of the Company's obligations under the Note were guaranteed by Rezolve AI plc. The Company settled the promissory note with Northland on January 30, 2025 by issuing 391,681 ordinary shares and paying $3,500,000 in cash. No further amounts remain outstanding.

J.V.B. Financial Group

On August 14, 2024 the Company issued a promissory note to J.V.B. Financial Group, LLC ("JVB") ) for an amount of $7,500,000 and agreed to pay interest on the principal amount outstanding from time to time from August 14, 2024 until the note is fully paid, at the rate of 4.95% per annum. The note is to be repaid in installments of $625,000 ("Amortization Payment") beginning on January 31, 2025, and on each month end thereafter until December 31, 2025. The Company may, in its sole discretion, elect to pay all or any portion of the Amortization Payment or any interest due and payable on the maturity date in ordinary shares of Rezolve AI, with the number of such shares determined by dividing the Amortization Payment by a price per ordinary share equal to 95% of the arithmetic average of the daily volume weighted average share price ("VWP") for the 5 days ending on the day immediately preceding the due date of the Amortization Payment. The note was entered into in full satisfaction of the cash payments otherwise due to JVB by the Company at the time of closing and which are described above. All of the Company's obligations under the Note were guaranteed by Rezolve AI plc. On February 26, 2025, the Company issued 778,165 ordinary shares to settle $2,000,000 of principle outstanding to the JVB promissory note.

Cantor Fitzgerald

On November 20, 2023, the Company engaged Cantor Fitzgerald ("Cantor") to act as its financial and capital markets advisor in connection with any transactions, placement agent and arranger in connection with any financing. A fee of $16,000,000 ("the Armada fee") contingent on the close of the Business Combination with Armada payable in ordinary shares. The number of shares issuable in connection with the Armada fee was to be calculated using the greater of 1) 1.6 million and 2) the quotient obtained by dividing (x) $16,000,000 by (y) the daily VWAP of the ordinary shares over five trading days immediately preceding the date of the initial filing of the F-1 registration statement.

On December 5, 2024 the Company issued 17,354,231 ordinary shares to Cantor to settle the Armada fee. A loss on extinguishment of $1,804,814 was recognized. No further amounts remain outstanding.

Fair value measurement and concentration of credit risk

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price at which an asset could be exchanged or a liability transferred in an orderly transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or derived from such prices. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments' complexity.

The Company reports all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1-Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2-Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3-Inputs are unobservable inputs for the asset or liability.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety.

Fair value measurement at reporting date:

The derivative asset pertains to an option held by the Company to convert a promissory note payable to Northland Securities. In the event that the Company and its direct and indirect parent companies after completion of the Business Combination have less than $20,000,000 in cash, cash equivalents and marketable securities as of December 31, 2024, the Company may, at its option, on or before March 31, 2025, convert all but $1,135,000 into shares of the Company's common stock at a price of $10.00 per share.

The derivative liabilities were triggered by conversion features embedded in promissory notes held by investors Cohen & Company Financial Management LLC, J.V.B. Financial Group and Northlands. On August 15, 2024, the Company recognized derivative liabilities and an offsetting debt discount associated with the embedded conversion features in its senior secured convertible notes, convertible promissory notes and advisors loans. The Company previously did not bifurcate the embedded conversion features as derivatives due to the lack of an underlying share price prior to the Company's acquisition of Armada and listing of is ordinary shares on the NASDAQ. The Company no longer recognizes a derivative liability associated with the following debt liabilities due to the investors having exercised their conversion features by December 31, 2024:

The carrying amount of the Company's cash, accounts receivable, accounts payable and accrued expenses approximated their fair values due to their short term to maturity.

Balance Sheet Information

The following table sets forth our unrestricted cash and cash equivalents on our balance sheet and undrawn amounts under our revolving credit facility as of December 31, 2024 and December 31, 2023:

Cash Flows

The following table summarizes our cash flows for the periods presented:

Operating Activities

Net cash used in operating activities was $21.6 million for the year ended December 31, 2024, which resulted primarily from a net loss of $172.6 million from operating activities, adjusted for non-cash items such as share-based compensation expenses, advisor loans, interest expense, net gains on derivatives and net losses on extinguishments of debt.

Investing Activities

Net cash used in investing activities was $3.5 million for the year ended December 31, 2024, which resulted primarily from costs incurred to continue the development of our Rezolve platform and related technology.

Financing Activities

Net cash provided by financing activities of $34.6 million for the year ended December 31, 2024 was primarily due to proceeds from convertible promissory notes, proceeds from the issuance ordinary shares and proceeds from short-term debt from related parties partially offset by repayments of debt obligations to related parties and repayments of promissory notes.

Commitments

On October 3, 2024, the Company announced that it entered into a commercial agreement with Microsoft Corporation. Through this collaboration, Rezolve's Brain Suite, including Brain Commerce, Brain Checkout, and Brain Assistant, will be powered by Microsoft Azure and available globally via Microsoft's Azure Marketplace and co-sell channels. The Company is committed to spend £117.98 million (approximately $147.66 million at December 31, 2024) under this agreement to purchase eligible services and offerings from Microsoft over the next 5 years.

On November 20, 2024, the Company announced that it entered into a commercial agreement with Google Cloud EMEA Ltd ("Google"). Through this collaboration, Google will resell Rezolve AI's Brain Suite. The Company's commitments to purchase eligible services and offerings from Google is summarized in the table below:

(a) The period starting on November 15, 2024 and continuing for 12 months.

(b) The period starting at the end of Commitment Period 1 and continuing for 12 months.

(c) The period starting at the end of Commitment Period 2 and continuing for 12 months.

Off-Balance Sheet Arrangements

As of December 31, 2024, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Please refer to "Item 4. Information on the Company-B. Business Overview" and "Item 4. Information on the Company-B. Business Overview-Intellectual Property."

Please refer to "Item 4.B-Business Overview-Industry Overview and Trends."

The Rezolve AI plc and Subsidiaries Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles. In preparing the Rezolve AI plc and Subsidiaries Consolidated Financial Statements, we make assumptions, judgments and estimates that can have a significant impact on amounts reported in the Rezolve AI plc and Subsidiaries Consolidated Financial Statements. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We regularly reevaluate our assumptions, judgments and estimates.

Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and could have a material impact on our financial condition or results of operations. We have critical accounting estimates in the areas of the valuation of acquisition-related assets and liabilities, deferred income taxes and related valuation allowances, fair value measurements, useful lives of long-lived assets, capitalized software and share-based compensation.

Our significant accounting policies are described in Note 2, "Basis of presentation and summary of significant accounting policies" in the notes to the Rezolve AI plc and Subsidiaries Consolidated Financial Statements included elsewhere in this Report.

Valuation of assets and liabilities

Accounting for business combinations requires significant judgments when allocating the purchase price to the estimated fair values of assets acquired and liabilities assumed at the acquisition date. Determination of fair value involves estimates and assumptions which can be complex. The valuation of certain assets and liabilities require significant judgment and assumptions such as estimation of future cash flows, discount rates, market data of comparable assets and companies, useful lives among others. While management's estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain as they pertain to forward-looking views of our business and market conditions. The judgments made in this valuation process could materially impact our consolidated financial statements.

Determining the useful life of intangible assets requires management judgment and is based on an evaluation of several factors including estimated design life, information from our research and development department and our overall strategy for the use of the assets. If the useful life of our significant assets changes, this change could impact our operating results.

Deferred income taxes and related valuation allowances

We are subject to income taxes in the United Kingdom and numerous foreign jurisdictions. Significant judgment is required in determining our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets that are not more likely than not to be realized.

Tax valuation allowances are established to reduce deferred tax assets, such as tax loss carryforwards, to net realizable value. Factors considered in estimating net realizable value include historical results by tax jurisdiction, carryforward periods, income tax strategies and forecasted taxable income.

Capitalized software

Costs incurred internally in researching and developing internal-use software are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, software costs are capitalized until the product is ready for its intended use. Judgment is required in determining when technological feasibility of a product is established. The Company has not commenced amortizing the in-development software as it not yet ready for its intended use. The Company reviews internal-use software for impairment when an event or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable.

Share-based compensation

We recognize the cost of employee services received in exchange for awards of equity instruments, such as share options (time-vested), based on the fair value of those awards at the date of grant. We use the Black-Scholes-Merton ("Black-Scholes") option pricing model to estimate the fair value of stock option awards. The Black-Scholes model uses various assumptions to estimate the fair value of stock option awards. These assumptions include the expected term of stock option awards, expected volatility rate, risk-free interest rate and expected dividend yield. While these assumptions do not require significant judgment, as the significant inputs are determined from historical experience or independent third-party sources, changes in these inputs could result in significant changes in the fair value of stock option awards.

Recently Issued and Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 3 to the Rezolve AI plc and Subsidiaries Consolidated Financial Statements included elsewhere in this Report.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We have no interest rate risk. Our short-term debt from related parties consist of an unsecured, interest free loan and a unsecured convertible loan with a fixed interest rate. The convertible debt and the convertible promissory notes have fixed interest rates and the accrued interest converts into ordinary shares upon maturity. The short term convertible debt to a related party accrues interest at a fixed rate which converts into ordinary shares upon maturity. Interest accrues at a fixed rate on the advisor loans and is payable in cash according to the terms of the loans.

Foreign Currency Risk

All of the Company's revenue is denominated in the Euro ("EUR") since the sales of the Company are in Spain. Based upon the Company's level of operations for the year ended December 31, 2024 and 2023, a sensitivity analysis shows that a 10% appreciation or depreciation in the EUR against the dollar would have increased or decreased, respectively, the Company's revenue for the years ended December 31, 2024 and 2023 by approximately $18,779 and $14,505 respectively.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

Credit Risk

Cash and cash equivalents, other receivables, and accounts receivable are potentially subject to credit risk concentration. We have not experienced any material losses related to these concentrations during the years presented. We are in the process of spreading deposit risk across a number of financial institutions rated AA+ or AAA.