Aeries Technology Inc

Previous wording

For the three months ended June 30, 2024, our revenue on a consolidated basis increased by $0.3 million or 2%, to $16.7 million from $16.3 million for the three months ended June 30, 2023. We experienced revenue growth of $3.3 million primarily due to the addition of new clients, which was offset by a $2.9 million decrease in revenue due to the ramp-down in our existing client engagements and the completion and closure of certain consulting projects.

Current wording

For the three months ended September 30, 2024, our revenue on a consolidated basis decreased by $0.7 million or 4%, to $16.9 million from $17.6 million for the three months ended September 30, 2023. We experienced revenue growth of $4.6 million primarily due to the addition of new clients and increase in business from existing clients, which was offset by a $5.4 million decrease in revenue due to the ramp-down in our existing client engagements and the completion and closure of certain consulting projects.

Previous wording

For the three months ended June 30, 2024, our cost of revenue increased by $0.8 million or 7%, to $12.7 million from $11.9 million for the three months ended June 30, 2023. The primary drivers of the increase included a $1.6 million increase in employee compensation and benefits, reflecting an expansion in client-serving headcount to support revenue growth. These cost increases were offset by a $0.9 million decrease in cost related to fees to external consultants.

Current wording

For the three months ended September 30, 2024, our cost of revenue increased by $0.6 million or 4%, to $13.3 million from $12.7 million for the three months ended September 30, 2023. The primary drivers of the increase included a $1.6 million increase in employee compensation and benefits, including bonuses and a $0.8 million increase in administrative cost, rent and legal & professional fees. These cost increases were offset by a $1.9 million decrease in cost related to fees to external consultants.

Previous wording

For the three months ended June 30, 2024, our gross profit decreased by $0.4 million or 10%, compared to the three months ended June 30, 2023. The lower gross profit was primarily due to flat revenue showing 0.3 million increase, against increase of $0.8 million in cost of revenue mainly due to the increased compensation costs and benefits offset by decrease in cost related to fees to external consultants.

Current wording

For the three months ended September 30, 2024, our gross profit decreased by $1.2 million or 26%, compared to the three months ended September 30, 2023. The lower gross profit was primarily due to decline in revenue showing 0.7 million decrease, against increase of $0.5 million in cost of revenue mainly due to the increased compensation costs and benefits offset by decrease in cost related to fees to external consultants.

Previous wording

For the three months ended June 30, 2024, our gross profit margin decreased by 300 basis points compared to the three months ended June 30, 2023. The decrease was primarily attributed to decrease in business from the project-based consulting business, which typically yield higher margins due to billing being based on fixed hourly rates.

Current wording

For the three months ended September 30, 2024, our gross profit margin decreased by 2,600 basis points compared to the three months ended September 30, 2023. The decrease was primarily attributed to decrease in business from the project-based consulting business, which typically yield higher margins due to billing being based on fixed hourly rates.

Previous wording

Income tax expense / (benefit) for the three months ended June 30, 2024, was $(1.1) million, a $1.3 million or 600% decrease compared to provision of income taxes of $0.2 million for the three months ended June 30, 2023. The decrease was primarily due to significant increase in recognition of deferred tax benefit on losses in certain subsidiaries having a lower jurisdictional tax rates along with a reduction in taxable income resulting in lower current tax.

Current wording

Income tax expense/ (benefit) for the three months ended September 30, 2024, was $(0.5) million, a $1.2 million or 177% decrease compared to provision of income taxes of $0.7 million for the three months ended September 30, 2023. The decrease was primarily due to significant increase in recognition of deferred tax benefit on losses in certain subsidiaries having a lower jurisdictional tax rates along with a reduction in taxable income resulting in lower current tax.

Previous wording

Selling, general and administrative expenses (“SG&A expenses”) increased by $16.8 million, or 457% to $20.4 million for the three months ended June 30, 2024, compared to $3.7 million for the three months ended June 30, 2023. This significant increase was primarily driven by a $11.4 million increase in stock-based compensation related expense, a $1.5 million increase in legal and professional charges related to the Business Combination, and a $1 million provision for expected credit loss on customer receivables. Additionally, employee compensation and benefits increased by $2.8 million due to the expansion of operations, which required increased hiring, resulting in increased personnel related costs, and travel expenses.

Current wording

Selling, general and administrative expenses increased by $21.0 million, or 301% to $28.1 million for the six months ended September 30, 2024, compared to $7.0 million for the six months ended September 30, 2023. This significant increase was primarily driven by a $11.4 million increase in stock-based compensation related expense, a $2.0 million increase in legal and professional charges related to the Business Combination, and a $3.6 million provisions for expected credit loss on customer receivables. Additionally, employee compensation and benefits increased by $3.2 million due to increased hiring, resulting in increased personnel related costs, and travel expenses.

Previous wording

Total other income / (expense), net was $0.01 million for the three months ended June 30, 2024 compared to total other expense, net of $(0.07) million for the three months ended June 30, 2023, a $0.08 and 118% change.

Current wording

Total other income / (expense), net was $1.3 million for the six months ended September 30, 2024 compared to total other expense, net of $0.05 million for the six months ended September 30, 2023, a $1.2 million and 2,218% change.

Previous wording

We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate the business. We use non-GAAP financial measures to budget, make operating and strategic decisions, and evaluate our performance. We have detailed the non-GAAP adjustments that we make in our non-GAAP definitions below. The adjustments generally fall within the categories of non-cash items, other than costs related to the Business Combination. We believe the non-GAAP measures presented herein should always be considered along with, and not as a substitute for or superior to, the related US GAAP financial measures. We have provided the reconciliations between the US GAAP and non-GAAP financial measures below, and we also discuss our underlying US GAAP results throughout the Management’s Discussion and Analysis of Financial Condition and Results of Operations section. The non-GAAP financial measures we present may differ from similarly captioned measures presented by other companies. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Current wording

We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate the business. We use non-GAAP financial measures to budget, make operating and strategic decisions, and evaluate our performance. We have detailed the non-GAAP adjustments that we make in our non-GAAP definitions below. The adjustments generally fall within the categories of non-cash items, other than costs related to the Business Combination and transaction related costs, which represent non-recurring legal, professional, personnel and other fees and expenses incurred in connection with potential mergers and acquisitions related activities. We believe the non-GAAP measures presented herein should always be considered along with, and not as a substitute for or superior to, the related US GAAP financial measures. We have provided the reconciliations between the US GAAP and non-GAAP financial measures below, and we also discuss our underlying US GAAP results throughout the Management’s Discussion and Analysis of Financial Condition and Results of Operations section. The non-GAAP financial measures we present may differ from similarly captioned measures presented by other companies. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Previous wording

We define Adjusted EBITDA as net income from operations before interest, income taxes, depreciation and amortization, further adjusted to exclude stock-based compensation, business combination-related costs, and changes in fair value of derivative liabilities. Adjusted EBITDA is a key performance indicator that we use to evaluate our operating performance and in making financial, operating, and planning decisions.

Current wording

We define Adjusted EBITDA as net income from operations before interest, income taxes, depreciation and amortization, further adjusted to exclude stock-based compensation, business combination-related costs, and changes in fair value of derivative liabilities.

Previous wording

We believe these non-GAAP measures are useful insight to investors by offering a clearer view of Aeries’ operating performance. This information is frequently utilized by securities analysts and other stakeholders as a measure of financial information and debt service capabilities, and it has been used by our management for internal reporting and planning procedures, including aspects of our consolidated operating budget and capital expenditures.

Current wording

Adjusted EBITDA and Core Adjusted EBITDA are key performance indicators that we use to evaluate our operating performance and in making financial, operating, and planning decisions. We believe these non-GAAP measures are useful insight to investors by offering a clearer view of Aeries’s operating performance. This information has been used by our management for internal reporting and planning procedures, including aspects of our consolidated operating budget and capital expenditures.

Previous wording

The following table provides a reconciliation from net income (US GAAP measure) to Adjusted EBITDA and Adjusted EBITDA margin (Non-GAAP measures) for the three months ended June 30, 2024, and 2023 (in thousands):

Current wording

The following table provides a reconciliation from net income (US GAAP measure) to Adjusted EBITDA, Core Adjusted EBITDA and Adjusted EBITDA margin for the three and six months ended September 30, 2024, and 2023 (in thousands):

Previous wording

Some of the limitations of adjusted EBITDA include: it does not reflect (i) our cash expenditures or future requirements for capital expenditures or contractual commitments or foreign exchange gain/loss; (ii) changes in, or cash requirements for, working capital; (iii) significant interest expense or the cash requirements necessary to service interest or principal payments on our outstanding debt; (iv) payments made or future requirements for income taxes; and (v) cash requirements for future replacement or payment in depreciated or amortized assets; (vi) stock based compensation costs, (vii) Business Combination and transaction related costs, which represent non-recurring legal, professional, personnel and other fees and expenses incurred in connection with potential mergers and acquisitions related activities for the three months ended June 30, 2024, and Business Combination related costs for the three months related June 30, 2023, and (viii) change in fair value of derivative liabilities.

Current wording

Some of the limitations of Adjusted EBITDA and Core Adjusted EBITDA include: each of these measures does not reflect (i) our cash expenditures or future requirements for capital expenditures or contractual commitments or foreign exchange gain/loss; (ii) changes in, or cash requirements for, working capital; (iii) significant interest expense or the cash requirements necessary to service interest or principal payments on our outstanding debt; (iv) payments made or future requirements for income taxes; and (v) cash requirements for future replacement or payment in depreciated or amortized assets; (vi) stock based compensation costs, (vii) Business Combination and transaction related costs, which represent non-recurring legal, professional, personnel and other fees and expenses incurred in connection with potential mergers and acquisitions related activities for the three and six months ended September 30, 2024, and Business Combination related costs for the three and six months related September 30, 2023, (viii) change in fair value of derivative liabilities. Additionally, the Core Adjusted EBITDA does not reflect the provision for expected credit loss / (profit) from non-core business.

Previous wording

The accompanying condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. For the three months ended June 30, 2024, the Company has reported a net loss of $15.3 million. This may raise substantial doubt regarding the Company’s ability to continue as a going concern for at least 12 months from the date when these financial statements are available to be filed with the SEC.

Current wording

The accompanying condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. However, certain conditions as listed below raise substantial doubt about the Company’s ability to continue as a going concern for this period:

Previous wording

The Company has historically financed its operations and expansions with cash generated from operations, the revolving credit facility from Kotak Mahindra Bank, and loans from related parties. As of June 30, 2024, the Company had $4.2 million in cash and cash equivalents, and the Company also generated overall positive cash flows totalling $2.1 million for the three months ended June 30, 2024. Management expects to have sufficient cash from the operations, cash reserves and debt capacity for the next 12 months and for the foreseeable future to finance our operations, our growth and expansion plans. In addition, we may attempt to raise additional funds through public or private debt or equity financing. In April 2024, we received net proceeds of $4.68 million by selling 2,261,778 newly issued Class A ordinary shares in a private placement at a purchase price of $2.21 per share. Also, we are in ongoing negotiations with relevant parties to potentially restructure the current liabilities into equity or long-term liabilities. The Company is hopeful of accomplishing its objectives through these measures in the anticipated time frame and also expects that the funds available through the above-mentioned arrangements will be sufficient to alleviate the doubts about the Company’s ability to continue as a going concern. However, there is no guarantee that these measures will achieve the desired objectives, and these is no assurance that we may raise additional financing on terms acceptable to us or at all.

Current wording

The Company’s ability to continue as a going concern is dependent upon, among other things, successfully executing its mitigation plan, which includes (i) raising additional funds from existing or new credit facilities, (ii) raising equity or equity linked capital, (iii) restructuring current liabilities into equity or long-term obligations, and (iv) further reducing non-core expenses with a renewed focus on organic growth in the core geography we historically operate in, which is North America. The Company is hopeful of accomplishing its objectives through these measures in the anticipated time frame and also expects that the funds available through the above-mentioned arrangements will be sufficient to alleviate the doubts about the Company’s ability to continue as a going concern. However, there is no guarantee of the success of these efforts.

Previous wording

Cash Flow for the Three Months ended June 30, 2024, and 2023

Current wording

Cash Flow for the Six Months ended September 30, 2024 and 2023

Previous wording

The following table presents net cash provided by operating activities, investing activities and financing activities for the three months ended June 30, 2024, and 2023 (in thousands):

Current wording

The following table presents net cash provided by operating activities, investing activities and financing activities for the Six months ended September 30, 2024, and 2023 (in thousands):

Previous wording

Analysis of Cash Flow Changes between the three months ended June 30, 2024, and 2023

Current wording

Analysis of Cash Flow Changes between the six months ended September 30, 2024 and 2023

Previous wording

Operating Activities - The decrease of $1.8 million in net cash used in operating activities for the three months ended June 30, 2024 was primarily due to decrease in net income by $15.8 million as a result of higher cost of revenue and selling, general and administrative expenses; partially offset by increase in adjustment by $11.1 million mainly pertaining to stock-based compensation, and increase due to better working capital management by $2.9 million.

Current wording

Operating Activities - The $0.2 million net cash provided by operating activities for the six months ended September 30, 2024 was primarily due to a net loss (adjusted with non-cash adjustments) of $3.6 million as a result of higher cost of revenue and selling, general and administrative expenses; partially offset by a $3.8 million increase in cash flow from better working capital management.

Previous wording

Investing Activities - Net cash used in investing activities during the three months ended June 30, 2024 was $0.6 million, of which $0.4 million was used for the purchase of property and equipment and $0.3 million was used for the issuance of loans to affiliates, offset by $0.04 million generated from loan repayments received from affiliates.

Current wording

Investing Activities - Net cash used in investing activities during the six months ended September 30, 2024 was $0.9 million, of which $0.9 million was used for the purchase of property and equipment and $0.8 million was used for the issuance of loans to affiliates, offset by $0.8 million generated from loan repayments received from affiliates.

Previous wording

Net cash used in investing activities during the three months ended June 30, 2023 was $0.6 million, of which $0.3 million was used for the purchase of property and equipment and $0.7 million was used for the issuance of loans to affiliates, offset by $0.4 million generated from loan repayments received from affiliates.

Current wording

Net cash used in investing activities during the six months ended September 30, 2023 was $0.8 million, of which $0.7 million was used for the purchase of property and equipment and $0.7 million was used for the issuance of loans to affiliates, offset by $0.7 million generated from loan repayments received from affiliates.

Previous wording

Financing Activities - Net cash provided by financing activities during the three months ended June 30, 2024 was $4.4 million, primarily from proceeds of the PIPE transaction of $4.7 million, and proceeds from long-term debt of $0.2 million; offset by the repayment of short-term debt of $0.2 million, payment of insurance financing liability of $0.2 million and payment of finance lease obligation of $0.1 million.

Current wording

Financing Activities - Net cash provided by financing activities during the six months ended September 30, 2024 was $2.3 million, primarily from proceeds of the PIPE transaction of $4.7 million, and proceeds from long-term debt of $0.9 million; offset by the repayment of short-term debt of $1.9 million, payment of insurance financing liability of $0.4 million and payment of finance lease obligation of $0.2 million.

Previous wording

Net cash provided by financing activities during the three months ended June 30, 2023, was $1 million, primarily due to net proceeds from short-term borrowings of $1.2 million, proceeds from long-term debt of $0.5 million; partially offset by payment of deferred transaction costs of $0.4 million and payment of finance lease obligations and long-term debt of $0.3 million.

Current wording

Net cash provided by financing activities during the six months ended September 30, 2023 was $0.2 million, primarily due to net proceeds from short-term borrowings of $1.2 million, proceeds from long-term debt of $0.5 million; partially offset by payment of deferred transaction costs of $1.4 million and payment of finance lease obligations and long-term debt of $0.2 million.