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Chidambaran","extra_info":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/parties/14663205/","id":14663205,"attorneys":[{"attorney":"https://www.courtlistener.com/api/rest/v4/attorneys/11836968/","attorney_id":11836968,"date_action":null,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","docket_id":69233925,"role":2},{"attorney":"https://www.courtlistener.com/api/rest/v4/attorneys/11836968/","attorney_id":11836968,"date_action":null,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","docket_id":69233925,"role":1}],"party_types":[{"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","docket_id":69233925,"name":"Defendant","date_terminated":"2024-12-27","extra_info":"TERMINATED: 12/27/2024","highest_offense_level_opening":"","highest_offense_level_terminated":"","criminal_counts":[],"criminal_complaints":[]}],"date_created":"2024-10-07T19:24:41.166772-07:00","date_modified":"2024-10-07T19:24:41.166780-07:00","name":"iLearningEngines, Inc.","extra_info":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/parties/14663204/","id":14663204,"attorneys":[{"attorney":"https://www.courtlistener.com/api/rest/v4/attorneys/9869474/","attorney_id":9869474,"date_action":null,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","docket_id":69233925,"role":2},{"attorney":"https://www.courtlistener.com/api/rest/v4/attorneys/9869474/","attorney_id":9869474,"date_action":null,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","docket_id":69233925,"role":1}],"party_types":[{"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","docket_id":69233925,"name":"Plaintiff","date_terminated":null,"extra_info":"Individually and on Behalf of All Others Similarly Situated","highest_offense_level_opening":"","highest_offense_level_terminated":"","criminal_counts":[],"criminal_complaints":[]}],"date_created":"2024-10-07T19:24:41.142275-07:00","date_modified":"2024-10-07T19:24:41.142282-07:00","name":"Danny Walker","extra_info":""}],"entries":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/458068807/","id":458068807,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/473063484/","id":473063484,"tags":[],"absolute_url":"/docket/69233925/108/walker-v-chidambaran/","date_created":"2026-03-20T23:36:52.405381-07:00","date_modified":"2026-05-22T06:41:52.663069-07:00","sha1":"e121709115fdaa0850e556fa711665ad032cb384","page_count":2,"file_size":18434,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.108.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.108.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 108 Filed 03/20/26 Page 1 of 2\n\n\n\n IN THE UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n\nLOUIS LEVEQUE, individually and :\non behalf of all others\nsimilarly situated :\n\n v. : Civil Action No. DKC 24-2900\n\n :\nILEARNINGENGINES, INC., et al.\n :\n\n ORDER\n\n For the reasons stated in the foregoing Memorandum Opinion,\n\nit is this 20th day of March, 2026, by the United States District\n\nCourt for the District of Maryland, ORDERED that:\n\n 1. The motions to dismiss filed by Marcum LLP (ECF No. 80),\n\nThomas Olivier (ECF No. 82), Harish Chidambaran (ECF No. 83),\n\nSayyed Farhan Naqvi (ECF No. 84), Matthew Barger, Ian Davis, Bruce\n\nMehlman, and Michael Moe (ECF No. 85) BE, and the same hereby ARE,\n\nGRANTED; and\n\n 2. The amended complaint filed by Louis Leveque and Iqbal\n\nAl Hamid (ECF No. 41) BE, and the same hereby IS, DISMISSED WITH\n\nPREJUDICE;\n\n 3. The motion to partially lift the discovery stay filed by\n\nLouis Leveque and Iqbal Al Hamid (ECF No. 93) BE, and the same\n\nhereby IS, DENIED;\n\f Case 8:24-cv-02900-DKC Document 108 Filed 03/20/26 Page 2 of 2\n\n\n\n 4. The clerk will transmit copies of the Memorandum Opinion\n\nand this Order to counsel for the parties and CLOSE this case.\n\n\n\n /s/\n DEBORAH K. CHASANOW\n United States District Judge\n\n\n\n\n 2\n\f","ocr_status":1,"date_upload":"2026-05-19T01:22:04.428754-07:00","document_number":"108","attachment_number":null,"pacer_doc_id":"093015611775","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2026-03-20T23:36:52.297489-07:00","date_modified":"2026-05-18T23:59:56.312495-07:00","date_filed":"2026-03-20","time_filed":null,"entry_number":108,"recap_sequence_number":"2026-03-20.002","pacer_sequence_number":316,"description":"ORDER GRANTING 80, 82, 83, 84, and 85 motions to dismiss, DISMISSING with prejudice 41 amended complaint, DENYING 93 motion to partially lift the discovery stay, and DIRECTING the Clerk to CLOSE this case. Signed by Judge Deborah K. Chasanow on 3/20/2026. (sat, Chambers) (Entered: 03/20/2026)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/458068806/","id":458068806,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/473063483/","id":473063483,"tags":[],"absolute_url":"/docket/69233925/107/walker-v-chidambaran/","date_created":"2026-03-20T23:36:52.172416-07:00","date_modified":"2026-06-10T04:11:10.831463-07:00","sha1":"2df9ede0abfd793dcb49127d3e46b5837757ba53","page_count":70,"file_size":155863,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.107.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.107.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 1 of 70\n\n\n\n IN THE UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n\nLOUIS LEVEQUE, individually and :\non behalf of all others\nsimilarly situated :\n\n v. : Civil Action No. DKC 24-2900\n\n :\nILEARNINGENGINES, INC., et al.\n :\n\n MEMORANDUM OPINION\n\n Presently pending and ready for resolution in this putative\n\nsecurities class action are five motions to dismiss for failure to\n\nstate a claim filed by Defendants Marcum LLP, (ECF No. 80); Thomas\n\nOlivier, (ECF No. 82); Harish Chidambaran, (ECF No. 83); Sayyed\n\nFarhan Naqvi, (ECF No. 84); and Matthew Barger, Ian Davis, Bruce\n\nMehlman, and Michael Moe, (ECF No. 85); as well as the motion to\n\npartially lift the discovery stay filed by Louis Leveque and Iqbal\n\nAl Hamid (collectively, \u201cPlaintiffs\u201d), (ECF No. 93). The issues\n\nhave been briefed, and the court now rules, no hearing being deemed\n\nnecessary. Local Rule 105.6. For the following reasons, the five\n\nmotions to dismiss will be granted and the motion to partially\n\nlift the discovery stay will be denied.\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 2 of 70\n\n\n\nI. Background\n\n A. Factual Background 1\n\n 1. iLearningEngines\u2019 Origin\n\n Mr. Chidambaran founded a company named iHealthEngines in\n\n2010, before changing its name to iLearningEngines (\u201ciLE\u201d) in 2018.\n\n(ECF No. 41 \u00b6\u00b6 54\u201355). Through at least 2018, iLE described itself\n\nas a \u201cLearning as a Service platform\u201d for the healthcare industry.\n\n(Id. \u00b6\u00b6 56\u201359). In August 2020, iLE began describing itself as an\n\n\u201c[Artificial Intelligence (\u201cAI\u201d)] Powered Learning Platform.\u201d\n\n(Id. \u00b6 60). It explained that its platform has three main\n\ncomponents: (1) \u201cKnowledge Clouds,\u201d which consist of \u201cdata\n\nretrieved from both internal institutional data and external\n\nsources\u201d such as Salesforce and Microsoft Teams; (2) its \u201cOut-of-\n\nthe-Box AI Engine\u201d and associated proprietary AI algorithms\n\ntrained on the data sets; and (3) its \u201cno-Code Work Flow and AI\n\nCanvas,\u201d which \u201cintegrate[s] an organization[\u2019s] systems using AI\n\n. . . to optimize the organization\u2019s workflows, including by\n\ncreating chat bots with subject matter expertise and \u2018providing\n\nsmart decision making\u2019 that will \u2018unlock\u2019 a company\u2019s\n\ninstitutional knowledge.\u201d (Id. \u00b6 63). More specifically, iLE\n\n\n 1The facts herein are as alleged in the overly long, at times\nredundant, amended complaint or drawn from documents integral to\nthe complaint. Counsel did not seek leave to file a pleading\nexceeding the permitted length of 40 pages (by an extra 200 pages),\nin violation of Local Rule 103.1.d.\n 2\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 3 of 70\n\n\n\n\u201coffers two solutions to enterprises: Learning Automation and\n\nInformation Intelligence.\u201d (Id. \u00b6 65). Its Learning Automation\n\nsolution uses AI \u201cto create real time learning solutions to assist\n\nin developing an organization\u2019s personnel through\u201d learning\n\nmodules, whereas its Information Intelligence solution \u201cuse[s] its\n\nAI Assistant to integrate enterprise systems\u201d to assist with\n\ncompany decision-making and cost savings. (Id.).\n\n Mr. Chidambaran served as President and Chief Executive\n\nOfficer (\u201cCEO\u201d) of iLE during the time it was private. (Id. \u00b6\n\n31). Balakrishnan Arackal joined the company in 2014 as Chief\n\nBusiness Officer (\u201cCBO\u201d), (Id. \u00b6 34), and Mr. Naqvi joined as Chief\n\nFinancial Officer (\u201cCFO\u201d) in 2019, (Id. \u00b6 32).\n\n 2. iLE Goes Public\n\n Arrowroot Acquisitions, Inc. (\u201cArrowroot\u201d) was formed in 2020\n\nas a special purpose acquisition company (\u201cSPAC\u201d), meaning it was\n\na shell company with the express purpose of merging with another\n\ncompany or effecting some other form of business combination. (Id.\n\n\u00b6 68). Arrowroot held an initial public offering (\u201cIPO\u201d) in March\n\n2021, which raised $287.5 million. (Id. \u00b6 69). In 2022, Arrowroot\n\nidentified iLE as its target. (Id. \u00b6 71). In January 2023,\n\nArrowroot\u2019s Board discussed a proposed valuation of iLE of $1.28\n\nbillion. (Id. \u00b6 73). In May 2023, Arrowroot and iLE jointly\n\nannounced the execution of a reverse merger agreement, upon the\n\n 3\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 4 of 70\n\n\n\nclosing of which the combined entity would retain the iLE name and\n\ncontinue to be headed by Mr. Chidambaran. (Id. \u00b6\u00b6 67, 77). The\n\nmerger would take iLE public on the NASDAQ stock exchange. (Id.\n\n\u00b6 76). According to its later public filings, iLE tallied revenue\n\nof \u201c$217.9 million, $309.2 million, and $420.6 million, for fiscal\n\nyears 2021, 2022 and 2023, respectively.\u201d (Id. \u00b6 66). In March\n\n2024, though, just prior to the closing of the merger, iLE \u201cwas in\n\na dire financial state, reporting just $800,000 in cash, $22\n\nmillion in debt, and an accumulated deficit of $47.1 million.\u201d\n\n(Id. \u00b6 67).\n\n On April 17, 2024, the merger closed and iLE went public.\n\n(Id. \u00b6 79). Mr. Chidambaran remained CEO, Mr. Naqvi remained CFO,\n\nMr. Arackal remained CBO and took on the role of President, and\n\nthe following individuals were appointed to the Board: Mr. Barger,\n\nMr. Davis, Mr. Mehlman, Mr. Moe, and Mr. Olivier. (Id. \u00b6\u00b6 31\u201339).\n\nAt the time of closing, Arrowroot\u2019s funds had declined from $287.5\n\nmillion to $5.9 million, because \u201cmost [Arrowroot] stockholders\n\nelect[ed] to redeem their shares for cash instead of becoming\n\ninvestors in [iLE].\u201d (Id. \u00b6 79). Upon closing, iLE received\n\naround $52.7 million in gross proceeds. (Id. \u00b6 80). After going\n\npublic, iLE had 134,313,494 shares of common stock outstanding,\n\n(Id. \u00b6 46), of which roughly 76.9% were subject to a one-year lock-\n\nup provision, (Id. \u00b6\u00b6 417, 419).\n\n 4\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 5 of 70\n\n\n\n 3. iLE\u2019s Registration Statements\n\n Once it went public, iLE decided to register several tranches\n\nof shares with the Securities & Exchange Commission (\u201cSEC\u201d). (Id.\n\n\u00b6\u00b6 9\u201310). Effective June 21, 2024, iLE registered up to 16,208,318\n\nshares pursuant to a Form S-8 Registration Statement (\u201cS-8\n\nRegistration Statement\u201d). (Id. \u00b6\u00b6 137, 139, 142). Those shares\n\nwere issued or issuable to employees pursuant to various employee\n\nequity incentive and stock purchase plans. (Id. \u00b6\u00b6 137, 139).\n\nEffective August 9, 2024, iLE registered up to an additional\n\n100,774,669 shares of iLE common stock pursuant to a Form S-1\n\nRegistration Statement (\u201cS-1 Registration Statement\u201d). (Id. \u00b6\u00b6\n\n247, 250). These shares were either issued or issuable to a\n\nvariety of parties. (Id. \u00b6 248). The S-1 Registration Statement\n\nadditionally registered over 22 million shares issuable upon\n\nexercise of iLE warrants. (Id. \u00b6 247). Both Registration\n\nStatements were signed by Mr. Chidambaran, Mr. Naqvi, Mr. Arackal,\n\nMr. Olivier, Mr. Barger, Mr. Davis, Mr. Mehlman, and Mr. Moe. (Id.\n\n\u00b6\u00b6 138, 250). Incorporated into both Registration Statements were\n\niLE\u2019s financial statements for 2021, 2022, and 2023, (see id. \u00b6\u00b6\n\n134, 140, 145), as well as iLE\u2019s independent accounting firm\n\nMarcum\u2019s April 22, 2024, audit report that these financial\n\nstatements presented the financial position of iLE \u201cfairly, in all\n\n\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 6 of 70\n\n\n\nmaterial respects, . . . in conformity with\u201d generally accepted\n\naccounting principles (\u201cGAAP\u201d), (id. \u00b6\u00b6 141, 146, 246).\n\n The content of those financial statements is central to this\n\ncase. As previously mentioned, iLE reported therein that it had\n\nearned \u201crevenue of $217.9 million, $309.2 million, and $420.6\n\nmillion, for fiscal years 2021, 2022 and 2023, respectively.\u201d (Id.\n\n\u00b6 66). It further reported that \u201cmost of the revenue and sales\n\ncomes from [iLE\u2019s] partner relationships . . . with a \u2018Technology\n\nPartner\u2019 and value added resellers.\u201d (Id. \u00b6 82). iLE never stated\n\nthe identity of the Technology Partner in its public filings. (Id.\n\n\u00b6 96).\n\n Plaintiffs focus on the Technology Partner, by far the largest\n\npartner relationship iLE manages. iLE management explained that\n\niLE \u201center[s] contracts with the Technology Partner through which\n\nthe Technology Partner purchases and integrates [iLE\u2019s] platform\n\ninto the Technology Partner\u2019s own software solution provided to\n\none of the Technology Partner\u2019s customers.\u201d (Id. \u00b6 90 (emphasis\n\nomitted)). Furthermore, iLE \u201chas outsourced [implementation]\n\nservices to its . . . Technology Partner . . . who has been trained\n\nto provide the implementation services.\u201d (Id. (emphasis\n\nomitted)). Accordingly, iLE treats the Technology Partner as \u201ca\n\ncustomer in some arrangements and a vendor in other arrangements.\u201d\n\n(Id. \u00b6 92). iLE had entered into a Master Agreement with the\n\n 6\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 7 of 70\n\n\n\nTechnology Partner in 2019 and renewed that contract for another\n\nten years in 2024. (Id. \u00b6\u00b6 97, 157). That agreement \u201cprovide[d]\n\nfor the quarterly netting of amounts collected by the Technology\n\nPartner from end-users[] against the cost of the Technology\n\nPartner\u2019s services rendered and billable to [iLE].\u201d (Id. \u00b6\u00b6 97,\n\n157). iLE clarified in the S-1 Registration Statement that it\n\n\u201cdetermined the services it received from the Technology Partner\n\nwere distinct and the consideration paid to the Technology Partner\n\nwas equivalent to an arms-length transaction. As a result, no\n\ncosts incurred by [iLE] related to services provided by the\n\nTechnology Partner have been netted against revenues earned from\n\nthe Technology Partner.\u201d (Id. \u00b6 92).\n\n iLE did not describe the Technology Partner as a related party\n\nin its SEC filings. (Id. \u00b6 12). Prior to the closing of the\n\nmerger, the SEC inquired as to \u201cwhether the Technology Partner is\n\na related party.\u201d (Id. \u00b6 402). In response, iLE represented that\n\n\u201cthe Technology Partner is not a related party and they do not\n\nhold any financial interest in [iLE].\u201d (Id. \u00b6 403).\n\n 4. Mr. Leveque and Mr. Al Hamid Purchase Shares\n\n On July 25, 2024, just over a month after the S-8 Registration\n\nStatement and several weeks before the S-1 Registration Statement,\n\nMr. Leveque purchased 5,000 shares of iLE common stock. (Id. \u00b6\n\n423). Starting eleven days after the August 9 S-1 Registration\n\n 7\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 8 of 70\n\n\n\nStatement, Mr. Al Hamid made a series of purchases of iLE common\n\nstock: 500 shares on August 20, 500 shares on August 23, 1,000\n\nshares on August 27, 1,000 shares on August 30, and 1,500 shares\n\non September 16. (ECF Nos. 41-1, at 3; 41 \u00b6 424). The final two\n\npurchases occurred after an August 29 short-seller report\n\ndescribed below and were followed nearly immediately by sales of\n\nthe same number of shares. (ECF No. 41-1, at 3).\n\n 5. The Hindenburg Report\n\n On August 29, 2024, the short-seller firm Hindenburg Research\n\npublished an investigative research report about iLE titled \u201cAn\n\nArtificial Intelligence SPAC With Artificial Partners And\n\nArtificial Revenue\u201d (the \u201cHindenburg Report\u201d or \u201cReport\u201d). 2 (ECF\n\nNo. 41 \u00b6 159). The Report identified the Technology Partner as\n\nExperion Technologies, FZ LLC (\u201cExperion\u201d). (Id. \u00b6 167). Its\n\nauthors made two principal claims: Experion was an undisclosed\n\nrelated party, and \u201cthe vast majority of [iLE\u2019s] revenue is fake.\u201d\n\n(Id. \u00b6 159). The Report stated that \u201call information contained\n\n[t]herein . . . ha[d] been obtained from public sources\u201d and it\n\n\u201cma[de] no representation, express or implied, as to the accuracy,\n\n\n\n\n 2 Mr. Barger notified iLE of his intention to resign as iLE\ndirector on August 28, the day before the release of the Hindenburg\nReport. (ECF No. 41 \u00b6 184). His resignation was effective August\n29, the day of the Report\u2019s release. (Id.).\n 8\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 9 of 70\n\n\n\ntimeliness, or completeness of any such information.\u201d (ECF No.\n\n83-2, at 24). 3\n\n Regarding its contention that Experion was an undisclosed\n\nrelated party, the Hindenburg Report provided the following\n\nevidence:\n\n (i) [Mr.] Chidambaran was listed as the\n American contact for [the] \u201cTechnology\n Partner\u201d on Experion\u2019s website and listed his\n personal residence as the location of\n \u201cExperion Americas\u201d; (ii) per Indian corporate\n records and LinkedIn, iLearningEngines\u2019\n Senior Project Manager, Tom Thomas and AVP of\n Sales & Business Development Director, Ratish\n Nair, were directors and shareholders of\n Experion\u2019s India affiliate, Experion\n Technologies, FZ LLC [sic, should be Experion\n Infosystems]; (iii) Experion India and\n Experion [Middle East & Africa (\u201cMEA\u201d)] are\n partially owned by Jojo Philip, the brother of\n iLearningEngines\u2019 Senior Director Channel\n Partnerships, Cherian K. Philip; and (iv)\n Experion MEA was headed and partially owned by\n iLearningEngines\u2019 President and Chief\n Business Officer, Arackal, and\n iLearningEngines\u2019 AVP of Sales & Business\n Development, Ratish Nair.\n\n(ECF No. 41 \u00b6 169). More specifically, Mr. Chidambaran\u2019s listing\n\nas the contact person for Experion Americas is from February 2020.\n\n(Id. \u00b6\u00b6 113\u201314). The listing of Tom Thomas and Ratish Nair as\n\n\n\n 3 The court may consider the Hindenburg Report on a motion to\ndismiss because Plaintiffs do not dispute its authenticity, and it\nis integral to the complaint. See Faulkenberry v. U.S. Dep\u2019t of\nDef., 670 F.Supp.3d 234, 249 (D.Md. 2023) (quoting Reamer v. State\nAuto. Mut. Ins. Co., 556 F.Supp.3d 544, 549 (D.Md. 2021), aff\u2019d,\nNo. 21-2432, 2022 WL 17985700 (4th Cir. Dec. 29, 2022)).\n 9\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 10 of 70\n\n\n\ndirectors of an Experion India affiliate is from March 2023. (Id.\n\n\u00b6 119). Mr. Nair was also listed as the contact person for Experion\n\nMEA and a shareholder of Experion MEA. (Id. \u00b6\u00b6 123, 125, 126).\n\nBoth Mr. Thomas and Mr. Nair were senior employees at iLE while\n\nthey held their positions at Experion. (Id. \u00b6 121). 2024 Indian\n\ncorporate records reflect that Jojo Philip at that time owned a\n\n35% stake in Experion India, and records from a corporate\n\nintelligence firm around the same time show that he had a 45% stake\n\nin Experion MEA. (Id. \u00b6\u00b6 131\u201332). Cherian Philip was a senior\n\nemployee of iLE at the time. (Id. \u00b6 129). Indian court orders\n\nshow that Jojo Philip is the brother of Cherian Philip. (Id. \u00b6\n\n130). As for Mr. Arackal, public records reveal that he is a\n\nshareholder of Experion MEA and was a director of Experion India\n\nfrom 2017\u20132022, an Experion MEA Advisory Board member in 2019, and\n\nCEO of Experion MEA in 2015. (Id. \u00b6\u00b6 126\u201328). He was a senior\n\nemployee of iLE during that period. (Id. \u00b6 34). The Report\n\nauthors and Plaintiffs point to this web of connections as proof\n\nthat Experion was a related party of iLE. (Id. \u00b6 168). They also\n\nnote a \u201cpeculiar aspect of the Master Agreement\u201d with Experion:\n\niLE did not need to repay the nearly $50 million outstanding\n\nbalance it owed to Experion until \u201c10 years after the Master\n\nAgreement was terminated.\u201d (Id. \u00b6\u00b6 165\u201366). Such an arrangement,\n\nthey contend, makes \u201cno rational business sense\u201d and \u201crais[es]\n\n 10\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 11 of 70\n\n\n\nquestions of whether [there] is an arms-length relationship.\u201d (Id.\n\n\u00b6 166).\n\n Regarding its claim that iLE\u2019s revenues were largely fake,\n\nthe Hindenburg Report emphasized the considerable revenues,\n\nminimal net income, and the netting arrangement. In 2023, iLE\n\nearned $389.4 million of its $420.6 million total revenue from\n\nand/or through the Technology Partner, and incurred $388.2 million\n\nin costs to the Technology Partner, for a net income from the\n\nTechnology Partner of $1.2 million, which the Report authors\n\nbelieved would be paid toward the large outstanding balance iLE\n\nowed to Experion. (Id. \u00b6\u00b6 164\u201365). For the quarter ending March\n\n31, 2024, the Technology Partner collected 90% of iLE\u2019s revenue\n\nand invoiced 94.62% of iLE\u2019s costs associated with that revenue.\n\n(Id. \u00b6 94). Likewise, through the second quarter of 2024, iLE\n\nreported $238,961,000 in revenue and $237,553,000 in costs from\n\nthe Technology Partner, for a net income of roughly $1.4 million.\n\n(Id. \u00b6 157). The Report authors described the hypothesized scheme\n\nas follows: By \u201cclaiming that virtually all business takes place\n\nthrough Experion, [iLE] can put a layer between it and the suspect\n\ntransactions in an offshore, opaque jurisdiction,\u201d and the\n\n\u201cunusual circular structure makes it easy to inflate both revenue\n\nand cost figures while only netting out a minimal difference.\u201d\n\n(Id. \u00b6 177).\n\n 11\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 12 of 70\n\n\n\n The Report authors buttressed their fake-revenue theory with\n\nseveral additional allegations. They asserted that iLE\u2019s revenue\n\nin India was 99.4% lower than claimed based on a review of its\n\nIndian subsidiary\u2019s records, (Id. \u00b6 170), and that when they\n\nvisited iLE\u2019s Indian location, they \u201cfound no signage to indicate\n\n[iLE] had any presence in the building,\u201d (Id. \u00b6 171). They noted\n\nanother \u201ccircular\u201d deal generating $50 million in annual revenue\n\nand $30 million in annual costs, which was \u201chighly suspicious\u201d and\n\npurportedly indicative of the revenue and expenses being \u201clargely\n\nfake.\u201d (Id. \u00b6 172). Next, they questioned iLE\u2019s $722,000\n\nacquisition of In2vate, which had only $60,000 in accounts\n\nreceivable, and its supposed contribution of more than two million\n\nof iLE\u2019s 4.9 million total users. (Id. \u00b6 173). Running their own\n\nmath, the Report authors argued that those two million users did\n\n\u201cnot add up to [a] significant portion of [iLE\u2019s] revenue.\u201d (Id.\n\n\u00b6 174). Finally, they investigated iLE\u2019s \u201cKey Customer in India,\u201d\n\nVedhik Schools, which reported only $649,000 in revenue in 2023\n\nand thus was \u201cunlikely to be a major source of revenue.\u201d (Id. \u00b6\n\n176). Plaintiffs included Mr. Chidambaran\u2019s rebuttal of these\n\nallegations in the amended complaint, (Id. \u00b6 515), and they neither\n\ndiscuss nor rely on these allegations in their motion papers.\n\n They contended that the fake-revenue scheme could persist\n\nbecause iLE\u2019s accountant, Marcum, failed \u201cto uphold basic auditing\n\n 12\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 13 of 70\n\n\n\nstandards,\u201d as evidenced by the $13 million in total fines it\n\nreceived from the Public Company Accounting Oversight Board\n\n(\u201cPCAOB\u201d) and the SEC in 2023 for \u201cwidespread audit deficiencies\n\nin connection with SPAC audits.\u201d (Id. \u00b6 178).\n\n The market reaction to the Hindenburg Report was swift. The\n\nday it was released, iLE\u2019s stock price fell 53.3%. (Id. \u00b6 179).\n\nThe media outlets Fortune, Bloomberg, and Reuters all published\n\narticles about the Report and the stock price decline. (Id. \u00b6\u00b6\n\n180\u201382, 185).\n\n 6. iLE\u2019s Response\n\n iLE issued an immediate response on August 29, 2024,\n\ndenouncing the report as a scheme to profit at the expense of iLE\u2019s\n\ninvestors, declaring that it \u201ccontain[ed] misleading statements,\n\nspeculations and innuendos,\u201d and announcing that it would respond\n\nfurther in the days ahead. (Id. \u00b6 183). On September 5, 2024,\n\niLE issued a press release and Form 8-K announcing that the Board\n\nhad formed a special committee (\u201cSpecial Committee\u201d) to\n\ninvestigate the Hindenburg Report\u2019s allegations. (Id. \u00b6 186).\n\nThey explained that an investigation was \u201cin the best interest of\n\nshareholders\u201d even though iLE\u2019s \u201cindependent auditors conduct[ed]\n\nperiodic audits in accordance with PCAOB standards and ha[d] issued\n\nclean audit opinions.\u201d (Id.). In the press release, Mr.\n\nChidambaran asserted that iLE \u201chas real products, contracts, and\n\n 13\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 14 of 70\n\n\n\nrevenue\u201d and reaffirmed that the Hindenburg Report contained\n\n\u201cmisleading statements, speculations and innuendoes.\u201d (Id. \u00b6\n\n187).\n\n On September 10, 2024, iLE issued another press release titled\n\n\u201ciLearningEngines CEO Sets the Record Straight,\u201d in which Mr.\n\nChidambaran stated the need to \u201ccorrect the egregious\n\nmisstatements\u201d in the Hindenburg Report and directed readers to a\n\nlonger rebuttal posted to the iLE website. (Id. \u00b6\u00b6 188\u201389).\n\nPlaintiffs allege that Mr. Chidambaran did not address all of the\n\nHindenburg Report\u2019s claims. (Id. \u00b6 189). Instead, he appeared to\n\nacknowledge that Experion was the Technology Partner, (Id. \u00b6 190),\n\nalthough he simultaneously announced that as of September 10, 2024,\n\n\u201ca majority of iLE revenue comes from partnerships outside of\n\nExperion,\u201d (Id. \u00b6 191). As for the Hindenburg Report\u2019s related-\n\nparty allegations, Mr. Chidambaran responded that \u201c[t]here is no\n\nmutual ownership between [iLE] and Experion.\u201d (Id. \u00b6 192 (first\n\nalteration in original)). Plaintiffs allege that Mr.\n\nChidambaran\u2019s lack of response to the \u201cclaims that [iLE] senior\n\nemployees and/or their family were directors, shareholders, or\n\nowners in Experion is a tacit admission that they were true.\u201d\n\n(Id.). Lastly, Mr. Chidambaran responded to the fake-revenue\n\nclaims by pointing to the fact that iLE\u2019s financials had withstood\n\nscrutiny from independent auditors and lenders. (Id. \u00b6 193). That\n\n 14\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 15 of 70\n\n\n\nsame day, an analyst from the Benchmark Company published a report\n\ndeeming Mr. Chidambaran\u2019s rebuttal to be credible and dismissing\n\nthe Hindenburg Report\u2019s allegations. (Id. \u00b6\u00b6 194\u201395). Plaintiffs\n\nallege that the Benchmark report is not credible on the ground\n\nthat the analyst could not have had enough time to verify the\n\naccuracy of the rebuttal. (Id. \u00b6 195).\n\n A series of further press releases followed. On November 18,\n\n2024, iLE announced that its financial statements since 2020 should\n\n\u201cno longer be relied upon,\u201d Marcum had withdrawn its prior\n\nopinions, iLE had received a subpoena from the SEC, and Mr. Naqvi\n\nhad been placed on administrative leave from his role as CFO and\n\ngiven the new title of Senior Vice President. (Id. \u00b6 196). iLE\u2019s\n\nshare price fell 27%. (Id. \u00b6 202). On December 10, 2024, iLE\n\ninformed the market that Mr. Chidambaran, Mr. Naqvi, Mr. Arackal,\n\nand two iLE Vice Presidents, Ramakrishnan Parameswaran Arackal 4\n\nand Vivek Chary, had been placed on administrative leave and Mr.\n\nOlivier had been appointed interim CEO. (Id. \u00b6 205). iLE\u2019s share\n\nprice fell 14.2%. (Id. \u00b6 207). On December 23, 2024, iLE reported\n\nthat it had filed for Chapter 11 bankruptcy. 5 (Id. \u00b6 208). Its\n\n\n\n 4\n Ramakrishnan Arackal is not a defendant in this action. All\nreferences to \u201cMr. Arackal\u201d are to Balakrishnan Arackal.\n\n 5 iLE\u2019s affiliates\u2014iLearningEngines Holdings,\niLearningEngines FZ-LLC, and In2vate\u2014all filed for bankruptcy,\ntoo. (ECF No. 41 \u00b6 210, 212, 213).\n 15\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 16 of 70\n\n\n\nshare price tumbled 78.5%. (Id. \u00b6 209). That same day, NASDAQ\n\nnotified iLE that it would be delisted from the stock exchange.\n\n(Id. \u00b6 211). Finally, iLE announced on December 27, 2024, that\n\nMr. Chidambaran, Mr. Naqvi, Balakrishnan Arackal, Ramakrishnan\n\nArackal, and Mr. Chary had resigned. (Id. \u00b6 214). In the same\n\npress release, iLE conveyed that it had \u201cself-reported potential\n\nviolations of law to the Department of Justice [(\u2018DOJ\u2019)]\u201d and \u201cwas\n\ncooperating with both the SEC\u2019s and DOJ\u2019s investigations.\u201d (Id.\n\n\u00b6 215).\n\n Marcum resigned as iLE\u2019s auditor on February 13, 2025. (Id.\n\n\u00b6 217). The 8-K reporting Marcum\u2019s resignation revealed that\n\nMarcum had notified iLE on January 5, 2024, in connection with its\n\naudit of iLE\u2019s 2023 financial statements, that iLE \u201chad material\n\nweaknesses in internal control over financial reporting relating\n\nto corporate governance policies, statutory compliance policies,\n\nand information technology controls.\u201d (Id.).\n\n On March 6, 2025, iLE converted its bankruptcy from Chapter\n\n11 reorganization to Chapter 7 liquidation. (Id. \u00b6 220). In iLE\u2019s\n\nbankruptcy proceedings, the iLE affiliate iLearningEngines\n\nHoldings (\u201ciLE Holdings\u201d) submitted a Statement of Financial\n\nAffairs on April 11, 2025, identifying Experion MEA as an \u201cinsider\u201d\n\nand a \u201crelated party.\u201d (Id. \u00b6\u00b6 226\u201327). The Statement of\n\nFinancial Affairs also indicated that in the year prior to\n\n 16\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 17 of 70\n\n\n\nbankruptcy, iLE Holdings had sent fifty wire transfers totaling\n\nover $87 million to Experion MEA. (Id. \u00b6 230). Of that $87\n\nmillion, iLE Holdings sent a series of transfers totaling $2\n\nmillion in December 2023, $1.75 million in the first quarter of\n\n2024, and $12.225 million in the first two quarters of 2024. (Id.\n\n\u00b6 231). Plaintiffs allege that those numbers do not match the\n\n\u201c\u2018[n]et cash transfers between [iLE] and Technology Partner\u2019 of\n\n$2.213 million, $330,000, and $2.14 million\u201d that iLE reported for\n\nthose periods, respectively. (Id.). iLE Holdings sent the\n\nremaining $73.2 million in the third and fourth quarters of 2024,\n\n$55.7 million of which it sent after the publication of the\n\nHindenburg Report. (Id. \u00b6\u00b6 230\u201331). Plaintiffs contend that all\n\n\u201c[t]hese payments [we]re in addition to the funds Experion kept\n\ndue to netting.\u201d (Id. \u00b6 232). 6\n\n B. Procedural Background\n\n On October 7, 2024, Danny Walker filed a securities class\n\naction complaint against Harish Chidambaran, Sayyed Farhan Naqvi,\n\nand iLE. (ECF No. 1). On December 24, 2024, iLE informed the\n\ncourt that it had filed for bankruptcy, and an automatic stay had\n\n\n 6 iLE affiliates also identified Experion Infosystems Private\nLimited, Vedic Network Experion, Synergy Markets Experion, and\nExperion MEA each as an \u201cinsider\u201d and \u201crelated party.\u201d (ECF No.\n41 \u00b6\u00b6 234\u201335, 238). The wire transfers to those entities from iLE\naffiliates were much smaller, in the range of $6,200 to\n$216,343.55. (Id. \u00b6\u00b6 234, 238).\n\n 17\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 18 of 70\n\n\n\nissued. (ECF No. 18). iLE was terminated as a party on December\n\n27. (ECF No. 19). Various individuals moved to be appointed Lead\n\nPlaintiff, and the court appointed Louis Leveque as Lead Plaintiff\n\non February 27, 2025. (ECF No. 36).\n\n Mr. Leveque and Mr. Al Hamid filed the 240-page, operative\n\namended complaint on April 28, 2025. (ECF No. 41). In Count I,\n\nthey allege that all defendants are strictly liable under Section\n\n11 of the Securities Act of 1933, 15 U.S.C. \u00a7 77a et seq.\n\n(\u201cSecurities Act\u201d). (ECF No. 41 \u00b6\u00b6 437\u201350). They assert that the\n\nfollowing defendants are liable because they were signatories of\n\nthe S-1 and S-8 Registration Statements: Mr. Chidambaran, (Id. \u00b6\n\n31); Mr. Naqvi, (Id. \u00b6 32); Mr. Arackal, 7 (Id. \u00b6 34); and Matthew\n\nBarger, Ian Davis, Bruce Mehlman, Michael Moe, and Thomas Olivier,\n\n(Id. \u00b6\u00b6 35\u201339) (collectively, \u201cIndividual Defendants\u201d). (Id. \u00b6\n\n444). Plaintiffs further seek to hold Marcum strictly liable\n\nbecause it certified the financial statements incorporated into\n\nthe S-1 and S-8 Registration Statements. (Id. \u00b6 445). Count II\n\n\n 7\n Mr. Arackal has not yet been served with the amended\ncomplaint. He lives in India and would likely need to be served\npursuant to the Hague Service Convention, which Plaintiffs\nestimate would take six to twelve months. (ECF No. 88, at 3).\nBecause \u201cthe factual elements and the claims against Mr. Arackal\nmaterially overlap with the facts and claims asserted against the\nother defendants,\u201d (Id.), the court approved Plaintiffs\u2019 request\nto defer service on Mr. Arackal until the court decides the pending\nmotions to dismiss, (ECF No. 89). Given the rulings announced in\nthis opinion, there is no reason to proceed to serve Mr. Arackal,\nand the amended complaint will be dismissed in its entirety.\n 18\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 19 of 70\n\n\n\nalleges that Individual Defendants violated Section 15 of the\n\nSecurities Act because they are \u201ccontrolling persons\u201d of\n\nindividuals liable under Section 11. (Id. \u00b6\u00b6 451\u201357). Count III\n\nasserts violations by Mr. Chidambaran, Mr. Naqvi, and Mr. Arackal\n\nof Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.\n\n\u00a7 78a et seq. (\u201cExchange Act\u201d), and Rule 10b-5 promulgated\n\nthereunder, 17 C.F.R. \u00a7 240.10b-5, by making material\n\nmisrepresentations and omissions that deceived the investing\n\npublic, artificially inflated and maintained the market price of\n\niLE\u2019s common stock, and caused iLE common stock purchasers to pay\n\nartificially inflated prices. (ECF No. 41 \u00b6\u00b6 549\u201360; see also id.\n\n\u00b6\u00b6 33, 42). Finally, Count IV alleges violations of Section 20(a)\n\nof the Exchange Act by Mr. Chidambaran and Mr. Naqvi because they\n\nare \u201ccontrolling persons\u201d of individuals liable under Section\n\n10(b). (Id. \u00b6\u00b6 561\u201364; see also id. \u00b6 33).\n\n On July 31, 2025, Individual Defendants and Marcum filed\n\nmotions to dismiss all counts asserted against them for failure to\n\nstate a claim. (ECF Nos. 80; 82; 83; 84; 85). Plaintiffs responded\n\non September 18. (ECF Nos. 90; 91; 92). Individual Defendants\n\nand Marcum replied on October 22. (ECF Nos. 101; 102; 103; 104;\n\n105). 8\n\n\n 8Plaintiffs and Marcum also filed notices of supplemental\nauthority on October 17, (ECF No. 97), and November 17, (ECF No.\n106), respectively.\n 19\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 20 of 70\n\n\n\n Finally, Plaintiffs moved on September 19, 2025, for a partial\n\nlift of the discovery stay to conduct discovery regarding the\n\ntraceability of their shares to the S-1 and S-8 Registration\n\nStatements. (ECF No. 93). Marcum responded on October 2, (ECF\n\nNo. 94), and all other served defendants joined Marcum\u2019s response\n\nthe same day, (ECF No. 95). Plaintiffs replied on October 17.\n\n(ECF No. 98).\n\nII. Standard of Review\n\n A motion to dismiss under Fed.R.Civ.P. 12(b)(6) tests the\n\nsufficiency of the complaint. Presley v. City of Charlottesville,\n\n464 F.3d 480, 483 (4th Cir. 2006). The court \u201cmust accept the\n\ncomplaint\u2019s factual allegations as true and construe the facts in\n\nthe light most favorable to the plaintiff.\u201d Barnett v. Inova\n\nHealth Care Servs., 125 F.4th 465, 469 (4th Cir. 2025) (citing\n\nBarbour v. Garland, 105 F.4th 579, 589 (4th Cir. 2024)).\n\nOrdinarily, a plaintiff\u2019s complaint must only satisfy the standard\n\nof Rule 8(a)(2), which requires a \u201cshort and plain statement of\n\nthe claim showing that the pleader is entitled to relief.\u201d\n\n\u201c[W]here the well-pleaded facts do not permit the court to infer\n\nmore than the mere possibility of misconduct, the complaint has\n\nalleged\u2014but it has not \u2018show[n]\u2019\u2014that the pleader is entitled to\n\nrelief.\u2019\u201d Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (quoting\n\nFed.R.Civ.P. 8(a)(2)). A Rule 8(a)(2) \u201cshowing\u201d requires\n\n 20\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 21 of 70\n\n\n\n\u201cstat[ing] a claim to relief that is plausible on its face.\u201d Bell\n\nAtl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). \u201cA claim has\n\nfacial plausibility when the plaintiff pleads factual content that\n\nallows the court to draw the reasonable inference that defendant\n\nis liable for the misconduct alleged.\u201d Mays v. Sprinkle, 992 F.3d\n\n295, 299\u2013300 (4th Cir. 2021) (quoting Iqbal, 556 U.S. at 678).\n\n Because Plaintiffs\u2019 Securities Act and Exchange Act claims\n\nsound in fraud, they are subject to a heightened pleading standard\n\nunder Fed.R.Civ.P. 9(b). Cozzarelli v. Inspire Pharms. Inc., 549\n\nF.3d 618, 629 (4th Cir. 2008) (holding that Rule 9(b)\u2019s heightened\n\npleading requirements apply to Securities Act claims when \u201ca\n\nplaintiff makes an allegation that has the substance of fraud,\u201d\n\neven when the plaintiff disclaims allegations of fraud). 9 Rule\n\n9(b) requires that \u201c[i]n alleging fraud or mistake, a party must\n\nstate with particularity the circumstances constituting fraud or\n\nmistake.\u201d A plaintiff must plead with particularity \u201cthe time,\n\nplace, speaker and contents of the allegedly false statements, as\n\nwell as the manner in which [the] statements are supposedly false\n\nand the specific facts which raise an inference of fraud.\u201d In re\n\nMedimmune, Inc. Sec. Litig., 873 F.Supp. 953, 960 (D.Md. 1995)\n\n\n 9 When\u201c[t]he complaint treats the allegedly false statements\u201d\nin the company\u2019s Registration Statements \u201cas part of a single,\ncoordinated scheme to defraud investors,\u201d the Securities Act\nallegations are subject to Rule 9(b). Cozzarelli, 549 F.3d at\n629. Here, the amended complaint does just that.\n 21\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 22 of 70\n\n\n\n(citing Gollomp v. MNC Fin. Inc., 756 F.Supp. 228, 232 (D.Md.\n\n1991); Borow v. nView Corp., 829 F.Supp. 828, 833 (E.D.Va. 1993)).\n\n The Private Securities Litigation Reform Act of 1995, 15\n\nU.S.C. \u00a7 78u-4 et seq. (\u201cPSLRA\u201d), imposes additional pleading\n\nrequirements on plaintiffs in securities fraud actions. When a\n\nplaintiff alleges a misleading statement or omission, he must\n\n\u201cspecify each statement alleged to have been misleading\u201d and \u201cthe\n\nreason or reasons why the statement is misleading.\u201d 15 U.S.C. \u00a7\n\n78u-4(b)(1). With respect to causes of action requiring a\n\nparticular state of mind, a plaintiff must \u201cstate with\n\nparticularity facts giving rise to a strong inference that the\n\ndefendant acted with the required state of mind\u201d when committing\n\neach alleged violation. Id. \u00a7 78u-4(b)(2)(A). Finally, a\n\nplaintiff must \u201cplead . . . with sufficient specificity\u201d that \u201cthe\n\ndefendant\u2019s misrepresentations proximately caused the plaintiff\u2019s\n\neconomic loss.\u201d Tchrs.\u2019 Ret. Sys. of La. v. Hunter, 477 F.3d 162,\n\n185\u201386 (4th Cir. 2007) (citing Hillson Partners Ltd. P\u2019ship v.\n\nAdage, Inc., 42 F.3d 204, 208 (4th Cir. 1994); Lentell v. Merrill\n\nLynch & Co., 396 F.3d 161, 172 (2d Cir. 2005)); see also 15 U.S.C.\n\n\u00a7 78u-4(b)(4) (\u201c[T]he plaintiff shall have the burden of proving\n\nthat the act or omission of the defendant alleged to violate this\n\nchapter caused the loss for which the plaintiff seeks to recover\n\ndamages.\u201d); Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 346 (2005)\n\n 22\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 23 of 70\n\n\n\n(\u201cOur holding about plaintiffs\u2019 need to prove proximate causation\n\nand economic loss leads us also to conclude that plaintiffs\u2019\n\ncomplaint here failed adequately to allege these requirements.\u201d).\n\nIII. Analysis\n\n A. Exchange Act\n\n Plaintiffs bring a claim for violation of Section 10(b) of\n\nthe Exchange Act and Rule 10b-5 promulgated thereunder against Mr.\n\nChidambaran, Mr. Naqvi, and Mr. Arackal, and a derivative claim\n\nfor violation of Section 20(a) of the Exchange Act against Mr.\n\nChidambaran and Mr. Naqvi. Both Mr. Chidambaran and Mr. Naqvi\n\nmove to dismiss these claims. Their arguments prevail, and Counts\n\nIII and IV will be dismissed.\n\n 1. Section 10(b) and Rule 10b-5 (Count III)\n\n A claim under Section 10(b) and Rule 10b-5 must allege: \u201c(1)\n\na material misrepresentation or omission by the defendant; (2)\n\nscienter; (3) a connection between the misrepresentation or\n\nomission and the purchase or sale of a security; (4) reliance upon\n\nthe misrepresentation or omission; (5) economic loss; and (6) loss\n\ncausation.\u201d Maguire Fin., LP v. PowerSecure Int\u2019l, Inc., 876 F.3d\n\n541, 546 (4th Cir. 2017) (quoting Stoneridge Inv. Partners v. Sci.-\n\nAtlanta, Inc., 552 U.S. 148, 157 (2008)). Materiality hinges on\n\nwhether there is \u201ca substantial likelihood that the disclosure of\n\nthe . . . fact would have been viewed by the reasonable investor\n\n\n 23\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 24 of 70\n\n\n\nas having significantly altered the total mix of information made\n\navailable.\u201d Greenhouse v. MCG Cap. Corp., 392 F.3d 650, 656 (4th\n\nCir. 2004) (quoting Basic, Inc. v. Levinson, 485 U.S. 224, 231\u201332\n\n(1988)). Defendants challenge Plaintiffs\u2019 allegations as to\n\nmaterial misrepresentations or omissions, scienter, and loss\n\ncausation. Plaintiffs\u2019 allegations regarding each of these three\n\nelements are indeed inadequate.\n\n a. Material Misrepresentations or Omissions\n\n To plead a material misrepresentation in a Section 10(b)\n\nclaim, a plaintiff must plead the falsity of each statement with\n\nspecificity. Cozzarelli, 549 F.3d at 625. As for material\n\nomissions, a plaintiff must identify an affirmative duty to\n\ndisclose and a failure to make the requisite disclosure. See\n\nSinger v. Reali, 883 F.3d 425, 440 (4th Cir. 2018). Here,\n\nPlaintiffs allege fifteen material misrepresentations or\n\nomissions, all of which hinge on Plaintiffs\u2019 belief that Experion\n\nis an undisclosed related party and/or iLE revenues are \u201clargely\n\nfake.\u201d (See ECF No. 41 \u00b6\u00b6 459-517). Analysis can, therefore,\n\nfocus on these cross-cutting assertions rather than on each\n\nindividual misrepresentation. Because the related-party\n\nallegations rest on a failure to disclose, those allegations are\n\ntreated as raising a material omission, whereas the fake-revenue\n\nassertions are treated as raising a material misrepresentation.\n\n 24\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 25 of 70\n\n\n\nDefendants do not appear to contest Plaintiffs\u2019 assertion that\n\nthere is a duty to disclose material related-party relationships.\n\n(See id. \u00b6 287 (\u201cGAAP requires financial statements to include .\n\n. . disclosures of material related party transactions[.]\u201d)).\n\nAccordingly, the issue that the related-party allegations raise is\n\nsolely whether Defendants failed to meet that duty. The issue\n\nthat the fake-revenue allegations raise is the falsity of\n\nDefendants\u2019 statements regarding iLE\u2019s revenues. Plaintiffs have\n\nnot adequately pleaded either one.\n\n First, Plaintiffs\u2019 related-party allegations, which mirror\n\nthose in the Hindenburg Report, do not appear to square with GAAP\n\nstandards. The relevant standard, Accounting Standards\n\nCodification (\u201cASC\u201d) 850-10-20 (\u201cRelated Party Disclosures\u201d),\n\ndefines a related party as follows:\n\n a. Affiliates of the entity\n\n b. Entities for which investments in their\n equity securities would be required\n\n c. Trusts for the benefit of employees\n\n d. Principal owners of the entity and members\n of their immediate families\n\n e. Management of the entity and members of\n their immediate families\n\n f. Other parties with which the entity may\n deal if one party controls or can\n significantly influence the management or\n operating policies of the other to an extent\n that one of the transacting parties might be\n 25\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 26 of 70\n\n\n\n prevented from fully pursuing its own separate\n interests\n\n g. Other parties that can significantly\n influence the management or operating policies\n of the transacting parties or that have an\n ownership interest in one of the transacting\n parties and can significantly influence the\n other to an extent that one or more of the\n transacting parties might be prevented from\n fully pursuing its own separate interests.\n\n(Id. \u00b6 283 (emphasis omitted)). Plaintiffs focus on the final\n\nthree categories. First, they allege that Experion was a related\n\nparty \u201cdue to the existence of [a] familial relationship between\n\nthe owner of Experion India/Experion MEA and a member of [iLE\u2019s]\n\nsenior management.\u201d (Id. \u00b6 301). They are referring to Cherian\n\nand Jojo Philip; Jojo Philip evidently owned a 35% stake in\n\nExperion India and a 45% stake in Experion MEA while his brother,\n\nCherian Philip, was iLE\u2019s \u201cSenior Director Channel Partnerships\n\nfor Asia, Middle East & Africa.\u201d (Id. \u00b6\u00b6 129-32). But as Mr.\n\nChidambaran explains, this fact, at most, only makes Jojo Philip\n\na related party, as a member of the immediate family of a member\n\nof iLE management. (ECF No. 83-1, at 18 & n.2). Plaintiffs do\n\nnot explain how Jojo Philip\u2019s immediate family status is imputed\n\nfirst to the Experion affiliates in which he is a minority\n\nshareholder and then to Experion itself. Plaintiffs\u2019 other\n\nallegations regarding members of iLE who have held shares or roles\n\n\n\n 26\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 27 of 70\n\n\n\nin Experion affiliates fail to make Experion a related party for\n\nthe same reason.\n\n Second, Plaintiffs contend that \u201cmembers of [iLE\u2019s] senior\n\nmanagement team\u201d had the ability \u201cto significantly influence the\n\noperations of Experion India and Experion MEA.\u201d (ECF No. 41 \u00b6\n\n301). Plaintiffs incorporate the following allegations from the\n\nHindenburg Report:\n\n (i) [Mr.] Chidambaran was listed as the\n American contact for [the] \u201cTechnology\n Partner\u201d on Experion\u2019s website and listed his\n personal residence as the location of\n \u201cExperion Americas\u201d;\n\n (ii) per Indian corporate records and\n LinkedIn, iLearningEngines\u2019 Senior Project\n Manager, Tom Thomas and AVP of Sales &\n Business Development Director, Ratish Nair,\n were directors and shareholders of Experion\u2019s\n India affiliate, Experion Technologies, FZ LLC\n [sic, should be Experion Infosystems];\n\n (iii) Experion India and Experion [Middle East\n & Africa (\u201cMEA\u201d)] are partially owned by Jojo\n Philip, the brother of iLearningEngines\u2019\n Senior Director Channel Partnerships, Cherian\n K. Philip; and\n\n (iv) Experion MEA was headed and partially\n owned by iLearningEngines\u2019 President and Chief\n Business Officer, Arackal, and\n iLearningEngines\u2019 AVP of Sales & Business\n Development, Ratish Nair.\n\n(Id. \u00b6 169 (citation modified)). Mr. Chidambaran\u2019s listing as\n\nExperion Americas\u2019 contact person and the inclusion of his\n\nresidence as Experion Americas\u2019 business location are inapposite\n\n 27\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 28 of 70\n\n\n\nbecause that was verifiably true only as recently as February 2020\n\nand January 2022, respectively, (Id. \u00b6\u00b6 113\u201314), long before the\n\nissuance of any of the alleged omissions. As for Mr. Thomas and\n\nMr. Nair, records do reflect that as of March 31, 2023, they held\n\ntwo of the three director positions at Experion India while serving\n\nas senior employees at iLE. (Id. \u00b6\u00b6 119-22). While it is possible,\n\nthen, that they controlled Experion India while working for iLE,\n\nPlaintiffs do not explain how iLE exerted sufficient influence and\n\ncontrol over Mr. Thomas and Mr. Nair to achieve influence and\n\ncontrol over Experion India. And even if Experion India was indeed\n\na related party, it is not remotely clear that that renders\n\nExperion itself a related party, or that iLE had a material\n\nrelationship with Experion India such that its duty to disclose\n\nwould be triggered. On the latter point, bankruptcy proceedings\n\ndisclosed $216,343.55 in wire transfers from an iLE affiliate to\n\nExperion India in the year preceding bankruptcy, (Id. \u00b6 234), which\n\npales in comparison to the $87 million sent to Experion MEA, (Id.\n\n\u00b6 231). The Philip brothers\u2019 relationship also does not render\n\nExperion a related party because Plaintiffs do not explain why the\n\nsibling relationship is sufficient to satisfy the significant\n\ninfluence or control test. Lastly, Mr. Arackal was CEO of Experion\n\nMEA in 2015, (Id. \u00b6 128), long before the alleged omissions. He\n\nwas an Experion MEA board member until 2022 and held an undisclosed\n\n 28\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 29 of 70\n\n\n\nshare of Experion MEA, (Id. \u00b6\u00b6 126-27), but neither fact clarifies\n\nthe extent of his influence or control over Experion MEA. The\n\nallegations regarding Mr. Nair\u2019s stake in Experion MEA are\n\ninsufficient for the same reason. In short, Plaintiffs succeed in\n\ndemonstrating considerable overlap in personnel between iLE and\n\nExperion entities but fail to spell out beyond conclusory\n\nallegations that this overlap constitutes significant influence or\n\ncontrol over Experion. See In re Qutoutiao, Inc. Sec. Litig., No.\n\n20-cv-6707, 2023 WL 4977499, at *10 (S.D.N.Y. Aug. 3, 2023)\n\n(explaining that a \u201cclose business relationship\u201d alone does not\n\ntrigger a duty to disclose absent allegations revealing how that\n\ncloseness manifests in influence and control), vacated on other\n\ngrounds sub nom., Pappas v. Qutoutiao Inc., No. 23-1233, 2024 WL\n\n4588491 (2d Cir. Oct. 28, 2024).\n\n In one last attempt to do so, Plaintiffs point to bankruptcy\n\nfilings in which iLE affiliates refer to Experion MEA, Experion\n\nIndia, and a few other Experion affiliates as \u201cinsiders\u201d under the\n\nBankruptcy Code, as well as \u201crelated parties.\u201d (ECF No. 41 \u00b6\u00b6\n\n227, 234\u201335). Although these observations might seem\n\nsuperficially probative, their weight dissipates under proper\n\nanalysis. Plaintiffs do not counter Mr. Chidambaran\u2019s contention\n\nthat the definition of \u201cinsider\u201d under the Bankruptcy Code differs\n\nmeaningfully from that of \u201crelated party\u201d under GAAP, and that\n\n 29\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 30 of 70\n\n\n\n\u201crelated party\u201d is not a defined term under the Bankruptcy Code.\n\n(ECF No. 83-1, at 20). Moreover, Mr. Chidambaran points to the\n\n\u201cGlobal Notes\u201d included with the \u201cinsider\u201d disclosures that state:\n\n\u201cPersons listed as \u2018insiders\u2019 have been included for informational\n\npurposes only and the inclusion of them in the Schedules and\n\nStatements[] shall not constitute an admission that those persons\n\nare insiders for purposes of . . . the Bankruptcy Code.\u201d (ECF No.\n\n103, at 9). Whatever motive iLE affiliates had for making such\n\ndisclosures (perhaps an abundance of caution), they are not so\n\nsubstantiated and unequivocal that they undercut iLE\u2019s previous\n\nposition regarding the nature of its relationship with those\n\nExperion entities.\n\n Plaintiffs fail to allege that iLE had a duty to disclose\n\nExperion as a related party, so none of the alleged omissions is\n\nactionable on this basis.\n\n The other category of allegations Plaintiffs assert pertains\n\nto iLE\u2019s misrepresentation of its revenues; to wit, that its\n\nreported and discussed revenues were \u201clargely fake.\u201d These\n\nallegations fail, however, for the simple reason that they assume\n\ntheir conclusion. The Hindenburg Report \u201csuspect[ed]\u201d that the\n\nrevenue and expenses associated with the Technology Partner,\n\nExperion, were \u201clargely fake\u201d because \u201c[t]he unusual circular\n\nstructure makes it easy to inflate both revenue and cost figures\n\n 30\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 31 of 70\n\n\n\nwhile only netting out a minimal difference.\u201d (ECF No. 41 \u00b6\u00b6 172,\n\n177 (alterations in original)). But the suspicion that the\n\nrelationship structure could facilitate revenue inflation does not\n\nmean that iLE in fact inflated its revenues. (ECF No. 84-1, at\n\n20). By failing to bridge that gap, Plaintiffs \u201cdo not permit the\n\ncourt to infer more than the mere possibility of misconduct,\u201d\n\nIqbal, 556 U.S. at 679, much less the specificity of misconduct\n\nrequired under Rule 9(b) and the PSLRA.\n\n Plaintiffs argue, in essence, that the relationship with\n\nExperion lacked economic substance and instead consisted of round-\n\ntripping funds. \u201cA typical \u2018round-tripping\u2019 scheme involves\n\nparties entering into reciprocal contracts to exchange similar\n\namounts of money for similar services.\u201d Tchrs.\u2019 Ret. Sys., 477\n\nF.3d at 178 (citation modified). As the Fourth Circuit explained:\n\n Such transactions can be improper because the\n parties book revenues even though the\n transactions \u201cwash out\u201d without any economic\n substance. But the basis for alleging \u201cround-\n tripping\u201d does not exist when either of the\n transactions have economic substance because\n those transactions would not wash out. The\n mere existence of reciprocal dealing does not\n suggest \u201cround-tripping.\u201d\n\nId. Here, Plaintiffs assume without adequate explanation that\n\nneither leg of the transaction contained economic substance. Based\n\non iLE\u2019s financial statements, it does not appear that iLE and the\n\nTechnology Partner provided similar services. In some\n\n 31\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 32 of 70\n\n\n\ncircumstances, the Technology Partner purchased the right to use\n\niLE\u2019s platform, to which iLE retained the intellectual property\n\nrights, and the Technology Partner would integrate the platform\n\ninto its own software and provide it to its own customers. (ECF\n\nNo. 41 \u00b6\u00b6 291, 515). In other circumstances, iLE paid the\n\nTechnology Partner to serve as its agent, and in exchange the\n\nTechnology Partner would facilitate sales to iLE customers. (Id.\n\n\u00b6 291). iLE would also pay the Technology Partner to perform\n\nresearch and development, sales and marketing, and implementation\n\nand support services. (Id.). Although iLE and the Technology\n\nPartner each facilitated the sales of the other in some way, they\n\nappear to have done so in different ways and with different\n\ncustomers. Given the apparent substance to both legs of these\n\ntransactions, the happenstance that the values of these services\n\nroughly coincided does not mean that they washed each other out.\n\nPlaintiffs allege nothing more than \u201cthe mere existence of\n\nreciprocal dealing.\u201d Tchrs.\u2019 Ret. Sys., 477 F.3d at 178. That is\n\nnot enough.\n\n Finally, Plaintiffs\u2019 allege that the $87 million in wire\n\ntransfers revealed in the bankruptcy proceedings are not properly\n\naccounted for in iLE\u2019s financial statements. These wire transfers\n\ndo not match the \u201cnet cash transfers\u201d to the Technology Partner as\n\nstated in SEC filings, are in large round amounts, and are\n\n 32\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 33 of 70\n\n\n\ndescribed minimally as \u201coutgoing wire transfer[s].\u201d (ECF No. 41\n\n\u00b6\u00b6 310, 331). Thus, Plaintiffs argue, iLE \u201crevenue and net revenue\n\nis overstated by the amount of these payments.\u201d (ECF No. 92, at\n\n19). How amounts being round and minimally described as outgoing\n\nwire transfers lead to a conclusion that they lacked a legitimate\n\nbusiness purpose is not explained. It is doubtful that such\n\nattributes constitute indicia of wrongdoing. And the fact that\n\nthe outgoing wires do not match net cash transfers is perhaps\n\nunsurprising given that net cash transfers would also account for\n\nincoming transfers from the Technology Partner. Admittedly, the\n\nnetting arrangement between iLE and the Technology Partner is\n\nsomewhat confusing. It is not clear if, and to what extent, iLE\n\nand the Technology Partner did net costs and revenues; the amended\n\ncomplaint is somewhat contradictory. On the one hand, the\n\nstatement in the S-1 Registration Statement seems to consider the\n\nnetting arrangement to be optional: \u201c[iLE] determined the services\n\nit received from the Technology Partner were distinct and the\n\nconsideration paid to the Technology Partner was equivalent to an\n\narms-length transaction. As a result, no costs incurred by [iLE]\n\nrelated to services provided by the Technology Partner have been\n\nnetted against revenues earned from the Technology Partner.\u201d (ECF\n\nNo. 41 \u00b6 92). On the other hand, the \u201cFees\u201d provision of the\n\nMaster Agreement does not clearly contemplate that netting is\n\n 33\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 34 of 70\n\n\n\noptional, as opposed to mandatory. For example, it provides that\n\n\u201c[o]n or before the fifth (5th) day of each calendar month,\u201d the\n\nTechnology Partner \u201cwill promptly report and pay to [iLE] all\n\namounts due and payable for [iLE] Products . . . less any fees due\n\nfor . . . [s]ervices previously provided\u201d by the Technology\n\nPartner. (Id. \u00b6 108). Plaintiffs do not explain how to square\n\niLE\u2019s characterization of the netting arrangement in the S-1\n\nRegistration Statement with their theory of the netting\n\narrangement. To the extent iLE and the Technology Partner did not\n\nalways net, it is hard to see how iLE Holdings\u2019 outgoing wire\n\ntransfers give rise to an inference that iLE misstated revenue.\n\n Plaintiffs fail to allege that iLE made any false\n\nrepresentation about its revenue, so none of the alleged statements\n\nis actionable on this basis, either.\n\n b. Scienter\n\n The next pleading requirement that Defendants raise is\n\nscienter, which is \u201ca mental state embracing intent to deceive,\n\nmanipulate, or defraud.\u201d Tellabs, Inc. v. Makor Issues & Rts.,\n\nLtd., 551 U.S. 308, 319 (2007) (quoting Ernst & Ernst v.\n\nHochfelder, 425 U.S. 185, 193 n.12 (1976)). In addition to intent,\n\nscienter also \u201cencompasses \u2018severe recklessness,\u2019\u201d meaning \u201can act\n\nso highly unreasonable and such an extreme departure from the\n\nstandard of ordinary care as to present a danger of misleading the\n\n 34\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 35 of 70\n\n\n\nplaintiff to the extent that the danger was either known to the\n\ndefendant or so obvious that the defendant must have been aware of\n\nit.\u201d In re Triangle Cap. Corp. Sec. Litig., 988 F.3d 743, 751 (4th\n\nCir. 2021) (quoting Ottmann v. Hanger Orthopedic Grp., Inc., 353\n\nF.3d 338, 343 (4th Cir. 2003)) (citing Tchrs.\u2019 Ret. Sys., 477 F.3d\n\nat 184).\n\n The PSLRA \u201cimposes a heightened pleading standard for\n\nscienter, requiring plaintiffs to \u2018state with particularity facts\n\ngiving rise to a strong inference of scienter.\u2019\u201d Id. (quoting 15\n\nU.S.C. \u00a7 78u-4(b)(2)). \u201cTo qualify as \u2018strong[,]\u2019 . . . an\n\ninference of scienter must be more than merely plausible or\n\nreasonable\u2014it must be cogent and at least as compelling as any\n\nopposing inference of nonfraudulent intent.\u201d Tellabs, 551 U.S. at\n\n314. The scienter inquiry \u201cassess[es] the allegations\n\nholistically,\u201d rather than \u201ceach allegation in isolation.\u201d Id. at\n\n326 (citation modified). \u201c[O]missions and ambiguities count\n\nagainst inferring scienter,\u201d as does absence of motive, though the\n\nlatter is not \u201cfatal.\u201d Id. at 325, 326 (citation modified).\n\n In the amended complaint, Plaintiffs offer various\n\nallegations of scienter, all of which Defendants contend are\n\ninsufficient. Defendants are correct. To begin, Plaintiffs allege\n\nthat \u201cas the CEO and CFO,\u201d Mr. Chidambaran and Mr. Naqvi \u201cwould\n\nhave personal knowledge\u201d of the structure of the relationship with\n\n 35\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 36 of 70\n\n\n\nExperion \u201cand would have known or recklessly disregarded the\n\nfalsity and misleadingness of the alleged misstatements.\u201d (ECF\n\nNo. 41 \u00b6 522). Mr. Chidambaran and Mr. Naqvi\u2019s \u201cknowledge of\n\n[iLE\u2019s] core business,\u201d along with \u201cits employees and\n\nexecutive[s\u2019] relationships with Experion,\u201d is allegedly \u201cstrong\n\nevidence\u201d of scienter. (Id. \u00b6 525). But \u201c\u2018bare allegations\u2019 that\n\nofficers have \u2018knowledge of key facts\u2019 because of their positions\n\nor because such knowledge relates to the business\u2019s core operations\n\nare not enough, standing alone, \u2018to support a strong inference of\n\nscienter.\u2019\u201d KBC Asset Mgmt. NV v. DXC Tech. Co., 19 F.4th 601,\n\n612 (4th Cir. 2021) (quoting Yates v. Mun. Mortg. & Equity, LLC,\n\n744 F.3d 874, 890 (4th Cir. 2014)). Defendants\u2019 positions at most\n\nindicate their involvement in any alleged misstatement, but not\n\ntheir knowledge thereof.\n\n On that point, Defendants also argue that the mere fact of a\n\nGAAP violation, whether in recording revenue or identifying a\n\nrelated party, is generally insufficient on its own to raise a\n\nstrong inference of scienter. As another court in this district\n\nhas explained, \u201callegations of a violation of GAAP provisions or\n\nSEC regulations, without corresponding fraudulent intent, are not\n\nsufficient to state a securities fraud claim.\u201d Keeney v. Larkin,\n\n306 F.Supp.2d 522, 541 (D.Md. 2003) (quoting Chill v. Gen. Elec.\n\nCo., 101 F.3d 263, 270 (2d Cir. 1996)), aff\u2019d, 102 F.App\u2019x 787 (4th\n\n 36\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 37 of 70\n\n\n\nCir. 2004). Plaintiffs do not respond on this front in relation\n\nto recording revenue, but do contend that as to related parties,\n\nthe GAAP test is so simple that a violation should give rise to an\n\ninference of scienter. (ECF No. 92, at 26). They cite ASC 850-\n\n10-20(e), which defines as a related party \u201c[m]anagement of the\n\nentity and members of their immediate families,\u201d and assert that\n\nseveral iLE executives clearly meet this definition. (Id.\n\n(alteration in original)). Fair enough. But that says nothing\n\nabout whether Experion meets that definition, and it is difficult\n\nto see how it does. If Plaintiffs themselves struggle to apply\n\nthe test they frame as simple, then they cannot rely on potential\n\nmisapplication of the test by Mr. Chidambaran and Mr. Naqvi as\n\nstrong evidence of scienter. See Harris v. AmTrust Fin. Servs.,\n\nInc., 135 F.Supp.3d 155, 161 n.9 (S.D.N.Y. Sep. 29, 2015) (\u201cGAAP\n\nis not the lucid or encyclopedic set of pre-existing rules that\n\n[it might be perceived] to be.\u201d (alteration in original) (quoting\n\nIn re Worldcom, Inc. Sec. Litig., 352 F.Supp.2d 472, 478 (S.D.N.Y.\n\n2005)).\n\n Plaintiffs next point to the Board placing Mr. Chidambaran\n\nand Mr. Naqvi on administrative leave during the Special Committee\n\ninvestigation, (ECF No. 41 \u00b6 527), and their subsequent\n\nresignations while the investigation remained ongoing, (Id. \u00b6\n\n528), as evidence of scienter. Again, these allegations on their\n\n 37\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 38 of 70\n\n\n\nown are insufficient. The Fourth Circuit has repeatedly declined\n\nto rely on executive departures as strong evidence of scienter.\n\nS.A. Fire & Police Pension Fund v. Syneos Health Inc., 75 F.4th\n\n232, 244 (4th Cir. 2023) (\u201c[E]xecutive departures are, at best,\n\nweak evidence of scienter.\u201d (citation modified)); Triangle Cap.,\n\n988 F.3d at 754 (\u201c[W]ithout allegations demonstrating Defendants\u2019\n\ncontemporaneous knowledge [of their misfeasance], we find it\n\ndifficult to give this regime change any weight toward a scienter\n\ninference.\u201d). Plaintiffs respond that the timing of Mr.\n\nChidambaran\u2019s and Mr. Naqvi\u2019s resignations pending the Special\n\nCommittee investigation indicate that they resigned to avoid\n\ntermination for cause. (ECF No. 92, at 27). Perhaps, but that in\n\nitself is an inference. And the \u201cstrong inference of scienter\n\n[must] be supported by facts, not other inferences.\u201d Maguire Fin.,\n\n876 F.3d at 548.\n\n iLE\u2019s self-reporting of potential violations of the law to\n\nthe Department of Justice is even further evidence of scienter,\n\nPlaintiffs contend. (Id. \u00b6 530). Those were potential violations\n\nof law, however, and Plaintiffs provide no indication that the\n\ngovernment has concluded any violations actually occurred, or that\n\nthe potential violations reported entailed intentional or severely\n\nreckless behavior by Mr. Chidambaran and Mr. Naqvi. Again, a\n\n\n\n 38\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 39 of 70\n\n\n\nstrong inference of scienter cannot be supported by \u201cother\n\ninferences.\u201d Maguire Fin., 876 F.3d at 548.\n\n Plaintiffs also allege that as CEO and CFO, Mr. Chidambaran\n\nand Mr. Naqvi \u201cwould have been aware\u201d of the $87 million in wire\n\ntransfers to Experion MEA in the year preceding bankruptcy. (Id.\n\n\u00b6 532). This, however, is just another allegation that senior\n\nemployees had \u201c\u2018knowledge of key facts\u2019 because of their\n\npositions.\u201d KBC Asset Mgmt., 19 F.4th at 612 (quoting Yates, 744\n\nF.3d at 890). And as discussed in the previous section, Plaintiffs\n\nfail to explain fully why the court should read anything into these\n\nwire transfers given the unclear extent of the netting arrangement.\n\nThe fact that over $55 million of the wire transfers occurred after\n\npublication of the Hindenburg Report does not necessarily mean\n\nthey \u201crushed to move money out of [iLE].\u201d (ECF No. 92, at 27).\n\nPlaintiffs cite this figure from iLE\u2019s bankruptcy proceedings but\n\ndo not indicate that any party to those proceedings has suggested\n\nthese payments constituted fraudulent conveyances. Without any\n\nindication of what iLE\u2019s obligations to Experion actually were\n\nduring this time period, the timing of these payments cannot raise\n\na strong inference of scienter.\n\n Finally, Plaintiffs contend that Mr. Chidambaran and Mr.\n\nNaqvi had a motive to defraud because \u201cthere [wa]s a clear\n\nincentive to maximize the company\u2019s perceived value.\u201d (ECF No.\n\n 39\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 40 of 70\n\n\n\n92, at 27). But the Fourth Circuit has concluded that \u201cthese types\n\nof generalized motives\u2014which are shared by all companies\u2014a[re]\n\ninsufficient to plead scienter under the PSLRA.\u201d Ottmann, 353\n\nF.3d at 352 (citing, inter alia, City of Philadelphia v. Fleming\n\nCos., 264 F.3d 1245, 1269 (10th Cir. 2001)). A motivation to\n\nmaximize the company\u2019s perceived value and \u201ckeep share prices . .\n\n. high\u201d is precisely this type of generalized motive. Triangle\n\nCap., 988 F.3d at 754.\n\n Considering these allegations together, they do not raise an\n\ninference of scienter at least as compelling as the innocent\n\nalternative. It remains more likely that Mr. Chidambaran and Mr.\n\nNaqvi faced tricky GAAP issues and relied on their independent\n\naccountant\u2019s opinion of their resolution of those issues. \u201cMarcum\n\nhad continual access to internal, confidential, current corporate\n\ninformation concerning [iLE\u2019s] most up-to-date operational and\n\nfinancial results and prospects.\u201d (ECF No. 41 \u00b6 400). It\n\ncertified iLE\u2019s financial statements for 2023, 2022, and 2021, and\n\nconsented to the inclusion of its opinion in the Registration\n\nStatements. (Id. \u00b6\u00b6 245-46, 253). iLE stated that it incorporated\n\nthose financial statements \u201cin reliance\u201d on Marcum\u2019s opinion. (Id.\n\n\u00b6 145). Even though Marcum apparently notified iLE in January\n\n2024 while auditing iLE\u2019s 2023 financial statement that iLE had\n\ncertain \u201cmaterial weaknesses,\u201d (Id. \u00b6 217), its April 2024 opinion\n\n 40\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 41 of 70\n\n\n\nstated that iLE\u2019s 2023 financial statement \u201cpresent[ed] fairly, in\n\nall material respects, the financial position\u201d of iLE, (Id. \u00b6 246).\n\nIt appears, then, that Mr. Chidambaran and Mr. Naqvi could\n\nreasonably believe that they were consistently and accurately\n\nrepresenting iLE\u2019s financials to investors.\n\n c. Loss Causation\n\n Finally, a plaintiff must adequately plead loss causation to\n\nstate a Section 10(b) claim. 15 U.S.C. \u00a7 78u-4(b)(4); Defeo v.\n\nIonQ, Inc., 134 F.4th 153, 161 (4th Cir. 2025). Loss causation is\n\n\u201ca causal connection between the material misrepresentations and\n\nthe loss.\u201d Dura Pharms., 544 U.S. at 342 (citation modified).\n\nLoss causation allegations are reviewed \u201cfor \u2018sufficient\n\nspecificity,\u2019 a standard \u2018largely consonant with Fed.R.Civ.P.\n\n9(b)\u2019s\u2019 particularity requirement.\u201d Defeo, 134 F.4th at 161\n\n(quoting Katyle v. Penn Nat\u2019l Gaming, Inc., 637 F.3d 462, 471 (4th\n\nCir. 2011)). \u201cTo plead loss causation, a plaintiff must plausibly\n\nand with sufficient specificity allege . . . \u2018(1) the exposure of\n\nthe defendant\u2019s misrepresentation or omission, i.e., the\n\nrevelation of new facts suggesting the defendant perpetrated a\n\nfraud on the market, and [that] (2) such exposure resulted in the\n\ndecline of the defendant\u2019s share price.\u201d Id. at 161\u201362 (emphasis\n\nadded) (citation modified) (quoting Singer, 883 F.3d at 445).\n\nThere are three ways to plead such exposure: (1) the corrective\n\n 41\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 42 of 70\n\n\n\ndisclosure theory, meaning \u201cthe defendant company itself made a\n\ndisclosure that publicly revealed for the first time that the\n\ncompany perpetrated a fraud on the market by way of a material\n\nmisrepresentation or omission\u201d; (2) the materialization of a\n\nconcealed risk theory, meaning exposure by a third party of the\n\ndefendant company\u2019s fraud; and (3) an \u201camalgam\u201d of the previous\n\ntwo, \u201callowing for the reality that the truth of a company\u2019s fraud\n\ncan leak out slowly from a variety of different sources.\u201d Id. at\n\n162 (quoting Singer, 883 F.3d at 445\u201347). \u201c[I]t is not enough to\n\nplead that some allegation of fraud hit the market if it is\n\nimplausible to believe that said allegation revealed any new truth\n\nto the market.\u201d Id.\n\n Here, Plaintiffs allege loss causation through an amalgam of\n\nexposures. They point to four disclosures. (ECF No. 41 \u00b6 535).\n\nFirst, and most importantly, they highlight the release of the\n\nHindenburg Report on August 29, 2024, which posited that iLE had\n\nfabricated its revenues and failed to disclose its Technology\n\nPartner as a related party. (Id. \u00b6 159). iLE\u2019s share price fell\n\nfrom a closing price of $3.19 on August 28 to a closing price of\n\n$1.49 on August 29, a 53.3% decline. (Id. \u00b6 179). Second, they\n\ncite the Form 8-K filing on November 18, 2024 (\u201cCautionary 8-K\u201d),\n\nin which iLE announced that its financial statements since 2020\n\nshould \u201cno longer be relied upon,\u201d Marcum had withdrawn its prior\n\n 42\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 43 of 70\n\n\n\nopinions, iLE had received a subpoena from the SEC, and Mr. Naqvi\n\nhad been placed on administrative leave from his role as CFO and\n\ngiven the new title of Senior Vice President. (Id. \u00b6 196). iLE\u2019s\n\nshare price fell again, this time from a closing price of $1.50\n\nthe previous trading day to a closing price of $1.095 on November\n\n18, a 27% decline. (Id. \u00b6 202). Third, they raise the Form 8-K\n\nfiling on December 10, 2024 (\u201cExecutive Leave 8-K\u201d), in which iLE\n\nannounced that Mr. Chidambaran, Mr. Naqvi, Mr. Arackal, and two\n\niLE Vice Presidents had been placed on administrative leave and\n\nMr. Olivier had been appointed interim CEO. (Id. \u00b6 205). iLE\u2019s\n\nshare price fell further, from a closing price of $1.20 on December\n\n9 to a closing price of $1.03 on December 10, a 14.2% decline.\n\n(Id. \u00b6 207). Fourth, they point to iLE\u2019s press release on December\n\n23, 2024 (\u201cBankruptcy Press Release\u201d), that it had filed for\n\nbankruptcy. (Id. \u00b6 208). iLE\u2019s share price tumbled from a closing\n\nprice of $0.885 the previous trading day to a closing price of\n\n$0.19 on December 23, a 78.5% decline. (Id. \u00b6 209).\n\n Defendants argue that Plaintiffs have failed to plead loss\n\ncausation because the Hindenburg Report disclaims its own accuracy\n\nand exposed no new facts, and none of the other three alleged\n\ndisclosures exposed to the market any new facts, either. (ECF\n\nNos. 83-1, at 31\u201334; 84-1, at 34\u201337). Plaintiffs respond that the\n\nHindenburg Report did indeed expose new facts to the market, and\n\n 43\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 44 of 70\n\n\n\nthat all the alleged \u201cpartial\u201d disclosures considered together\n\nconstituted the requisite exposure. (ECF No. 92, at 28\u201335). 10\n\n Defendants are correct that the Hindenburg Report is not a\n\nqualifying disclosure. It is a \u201c\u2018high bar that plaintiffs must\n\nmeet in relying on self-interested and anonymous short-sellers\u2019\n\nwhen attempting to plead loss causation.\u201d Defeo, 134 F.4th at 163\n\n(quoting In re Nektar Therapeutics Sec. Litig., 34 F.4th 828, 839\n\n(9th Cir. 2022)). Two circumstances are generally fatal to reliance\n\non a short-seller report. First, when self-interested and\n\nanonymous short-sellers disclaim the accuracy of their report,\n\ntheir report is \u201crendered . . . inadequate\u201d for pleading loss\n\ncausation. Id. (quoting Nektar Therapeutics, 34 F.4th at 840)).\n\nIn Defeo, the Fourth Circuit held that a short-seller report did\n\nnot constitute a qualifying disclosure because its self-\n\ninterested, anonymous authors included a disclaimer that it\n\n\u201ccannot and does not provide any representations or warranties\n\nwith respect to the accuracy of th[e] [cited] materials.\u201d Id. at\n\n158\u201359, 165. Likewise, the Hindenburg Report\u2019s authors were self-\n\ninterested, possibly anonymous, 11 and included a disclaimer that\n\n\n 10\n Plaintiffs disclaim reliance on the Hindenburg Report as a\n\u201ccomplete corrective disclosure.\u201d (ECF No. 92, at 35 n.1).\n\n 11\n Defendants contend that the Hindenburg Report\u2019s authors are\nanonymous, (ECF No. 83-1, at 11), and Plaintiffs do not contest\nthat assertion. The Ninth Circuit, however, has described\nHindenburg reports as not anonymous because Hindenburg is a \u201cwell-\n 44\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 45 of 70\n\n\n\nthey \u201cmake[] no representation, express or implied, as to the\n\naccuracy, timeliness, or completeness of any . . . information\u201d in\n\nthe Report. (ECF No. 83-2, at 24). The disclaimer is strikingly\n\nsimilar to the one in Defeo. Accordingly, any \u201creasonable investor\n\nreading the[] [report] would likely have taken [its] contents with\n\na healthy grain of salt,\u201d causing \u201cits potential evidentiary value\n\n[to] evaporate[].\u201d Defeo, 134 F.4th at 163, 164 (quoting In re\n\nBofl Holding, Inc. Sec. Litig., 977 F.3d 781, 794\u201395 (9th Cir.\n\n2020)). Therefore, it is \u201cimplausible\u201d that the Hindenburg Report,\n\n\u201caccompanied by those kinds of disclosures[]\u201d and \u201cpublished by an\n\nactivist short seller, would reveal some new truth to the market.\u201d\n\nId. at 164. 12\n\n\nknown short-seller firm[].\u201d Espy v. J2 Glob., Inc., 99 F.4th 527,\n541 (9th Cir. 2024). It is not clear whether anonymity is\neliminated when an institutional author is named, such as\nHindenburg, or whether the Report is still considered anonymous\nunless individual authors are named. The court need not resolve\nthe question because the issue is not dispositive. Id. (holding\nthat a Hindenburg Report, despite not being anonymous, did not\nqualify as a corrective disclosure). Also, the authors of the\nReport announced that they \u201cstand[] to realize significant gains\nin the event that the price of the securities move[s].\u201d (ECF No.\n83-2, at 24). Accordingly, the Hindenburg Report is self-\ninterested, if not also anonymous.\n\n 12 Plaintiffs appear to try to distinguish Defoe on the basis\nthat the short-seller report there also relied on anonymous sources\nthat were readily manipulable by the short-seller, whereas the\nHindenburg Report did not rely on anonymous sources. (ECF No. 92,\nat 30, 33). A better reading of Defoe, however, is that the short-\nseller\u2019s reliance on anonymous sources was an additional, but not\nnecessary, deficiency in the loss causation inquiry. The rule\nDefoe announces makes no mention of anonymous sources: \u201c[W]hen\n 45\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 46 of 70\n\n\n\n Second, when the short-seller report relies exclusively on\n\npublic information, it generally does not qualify as a corrective\n\ndisclosure. Espy v. J2 Glob., Inc., 99 F.4th 527, 540\u201342 (9th Cir.\n\n2024). In efficient markets, the stock price is presumed to\n\nincorporate all publicly available information, so a report\n\nrelying exclusively on publicly available information often cannot\n\n\u201creveal new information to the market that has not yet been\n\nincorporated into the price.\u201d Bofl Holding, 977 F.3d at 794\n\n(emphasis added); see also Nektar Therapeutics, 34 F.4th at 839\n\n(explaining that it \u201cis normally difficult\u201d to infer that a short-\n\nseller\u2019s report exposed new information to the market if the report\n\n\u201cuses publicly available information\u201d). That being said, a short-\n\nseller\u2019s report that relies exclusively on publicly available\n\ninformation can still qualify as a corrective disclosure if the\n\nunderlying data is complex and/or required considerable effort to\n\nlocate and analyze. Espy, 99 F.4th at 541. In other words, if\n\nsynthesizing the public information required \u201cexpertise or\n\nspecialized skills beyond what a typical market participant would\n\npossess,\u201d then it might qualify as a corrective disclosure. Id.\n\n\nauthors of a report are \u2018anonymous and self-interested short-\nsellers who disavowed any accuracy,\u2019 their reports are \u2018rendered\n. . . inadequate\u2019 for purposes of loss causation.\u201d 134 F.4th at\n163 (quoting Nektar Therapeutics, 34 F.4th at 840). Nor do the\nNinth Circuit cases the Defoe court relied on as \u201cpersuasive\u201d make\nany mention of anonymous sources. See Nektar Therapeutics, 34\nF.4th at 838\u201340; Bofl Holding, 977 F.3d at 791\u201397.\n 46\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 47 of 70\n\n\n\nat 542 (quoting Grigsby v. Bofl Holding, Inc., 979 F.3d 1198, 1208\n\n(9th Cir. 2020)).\n\n Such reliance on publicly available information is fatal to\n\nthe Hindenburg Report\u2019s status as a corrective disclosure.\n\nHindenburg explicitly represented that \u201c[t]o the best of [its]\n\nability and belief, all information contained herein . . . has\n\nbeen obtained from public sources.\u201d (ECF No. 83-2, at 24 (emphasis\n\nadded)). Plaintiffs argue that the Report also relied on private\n\ninformation obtained from \u201ccorporate intelligence firm\n\nDiligencia.\u201d (ECF No. 92, at 34). Putting aside the fact that\n\nthis contention contradicts Hindenburg\u2019s representations,\n\nDefendants note that the only information sourced from Diligencia\n\nis that \u201cJojo Philip, the brother of an iLE employee, held a\n\nminority interest in Experion MEA.\u201d (ECF No. 103, at 18 (citing\n\nECF No. 41 \u00b6 132)). That factual allegation was one small\n\ncomponent of Plaintiffs\u2019 sweeping related-party argument and thus\n\ndoes not change the overall character of the Report\u2019s sourcing.\n\nPlaintiffs also argue that preparing the Report required expertise\n\nand specialized skills, so synthesizing the publicly available\n\ninformation effectively provided the market with new information.\n\n(ECF No. 92, at 33\u201334). That argument fares no better. No\n\nexpertise or specialized skills are required for \u201ca careful reading\n\nof public documents, including . . . investor presentations, press\n\n 47\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 48 of 70\n\n\n\nreleases, employees\u2019 LinkedIn profiles, board members\u2019 resumes,\n\npublic corporate records, and SEC filings.\u201d Espy, 99 F.4th at\n\n542. The Hindenburg Report largely relied on a careful reading of\n\nprecisely the same materials: investor presentations, (ECF No. 83-\n\n2, at 3, 9, 17); press releases (id. at 11, 18, 19); employees\u2019\n\nLinkedIn profiles, (id. at 7, 9, 11, 12); public corporate records,\n\n(id. at 3, 9\u201314); and SEC filings (id. at 3\u201327). Contrary to\n\nPlaintiffs\u2019 assertions, such materials do not take \u201cgreat effort\n\n. . . to locate and analyze,\u201d Espy, 99 F.4th at 541 (quoting Bofl\n\nHolding, 977 F.3d at 795), nor do they consist of \u201ccomplex economic\n\ndata understandable only through expert analysis,\u201d Pub. Emps. Ret.\n\nSys. v. Amedisys, Inc., 769 F.3d 313, 323 (5th Cir. 2014). Because\n\nPlaintiffs \u201callege[] no facts plausibly explaining why this\n\n[publicly available] information . . . was not yet reflected in\n\n[iLE\u2019s] stock price,\u201d they have \u201cfailed to plausibly allege that\n\nthe Hindenburg [R]eport qualifies as a corrective disclosure.\u201d\n\nEspy, 99 F.4th at 542.\n\n Although the Hindenburg Report itself does not qualify as a\n\ncorrective disclosure, it is still possible for Plaintiffs to plead\n\na corrective disclosure through \u201ca series of partial disclosures.\u201d\n\nSinger, 883 F.3d at 446 (quoting Katyle, 637 F.3d at 472). When\n\npartial disclosures tend to corroborate a short-seller report\n\nbased on public information, those disclosures can lend greater\n\n 48\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 49 of 70\n\n\n\ncredence to the notion that the short-seller report did reveal\n\nsomething new to the market. Defeo, 134 F.4th at 164.\n\n Plaintiffs cite the Cautionary 8-K, Executive Leave 8-K, and\n\nBankruptcy Press Release as additional partial disclosures tending\n\nto corroborate the Hindenburg Report. 13 (ECF No. 41 \u00b6 535). But\n\nnone of these alleged disclosures acknowledged fake revenues or\n\nadmitted that the Technology Partner should have been disclosed as\n\na related party. The Cautionary 8-K provisionally communicated to\n\nthe market that investors should not rely on iLE\u2019s previous\n\nfinancial statements during the pendency of the Special\n\nCommittee\u2019s investigation. It explicitly stated that iLE \u201cis\n\nunable to determine whether it must correct financial statements\u201d\n\nand \u201cno conclusions have been reached at this time.\u201d (Id. \u00b6 200).\n\nSuch statements do not \u201creveal[] any truth about [iLE\u2019s] purported\n\nfraud.\u201d Defeo, 134 F.4th at 164. Likewise, it is implausible\n\n\n 13\n In their opposition, Plaintiffs also point to a few other\nalleged disclosures, namely various news reports and iLE\u2019s\nDecember 27, 2024, 8-K filing. (ECF No. 92, at 31\u201332, 34\u201335). To\nbegin, neither were included in Plaintiffs\u2019 list of potential\nqualifying disclosures in the amended complaint. (ECF No. 41 \u00b6\n535). As excerpted, the news articles do no more than report that\niLE\u2019s stock price fell following the release of the Hindenburg\nReport. (Id. \u00b6\u00b6 180-82, 185). The December 27 8-K filing\nannounced that Mr. Chidambaran and Mr. Naqvi had resigned and iLE\nhad self-reported potential violations of law to the Department of\nJustice. (Id. \u00b6\u00b6 214-15). But iLE did not link the resignations\nor self-reported violations to the allegations in the Hindenburg\nReport. While they suggest something in the company is amiss,\nthey do not \u201crelate back\u201d to the specific misrepresentations of\nwhich Plaintiffs complain. Singer, 883 F.3d at 446.\n 49\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 50 of 70\n\n\n\nthat Marcum\u2019s withdrawal of its opinions, the receipt of an SEC\n\nsubpoena, and the placement of Mr. Naqvi on administrative leave\n\n(but simultaneously appointing him Senior Vice President) revealed\n\nany truth to the purported fraud. Instead, such actions are\n\nconsistent with reasonable, ongoing investigation into the\n\nHindenburg Report\u2019s allegations, even if they turned out to be\n\nentirely false. Similarly, the Executive Leave 8-K noted that\n\n\u201c[t]he [i]nvestigation remains ongoing,\u201d (ECF No. 41 \u00b6 206), and\n\nany inference regarding the reason for placing the iLE executives\n\non administrative leave rests on speculation, nothing more, see\n\nTwombly, 550 U.S. at 555. Lastly, the Bankruptcy Press Release\n\nreveals little. Plaintiffs explain in the amended complaint that\n\njust prior to the April 2024 merger, iLE \u201cwas in a dire financial\n\nstate, reporting just $800,000 in cash, $22 million in debt, and\n\nan accumulated deficit of $47.1 million.\u201d (ECF No. 41 \u00b6 67). The\n\nfact that iLE had to file for bankruptcy before the end of the\n\nyear is perhaps unsurprising, especially considering the effect of\n\na short-seller attack, even if entirely unsubstantiated.\n\n In the end, Plaintiffs fall back on perhaps the most logical\n\nargument of all, \u201c[t]he immediate and severe stock price reaction\n\nto the Hindenburg Report.\u201d (ECF No. 92, at 33). Certainly, the\n\nstock price fell severely after the release of the Hindenburg\n\nReport and each subsequent alleged disclosure. But \u201c[t]aken\n\n 50\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 51 of 70\n\n\n\ntogether or separately,\u201d the Hindenburg Report and subsequent\n\nalleged disclosures do not reflect a \u201crevelation of [iLE\u2019s] fraud\n\nas contributing to the decline in share price so much as they\n\ncredit the allegation of fraud as a contributing factor.\u201d Defeo,\n\n134 F.4th at 164. There are various other explanations for a stock\n\nprice decline in the immediate wake of a short-seller report\n\nbesides the report\u2019s allegations being meritorious. 14 Absent any\n\ncorroborating facts of the fraud alleged in the Hindenburg Report,\n\nPlaintiffs\u2019 favored explanation is \u201cmerely consistent with\u201d\n\nDefendants\u2019 liability. Twombly, 550 U.S. at 557. Such\n\n\u201ccorrelation does not equal causation.\u201d Defeo, 134 F.4th at 164\n\n(citation modified). The PSLRA requires more.\n\n\n 14Other observers have noted that allegations in short-seller\nreports can induce panic selling, detached from the underlying\nmerits of the allegations. Katherine McGavin, Short Selling in a\nFinancial Crisis: The Regulation of Short Sales in the United\nKingdom and the United States, 30 Nw. J. Int\u2019l L. & Bus. 201, 223\n(2010). Or the short-seller report might alert formerly disengaged\nor uninformed investors that they had neglected their due diligence\non the company, even if the short-seller\u2019s specific allegations\nare unpersuasive. See Lei Chen, The Informational Role of Short\nSellers: The Evidence from Short Sellers\u2019 Reports on US-Listed\nChinese Firms, 43 J. Bus. Fin. & Acct. 1444 (2016) (noting that\ndue diligence can be poorer when companies go public via reverse\nmerger, especially when the bulk of their operations is overseas).\nHere, upon closer look, investors may well have disbelieved the\nHindenburg Report\u2019s fraud allegations but disliked iLE\u2019s\nsignificant reliance on a single customer/vendor relationship and\nsold their shares. Finally, execution of a short sale itself can\nflood the market with shares and depress the share price. Merritt\nB. Fox, Lawrence R. Glosten & Paul C. Tetlock, Short Selling and\nthe News: A Preliminary Report on an Empirical Study, 54 N.Y. L.\nSch. L. Rev. 645, 652-53 (2009).\n 51\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 52 of 70\n\n\n\n 2. Section 20(a) (Count IV)\n\n Section 20(a) of the Exchange Act imposes liability on anyone\n\nwho \u201ccontrols any person liable under\u201d Section 10(b). 15 U.S.C.\n\n\u00a7 78t(a). Plaintiffs allege that Mr. Chidambaran and Mr. Naqvi\n\nare liable under Section 20(a). (ECF No. 41 \u00b6\u00b6 33, 564). Mr.\n\nChidambaran and Mr. Naqvi move to dismiss Plaintiffs\u2019 Section 20(a)\n\nclaims against them because Section 20(a) liability is derivative\n\nof Section 10(b) liability, and Plaintiffs fail to allege Section\n\n10(b) liability adequately. (ECF Nos. 83-1, at 16; 84-1, at 28\n\nn.4). Plaintiffs do not respond to this argument. Because\n\nPlaintiffs fail to state a claim under Section 10(b) against any\n\ndefendant, their Section 20(a) claims will necessarily be\n\ndismissed, too. Yates, 744 F.3d at 894 n.8 (\u201cBecause the complaint\n\nis legally insufficient with respect to the \u00a7 10(b) claim, the \u00a7\n\n20(a) claim must also fail. (citing Matrix Cap. Mgmt. Fund, LP v.\n\nBearingPoint, Inc., 576 F.3d 172, 192 (4th Cir. 2009))).\n\n B. Securities Act\n\n Plaintiffs also bring a claim for violation of Section 11 of\n\nthe Securities Act against Individual Defendants and Marcum, and\n\na derivative claim for violation of Section 15 of the Securities\n\nAct against Individual Defendants. Individual Defendants all move\n\nto dismiss these claims, and Marcum moves to dismiss the Section\n\n\n\n\n 52\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 53 of 70\n\n\n\n11 claim asserted against it. Their arguments succeed, and Counts\n\nI and II will be dismissed.\n\n 1. Section 11 (Count I)\n\n Section 11 provides a civil cause of action to \u201cany person\n\nacquiring [a] security\u201d from a registration statement that\n\n\u201ccontained an untrue statement of a material fact or omitted to\n\nstate a material fact required to be stated therein or necessary\n\nto make the statements therein not misleading.\u201d 15 U.S.C. \u00a7\n\n77k(a). The standard for assessing materiality is the same as\n\nSection 10(b) and Rule 10b-5. In re Constellation Energy Grp.,\n\nInc. Sec. Litig., 738 F.Supp.2d 614, 633 (D.Md. 2010) (citing\n\nGarber v. Legg Mason, 537 F.Supp.2d 597, 615 (S.D.N.Y. 2008)).\n\nSection 11, however, imposes strict liability and does not require\n\na plaintiff to establish scienter. See Yates, 744 F.3d at 894.\n\n Plaintiffs allege that Individual Defendants and Marcum are\n\nliable under Section 11 for the misrepresentations and omissions\n\nin the financial statements incorporated into the S-1 and S-8\n\nRegistration Statements. (ECF No. 41 \u00b6\u00b6 314\u2013416, 438, 443, 445).\n\nIndividual Defendants and Marcum contend that Plaintiffs lack\n\nstatutory standing because the shares they purchased are not\n\ntraceable to the Registration Statements. (ECF Nos. 80-1, at 26\u2013\n\n30; 82-1, at 9\u201313; 83-1, at 34\u201337; 84-1, at 28\u201334; 85-1, at 12\u2013\n\n16). Alternatively, Mr. Chidambaran argues that Plaintiffs\u2019\n\n 53\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 54 of 70\n\n\n\nSection 11 claim is inadequate because it fails to allege any\n\nmaterial misstatement, (ECF No. 83-1, at 37), and Marcum argues\n\nthat Plaintiffs fail to allege its liability under the Section 11\n\nstandard for statements of opinion set forth in Omnicare, Inc. v.\n\nLaborers Dist. Council Constr. Indus. Pension Fund, 575 U.S. 175\n\n(2015), (ECF No. 80-1, at 15\u201326). Plaintiffs argue that they do\n\nhave statutory standing. (ECF Nos. 90, at 16\u201329; 91, at 34\u201337).\n\nThey also vigorously contest, in their discussion of the Exchange\n\nAct claims, Mr. Chidambaran\u2019s argument that there were no material\n\nmisstatements, (ECF No. 92, at 16\u201324), as well as Marcum\u2019s position\n\nthat the Omnicare standard governs audit opinions, (ECF No. 91, at\n\n20\u201333).\n\n a. Statutory Standing\n\n Plaintiffs allege that their Section 11 claim is asserted \u201con\n\nbehalf of Plaintiffs and other members of the Securities Act\n\nClasses who, during the Class Period, purchased or acquired [iLE]\n\ncommon stock pursuant and/or traceable to the Form S-8 Registration\n\nForm and Form S-1 Registration Form.\u201d (ECF No. 41 \u00b6 438). After\n\nthe S-8 Registration Statement became effective on June 21, 2024,\n\nMr. Leveque purchased 5,000 shares of iLE common stock on the open\n\nmarket on July 25, just over a month later. (Id. \u00b6\u00b6 420, 423).\n\nAfter the S-1 Registration took effect on August 9, Mr. Al Hamid\n\npurchased 500 shares of iLE common stock on the open market on\n\n 54\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 55 of 70\n\n\n\nAugust 20, 2024, 500 shares on August 23, 1,000 shares on August\n\n27, 1,000 shares on August 30, and 1,500 shares on September 16.\n\n(ECF No. 41-1, at 3; see also ECF No. 41 \u00b6 424). Plaintiffs allege\n\nthat \u201c[g]iven the substantial increase in the volume of shares\n\nbeing traded\u201d immediately after the Registration Statements took\n\neffect, \u201cthere is a high probability that the shares Plaintiffs\n\npurchased after these dates were traceable to the Offering\n\nDocuments.\u201d (ECF No. 41 \u00b6 422). Accordingly, Plaintiffs state\n\nthat through discovery they \u201cwill prove that some or all of the\n\nshares [they] purchased on the open market are traceable to the\u201d\n\nRegistration Statements. (Id. \u00b6\u00b6 423, 424). They then detail how\n\nthey plan to trace the chain of title of their shares in discovery.\n\n(Id. \u00b6\u00b6 426\u201336).\n\n Plaintiffs\u2019 allegations are insufficient for statutory\n\nstanding. A plaintiff bringing a Section 11 claim must \u201cplead and\n\nprove that he purchased shares traceable to the allegedly defective\n\nregistration statement.\u201d Slack Techs., LLC v. Pirani, 598 U.S.\n\n759, 770 (2023). Standing allegations are assessed under the\n\npleading requirements of Fed.R.Civ.P. 8(a). Yates, 744 F.3d at\n\n899 (citing In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104,\n\n1107 (9th Cir. 2013)). Plaintiffs cite several cases holding that\n\na plaintiff need only provide the general allegation that the\n\nplaintiff purchased stock pursuant to or traceable to the offering\n\n 55\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 56 of 70\n\n\n\ndocuments. (ECF No. 90, at 18\u201319, 23 n.10, 26). Courts in this\n\ncircuit have rejected that proposition and instead held that, in\n\nlight of Twombly and Iqbal, \u201cthe complaint must set forth facts\n\nplausibly suggesting that plaintiffs\u2019 shares were issued as part\n\nof the relevant offering.\u201d TransEnterix Inv. Grp. v. TransEnterix,\n\nInc., 272 F.Supp.3d 740, 760 (E.D.N.C. 2017); accord Fanucchi v.\n\nEnviva Inc., No. 22-cv-2844-DKC, 2024 WL 3302564, at *18 (D.Md.\n\nJuly 3, 2024). 15 Although the Fourth Circuit has not weighed in\n\non this question in the Section 11 context, the TransEnterix court\n\nunderstood the Fourth Circuit\u2019s opinion in an analogous case to\n\nreject the viability of such general allegations:\n\n In analyzing standing under Section 12(a)(2),\n the Fourth Circuit in Yates . . . h[eld] that\n \u201cusing the \u2018pursuant and/or traceable to\u2019\n language\u2014coupled with sufficient supporting\n facts\u2014can give rise to a plausible inference\n of standing in certain circumstances.\u201d Yates,\n 744 F.3d at 900. The Fourth Circuit held that\n the plaintiffs had not plausibly alleged\n standing because the complaint lacked\n \u201csupporting facts sufficient to push the claim\n into the realm of plausibility.\u201d Id. This\n court concludes that the Fourth Circuit would\n\n 15 Plaintiffs rely on a case from this district, In re Mun.\nMortg. & Equity, LLC, Sec. & Derivative Litig., 876 F.Supp.2d 616\n(D.Md. 2012), which concluded that \u201c[t]he pleading requirement for\nSection 11 standing is satisfied by general allegations that\nplaintiff purchased pursuant to or traceable to [a] false\nregistration statement,\u201d id. at 658 (second alteration in\noriginal) (quoting In re Wachovia Equity Sec. Litig., 753 F.Supp.2d\n326, 373 (S.D.N.Y. 2011)). (ECF No. 90, at 26). That case is\n\u201coutdated\u201d and therefore unpersuasive. Fanucchi, 2024 WL 3302564,\nat *19.\n\n 56\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 57 of 70\n\n\n\n subject allegations of standing under Section\n 11 to the same plausibility analysis.[16]\n\nTransEnterix, 272 F.Supp.3d at 760\u201361. The only two circuit courts\n\nto address this question directly since Twombly and Iqbal have\n\nagreed that something more than a barebones allegation is required.\n\nIn re Ariad Pharms., Inc. Sec. Litig., 842 F.3d 744, 755\u201356 (1st\n\nCir. 2016); Century Aluminum, 729 F.3d at 1107; see also Cupat v.\n\nPalantir Techs., Inc., No. 22-cv-2384, 2025 WL 1141534, at *14\n\n(D.Colo. Apr. 4, 2025) (observing that the United States Courts of\n\nAppeals for the First and Ninth Circuits are \u201cthe only two circuit\n\ncourts that appear to have addressed the issue\u201d). 17 Otherwise,\n\n\n\n 16Plaintiffs contend that Yates is inapposite because Section\n12 requires a \u201cheightened showing for standing\u201d compared to Section\n11. (ECF No. 90, at 25 n.12). While it is true that Section 12\u2019s\npleading requirement is indeed more rigorous because aftermarket\npurchasers may not sue, Yates, 744 F.3d at 899\u2013900 (describing\nSection 11 standing requirements as \u201cmore relaxed\u201d), that does not\nrender the reasoning of Yates inapplicable. Yates properly\nimported the more general teachings of Twombly and Iqbal that\nstatutory standing allegations require \u201cfactual enhancement\u201d and\nmust be more than \u201cmerely consistent with\u201d standing. Id. at 899,\n901 (quoting and citing Iqbal, 556 U.S. at 678). The Yates court\ncited Century Aluminum\u2019s conclusion that supporting facts are not\nalways sufficient, even in the less restrictive Section 11 context.\nId. at 900 (citing Century Aluminum, 729 F.3d at 1107\u201308).\nPlaintiffs\u2019 efforts to distinguish Yates are unavailing.\n\n 17 Plaintiffs point to In re Suprema Specialties, Inc. Sec.\nLitig., 438 F.3d 256 (3d Cir. 2006), as a circuit court upholding\ngeneral allegations as sufficient at the motion-to-dismiss stage.\n(ECF No. 90, at 18\u201319). Indeed, the Third Circuit held that the\n\u201cplaintiffs\u2019 assertions of purchases \u2018in\u2019 and \u2018traceable to\u2019 the\nSuprema stock offerings were sufficient at the pleading stage,\u201d\nand the question of traceability would be resolved in discovery.\n 57\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 58 of 70\n\n\n\nplaintiffs offer \u201cnothing more than a \u2018formulaic recitation\u2019 of\n\n[the traceability] element\u201d of a Section 11 claim. Ariad Pharms.,\n\n842 F.3d at 756 (quoting Twombly, 550 U.S. at 555).\n\n Where, as here, \u201c[a] company has issued shares in multiple\n\nofferings under more than one registration statement, \u2018a greater\n\nlevel of factual specificity will be needed before a court can\n\nreasonably infer that shares purchased in the aftermarket are\n\ntraceable to a particular offering.\u2019\u201d TransEnterix, 272 F.Supp.3d\n\nat 761 (quoting Century Aluminum, 729 F.3d at 1107). \u201cIn that\n\ncase, \u2018the plaintiff must prove that his or her shares were issued\n\nunder the allegedly false or misleading registration statement,\n\nrather than some other registration statement.\u2019\u201d Id. (quoting\n\nAriad Pharms., 842 F.3d at 755) (citing Century Aluminum, 729 F.3d\n\nat 1106). \u201cTo do so, a plaintiff may either prove that the shares\n\nat issue were purchased directly in the secondary offering or, if\n\nthe shares were purchases in the aftermarket, prove that the chain-\n\nof-title for the shares can be traced back to the secondary\n\noffering, starting with the plaintiff\u2019s purchase and ending with\n\nsomeone who purchased directly in the secondary offering.\u201d\n\nFanucchi, 2024 WL 3302564, at *18 (citing TransEnterix, 272\n\nF.Supp.3d at 761). In many instances, the \u201cobvious alternative\n\n\n\nSuprema Specialties, 438 F.3d at 274 n.7. That case, however, was\ndecided before Twombly and Iqbal and is therefore unpersuasive.\n 58\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 59 of 70\n\n\n\nexplanation\u201d to traceability is that the purchased shares \u201ccould\n\ninstead have come from the pool of previously issued shares.\u201d\n\nCentury Aluminum, 729 F.3d at 1108 (quoting Twombly, 550 U.S. at\n\n567). When that is the case, \u201cplaintiffs cannot offer allegations\n\nthat are \u2018merely consistent with\u2019 their favored explanation but\n\nare also consistent with the alternative explanation.\u201d Id.\n\n(quoting Iqbal, 556 U.S. at 678). Rather, they must provide\n\nsomething more, \u201csuch as facts tending to exclude the possibility\n\nthat the alternative explanation is true.\u201d Id. (citing Twombly,\n\n550 U.S. at 554).\n\n Here, Plaintiffs admit in the amended complaint that they\n\npurchased their shares on the open market. So, they must plead\n\nfacts that the shares they purchased are traceable to either the\n\nS-1 or S-8 Registration Statement and that tend to exclude the\n\nalternative explanation that their shares instead trace back to\n\nthe pool of shares that existed prior to and was unaffected by the\n\nRegistration Statements. Beyond the general allegation that their\n\nshares are traceable, Plaintiffs allege that there is a \u201chigh\n\nprobability\u201d their shares are traceable based on certain figures\n\nrelated to the number of total shares outstanding and the number\n\nof shares registered in the Registration Statements, and that they\n\nwill prove that their shares are in fact traceable through\n\ndiscovery. (ECF No. 41 \u00b6\u00b6 422, 425).\n\n 59\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 60 of 70\n\n\n\n Defendants argue that Plaintiffs impermissibly rely on the\n\nprobability that they purchased shares traceable to the\n\nRegistration Statements, rather than the fact that their purchased\n\nshares are so traceable. They echo the conclusion of a district\n\ncourt that recently considered the statistical tracing theory:\n\n\u201c[A] plaintiff must plead facts supporting a plausible inference\n\nthat its shares are traceable, not simply facts supporting a\n\nplausible inference that its shares are probably traceable to the\n\nchallenged registration statement.\u201d Cupat, 2025 WL 1141534, at\n\n*16. The only circuit courts to have considered the statistical\n\ntracing theory at the pleading stage both rejected it. Century\n\nAluminum, 729 F.3d at 1108 (allegations regarding purchase dates\n\nand prices and the trading volume around those dates were\n\ninsufficient); Pirani v. Slack Techs., Inc., 127 F.4th 1183, 1190\n\n(9th Cir. 2025) (explaining that Century Aluminum rejected the\n\nstatistical tracing theory and finding no standing where the\n\nplaintiff raised a \u201cstatistical inference\u201d based on \u201cthe number of\n\nshares he purchased and the fraction of shares on the exchange\n\nthat were registered\u201d); Ariad Pharms., 842 F.3d at 756 (finding\n\nstatutory standing implausible where 15 million registered shares\n\nwere issued when 166 million were already outstanding). 18\n\n\n 18\n The Fifth Circuit addressed the statistical tracing theory\non a Rule 12(b)(1) motion to dismiss for lack of subject matter\njurisdiction and therefore could consider evidence outside the\n 60\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 61 of 70\n\n\n\n Plaintiffs attempt to distinguish these cases on the ground\n\nthat in all of them, either the plaintiffs did not allege, or the\n\ncourts did not believe, that it was possible to prove traceability.\n\n(See ECF No. 90, at 17 (distinguishing Pirani), 24\u201325\n\n(distinguishing Cupat), 27 (distinguishing Century Aluminum), 28\n\n(distinguishing Ariad Pharms.)). In other words, Plaintiffs\n\nbelieve their complaint is different because they do not allege\n\nthat the best they will ever be able to do is give the court a\n\nhigh probability of traceability; rather, they allege they can\n\nprovide certainty. To begin, that distinction of Defendants\u2019\n\nauthorities is questionable. See, e.g., Second Amended Class\n\nAction Complaint \u00b6 237, Cupat, No. 22-cv-2384 (D.Colo. Apr. 4,\n\n2025), ECF No. 92 (\u201cWith discovery, a reliable chain of title can\n\nbe constructed that will allow Plaintiffs to prove they purchased\n\nshares traceable to the Registration Statement[.]\u201d (emphasis\n\nadded)). And even assuming traceability for aftermarket\n\n\n\npleadings. Krim v. pcOrder.com, Inc., 402 F.3d 489, 494\u201397 (5th\nCir. 2005). Accordingly, its discussion did not focus on how the\nstatistical tracing theory relates to pleading requirements.\nAssuming that chain-of-title tracing was impossible, the court\nrejected the proposition that a plaintiff could have standing\nsimply because there was a greater than 90% chance that his shares\nare traceable to the offering. Id. at 496. The court concluded\nthat this theory would confer standing on all aftermarket\npurchasers, despite Section 11\u2019s restriction of standing to those\npurchasers who actually acquired the registered stock. Id. at\n496\u201397.\n\n 61\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 62 of 70\n\n\n\npurchasers is possible in the modern marketplace, 19 Plaintiffs do\n\nnot explain why their belief that future proof is certain rests on\n\nanything other than their probabilistic assessment at this time.\n\nIndeed, if they had other reasons for such a belief, they would\n\nhave included them in their amended complaint. Plaintiffs\u2019 attempt\n\nto mask the central role of probabilities in their theory through\n\nunsubstantiated promises of certainty is nothing more than artful\n\npleading.\n\n Plaintiffs next argue that even if the court construes their\n\ntheory as one of probabilities, their allegations are sufficient\n\nbecause registered shares constituted 87.1% of outstanding shares\n\nand 100% of the \u201cpublic float.\u201d 20 (See, e.g., ECF No. 90, at 21).\n\n\n 19 Elsewhere, Plaintiffs include the following quotation from\na recent paper by two securities law scholars: \u201cMany judges,\nacademics, plaintiffs\u2019 and defense attorneys still subscribe to\nthe myth that it is impossible to trace chain of title for\ncommingled securities in order to establish standing under Section\n11. Unfortunately, this is a misguided, out-of-date assumption\nbecause enhanced data-reporting requirements and modern computing\npower can realistically solve this problem.\u201d (ECF No. 98, at 17\u2013\n18 (quoting John C. Coffee, Jr. & Joshua Mitts, Slack v. Pirani\nand the Future of Section 11 Claims, at 1 (Dec. 1, 2023),\nhttps://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID4650838_code180\n6223.pdf?abstractid=4644888&mirid=1&type=2 [https://perma.cc/\nZU84-G4QP])).\n\n 20 Plaintiffs (and iLE in the S-1 Registration Statement) do\nnot explain their understanding of the term \u201cpublic float.\u201d The\nSEC defines \u201cpublic float\u201d as the product of a company\u2019s total\nshares in the \u201cfloat\u201d and the market price of a share of said\ncompany. 17 C.F.R. \u00a7 229.10(f)(2). Plaintiffs do their math based\non iLE\u2019s representation in the S-1 Registration Statement that the\n100,774,669 shares registered constituted 90.9% of iLE\u2019s public\n 62\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 63 of 70\n\n\n\nThey point to various courts that have held that relatively high\n\nprobabilities are sufficient at the motion-to-dismiss stage. (Id.\n\nat 21\u201322); In re Ubiquiti Networks, Inc. Sec. Litig., 33 F.Supp.3d\n\n1107, 1119 (N.D.Cal. 2014) (finding traceability plausible where\n\nonly 26,000 of 87 million unregistered shares were freely\n\ntradable), aff\u2019d in part, rev\u2019d in part on other grounds, 669\n\nF.App\u2019x 878 (9th Cir. 2016); In re EveryWare Glob., Inc. Sec.\n\nLitig., 175 F.Supp.3d 837, 866 (S.D.Ohio 2016) (finding\n\ntraceability where 46.4% of outstanding shares were registered and\n\nplaintiff purchased 15% of the shares traded on the day of the\n\noffering), aff\u2019d sub nom., IBEW Loc. No. 58 Annuity Fund v.\n\nEveryWare Glob., Inc., 849 F.3d 325 (6th Cir. 2017); In re Coinbase\n\nGlob., Inc. Sec. Litig., No. 22-cv-04915, 2024 WL 4053009, at *19\n\n(D.N.J. Sep. 5, 2024) (finding traceability plausible where 74% of\n\n\nfloat. (ECF Nos. 90-2, at 74; 91, at 34). Because the S-1\nRegistration Statement speaks in terms of the number of shares\nrather than their aggregate value, (ECF No. 90-2, at 74), iLE and\nPlaintiffs do not appear to be using the SEC\u2019s definition of public\nfloat. Other courts have defined \u201cfloat\u201d as \u201cthe percentage of\nshares held by the public, rather than insiders.\u201d Krogman v.\nSterritt, 202 F.R.D. 467, 478 (N.D.Tex. 2001); see also, e.g., In\nre NII Holdings, Inc. Sec. Litig., 311 F.R.D. 401, 410 (E.D.Va.\n2015) (citing Krogman, 202 F.R.D. at 478). In that sense, then,\nthe word \u201cpublic\u201d is redundant. Regarding iLE\u2019s float, for the S-\n1 and S-8 Registration Statements to have registered 100% of the\nfloat, Plaintiffs must allege facts that the two Registration\nStatements registered every share not owned by an insider at the\ntime of Plaintiffs\u2019 purchases. They do not put together the\nnumbers, or even account for insider ownership, in a way that\npermits such a conclusion. Therefore, the float argument is\nunintelligible.\n 63\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 64 of 70\n\n\n\noutstanding shares were registered). Furthermore, they contend\n\nthat those courts that have held otherwise dealt with far lower\n\nprobabilities than are present here. (ECF No. 90, at 24, 27\u201328);\n\nsee Cupat, 2025 WL 1141534, at *17 (52.6% of outstanding shares\n\nregistered); Century Aluminum, 729 F.3d at 1106 (33.3% of\n\noutstanding shares registered); Ariad Pharms., 842 F.3d at 756\n\n(8.4% of outstanding shares registered); TransEnterix, 272\n\nF.Supp.3d at 761 (8% of outstanding shares registered).\n\n Off the bat, Plaintiffs\u2019 numbers appear incomplete, if not\n\nincorrect. Plaintiffs do not assess Mr. Leveque\u2019s standing\n\nseparately from that of Mr. Al Hamid, but it is essential to do\n\nso. Cf. Town of Chester v. Laroe Ests., Inc., 581 U.S. 433, 439\n\n(2017) (holding, in the Article III standing context, that \u201cwhen\n\nthere are multiple plaintiffs[,] [a]t least one plaintiff must\n\nhave standing\u201d). Mr. Leveque purchased before the S-1 Registration\n\nStatement took effect, so his shares can be traceable, if at all,\n\nonly to the S-8 Registration Statement. As of May 14, 2024,\n\nPlaintiffs allege that \u201c[iLE] had 134,313,494 shares of common\n\nstock outstanding.\u201d (ECF No. 41 \u00b6 46). Defendants argue the proper\n\nnumber is at least 157,595,089 shares, which includes 22,624,975\n\nshares issuable upon private and public warrants but not yet issued\n\nas of July 22. (ECF No. 105, at 11; see also ECF No. 90-2, at 2,\n\n\n\n 64\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 65 of 70\n\n\n\n19). 21 The lock-up provisions related to the merger restricted\n\nroughly 103,770,120 shares, or \u201cover 76.9% of [iLE] outstanding\n\nshares,\u201d 22 using Plaintiffs\u2019 preferred total figure. (ECF No. 41\n\n\u00b6 419). Those restrictions were likely to last until April 2025.\n\n(See id. \u00b6 417). Reading between the lines, then, at least\n\n30,543,374 shares were unrestricted and thus freely tradable. On\n\nJune 21, 2024, the S-8 Registration Statement \u201cregistered up to\n\n16,208,318 shares of iLearningEngines common stock.\u201d (Id. \u00b6 139).\n\nMr. Leveque purchased shares on July 25, 2024. (Id. \u00b6 423). From\n\nhere, at least four assumptions need to be made: (1) whether\n\nPlaintiffs\u2019 total outstanding shares figure is correct; (2)\n\nwhether all the registered shares were issued; (3) whether all the\n\nregistered shares had been issued by May 14 to be included in the\n\noutstanding shares figure; and (4) whether all the registered\n\nshares were freely tradable. Drawing all these assumptions in\n\nPlaintiffs\u2019 favor, there were still roughly 30,543,374 shares\n\n\n\n 21\n The court may consider the Form S-1 Registration Statement\nfiled at ECF No. 90-2 on a motion to dismiss because it is a public\nrecord. Moreover, it was filed on June 3 (ECF No. 90, at 12), and\namended for the second time on July 22, (ECF No. 90-2, at 2), so\nthe figures therein are relevant to Mr. Leveque\u2019s July 25\npurchases.\n\n 22The S-1 Registration Statement sets forth a slightly\ndifferent figure of 134,970,114 outstanding shares as of April 16,\n2024, roughly one month earlier. (ECF No. 90-2, at 19).\nPlaintiffs appear to use this total to calculate the 76.9% figure.\n\n 65\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 66 of 70\n\n\n\nfreely tradable on July 25 when Mr. Leveque purchased his 5,000\n\nshares, of which 16,208,318 shares were registered. 23 The highest\n\npossible percentage of freely tradable shares that were\n\nregistered, then, was 53.1%, nearly identical to the percentage in\n\nCupat that Plaintiffs seek to distinguish. Although the 46.4%\n\nfigure in EveryWare was lower, the plaintiff there purchased 15%\n\nof the total shares traded the day the registered shares came\n\navailable, whereas Mr. Leveque purchased an unspecified portion of\n\nthe total shares traded on a day over a month after the S-8\n\nRegistration Statement took effect. In other words, Mr. Leveque\u2019s\n\ntraceability odds appear remarkably lower than Plaintiffs suggest\n\nand lack any factual enhancements.\n\n Plaintiffs\u2019 numbers remain unsettled when it comes to Mr. Al\n\nHamid. On August 9, 2024, the S-1 Registration Statement\n\n\n 23 These assumptions matter. First, Plaintiffs\u2019 outstanding\nshares figure is several months out of date. If it is too low,\nthen the denominator should be larger. Second, iLE\u2019s S-8\nRegistration Statement identifies the registered shares as \u201cissued\nor issuable\u201d pursuant to various equity incentive plans. (ECF No.\n41 \u00b6 137). If not all the registered shares were issued, then\nfewer than 16,208,318 registered shares were available for\npurchase by Mr. Leveque, and therefore the numerator should be\nsmaller. Third, if some or all the registered shares were issued\nafter June 21 but before July 25, then they were not accounted for\nin the total outstanding shares figure of 134,313,494 shares, and\ntherefore the denominator should be larger. On this point, it is\nnotable that there was a large jump in trading volume on June 21\nafter the registration, suggestive of new shares being issued and\nthen sold. (Id. \u00b6 420). Fourth, if some of the registered shares\nwere subject to the merger lock-up provisions, then they were not\nfreely tradable, and the numerator should be smaller.\n 66\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 67 of 70\n\n\n\nregistered \u201cup to 100,774,669 shares of [iLE] common [stock].\u201d\n\n(Id. \u00b6 247). On top of the (up to) 16,208,318 S-8 shares, there\n\nwas a maximum total of 116,982,987 registered shares at the time\n\nMr. Al Hamid began purchasing iLE common stock on August 20.\n\nDividing this figure by the May 14 total outstanding shares figure\n\nof 134,313,494 shares yields the percentage Plaintiffs rely on:\n\n87.1%. (ECF No. 90, at 14). While the court can draw the first\n\nthree assumptions listed above, it cannot draw the fourth\n\nassumption because it is not possible that all 100,774,669 shares\n\nwere freely tradable given the alleged lock-up provisions. It is\n\npossible that a favorable percentage exists for Mr. Al Hamid,\n\nwhether it is below or above 87.1%, but the court will not do the\n\nmath for him.\n\n Even if a favorable percentage exists, however, \u201c[s]imply\n\nalleging that stock is traceable because of a favorable percentage\n\ndoes \u2018not give rise to a reasonable inference that plaintiffs\u2019\n\nshares are traceable.\u2019 Plaintiff[s\u2019] shares could have come from\n\nthe offering[s], or alternatively, could not have.\u201d Doherty v.\n\nPivotal Software, Inc., No. 19-cv-3589, 2019 WL 5864581, at *10\n\n(N.D.Cal. Nov. 8, 2019) (quoting and citing Century Aluminum, 729\n\nF.3d at 1108). Plaintiffs\u2019 allegations are \u201c\u2018merely consistent\n\nwith\u2019 their favored explanation.\u201d Century Aluminum, 729 F.3d at\n\n1108 (quoting Iqbal, 556 U.S. at 678). Rather, \u201c[s]omething more\n\n 67\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 68 of 70\n\n\n\nis needed,\u201d id., such as purchase of the shares within a day of\n\noffering, Coinbase, 2024 WL 4053009, at *19; EveryWare, 175\n\nF.Supp.3d at 864; Mun. Mortg., 876 F.Supp.2d at 657, 658.\n\nPlaintiffs purchased their shares weeks to months after the\n\nRegistration Statements. They allege no additional facts that\n\nwould nudge traceability into the realm of plausibility.\n\n b. Material Misrepresentations or Omissions\n\n Mr. Chidambaran also moves to dismiss Plaintiffs\u2019 Section 11\n\nclaims because they fail to allege any material misrepresentation.\n\n(ECF No. 83-1, at 37). Because the court has already concluded\n\nabove that Plaintiffs have not adequately alleged any material\n\nmisrepresentation or omission, this deficiency serves as an\n\nadditional basis of dismissal of the Section 11 claims against all\n\ndefendants. 24\n\n 2. Section 15 (Count II)\n\n Section 15 of the Securities Act imposes liability on anyone\n\nwho \u201ccontrols any person liable under\u201d Section 11. 15 U.S.C. \u00a7\n\n77o(a). Plaintiffs allege that Individual Defendants are liable\n\nunder Section 15. (ECF No. 41 \u00b6\u00b6 40, 457). Individual Defendants\n\nall move to dismiss Plaintiffs\u2019 Section 15 claims against them\n\n\n\n 24 Given that lack of traceability and material\nmisrepresentation serve as two separate grounds for dismissal, the\ncourt need not reach Marcum\u2019s additional argument that Plaintiffs\nhave not stated a claim against it under Omnicare.\n 68\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 69 of 70\n\n\n\nbecause Section 15 liability is derivative of Section 11 liability,\n\nand Plaintiffs fail to allege Section 11 liability adequately.\n\n(ECF Nos. 82-1, at 13; 83-1, at 35; 84-1, at 34; 85-1, at 17).\n\nPlaintiffs do not contest that Section 15 liability attaches only\n\nif there is an underlying violation of Section 11. (ECF No. 90,\n\nat 29). Because Plaintiffs fail to state a claim under Section 11\n\nagainst any defendant, their Section 15 claims will necessarily be\n\ndismissed, too. Emps.\u2019 Ret. Sys. v. Macrogenics, Inc., 61 F.4th\n\n369, 393\u201394 (4th Cir. 2023); Cozzarelli, 549 F.3d at 630.\n\n C. Motion to Lift the Stay on Discovery\n\n While the motions to dismiss were still in the briefing stage,\n\nPlaintiffs moved for a partial lift of the discovery stay that the\n\nPSLRA imposes, perhaps anticipating that their traceability\n\nallegations were insufficient. (ECF No. 93). The PSLRA mandates\n\nthat \u201call discovery and other proceedings shall be stayed during\n\nthe pendency of any motion to dismiss, unless the court finds upon\n\nthe motion of any party that particularized discovery is necessary\n\nto preserve evidence or to prevent undue prejudice to that party.\u201d\n\n15 U.S.C. \u00a7 78u-4(b)(3)(B). Through particularized discovery,\n\nPlaintiffs planned to try to reconstruct the chain of title of\n\ntheir shares by issuing subpoenas to the Depository Trust Company,\n\nContinental Stock Transfer & Trust Company (iLE\u2019s transfer agent),\n\nand, if necessary, a limited number of broker-dealers and the\n\n 69\n\f Case 8:24-cv-02900-DKC Document 107 Filed 03/20/26 Page 70 of 70\n\n\n\ncompany that ultimately purchased iLE out of bankruptcy. 25 (ECF\n\nNo. 93-1, at 9\u201310). Defendants characterize Plaintiffs\u2019 proposed\n\ndiscovery as an impermissible \u201cfishing expedition.\u201d (ECF Nos. 94,\n\nat 6; 95, at 1). Although Defendants\u2019 characterization of\n\nPlaintiffs\u2019 proposed discovery is dubious, Plaintiffs\u2019 motion is\n\nfutile because they fail to allege a material misrepresentation\n\nadequately. The motion is moot and will be denied.\n\nIV. Conclusion\n\n For the foregoing reasons, all five motions to dismiss will\n\nbe granted and the motion to lift the stay on discovery will be\n\ndenied. A separate order will follow.\n\n\n\n /s/\n DEBORAH K. CHASANOW\n United States District Judge\n\n\n\n\n 25\n Discovery would not necessarily involve so many parties.\nA recent paper, mentioned previously, notes that the Financial\nIndustry Regulatory Authority (FINRA) maintains a Consolidated\nAudit Trail of all stock trades. Coffee & Mitts, supra note 19,\nat 21. The paper asserts that plaintiffs thus need only subpoena\nFINRA, \u201cremov[ing] the need for [p]laintiffs to subpoena every\nindividual broker-dealer whose accounts at one time held the\nsecurities in question.\u201d Id.\n 70\n\f","ocr_status":2,"date_upload":"2026-04-16T01:57:17.153824-07:00","document_number":"107","attachment_number":null,"pacer_doc_id":"093015611767","is_available":true,"is_free_on_pacer":true,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2026-03-20T23:36:52.103234-07:00","date_modified":"2026-06-10T04:11:10.813818-07:00","date_filed":"2026-03-20","time_filed":null,"entry_number":107,"recap_sequence_number":"2026-03-20.001","pacer_sequence_number":314,"description":"MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 3/20/2026. (sat, Chambers)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475318/","id":447475318,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228768/","id":462228768,"tags":[],"absolute_url":"/docket/69233925/106/walker-v-chidambaran/","date_created":"2025-12-17T07:51:12.076170-08:00","date_modified":"2026-05-18T23:59:56.220367-07:00","sha1":"aa0d9bb683cf720f9459981fafabdb4f78ffae9d","page_count":4,"file_size":153538,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.106.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.106.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 106 Filed 11/17/25 Page 1 of 4\n\n\n\n IN THE UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n\n\n DANNY WALKER, Individually and on Civil Action No. 8:24-cv-02900-DKC\n Behalf of All Others Similarly Situated,\n Hon. Deborah K. Chasanow\n Plaintiff,\n\n v.\n\n ILEARNINGENGINES, INC., et al.,\n\n Defendants.\n\n\n DEFENDANT MARCUM LLP\u2019S NOTICE OF SUPPLEMENTAL AUTHORITY\n IN SUPPORT OF MOTION TO DISMISS THE AMENDED CLASS ACTION\n COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS\n\n Defendant Marcum LLP (\u201cMarcum\u201d) respectfully submits the attached opinion, which was\n\nissued on November 10, 2025 in Hunt v. PricewaterhouseCoopers LLP (PwC), No. 24-3568, ---\n\nF.4 th ----, 2025 WL 3137726 (9th Cir. Nov. 10, 2025). The Ninth Circuit\u2019s opinion constitutes the\n\nsecond circuit court opinion to confirm the applicability of the pleading requirements of Omnicare,\n\nInc. v. Laborers Dist. Council Const. Indus. Pension Fund, 575 U.S. 175 (2015), to a Section 11\n\nclaim brought against an independent accountant. In affirming Hunt v. Bloom Energy Corp., 2021\n\nWL 4461171 (N.D. Cal. Sept. 29, 2021) (on which Marcum relied in its briefing, see, e.g., Dkt.\n\n80-1 (\u201cMTD\u201d) at 10\u201311; Dkt. 102 (\u201cReply\u201d), at 2, 4, 6)), the Ninth Circuit held without\n\nqualification that plaintiffs asserting Section 11 claims against an auditor must \u201cchallenge[]\n\n[auditors] based on their audit opinion as Omnicare outlines.\u201d Ex. A at 18. See also id. (quoting\n\nOmnicare, 575 U.S. at 186, 194) (noting that audit opinions give rise to Section 11 liability only\n\nwhen a plaintiff plausibly pleads \u201c(1) \u2018the speaker did not hold the belief she professed\u2019; (2) \u2018the\n\nsupporting fact[s] [the speaker] supplied were untrue\u2019; or (3) the opinion omits facts \u2018whose\n\nomission makes the opinion statement at issue misleading.\u2019\u201d). The Hunt court also rejected\n 1\n\f Case 8:24-cv-02900-DKC Document 106 Filed 11/17/25 Page 2 of 4\n\n\n\noutright the notion that Section 11 applies strict liability to auditors: \u201cAccountants do not, \u2018by\n\nvirtue of auditing a company\u2019s financial statements, somehow make, own or adopt the assertions\n\ncontained therein.\u2019\u201d Ex. A at 20 (quoting Deephaven Priv. Placement Trading, Ltd. v. Grant\n\nThornton & Co., 454 F.3d 1168, 1174 (10th Cir. 2006)).\n\n In so holding, the Ninth Circuit joined the Second Circuit (Querub v. Hong Kong, 649 F.\n\nApp\u2019x 55 (2d Cir. 2016)), in accepting Marcum\u2019s argument for dismissal. 1 Both courts have now\n\nsquarely held that Marcum\u2019s analysis of Section 11 is the correct one. See Ex. A at 18; see also\n\nQuerub, 649 F. App\u2019x at 58 (\u201cAudit reports, labeled \u2018opinions\u2019 and involving considerable\n\nsubjective judgment, are statements of opinion subject to the Omnicare standard for Section 11\n\nclaims.\u201d). What\u2019s more\u2014the Hunt opinion also implicitly overrules the sole post-Omnicare\n\nauthority Plaintiffs cite on the question of Omnicare\u2019s applicability to Section 11 claims against\n\nan auditor. Compare Special Situations Fund III QP, L.P. v. Marrone Bio Innovations, Inc., 243\n\nF. Supp. 3d 1109, 1118 (E.D. Cal. 2017) (declining to adopt the reasoning in Querub because it\n\nwas (1) \u201cwithout precedential value \u2026 not binding on this Court[, and it] did not consider the\n\npertinent question here: whether an audit report included in a registration statement constitutes a\n\ncertification of the audited financial statements.\u201d) with Ex. A at 1, 24 (binding Ninth Circuit\n\nprecedent; holding that \u201can accountant\u2019s certification of financial statements is nothing more than\n\nan opinion. \u2026 Omnicare protects opinions from liability unless one of the three exceptions is\n\nmet.\u201d). See also Reply at 6\u20137 (discussing Marrone); Dkt. 91 (\u201cOpp.\u201d) at 13.\n\n The Hunt Court\u2019s analysis is squarely on point for purposes of Marcum\u2019s Motion to\n\nDismiss. An auditor who does no more than issue an opinion on underlying financial statements\n\n\n\n1\n See, e.g., MTD at 11\u201312; Reply at 5\u20137. Lead Plaintiffs sought to minimize the impact of Querub as an unpublished\nopinion. Even if that distinction had merit, which Marcum disputes, see Reply at 6 n.3, Hunt is not subject to the same\nchallenge.\n\n 2\n\f Case 8:24-cv-02900-DKC Document 106 Filed 11/17/25 Page 3 of 4\n\n\n\nis not strictly liable for material misrepresentations therein; a plaintiff who seeks to bring a claim\n\nagainst such an auditor must plausibly do so in accordance with Omnicare\u2019s framework. See Ex.\n\nA at 18-19. As Plaintiffs tacitly conceded in their opposition, see Opp. at 3, they have not done\n\nso. Marcum\u2019s motion to dismiss should be granted with prejudice. See MTD at 12\u201316; Reply at\n\n2\u20135.\n\n\n\nDated: November 17, 2025 Respectfully submitted,\n\n /s/ Shirlethia V. Franklin\n Shirlethia V. Franklin\n D. Md. Bar No. 28662\n JONES DAY\n 51 Louisiana Avenue, N.W.\n Washington, D.C. 20001\n T: 202.879.3892\n E: sfranklin@jonesday.com\n\n Adrienne Ferraro Mueller\n Jacob J. Thackston\n Admitted Pro Hac Vice\n JONES DAY\n 901 Lakeside Ave.\n Cleveland, OH 44114\n T: 216.586.3939\n E: afmueller@jonesday.com\n jthackston@jonesday.com\n\n Samir Kaushik\n Admitted Pro Hac Vice\n JONES DAY\n 2727 North Harwood Street, Suite 500\n Dallas, Texas 75201-1515\n T: 214.220.3939\n E: skaushik@jonesday.com\n\n Attorneys for Defendant Marcum LLP\n\n\n\n\n 3\n\f Case 8:24-cv-02900-DKC Document 106 Filed 11/17/25 Page 4 of 4\n\n\n\n CERTIFICATE OF SERVICE\n\n I hereby certify that on November 17, 2025, I electronically filed the foregoing Motion to\n\nDismiss by using the CM/ECF system which will send a notice of electronic filing to all counsel\n\nor parties of record.\n\n\n\n /s/ Shirlethia V. Franklin\n Shirlethia V. Franklin\n\n\n\n\n 4\n\f","ocr_status":2,"date_upload":"2025-12-17T07:51:46.845254-08:00","document_number":"106","attachment_number":null,"pacer_doc_id":"093015309618","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228776/","id":462228776,"tags":[],"absolute_url":"/docket/69233925/106/1/walker-v-chidambaran/","date_created":"2025-12-17T07:51:39.382681-08:00","date_modified":"2026-05-22T08:54:31.693566-07:00","sha1":"c570641abb1a89f9fce3172711026c73ab6805d8","page_count":28,"file_size":414776,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.106.1.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.106.1.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 1 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 1 of 2\n\n\n\n FOR PUBLICATION\n\n UNITED STATES COURT OF APPEALS\n FOR THE NINTH CIRCUIT\n\n JAMES EVERETT HUNT; JUAN No. 24-3568\n RODRIGUEZ; KURT VOUTAZ;\n D.C. No.\n JOEL WHITE; ANDREW AUSTIN;\n 4:19-cv-02935-\n SCOTT KLINE; RYAN FISHMAN,\n HSG\n Plaintiffs - Appellants,\n\n v. OPINION\n\n PRICEWATERHOUSECOOPERS\n LLP (PWC),\n\n Defendant - Appellee,\n\n and\n\n BLOOM ENERGY\n CORPORATION, JP MORGAN\n SECURITIES, LLC, MORGAN\n STANLEY SMITH BARNEY, LLC,\n CREDIT SUISSE SECURITIES\n (USA) LLC, KEYBANC CAPITAL\n MARKETS INC., MERRILL\n LYNCH, PIERCE, FENNER &\n SMITH INCORPORATED,\n ROBERT W. BAIRD & CO.\n INCORPORATED, COWEN AND\n COMPANY, LLC, HSBC\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 2 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 2 of 2\n 2 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n SECURITIES (USA) INC.,\n OPPENHEIMER & CO. INC.,\n RAYMOND JAMES &\n ASSOCIATES, INC.,\n\n Defendants.\n\n Appeal from the United States District Court\n for the Northern District of California\n Haywood S. Gilliam, Jr., District Judge, Presiding\n\n Argued and Submitted June 11, 2025\n San Francisco, California\n\n Filed November 10, 2025\n\n Before: Milan D. Smith, Jr. and N. Randy Smith, Circuit\n Judges, and Douglas L. Rayes, District Judge. *\n\n Opinion by Judge N. Randy Smith\n\n\n\n\n *\n The Honorable Douglas L. Rayes, United States District Judge for the\n District of Arizona, sitting by designation.\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 3 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 3 of 2\n HUNT V. PRICEWATERHOUSECOOPERS LLP 3\n\n\n SUMMARY **\n\n\n Securities Law\n\n The panel affirmed the district court\u2019s dismissal of\n claims under \u00a7 11 of the Securities Act of 1933 against\n PriceWaterhouseCoopers LLP (PwC), an outside accountant\n for Bloom Energy Corp., based on an audit opinion on\n Bloom Energy\u2019s financial statements included with its\n registration statement for an initial public stock offering.\n At issue was the manner in which Bloom Energy, a\n designer, manufacturer, and seller of fuel-cell servers that\n converted natural gas or biogas into electricity for on-site\n power generation, accounted for Managed Services\n Agreements (MSAs), a type of sale-leaseback\n arrangement. On appeal, plaintiffs challenged the alleged\n incorrect statements of revenue, net loss, and net loss per\n share in Bloom Energy\u2019s 2017 financial statement, due to the\n improper treatment of MSAs as operating rather than capital\n leases.\n The panel held that under \u00a7 11, an independent\n accountant is not strictly liable for the information in a\n registration statement or a client\u2019s financial statements\n simply because the accountant certified the financial\n statements prepared by the issuer. Instead, under 15 U.S.C.\n \u00a7 77k(b)(3)(B)(i), an independent accountant certifies the\n underlying statements without liability if, \u201cafter reasonable\n investigation, [the accountant has a] reasonable ground to\n believe and did believe, at the time such part of the\n\n **\n This summary constitutes no part of the opinion of the court. It has\n been prepared by court staff for the convenience of the reader.\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 4 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 4 of 2\n 4 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n registration because effective, that the statements therein\n were true and that there was no omission to state a material\n fact required to be stated therein or necessary to make the\n statements therein not misleading.\" Under Omnicare, Inc. v.\n Laborers Dist. Council Const. Indus. Pension Fund, 575\n U.S. 175 (2015), an independent accountant is also protected\n from liability for its opinions (not factual statements) made\n about those underlying documents as long as the opinion was\n sincerely held.\n The panel held that PwC was not liable as a preparer of\n Bloom Energy\u2019s financial statements. PwC also was not\n liable as a certifier of Bloom Energy\u2019s financial statements\n because PwC\u2019s audit opinion did not make any material\n misstatements of fact or omissions but rather was merely a\n statement of opinion based upon the subjective judgment of\n the MSA classification. The panel held that the district\n court\u2019s decision also must be affirmed because, under\n Omnicare, Bloom Energy\u2019s financial statements regarding\n classification of the MSAs were opinions.\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 5 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 5 of 2\n HUNT V. PRICEWATERHOUSECOOPERS LLP 5\n\n\n COUNSEL\n\n Nicholas I. Porritt (argued), Levi & Korsinsky LLP,\n Washington, D.C.; Adam M. Apton, Levi & Korsinsky LLP,\n San Francisco, California; Reed R. Kathrein and Lucas\n Gilmore, Hagens Berman Sobol Shapiro LLP, Berkeley,\n California; Kevin K. Green, Hagens Berman Sobol Shapiro\n LLP, San Diego, California; for Plaintiffs-Appellants.\n E. Joshua Rosenkranz (argued), Eliza Lehner, and Jodie C.\n Liu, Orrick Herrington & Sutcliffe LLP, New York, New\n York; Edward H. Williams II, Orrick Herrington & Sutcliffe\n LLP, Washington, D.C.; Lisa Bugni, King & Spalding LLP,\n San Francisco, California; for Defendant-Appellee.\n Linda T. Coberly, Winston & Strawn LLP, Chicago, Illinois;\n Lauren Gailey, Winston & Strawn LLP, Washington, D.C.;\n Janet Galeria and Tyler S. Badgley, U.S. Chamber Litigation\n Center, Washington, D.C.; Kevin Carroll, Securities\n Industry and Financial Markets Association, Washington,\n D.C.; for Amici Curiae the Chamber of Commerce of the\n United States of America and the Securities Industry and\n Financial Markets Association.\n David M. Parker and Elizabeth K. Brightwell, Hunton\n Andrews Kurth LLP, Richmond, Virginia; Matthew P.\n Bosher, Hunton Andrews Kurth LLP, Washington, D.C.; for\n Amicus Curiae American Institute of Certified Public\n Accountants.\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 6 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 6 of 2\n 6 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n OPINION\n\n N.R. SMITH, Circuit Judge:\n\n Under \u00a7 11 of the Securities Act of 1933, an independent\n accountant is not strictly liable for the information in a\n Registration Statement or a client\u2019s financial statements\n simply because the accountant certified the financial\n statements prepared by the issuer. Instead, an independent\n accountant certifies the underlying statements without\n liability if, \u201cafter reasonable investigation, [the accountant\n has a] reasonable ground to believe and did believe, at the\n time such part of the registration statement became effective,\n that the statements therein were true and that there was no\n omission to state a material fact required to be stated therein\n or necessary to make the statements therein not misleading.\u201d\n 15 U.S.C. \u00a7 77k(b)(3)(B)(i). Moreover, an independent\n accountant is also protected from liability for its opinions\n (not factual statements) made about those underlying\n documents as long as the opinion was sincerely held. See\n Omnicare, Inc. v. Laborers Dist. Council Const. Indus.\n Pension Fund, 575 U.S. 175, 187\u201388 (2015).\n FACTUAL BACKGROUND\n Bloom Energy designs, manufactures, sells, and (in\n some instances) installs fuel-cell servers (Energy Servers)\n that convert natural gas or biogas into electricity for on-site\n power generation.\n This case arises because of the manner in which Bloom\n Energy accounted for a type of contract that it used in\n connection with these Energy Servers; such contracts are\n known as Managed Services Agreements (MSA). MSAs are\n a type of sale-leaseback arrangement, where Bloom Energy\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 7 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 7 of 2\n HUNT V. PRICEWATERHOUSECOOPERS LLP 7\n\n\n first sells the Energy Server to a bank and then leases it back\n from the bank. Bloom Energy then subleases the Energy\n Server to a customer, whereby Bloom Energy becomes the\n lessee (from the bank) and the lessor (to the customer) of the\n Energy Server. At the time of the lease to the customer,\n Bloom Energy also enters into another contract with the\n customer to service the Energy Server (from which customer\n payment for the service, Bloom Energy pays its lease to the\n bank and generates income for servicing the Energy Server).\n Bloom Energy can account for these types of sale-\n leaseback arrangements in either of two ways: (1) as an\n \u201coperating lease,\u201d accounting for the revenue it earns when\n it sells the Energy Server to the bank; or (2) as a \u201ccapital\n lease,\u201d accounting for the revenue it earns when it gets the\n payment from the customer over the course of the service\n agreement with the customer. MSAs are classified as either\n an operating lease or a capital lease based on specific\n criteria. A capital lease is recognized if it meets any of the\n following criteria: (1) ownership is transferred to the lessee\n by the end of the lease term; (2) the lease contains a bargain\n purchase option; (3) the lease term is at least 75% of the\n property\u2019s estimated remaining economic life; or (4) the\n present value of the minimum lease payments is 90% or\n more of the fair value of the leased property. See Accounting\n Standards Codification (ASC) 840-10-25-1 1. If none of these\n\n 1\n ASC 840-10-25-1 was superseded by Topic 842 in the\n Accounting Standards Update 2016-02. See\n https://asc.fasb.org/1943274/1855311/GUID-4073757B-B23C-4931-\n ABE0-8A1DF61EAFEA ((last visited Oct. 29, 2025). Lease\n classification, as of February 25, 2016, can be found at ASC 842-10-25-\n 2. This section does not use 75% as a benchmark but rather a majority\n standard (ASC 842-10-25-2(c): \u201c[t]he lease term is for the major part of\n the remaining economic life of the underlying asset\u201d). However, the\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 8 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 8 of 2\n 8 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n criteria are met, the MSA is classified as an operating lease.\n Under an operating lease, an Energy Server would not be\n recognized as an asset on Bloom Energy\u2019s books (because\n the Energy Server was sold to the bank); instead, lease\n payments to the bank would be recorded as an expense and\n payments from the customer would be recorded as revenue.\n In contrast, a capital lease would be recorded on Bloom\n Energy\u2019s balance sheet by recognizing the Energy Server as\n an asset with a corresponding liability to the bank.\n Initially, Bloom Energy accounted for MSAs as\n operating leases. Bloom Energy determined that the MSAs\n were best classified as operating leases because the Energy\n Servers were not \u201cintegral equipment,\u201d as the cost to remove\n and relocate an Energy Server would not exceed 10% of its\n original installation value. Bloom Energy also determined\n that its MSAs failed to meet the capital lease criteria because\n Bloom Energy determined that Energy Servers had useful\n lives of 15\u201321 years, with typical MSAs for each Energy\n Server having a lease term of 6\u201310 years\u2014less than 75% of\n the estimated life, thus not triggering capital lease treatment.\n In 2018 (after more than 15 years as a private company),\n Bloom Energy decided to go public. To go public, it had to\n conduct an initial public stock offering (IPO) and file a\n Registration Statement with the Securities and Exchange\n Commission (SEC). To prepare the materials for the IPO and\n Registration Statement, Bloom Energy had already prepared\n\n February 2016 amendments were not effective for public business\n entities until fiscal years beginning after December 15, 2018, and the\n parties and the district court relied upon ASC 840-10-25-1. Moreover,\n the district court did not find the ASC to be dispositive: \u201cASC 840-10-\n 10-1 merely states the \u2018objectives\u2019 underlying the more detailed\n provisions that follow,\u201d and \u201c[d]espite Plaintiffs\u2019 urging, it does not\n appear to provide the definitive method for classifying a lease.\u201d\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 9 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 9 of 2\n HUNT V. PRICEWATERHOUSECOOPERS LLP 9\n\n\n its own financial statements for 2016, 2017, and the first\n quarter of 2018. It also retained responsibility for preparing\n all other financial statements for the IPO and Statement.\n However, Bloom Energy engaged PricewaterhouseCoopers\n LLP (PwC), as an outside accountant, to audit its 2016 and\n 2017 financial statements, so it could include that audit\n opinion with the Registration Statement.\n PwC was hired to express an opinion on Bloom Energy\u2019s\n 2016 and 2017 financial statements based on audits. In its\n audits, PwC would investigate the business, operations,\n financial statements, and accounting of Bloom Energy.\n Those audits included \u201cperforming procedures to assess the\n risks of material misstatement of the consolidated financial\n statements, whether due to error or fraud, and performing\n procedures that respond to those risks\u201d and \u201cexamining, on\n a test basis, evidence regarding the amounts and disclosure\n of consolidated financial statements.\u201d It also \u201cconducted [its]\n audits of the[] consolidated financial statements in\n accordance with standards of the\u201d Public Company\n Accounting Oversight Board (PCAOB). 2\n Following the audit, PwC concluded:\n\n In our opinion, the consolidated financial\n statements present fairly, in all material\n respects, the financial position of the\n Company as of December 31, 2017 and\n December 31, 2016, and the result of its\n operations and its cash flows for each of the\n two years in the period ended December 31,\n 2017 in conformity with accounting\n\n 2\n Again, PwC did not prepare the 2016 and 2017 financial statements\n because Bloom Energy\u2019s management had prepared them.\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 10 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 10 of\n 10 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n principles generally accepted in the United\n States of America.\n\n PwC\u2019s audit did not identify any issue with Bloom Energy\n classifying the MSAs as operating leases under Generally\n Accepted Accounting Principles (GAAP) or Generally\n Accepted Auditing Standards (GAAS).\n When Bloom Energy prepared the Registration\n Statement, it included the PwC audit opinion. The\n Registration Statement also described an MSA and how the\n sale-leaseback arrangement operated. The Statement\n expressly stated an MSA may be \u201cclassified as a capital lease\n or an operating lease\u201d; that Bloom Energy \u201c[d]etermine[d] if\n the leaseback [was] classified as a capital lease or an\n operating lease,\u201d and stated that its MSA \u201care classified as\n operating leases\u201d; and it explained that this classification\n affected Bloom Energy\u2019s recognition of revenue and\n liabilities.\n Its Registration Statement registered over 20.7 million\n Bloom Energy shares for sale. These shares were sold in the\n IPO at $15 per share and began trading on July 25, 2018.\n Bloom Energy received proceeds of $284.3 million, net of\n underwriting discounts, commissions, and estimated\n offering costs.\n In 2019, Bloom Energy reviewed the accounting for an\n MSA that had \u201cclosed on November 27, 2019 under an MSA\n financing . . . , [wherein] PwC identified an issue it had not\n previously identified related to the accounting for the\n Impacted MSA transactions.\u201d Based upon this review,\n Bloom Energy reevaluated its MSAs and determined the\n MSAs should be treated as capital leases (loans from the\n bank rather than sales). Thus, Bloom Energy (with the\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 11 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 11 of\n HUNT V. PRICEWATERHOUSECOOPERS LLP 11\n\n\n advice of its Audit Committee and PwC) reclassified certain\n MSAs as capital leases. To reflect these new classifications,\n Bloom Energy revised its 2016 and 2017 financial\n statements, and restated its 2018 and 2019 financial\n statements. 3 The next day, the price of Bloom Energy stock\n dropped by 13.8%.\n PROCEDURAL BACKGROUND\n In 2019, Plaintiffs (consisting of former and current\n stockholders) filed a class action against Bloom Energy, nine\n of its officers and directors, and ten underwriters of the IPO.\n PwC was not a named defendant in the class action\n complaint. The complaint asserted claims under \u00a7 10(b) and\n \u00a7 11 of the Securities Exchange Act of 1934, based on\n alleged misstatements Bloom Energy made from 2018 to\n 2019 and alleged misstatements in the Registration\n Statement. None of the allegations involved PwC or the\n classification of MSAs.\n A year into the litigation, Bloom Energy announced the\n restatements of the 2018 and 2019 financial statements that\n it deemed material and revisions of the 2016 and 2017\n financial statements that it deemed immaterial. After the\n amendment, Plaintiffs amended their complaint to add\n allegations, under \u00a7 10(b) and \u00a7 11, regarding the\n classifications of the MSAs. As a part of that amendment,\n PwC was added as a defendant. Plaintiffs alleged that PwC\n was liable under \u00a7 11 for the actionable statements and\n omissions in the Registration Statement because it purported\n to have \u201cconducted an adequate and reasonable investigation\n\n 3\n A restatement corrects a material error in prior financial statements,\n whereas a revision corrects an error that is \u201cimmaterial to the prior year\n financial statements.\u201d SEC Staff Accounting Bulletin No. 108, 71 Fed.\n Reg. 54,580, 54,582 (Sept. 18, 2006).\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 12 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 12 of\n 12 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n into the business, operations, financial statements, and\n accounting of Bloom Energy.\u201d\n All Defendants moved to dismiss all claims against\n them. PwC moved to dismiss the \u00a7 11 claims against it. The\n district court partially dismissed the claims against the other\n defendants and dismissed the claims against PwC.\n As to PwC, the court found that PwC\u2019s audit opinion was\n an inactionable opinion under Omnicare; that the PwC\n opinion said only that the financial statements \u201cpresent\n fairly, in all material respects, the financial position of the\n Company . . . in conformity [with GAAP]\u201d; that \u201cthe\n financial statements are the responsibility of [Bloom\n Energy\u2019s] management\u201d; that PwC only had the\n responsibility \u201cto express an opinion on [Bloom Energy\u2019s]\n consolidated financial statements based on [its] audits\u201d; that\n the classification of \u201cMSAs are complex\u201d; and thus, PwC\n was not liable. The district court also rejected Plaintiffs\u2019\n argument that PwC\u2019s opinions contained within them, as\n \u201cembedded statements of fact,\u201d the financial statements\n prepared by Bloom Energy. Lastly, the district court held\n that PwC\u2019s certification of the financial statements was not\n a guarantee that they were accurate but rather was limited to\n the conclusions of the audit opinion.\n After the district court ruled on Defendants\u2019 motions to\n dismiss, Plaintiffs settled their claims with all Defendants\n except PwC. Following the settlement, the district court\n entered a final judgment, dismissing all claims against PwC.\n However, the district court granted Plaintiffs leave to amend\n as to PwC, but Plaintiffs conceded that an amendment would\n be futile.\n Instead, Plaintiffs filed this timely appeal, challenging\n the alleged incorrect statements of revenue, net loss, and net\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 13 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 13 of\n HUNT V. PRICEWATERHOUSECOOPERS LLP 13\n\n\n loss per share in Bloom Energy\u2019s 2017 financial statement\n (due to the improper treatment of the MSAs as operating\n rather than capital leases). 4\n STANDARD OF REVIEW\n We review de novo a district court\u2019s order granting a\n motion to dismiss for failure to state a claim. Dunn v. Castro,\n 621 F.3d 1196, 1198 (9th Cir. 2010). We must accept\n sufficient factual allegations in the complaint as true and\n construe them in the light most favorable to the plaintiff. See\n Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); In re Gilead\n Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).\n ANALYSIS\n Under Omnicare, an accountant\u2019s opinion is actionable\n under \u00a7 11 if: (1) \u201cthe speaker did not hold the belief she\n professed\u201d and the supporting fact she supplied is\n objectively untrue; (2) the opinion contains false \u201cembedded\n statements of fact\u201d; or (3) the opinion omits facts \u201cwhose\n omission makes the opinion statement at issue misleading to\n a reasonable person reading the statement fairly and in\n context.\u201d 575 U.S. at 185\u201386, 194. Before the district court,\n Plaintiffs focused their arguments primarily on the assertion\n that PwC\u2019s audit opinion contained material\n\n 4\n In their opening brief, Plaintiffs admit that they do not challenge the\n dismissal of claims arising from their allegations concerning: (1) the\n alleged incorrect disclosure in Bloom Energy\u2019s 2017 financial\n statements of contingent liabilities arising from MSAs; or (2) the alleged\n misrepresentations contained in PwC\u2019s audit opinion on Bloom Energy\n 2017 financial statements, meaning they do not challenge the district\n court\u2019s dismissal of claims that the audit opinion itself was false or\n misleading apart from its certification of the financial statements.\n Accordingly, those issues are waived. See McKay v. Ingleson, 558 F.3d\n 888, 891 n.5 (9th Cir. 2009).\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 14 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 14 of\n 14 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n misrepresentations or omissions that met one or more of the\n three exceptions under Omnicare. Because Plaintiffs\u2019\n allegations did not meet any of the Omnicare exceptions, the\n district court dismissed their case.\n On appeal, Plaintiffs have abandoned those arguments.\n Plaintiffs do not deny that Bloom Energy prepared its own\n financial statements or that PwC neither prepared the\n statements nor repeated those statements in its opinion.\n Instead, they ask us to adopt the position that PwC is strictly\n liable under \u00a7 11(a)(4) for Bloom Energy\u2019s 2017 financial\n statement.\n I. Section 11 of the Securities Exchange Act does not\n provide for strict liability for accountants.\n Section 11 of the Securities Act of 1933, 15 U.S.C.\n \u00a7 77k, provides a private cause of action for investors who\n purchase securities pursuant to a registration statement\n containing \u201can untrue statement of a material fact\u201d or a\n registration statement that omits \u201cto state a material fact\n required to be stated therein or necessary to make the\n statements therein not misleading.\u201d Id. \u00a7 77k(a). Section 11\n allows purchasers to file an action against anyone who\n signed or helped prepare the registration statement,\n including the issuer, underwriter, director, partner,\n accountant, engineer, or appraiser. See id. However, \u00a7 11\n does not impose the same type of liability on all of these\n potential defendants.\n Section 11 is a strict liability statute with respect to\n issuers of securities, company directors, and partners of\n issuers, without requiring proof of intent, negligence, or\n scienter. Id. \u00a7 77k(a). However, the statute provides defenses\n for other non-issuer defendants, such as experts, based on\n their reasonable investigation and belief in the accuracy of\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 15 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 15 of\n HUNT V. PRICEWATERHOUSECOOPERS LLP 15\n\n\n the registration statement. Id. \u00a7 77k(b). We have also said\n that only \u201cissuers are held strictly liable under \u00a7 11 for\n damages resulting from misrepresentations in a registration\n statement.\u201d Monroe v. Hughes, 31 F.3d 772, 774 (9th Cir.\n 1994).\n Relevant here, \u00a7 11(a)(4) imposes liability on an\n accountant \u201cwho has with his consent been named as having\n prepared or certified any part of the registration statement,\n or as having prepared or certified any report or valuation\n which is used in connection with the registration statement,\n with respect to the statement in such registration statement,\n report, or valuation, which purports to have been prepared or\n certified by him.\u201d 5 However, the statute allows accountants\n to raise a defense to liability if they employed due diligence\n in preparing or certifying statements the registration\n statement, by showing that they \u201chad, after reasonable\n investigation, reasonable ground to believe and did believe,\n at the time such part of the registration statement became\n effective, that the statements therein were true and that there\n was no omission to state a material fact required to be stated\n therein or necessary to make the statements therein not\n misleading.\u201d 6 Id. \u00a7 77k(b)(3)(B)(i). Courts have interpreted\n \u00a7 77k(b)(3)(B)(i) to require accountants \u201cto investigate, to\n various degrees, facts supporting and contradicting\n inclusions in registration statements. They must undertake\n that investigation which a reasonably prudent man in that\n position would conduct.\u201d Endo v. Albertine, 863 F. Supp.\n\n 5\n \u201cThe term certified, when used in regard to financial statements, means\n examined and reported upon with an opinion expressed by an\n independent public or certified public accountant.\u201d 17 C.F.R. \u00a7 230.405.\n 6\n PwC did not raise a due diligence defense in this case because Plaintiffs\n did not identify any statements of fact made by PwC.\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 16 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 16 of\n 16 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n 708, 728 (N.D. Ill. 1994) (citation omitted); see 15 U.S.C.\n \u00a7 77k(c) (defining \u201cstandard of reasonableness\u201d as \u201cthat\n required of a prudent man in the management of his own\n property\u201d). In other words, accountants must exercise due\n diligence in investigating the materials provided to them\n using the accepted practices of their profession.\n However, \u201c[a]ccountants cannot be held liable under\n Section 11 unless the misleading information can be\n expressly attributed to them.\u201d In re Worlds of Wonder Sec.\n Litig., 694 F. Supp. 1427, 1434 (N.D. Cal. 1988). Thus,\n while, \u00a7 11(a)(4) outlines that investors may sue accountants\n for materially false registration statements, accountants are\n only subject to suit \u201cwith respect to the statement in such\n registration statement . . . , which purports to have been\n prepared or certified by [that accountant].\u201d Id. \u00a7 77k(a)(4).\n The statute distinguishes between \u201cprepar[ing]\u201d and\n \u201ccertif[ying].\u201d This distinction limits liability for certifiers\n and expands it for preparers, who may be subject to more\n general liability for the content they create. See id.\n Nevertheless, the statute does not impose strict liability\n on accountants for the statements or omissions regardless of\n whether they prepared or certified them. \u00a7 77k(b)(3)(B)(i).\n Instead, because \u201can accountant has a due diligence defense;\n \u00a7 11 therefore imposes a negligence standard for an\n accountant\u2019s liability.\u201d Monroe, 31 F.3d at 774 (citing Ernst\n & Ernst v. Hochfelder, 425 U.S. 185, 208 (1976)); see also\n In re Wachovia Equity Sec. Litig., 753 F. Supp. 2d 326, 379\n (S.D.N.Y. 2011) (\u201c[A]lthough issuers are subject to virtually\n absolute liability under Section 11, experts such as\n accountants who have prepared portions of the registration\n statement are accorded a due diligence defense.\u201d (cleaned\n up)).\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 17 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 17 of\n HUNT V. PRICEWATERHOUSECOOPERS LLP 17\n\n\n As the Second Circuit correctly explained, strict liability\n is limited to those persons involved in \u201cenumerated\n distributional activities.\u201d See In re Lehman Bros. Mortg.-\n Backed Sec. Litig., 650 F.3d 167, 181 (2d Cir. 2011). \u201cThis\n approach avoids the implausible result of transforming every\n lawyer, accountant, and other professional whose work is\n theoretically \u2018necessary\u2019 to bringing a security to market into\n an \u2018underwriter\u2019 subject to strict liability under \u00a7 11, a\n dramatic outcome that Congress provided no sign of\n intending.\u201d Id.\n This approach is consistent with Omnicare and\n extending its holding to accountants does not negate the due\n diligence defense. In Omnicare, the Supreme Court\n examined \u00a7 11 and addressed an issuer\u2019s liability for\n statements of opinion, because \u201cCongress effectively\n incorporated . . . [a] distinction [between facts and opinions]\n in \u00a7 11\u2019s first part by exposing issuers to liability not for\n \u2018untrue statement[s]\u2019 . . . (which would have included ones\n of opinion), but only for \u2018untrue statement[s] of fact.\u2019\u201d 575\n U.S. at 183 (quoting \u00a7 77k(a)) (alterations in original).\n Focusing on the language of the statute, the Supreme Court\n excluded statements of opinions from liability. Under the\n Supreme Court\u2019s reasoning, accountants may be liable for\n statements of fact if they did not act with due diligence;\n however, accountants will not be liable for statements of\n opinion, even if they reflect a subjective belief that admits\n there is a possibility of error, as long as the statement of\n opinion was sincerely held. See id. As the Supreme Court\n aptly explained:\n\n A fact is \u201ca thing done or existing\u201d or \u201c[a]n\n actual happening.\u201d Webster\u2019s New\n International Dictionary 782 (1927). An\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 18 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 18 of\n 18 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n opinion is \u201ca belief[,] a view,\u201d or a \u201csentiment\n which the mind forms of persons or things.\u201d\n Most important, a statement of fact (\u201cthe\n coffee is hot\u201d) expresses certainty about a\n thing, whereas a statement of opinion (\u201cI\n think the coffee is hot\u201d) does not. . . . Indeed,\n that difference between the two is so\n ingrained in our everyday ways of speaking\n and thinking as to make resort to old\n dictionaries seem a mite silly. And Congress\n effectively incorporated just that distinction\n in \u00a7 11\u2019s first part by exposing issuers to\n liability not for \u201cuntrue statement[s]\u201d full\n stop (which would have included ones of\n opinion), but only for \u201cuntrue statement[s] of\n . . . fact.\u201d\n\n Id. (citations omitted). The Supreme Court further explained\n a statement of opinion is not an \u201cuntrue statement of a\n material fact\u201d simply because it is later determined to be\n incorrect (as here). Id. at 186\u201388.\n That said, Omnicare did not insulate accountants from\n liability. Accountants may instead be challenged based on\n their audit opinion as Omnicare outlines. The opinion can\n still be subject to liability under \u00a7 11 as a material\n misstatement, where (1) \u201cthe speaker did not hold the belief\n she professed\u201d; (2) \u201cthe supporting fact[s] [the speaker]\n supplied were untrue\u201d; or (3) the opinion omits facts \u201cwhose\n omission makes the opinion statement at issue misleading.\u201d\n See id. at 186, 194. In the district court, Plaintiffs attempted\n to establish liability for PwC under these standards and\n failed. Rather than appeal that decision, they abandon those\n arguments.\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 19 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 19 of\n HUNT V. PRICEWATERHOUSECOOPERS LLP 19\n\n\n Simply stated, an accountant\u2019s liability is limited to\n \u201cstatement[s] in such registration statement, report, or\n valuation, which purports to have been prepared or certified\n by him.\u201d \u00a7 77k(a)(4). Here, the PwC audit report did not\n incorporate the alleged misstatements or untrue facts, and\n clearly stated, in relevant part, that \u201c[i]n our opinion, the\n consolidated financial statements present fairly, in all\n material respects, the financial position of [Bloom Energy]\n as of December 31, 2017 and December 31, 2016, and the\n results of its operations and its cash flows for each of the two\n years in the period ended December 31, 2017 in conformity\n with accounting principles generally accepted in the United\n States of America.\u201d\n Thus, in order for Plaintiffs to prevail, they must\n establish that PwC did not have a \u201creasonable ground to\n believe and did [not] believe, at the time such part of the\n registration statement became effective, that the statements\n therein were true.\u201d \u00a7 77(k)(b)(3)(A). As explained below,\n PwC made statements of opinion protected under Omnicare.\n PwC did not make or prepare any statements of material fact\n or omit any material statements.\n A. PwC is not liable as a preparer.\n In this case, Plaintiffs argue that, because PwC certified\n Bloom Energy\u2019s financial statements, it became liable for\n any misstatements contained therein. However, no one\n disputes that PwC did not prepare the financial statements\n for 2017, or that Bloom Energy was responsible for\n preparing the consolidated financial statements. Frankly,\n PwC was not permitted (under the regulations) to prepare the\n financial statements. The regulations make clear that an\n accountant, who prepares the financial statements, is\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 20 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 20 of\n 20 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n disqualified from being the independent accountant\n authorized to certify it. See 17 C.F.R. \u00a7 230.405.\n Although PwC expressed an opinion in its audit with\n regard to Bloom Energy\u2019s 2016\u20132017 financial statements,\n there is no evidence that PwC prepared materially false\n statements. Accountants do not, \u201cby virtue of auditing a\n company\u2019s financial statements, somehow make, own or\n adopt the assertions contained therein.\u201d Deephaven Priv.\n Placement Trading, Ltd. v. Grant Thornton & Co., 454 F.3d\n 1168, 1174 (10th Cir. 2006). Instead, PwC merely affirmed\n that, in its opinion, Bloom Energy followed the proper\n accounting principles, and those statements of opinions are\n protected under Omnicare.\n B. PwC is not liable as a certifier.\n Plaintiffs also seek to have us impose strict liability for\n PwC for Bloom Energy\u2019s financial statements that they\n certified in their audit opinion. We decline to interpret the\n term \u201ccertify\u201d so broadly.\n Bloom Energy prepared \u201cconsolidated financial\n statements,\u201d which included the \u201caccompanying\n consolidated balance sheets of Bloom Energy Corporation\n and its subsidiaries as of December 31, 2016 and December\n 31, 2017, and the related consolidated statements of\n operations, of comprehensive loss, of convertible\n redeemable preferred stock and stockholders\u2019 deficit and of\n cash flows for each of the two years in the period ended\n December 31, 2017, including the related notes.\u201d PwC\n certified the \u201cconsolidated financial statements\u201d using audit\n procedures aimed to obtain reasonable assurance. Section 11\n does not require that PwC, by certifying the financial\n statements, guarantee that the documents provided by\n Bloom Energy were free from error. Instead, PwC was\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 21 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 21 of\n HUNT V. PRICEWATERHOUSECOOPERS LLP 21\n\n\n required to act in compliance with GAAP and GAAS, by\n performing a reasonable investigation and having reasonable\n grounds to believe, and did believe, that the statements\n provided by Bloom Energy were true and that there were no\n omissions that made the statement misleading. See 15 U.S.C.\n \u00a7 77k(b)(3). It was not the job of PwC to \u201cguarantee or\n insure\u201d the financial statements. Deephaven Priv. Placement\n Trading, Ltd., 454 F.3d at 1174 (internal quotation marks\n omitted); see also Dronsejko v. Thornton, 632 F.3d 658, 663\n (10th Cir. 2011) (\u201cA company\u2019s management\u2014not the\n auditor\u2014is responsible for the information contained in its\n financial statements and the propriety of its underlying\n accounting policies, including compliance with GAAP.\u201d);\n Fehribach v. Ernst & Young LLP, 493 F.3d 905, 910 (7th\n Cir. 2007) (\u201cThe purpose of an audit report is to make sure\n the audited company\u2019s financial statements\u2014which are\n prepared by the company, not by the auditor, . . .\u2014\n correspond to reality, lest they either have been doctored by\n a defalcating employee or innocently misrepresent the\n company\u2019s financial situation.\u201d).\n An accountant \u201cis in a position to express an unqualified\n opinion on the financial statements when the auditor\n conducted an audit in accordance with the standards of the\n Public Company Accounting Oversight Board (\u201cPCAOB\u201d)\n and concludes that the financial statements, taken as a whole,\n are presented fairly, in all material respects, in conformity\n with the applicable financial reporting framework.\u201d AS\n 3101.02. 7 \u201cMisstatements arising from fraudulent financial\n\n 7\n AS references the Codification of Accounting Standards and\n Procedures, Statement on Auditing Standards No. 1, \u00a7 150 (American\n Inst. of Certified Pub. Accountants 2001). Relevant here, the PCAOB\n auditing standards were reorganized and went into effect after Dec. 30,\n 2016, and were applicable to audits of financial statements for fiscal\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 22 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 22 of\n 22 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n reporting are intentional misstatements or omissions of\n amounts or disclosures in financial statements designed to\n deceive financial statement users where the effect causes the\n financial statements not to be presented, in all material\n respects, in conformity with [GAAP].\u201d AS 2401.06. The\n independent accountant\u2019s objective is to express \u201can opinion\n on the fairness with which [he or she] present[s], in all\n material respects, [the company\u2019s] financial position, results\n of operations, and its cash flows in conformity with\n [GAAP].\u201d AS 1001.01. However, \u201c[e]ven with good faith\n and integrity, mistakes and errors in judgment can be made.\u201d\n AS 1015.11. \u201c[A]ccounting presentations contain\n accounting estimates, the measurement of which is\n inherently uncertain and depends on the outcome of future\n events. The auditor exercises professional judgment in\n evaluating the reasonableness of accounting estimates based\n on information that could reasonably be expected to be\n available prior to the completion of field work.\u201d Id. To be\n sure, the division of responsibility is based on practical\n realities: Bloom Energy \u201coperate[s] the business daily\u201d and\n has superior knowledge of transactions, assets, and\n liabilities, whereas PwC\u2019s function was confined to\n reasonable assurance through its audit. These limits placed\n on accountants to assess a company\u2019s financial statements\n\n\n\n\n years ending before Dec. 15, 2017. See\n https://pcaobus.org/oversight/standards/auditing-standards (last visited\n Oct. 29, 2025). Other revisions occurred after December 15, 2017.\n However, the reorganized standards are substantially the same and\n would not alter PwC\u2019s review of the 2016 or 2017 financial statements.\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 23 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 23 of\n HUNT V. PRICEWATERHOUSECOOPERS LLP 23\n\n\n preclude its ability to ensure that there are no misstatements,\n and thus, accountants should consider risk factors such as:\n\n conditions in the company\u2019s industry and\n environment, and company-specific factors,\n such as the nature of the company, its\n activities, and internal control over financial\n reporting. For example, external or company-\n specific factors can affect the judgments\n involved in determining accounting estimates\n or create pressures to manipulate the\n financial statements to achieve certain\n financial targets. Also, risks of material\n misstatement may relate to, e.g., personnel\n who lack the necessary financial reporting\n competencies, information systems that fail\n to accurately capture business transactions,\n or financial reporting processes that are not\n adequately aligned with the requirements in\n the applicable financial reporting framework.\n\n AS 2110.05.\n Again, \u201can accountant is not a guarantor of the reports he\n prepares and is only duty bound to act honestly, in good faith\n and with reasonable care in the discharge of his professional\n obligations.\u201d SEC v. Arthur Young & Co., 590 F.2d 785, 788\n (9th Cir. 1979) (citation omitted). Nor does \u00a7 11 make\n accountants guarantors of every statement made by the\n issuer; to make such a holding would turn the whole\n accounting world upside down. Holding accountants strictly\n liable as if they were preparers would transform audits,\n making them prohibitively expensive. This was not\n Congress\u2019s goal. When Congress enacted the statute,\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 24 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 24 of\n 24 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n Congress was clear that it was limiting the liability of\n accountants by only requiring a \u201creasonable investigation\n and reasonable ground for belief, [for which] the standard of\n reasonableness shall be that required of a prudent man in the\n management of his own property.\u201d \u00a7 77k(c).\n Moreover, an accountant\u2019s certification of financial\n statements is nothing more than an opinion. The term\n \u201ccertify\u201d has been defined to mean that an independent\n public or certified public accountant has \u201cexamined and\n reported upon [the financial statements] with an opinion.\u201d 17\n C.F.R. \u00a7 230.405. Omnicare protects opinions from liability\n unless one of the three exceptions is met. Omnicare made\n clear that \u201cwhether a statement is \u2018misleading\u2019 depends on\n the perspective of a reasonable investor.\u201d 575 U.S. at 186.\n \u201cReasonable investors understand that opinions sometimes\n rest on a weighing of competing facts; indeed, the presence\n of such facts is one reason why an issuer may frame a\n statement as an opinion, thus conveying uncertainty.\u201d Id. at\n 189\u201390; see also Deephaven Priv. Placement Trading, Ltd.,\n 454 F.3d at 1175 (explaining that \u201cthe phrase \u2018in our\n opinion\u2019 indicates that there may be some information risk\n associated with the [reviewed] financial statements, even\n though the statements have been audited\u201d).\n In this case, PwC did just that. It conveyed its opinion as\n to Bloom Energy\u2019s financial statements. There may have\n been some differing opinions with regard to the Energy\n Server\u2019s useful life, but \u201c[a] reasonable investor does not\n expect that every fact known to an [accountant] supports its\n opinion statement.\u201d Omnicare, 575 U.S. at 176. And in this\n case, the classification and reasons for classification were\n provided to the investor. Thus, PwC\u2019s \u201cstatement of opinion\n [was not] viewed in a vacuum,\u201d but rather allowed each\n investor to \u201cread[] each statement within such a document,\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 25 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 25 of\n HUNT V. PRICEWATERHOUSECOOPERS LLP 25\n\n\n whether of fact or of opinion, in light of all its surrounding\n text, including hedges, disclaimers, and apparently\n conflicting information.\u201d Id. at 190.\n In summary, Plaintiffs\u2019 attempts to hold PwC liable fail.\n PwC\u2019s audit opinion did not make any material\n misstatements of fact or omissions but rather was merely a\n statement of opinion based, again, upon the subjective\n judgment of the MSA classification. Plaintiffs made no\n allegation that PwC did not sincerely believe that Bloom\n Energy\u2019s classification of the MSAs aligned with proper\n accounting principles based on the evidence available at that\n time. See id. at 186.\n Accordingly, PwC is not liable for the statements in its\n audit opinion.\n II. The district court\u2019s decision should also be\n affirmed because Bloom Energy\u2019s financial\n statements regarding classification of the MSAs\n were opinions.\n In this appeal, Plaintiffs challenge only the three line\n items referenced in the Registration Statement that related to\n whether MSAs should be classified as operating or capital\n leases. These line items in Bloom Energy\u2019s financial report\n were based on Bloom Energy\u2019s subjective judgments (not\n statements of fact) concerning the actual useful life of the\n Energy Server. Under ASC 840-10-25-1, an MSA qualifies\n as a capital lease if \u201c[t]he lease term is at least 75% of the\n property\u2019s [i.e., the Energy Servers\u2019] estimated remaining\n economic life.\u201d Plaintiffs allege that the lease terms were 6\n to 10 years; that Bloom Energy improperly estimated that the\n Energy Servers\u2019 useful lives were 15-21 years. However,\n there is no dispute that Bloom Energy was basing its\n estimates on newly designed Energy Servers whose useful\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 26 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 26 of\n 26 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n life was unknown. Nevertheless, Plaintiffs allege that the\n actual useful lives of these Energy Servers were \u201cmuch\n shorter.\u201d With that shorter lease term, Plaintiffs claim that\n the 75% rule required a capital lease classification.\n However, the district court correctly concluded that\n Plaintiffs failed to allege sufficient facts to establish that\n Bloom Energy\u2019s judgments were untrue. Throughout the\n district court opinion, it properly outlines that Bloom\n Energy\u2019s classification of its MSAs was based on an exercise\n of judgment related to its information about its Energy\n Servers, which Bloom Energy used to classify MSAs as\n operating or capital leases. For example, the district court\n highlighted that \u201cPlaintiffs contend that the service contracts\n \u2018typically last[] from 10 to 21 years and can last as long as\n 25 years,\u2019 in total, and are renewed each year at the\n customer\u2019s option,\u201d but failed \u201cto explain how Defendants\n could meaningfully estimate the length of future contracts\n from such a large range.\u201d \u201cPlaintiffs also suggest that Bloom\n knew the estimated life of its Energy Servers and fuel cells\n because it had to replace some of its earlier generation\n systems,\u201d but \u201cacknowledge[d], Bloom also had newer\n systems in place, and Plaintiffs [did] not explain how\n Defendants could extrapolate to determine the life or\n replacement schedule for all its Energy Servers.\u201d\n Thus, the district court correctly concluded that Plaintiffs\n failed to adequately plead that the challenged line items were\n statements of fact. Instead, the district court recognized that\n Bloom Energy\u2019s classification of the MSAs was the product\n of accounting judgments; it determined that those judgments\n \u201cinvolve[d] complex consideration[]\u201d of various GAAP\n provisions in determining how to evaluate the term of the\n MSAs and the value of the Energy Servers. Thus, the district\n court found those three line items to be opinions. Then,\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 27 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 27 of\n HUNT V. PRICEWATERHOUSECOOPERS LLP 27\n\n\n because Plaintiff failed to plead nor argue any of the\n Omnicare exceptions to establish liability, the district court\n concluded that those three line items were not actionable.\n We agree.\n On appeal Plaintiffs argue that \u201cstatements of revenue,\n net loss, and net loss per share contained within a company\u2019s\n financial statements\u201d cannot be opinions because they are\n always statements of fact. However, again Plaintiffs ignore\n the language in Omnicare.\n Omnicare does not limit an opinion to words over\n figures. To be sure, the language of the statute is limited to\n facts, not opinions. Thus, as long as Bloom Energy\u2019s\n statements were opinions and not facts, it is irrelevant\n whether the subject matter being opined about were words\n or figures. Instead, we need only determine whether Bloom\n Energy had a \u201csincere statement of pure opinion.\u201d Omnicare,\n 575 U.S. at 186. If it did, then it does not qualify as an\n \u201c\u2018untrue statement of material fact,\u2019 regardless whether an\n investor can ultimately prove the belief wrong.\u201d Id.\n An \u201cuntrue statement of a material fact,\u201d 15 U.S. C\n \u00a7 77k(a), \u201climited as it is to factual statements, does not\n allow investors to second-guess inherently subjective and\n uncertain assessments.\u201d Omnicare, 575 U.S. at 186\n (emphasis added). Although figures, by themselves, do not\n clearly convey whether it is an opinion or a fact, \u201can investor\n [should] read[] each statement within such a document,\n whether of fact or of opinion, in light of all its surrounding\n text, including hedges, disclaimers, and apparently\n conflicting information[,] . . . tak[ing] into account the\n customs and practices of the relevant industry.\u201d Id. at 190.\n \u201cSection 11\u2019s omissions clause, as applied to statements of\n both opinion and fact, necessarily brings the reasonable\n\f Case: 24-3568, 11/10/2025, DktEntry: 49.1, Page 28 of 28\nase 8:24-cv-02900-DKC Document 106-1 Filed 11/17/25 Page 28 of\n 28 HUNT V. PRICEWATERHOUSECOOPERS LLP\n\n\n person into the analysis, and asks what she would naturally\n understand a statement to convey beyond its literal\n meaning.\u201d Id. at 193\u201394.\n The district court correctly applied Omnicare\u2019s\n reasoning to conclude that numbers can sometimes be facts\n and other times be opinions, depending on whether \u201cthe\n considerations underlying the figures\u2014such as which\n GAAP provisions apply and how to apply them\u2014 . . .\n require the exercise of judgment.\u201d\n Plaintiffs do not explain what additional actions PwC\n should have taken in its audit, nor do they allege any facts\n that establish that PwC overlooked or disregarded warning\n signs about the Energy Server\u2019s useful life or Bloom\n Energy\u2019s MSA accounting.\n Because Plaintiffs failed to show that Bloom Energy\u2019s\n subjective opinions were based on untrue facts or\n information that it did not believe, see Omnicare, 575 U.S.\n at 187, Plaintiffs cannot demonstrate that PwC certified\n untrue facts or information. Accordingly, Plaintiffs have\n failed to establish liability for PwC\u2019s opinion. The record\n demonstrates that the classification of MSAs was a judgment\n call, and the Registration Statement thoroughly explained\n how it reached the classification. PwC was reasonable under\n the circumstances to certify Bloom Energy\u2019s classification\n based on the evidence at that time. 8\n AFFIRMED.\n\n\n\n\n 8\n Based on the foregoing, we need not decide whether the line item errors\n were material.\n\f","ocr_status":1,"date_upload":"2026-05-19T22:32:00.770585-07:00","document_number":"106","attachment_number":1,"pacer_doc_id":"093015309619","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit A - Hunt Opinion","acms_document_guid":""}],"date_created":"2025-12-17T07:51:12.047216-08:00","date_modified":"2026-05-18T23:59:56.202029-07:00","date_filed":"2025-11-17","time_filed":null,"entry_number":106,"recap_sequence_number":"2025-11-17.001","pacer_sequence_number":309,"description":"NOTICE by Marcum LLP re 80 MOTION to Dismiss for Failure to State a Claim Regarding Supplemental Authority (Attachments: # 1 Exhibit A - Hunt Opinion)(Franklin, Shirlethia) (Entered: 11/17/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475317/","id":447475317,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228767/","id":462228767,"tags":[],"absolute_url":"/docket/69233925/105/walker-v-chidambaran/","date_created":"2025-12-17T07:51:12.014041-08:00","date_modified":"2026-05-22T08:19:40.871800-07:00","sha1":"be009202c246e52cf862d86c8ad07b6944e4cd55","page_count":16,"file_size":706893,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.105.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.105.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 1 of 16\n\n\n\n UNITED STATES DISTRICT COURT\n DISTRICT OF MARYLAND\n (Southern Division)\n\n\nDANNY WALKER, Individually and on\nBehalf of All Others Similarly Situated, Civil Action No. 8:24-cv-02900-DKC\n\n Plaintiff,\n\n v.\n\nILEARNINGENGINES, INC., et al.,\n\n Defendants.\n\n\n\n\n REPLY IN SUPPORT OF DEFENDANTS MATTHEW BARGER,\n IAN DAVIS, BRUCE MEHLMAN, AND MICHAEL MOE\u2019S\n MOTION TO DISMISS THE AMENDED COMPLAINT\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 2 of 16\n\n TABLE OF CONTENTS\n\n Page\n\nI. INTRODUCTION .......................................................................................................................... 1\nII. PLAINTIFFS\u2019 ALLEGATIONS CONCERNING TRACEABILITY ARE\n INSUFFICIENT FOR A SECTION 11 CLAIM ............................................................................ 3\nIII. THE OPPOSITION HIGHLIGHTS PLAINTIFFS\u2019 INSUFFICIENT SECTION 15\n ALLEGATIONS ............................................................................................................................. 8\nIV. CONCLUSION ............................................................................................................................. 10\n\n\n\n\n i\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 3 of 16\n\n\n\n TABLE OF AUTHORITIES\n\n Page(s)\nCASES\n\nAshcroft v. Iqbal,\n 556 U.S. 662 (2009) .......................................................................................................1, 3, 4, 9\n\nBarbour v. Garland,\n 105 F.4th 579 (4th Cir. 2024) ....................................................................................................4\n\nBell Atl. Corp. v. Twombly,\n 550 U.S. 544 (2007) .......................................................................................................1, 3, 4, 9\n\nCiarciello v. Bioventus, Inc.,\n No. 1:23-CV-32, 2023 WL 7300081 (D. Md. Nov. 6, 2023) ....................................................4\n\nCupat v. Palantir Techs., Inc.,\n No. 1:22-CV-02805-GPG-SBP, 2025 WL 1141534 (D. Colo. Apr. 4, 2025) ...................1, 3, 4\n\nDavidco Inv\u2019rs, LLC v. Anchor Glass Container Corp.,\n 2006 WL 547989 (M.D. Fla. Mar. 6, 2006) ..............................................................................7\n\nDoherty v. Pivotal Software, Inc.,\n No. 3:19-CV-03589-CRB, 2019 WL 5864581 (N.D. Cal. Nov. 8, 2019) .............................5, 7\n\nFam. of Care Real Est. Holding Co. v. Chapman Prop., LLC,\n No. CV DKC 23-0574, 2023 WL 4134427 (D. Md. June 22, 2023).........................................4\n\nFanucchi v. Enviva Inc.,\n No. DKC 22-2844, 2024 WL 330256 (D. Md. July 3, 2024) ................................................4, 5\n\nGrand Lodge of Pa. v. Peters,\n 550 F. Supp. 2d 1363 (M.D. Fla. 2008) .....................................................................................7\n\nIn re Alstom SA Sec. Litig.,\n 406 F. Supp. 2d 433 (S.D.N.Y. 2005)................................................................................2, 8, 9\n\nIn re Ariad Pharms., Inc. Sec. Litig.,\n 842 F.3d 744 (1st Cir. 2016) ......................................................................................................7\n\nIn re Century Aluminum Co. Sec. Litig.,\n 729 F.3d 1104 (9th Cir. 2013) ...............................................................................................2, 5\n\nIn re Charles Schwab Corp. Sec. Litig.,\n 257 F.R.D. 534 (N.D. Cal. 2009) .........................................................................................9, 10\n\nIn re Coinbase Glob., Inc. Sec. Litig.,\n No. 2:22-CV-04915, 2024 WL 4053009 (D.N.J. Sept. 5, 2024) ...............................................7\n\n\n ii\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 4 of 16\n\n\n\nIn re Constellation Energy Grp.,\n 738 F. Supp. 2d 614 (D. Md. 2010) .....................................................................................8, 10\n\nIn re Creditrust Corp. Sec. Litig.,\n Civil Action Nos. MJG-00-2174, MJG-00-2297, 00-2343, 00-2346, 00-2347, 00-\n 2539, 2002 WL 35691716 (D. Md. Aug. 1, 2002) ................................................................2, 8\n\nIn re Evergreen Ultra Short Opportunities Fund Sec. Litig.,\n 705 F. Supp. 2d 86 (D. Mass. 2010) ..................................................................................2, 8, 9\n\nIn re EveryWare Glob., Inc. Sec. Litig.,\n 175 F. Supp. 3d 837 (S.D. Ohio 2016) ......................................................................................7\n\nIn re Mirant Corp. Sec. Litig.,\n No. 1:02-CV-1467-RWS, 2008 WL 11334395 (N.D. Ga. Aug. 5, 2008) .................................7\n\nIn re Mun. Mortg. & Equity, LLC,\n 876 F. Supp. 2d 616 (D. Md. 2012) ...........................................................................................8\n\nIn re Sourcefire, Inc. Sec. Litig.,\n No. CIV. JFM 07-1210, 2008 WL 1827484 (D. Md. Apr. 23, 2008)........................................9\n\nIn re Ubiquiti Networks, Inc. Sec. Litig.,\n 33 F. Supp. 3d 1107 (N.D. Cal. 2014) .......................................................................................7\n\nJohn v. Whole Foods Mkt. Grp., Inc.,\n 858 F.3d 732 (2d Cir. 2017).......................................................................................................4\n\nJohnson v. CBD Energy, Ltd.,\n No. H-15-1668, 2016 WL 3654657 (S.D. Tex. July 6, 2016) ...............................................5, 7\n\nKrim v. pcOrder.com, Inc.,\n 402 F.3d 489 (5th Cir. 2005) ........................................................................................... passim\n\nNB v. District of Columbia,\n 682 F.3d 77 (D.C. Cir. 2012) .....................................................................................................4\n\nNorthumberland Cnty. Ret. Sys. v. Kenworthy,\n No. CIV-11-520-D, 2013 WL 5230000 (W.D. Okla. Sept. 16, 2013) ......................................5\n\nPerry v. Duoyuan Printing, Inc.,\n No. 10 CIV. 7235 GBD, 2013 WL 4505199 (S.D.N.Y. Aug. 22, 2013)...................................5\n\nPirani v. Slack Techs., Inc.,\n 127 F.4th 1183 (9th Cir. 2025) ..............................................................................................2, 5\n\nRet. Sys. v. Chubb Corp.,\n 394 F.3d 126 (3d Cir. 2004).......................................................................................................8\n\n\n\n iii\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 5 of 16\n\n\n\nSD3, LLC v. Black & Decker (U.S.) Inc.,\n 801 F.3d 412 (4th Cir. 2015) .....................................................................................................4\n\nStarr v. Baca,\n 652 F.3d 1202 (9th Cir. 2011) ...................................................................................................4\n\nStenlund v. Marriott Int\u2019l, Inc.,\n 172 F. Supp. 3d 874 (D. Md. 2016) ...........................................................................................8\n\nTransEnterix Inv. Grp. v. TransEnterix, Inc.,\n 272 F. Supp. 3d 740 (E.D.N.C. 2017)........................................................................................7\n\nWachovia Equity Sec. Litig. v. Wachovia Corp.,\n 753 F. Supp. 2d 326 (S.D.N.Y. 2011)........................................................................................5\n\nRULES\n\nRule 8 ...................................................................................................................................1, 3, 4, 8\n\nRule 9(b) ..........................................................................................................................................8\n\nRule 12(b)(6) ....................................................................................................................................9\n\n\n\n\n iv\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 6 of 16\n\n\n\nI. INTRODUCTION\n\n Plaintiffs\u2019 Opposition fails to cure the fatal deficiencies in their Amended Complaint. 1\n\nRather than identify well-pleaded facts sufficient to satisfy Twombly, Iqbal, and Rule 8, Plaintiffs\n\nrely on decisions that pre-date those cases and other out-of-circuit law. See ECF No. 90 at 19.\n\nPlaintiffs also attempt to distinguish the actual governing law while simultaneously conceding that\n\ntheir allegations mirror the very ones rejected in those precedential decisions. Id. at 21, 27.\n\nPlaintiffs\u2019 motion briefing cannot backfill what the Amended Complaint omits. As the Opposition\n\nitself confirms, Plaintiffs fail to plead any facts that plausibly support either of their claims.\n\n First, Plaintiffs concede that (i) the registered shares under the offering documents were\n\ncommingled with non-registered shares, and (ii) they allege no facts showing their shares are\n\ntraceable to the Forms S-1 or S-8 for purposes of Section 11.2 Instead, they rely on a mere \u201cplan\u201d\n\nto conduct discovery (see ECF No. 90 at 15-16) and a self-declared \u201chigh probability\u201d of\n\ntraceability (AC \u00b6 422). Neither approach satisfies Twombly and Iqbal, which require plausible\n\nfactual allegations\u2014not conjecture or a promise of later proof. See Bell Atl. Corp. v. Twombly,\n\n550 U.S. 544, 570 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Rule 8 does not entitle\n\nplaintiffs to discovery \u201carmed with nothing more than conclusions.\u201d Iqbal, 556 U.S. at 678-79.\n\n In particular, Plaintiffs\u2019 \u201chigh probability\u201d pleading is insufficient. See AC \u00b6 422. Despite\n\nclaiming not to rely on statistics, Plaintiffs assert that 87.1% of the outstanding shares were\n\nregistered under the offering documents\u2014precisely the kind of statistical pleading that courts have\n\n\n\n1\n Capitalized terms not defined herein are given their meaning assigned to them in the Independent\nDirectors\u2019 Memorandum in Support of their Motion to Dismiss (the \u201cMotion\u201d). See ECF No. 85-\n1.\n2\n Plaintiffs recently moved to lift the discovery stay to obtain discovery related to traceability. ECF\nNo. 93. That is nothing more than a tacit acknowledgment that the Amended Complaint, as it\ncurrently stands, lacks the factual allegations sufficient to meet traceability under Section 11.\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 7 of 16\n\n\n\nrejected repeatedly. See, e.g., Cupat v. Palantir Techs., Inc., No. 1:22-CV-02805-GPG-SBP, 2025\n\nWL 1141534, at *16 (D. Colo. Apr. 4, 2025); Krim v. pcOrder.com, Inc., 402 F.3d 489, 496\u201397\n\n(5th Cir. 2005); Pirani v. Slack Techs., Inc., 127 F.4th 1183 (9th Cir. 2025) (\u201cPirani II\u201d). Even\n\ntheir percentage is wrong\u2014and, more importantly, irrelevant\u2014because the registration statements\n\nregistered shares and did not issue them, rendering Plaintiffs\u2019 probability analysis meaningless.\n\nUnder Century Aluminum, Plaintiffs\u2019 own allegations present \u201cobvious alternative explanation[s],\u201d\n\ni.e., that they purchased unregistered shares commingled with registered ones. In re Century\n\nAluminum Co. Sec. Litig., 729 F.3d 1104, 1108 (9th Cir. 2013).\n\n Second, Plaintiffs\u2019 Section 15 theory fails outright. They seek to hold newly appointed\n\nindependent directors\u2014who neither participated in the merger nor prepared the challenged\n\nstatements\u2014liable merely because they signed two registration statements. Plaintiffs\u2019 cited cases\n\ndo not support this result; each involved factual allegations far beyond a defendant\u2019s title and\n\nsignature. See, e.g., In re Alstom SA Sec. Litig., 406 F. Supp. 2d 433, 476-77 (S.D.N.Y. 2005)\n\n(alleging facts beyond simply the defendant\u2019s positions and signatures, including, inter alia, the\n\nimportance of the topic and defendant\u2019s involvement in the operations of the company); In re\n\nEvergreen Ultra Short Opportunities Fund Sec. Litig., 705 F. Supp. 2d 86, 97 (D. Mass. 2010)\n\n(alleging that the defendants participated in the drafting and/or preparation of the relevant\n\nmisstatements). Similarly, the Opposition fails to explain how any plausible inference of control\n\ncould survive based on position alone when the Amended Complaint affirmatively alleges that the\n\nIndependent Directors initiated corrective action. See In re Creditrust Corp. Sec. Litig., Civil\n\nAction Nos. MJG-00-2174, MJG-00-2297, 00-2343, 00-2346, 00-2347, 00-2539, 2002 WL\n\n35691716, at *19 (D. Md. Aug. 1, 2002) (\u201cconclusory statement that \u2018by virtue of their positions\n\nas \u2026 directors of non-defendant Creditrust, [the Outside Directors] had the power, and exercised\n\n\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 8 of 16\n\n\n\nthe same, to control the representations\u2019\u201d).\n\n Because these defects are incurable, the Amended Complaint should be dismissed with\n\nprejudice.\n\nII. PLAINTIFFS\u2019 ALLEGATIONS CONCERNING TRACEABILITY ARE\n INSUFFICIENT FOR A SECTION 11 CLAIM\n\n The Opposition concedes the core deficiencies in Plaintiffs\u2019 Section 11 claim. Plaintiffs\n\nadmit that ILE shares entered the market through multiple registration statements and pre-existing\n\nunregistered shares\u2014requiring Plaintiffs to plead facts establishing that their purchases are\n\ntraceable to the offering documents. See ECF No. 90 at 14 & n.4. Plaintiffs further concede that\n\nthe Amended Complaint relies on no such facts, only on a speculative \u201cplan\u201d to conduct discovery\n\nand a self-serving assertion that traceability is \u201clikely.\u201d Id. at 15\u201316. Such allegations are precisely\n\nwhat Twombly and Iqbal prohibit. See Twombly, 550 U.S. at 570; Iqbal, 556 U.S. at 678.\n\n Rule 8 does not \u201cunlock the doors of discovery for a plaintiff armed with nothing more\n\nthan conclusions.\u201d Iqbal, 556 U.S. at 678-79. That is exactly what Plaintiffs ask this Court to do.\n\nAs the Independent Directors\u2019 Motion explained, the Amended Complaint alleges only that\n\n(i) discovery is needed to \u201csupport\u201d traceability, AC \u00b6\u00b6 423\u201324; (ii) Plaintiffs intend to obtain\n\ndocuments from DTC and brokers to \u201cinvestigate\u201d traceability; and (iii) there is a \u201chigh probability\u201d\n\nthat their shares are traceable. Courts routinely reject such allegations. See, e.g., Cupat, 2025 WL\n\n1141534, at *16 & n.18 (allegations of \u201chigh probability,\u201d \u201cstatistical likelihoods,\u201d and need for\n\ndiscovery insufficient to show a plausible inference of traceability); Krim, 402 F.3d at 496\u201397\n\n(rejecting statistical tracing as inconsistent with Section 11 standing).\n\n Plaintiffs argue otherwise, claiming that they need not \u201cprove\u201d traceability at the pleading\n\nstage. ECF No. 90 at 18. But this argument misses the mark. The Independent Directors do not\n\ndemand proof at this stage\u2014only alleged facts from which traceability plausibly could be inferred.\n\n\n\n 3\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 9 of 16\n\n\n\nPlaintiffs confuse the requirement to plead facts supporting a plausible inference with the\n\nevidentiary burden of proof.\n\n Plaintiffs\u2019 cited cases exemplify their confusion. In Fam. of Care Real Est. Holding Co. v.\n\nChapman Prop., LLC, No. CV DKC 23-0574, 2023 WL 4134427, at *4 (D. Md. June 22, 2023),\n\nthe court held that a plaintiff in a contract action need not attach exhibits to the complaint\u2014an\n\nunremarkable proposition that says nothing about pleading traceability under Section 11. Similarly,\n\nthe other cases Plaintiffs cite concern entirely different pleading contexts. See SD3, LLC v. Black\n\n& Decker (U.S.) Inc., 801 F.3d 412, 431 (4th Cir. 2015) (antitrust); NB v. District of Columbia,\n\n682 F.3d 77, 85 (D.C. Cir. 2012) (Medicaid benefits); Barbour v. Garland, 105 F.4th 579, 581\n\n(4th Cir. 2024) (Title VII retaliation); John v. Whole Foods Mkt. Grp., Inc., 858 F.3d 732, 737 (2d\n\nCir. 2017) (consumer fraud); Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (civil rights).\n\nNone addresses what facts are necessary to plead traceability under Section 11.\n\n Plaintiffs\u2019 allegations concerning how they intend to establish traceability do not satisfy\n\nRule 8. See ECF No. 90 at 20. The plausibility standard does not demand evidence, but it does\n\nrequire factual content\u2014not an assurance that evidence may later be found. Allowing otherwise\n\nwould nullify Twombly and Iqbal.\n\n Plaintiffs also rely on pre-Twombly and Iqbal Third Circuit cases as if they were controlling.\n\nSee ECF No. 90 at 18-19 (citing In re Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256 (3d Cir.\n\n2006); Shapiro v. UJB Fin. Corp., 964 F.2d 272, 286 (3d Cir. 1992)). The more recent, post-Iqbal\n\nauthority holds that conclusory allegations of traceability are insufficient. See, e.g., Cupat, 2025\n\nWL 1141534, at *16; Fanucchi v. Enviva Inc., No. DKC 22-2844, 2024 WL 330256, at *14-16\n\n(D. Md. July 3, 2024); Ciarciello v. Bioventus, Inc., No. 1:23-CV-32, 2023 WL 7300081 (D. Md.\n\nNov. 6, 2023). Plaintiffs\u2019 attempts to distinguish these decisions fail. In Fanucchi, as here, the\n\n\n\n\n 4\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 10 of 16\n\n\n\nplaintiff did not plead facts supporting traceability, and the court found that even incorporating\n\nstock certificates was inadequate. 2024 WL 330256, at *14-16. 3 Plaintiffs\u2019 reliance on a \u201chigh\n\nprobability\u201d of tracing fares no better. Plaintiffs highlight Pirani II, but that case did not hold that\n\nstatistical tracing suffices. To the contrary, Pirani II reaffirmed In re Century Aluminum Co. Sec.\n\nLitig., 729 F.3d 1104 (9th Cir. 2013), emphasizing that alleging a percentage of registered shares\n\ncannot show traceability in a plausible way because \u201cit is entirely possible\u201d that the purchased\n\nshares were unregistered. Pirani II, 127 F.4th at 1190. And Plaintiffs\u2019 attempt to distinguish In\n\nre Century Aluminum Company Securities Litigation is unconvincing for the same reasons. 4\n\nPirani II directly referenced this precedent to explain that statistical tracing does not suffice to\n\nfulfill the operative pleading standard.\n\n Excluding statistical tracing at the pleading stage aligns with Section 11\u2019s purpose.\n\nAccepting such allegations \u201cwould impermissibly expand the standing requirement,\u201d since any\n\naftermarket purchaser could simply allege that a high percentage of shares were registered. Krim,\n\n402 F.3d at 496\u201397; see also Doherty v. Pivotal Software, Inc., No. 3:19-CV-03589-CRB, 2019\n\n\n\n3\n Plaintiffs also cite to a string of cases that do not reflect controlling law in this Circuit and are\nfactually distinguishable and thus, do not support that a conclusory pleading of traceability is\nsufficient here. See Perry v. Duoyuan Printing, Inc., No. 10 CIV. 7235 GBD, 2013 WL 4505199,\nat *9 (S.D.N.Y. Aug. 22, 2013) (finding that plaintiffs\u2019 allegation that they purchased pursuant to\nthe registration statement was sufficient because all outstanding shares were registered pursuant\nto the IPO at issue); Wachovia Equity Sec. Litig. v. Wachovia Corp., 753 F. Supp. 2d 326, 373\n(S.D.N.Y. 2011) (finding that an allegation that the purchases were pursuant to or traceable to the\noffering documents was sufficient, where no argument was made that more was required for\ncommingled shares); Northumberland Cnty. Ret. Sys. v. Kenworthy, No. CIV-11-520-D, 2013 WL\n5230000, at *6 (W.D. Okla. Sept. 16, 2013) (relying on Second Circuit authority to hold a\nconclusory pleading was enough).\n4\n Moreover, as explained below, even if a statistical analysis could exclude other plausible\ninferences for tracing, counter to In re Century Aluminum and Pirani II, Plaintiffs\u2019 analysis offered\nin their Opposition is incorrect. If the proper percentages were used here, this analysis only further\nhighlights the \u201cobvious alternative explanation[.]\u201d In re Century Aluminum, 729 F.3d at 1108\n(internal citation omitted).\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 11 of 16\n\n\n\nWL 5864581, at *10 (N.D. Cal. Nov. 8, 2019); Johnson v. CBD Energy, Ltd., No. H-15-1668,\n\n2016 WL 3654657, at *6 (S.D. Tex. July 6, 2016). Such analyses are inherently flawed because\n\nthey often ignore the critical difference between registered and outstanding shares. Even if a large\n\npercentage of shares were registered, that does not establish those shares actually were available\n\nfor purchase in the market. This ambiguity precludes plausibility.\n\n Plaintiffs\u2019 attempt to disclaim \u201cstatistical tracing\u201d while relying on percentages of\n\noutstanding shares (87.1%) only underscores the problem. See ECF No. 90 at 20; AC \u00b6 422. This\n\nis textbook statistical pleading. Krim, 402 F.3d at 496. Plaintiffs\u2019 inconsistent rhetoric cannot\n\nobscure the reality that their claim depends on purported probability, not facts.\n\n Even assuming arguendo such a \u201cprobability\u201d approach were permitted (and it is not),\n\nPlaintiffs\u2019 math is wrong. Using the figures available by the Form S-1 for shares outstanding as\n\nof May 2024\u2014which, importantly, does not even account for any additional shares issued after\n\nthe June 2024 Form S-8, 157,595,089 were outstanding. 5 Of those, 16,208,318 shares (10.3%)\n\nwere registered under the Form S-8\u2014not 87.1%. 6 For the Form S-1, even using Plaintiffs\u2019 May\n\n2024 baseline, the correct figure is 63.9%. ECF No. 90-2, at 74. The Form S-1 explicitly states\n\n\n\n\n5\n The Independent Directors do not concede the accuracy of these figures but use the, albeit\noutdated, numbers available from the Form S-1 as Plaintiffs do for their argument.\n6\n Plaintiffs\u2019 \u201cpublic float\u201d argument suffers from the same fundamental flaws. The asserted 90.9%\nfigure is based on share data from May 2024\u2014months before the relevant transactions\u2014and has\nno bearing on Plaintiffs\u2019 alleged purchases. Plaintiffs not only fail to plead this figure in their\nAmended Complaint, but they also omit any allegation regarding the public float as of the dates\nwhen their shares purportedly were purchased after August 2024. Equally unfounded is Plaintiffs\u2019\nassumption that the total public float can be derived by simply adding the 16,208,318 shares\nregistered under the Form S-8 to the percentage reported in the Form S-1. That assumption defies\nboth logic and basic market mechanics. Multiple plausible inferences exist\u2014namely, that all,\nsome, or none of those shares actually were trading at the relevant time. If they were not, Plaintiffs\u2019\n\u201cpublic float\u201d theory rests on speculation rather than fact and cannot support a plausible pleading.\n\n\n 6\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 12 of 16\n\n\n\nthat it registered\u2014not issued\u2014100,774,669 shares, further undermining Plaintiffs\u2019 calculation.\n\nId. at 19.\n\n Plaintiffs compound these errors by failing to analyze each named plaintiff individually.\n\nBy their own allegations, Plaintiff Leveque purchased 5,000 shares in late July 2024, when only\n\n10.3% of outstanding shares were registered; Plaintiff Al-Hamid allegedly purchased shares \u201cafter\n\nAugust 9, 2024,\u201d without alleging what shares were outstanding or issued at that time. AC \u00b6 423-\n\n24. This group pleading fails to establish traceability. See In re Ariad Pharms., Inc. Sec. Litig.,\n\n842 F.3d 744 (1st Cir. 2016); TransEnterix Inv. Grp. v. TransEnterix, Inc., 272 F. Supp. 3d 740\n\n(E.D.N.C. 2017).7\n\n Plaintiffs\u2019 other cited cases are inapposite. In In re Ubiquiti Networks, Inc. Sec. Litig., 33\n\nF. Supp. 3d 1107, 1119 (N.D. Cal. 2014), the plaintiffs alleged that they purchased stock during a\n\n180-day lock-up period when unregistered shares could not be sold\u2014making traceability\n\nplausible. Plaintiffs here allege no such lock-up. Similarly, In re EveryWare Glob., Inc. Sec.\n\nLitig., 175 F. Supp. 3d 837 (S.D. Ohio 2016), involved far more detailed allegations, including the\n\npurchase of 15% of shares traded on the first day of the offering at a uniform price just four cents\n\n\n7\n Plaintiffs also attempt to distinguish the cases cited by the other Defendants, contending that\nthose decisions merely rely on Krim but are distinguishable on other grounds. Curiously, Plaintiffs\nalso suggest that these cases do not actually address whether statistical tracing is permissible\u2014\nwhile at the same time insisting that they are not relying on statistical analysis. Even if Plaintiffs\u2019\nposition were internally consistent\u2014which it is not\u2014these authorities still underscore why their\npleading is deficient. See, e.g., Grand Lodge of Pa. v. Peters, 550 F. Supp. 2d 1363, 1374\u201376\n(M.D. Fla. 2008) (holding that a bare allegation that aftermarket purchases were traceable to a\nregistration statement was insufficient); Davidco Inv\u2019rs, LLC v. Anchor Glass Container Corp.,\n2006 WL 547989, at *22-23 (M.D. Fla. Mar. 6, 2006) (rejecting conclusory traceability allegation\nwhere unregistered shares were on the market at the time of purchase); Doherty, 2019 WL\n5864581, at *9-10 (finding plaintiffs\u2019 statistical argument speculative and insufficient to raise a\nplausible inference of traceability); In re Mirant Corp. Sec. Litig., No. 1:02-CV-1467-RWS, 2008\nWL 11334395, at *11 (N.D. Ga. Aug. 5, 2008) (holding that statistical tracing fails to meet\npleading requirements); Johnson, 2016 WL 3654657, at *6 (finding amendment to allow statistical\ntracing futile under Krim and dismissing Section 11 claims with prejudice).\n\n\n 7\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 13 of 16\n\n\n\nabove the asking price. Nothing comparable is alleged here. And In re Coinbase Glob., Inc. Sec.\n\nLitig., No. 2:22-CV-04915, 2024 WL 4053009, at *19 (D.N.J. Sept. 5, 2024), turned on higher\n\npercentages and shares actually offered for sale, not merely registered. Finally, in In re Mun.\n\nMortg. & Equity, LLC, 876 F. Supp. 2d 616, 657 (D. Md. 2012), the plaintiff alleged that he\n\nreceived his shares the date the public offering closed and the first day that the company stated\n\nthey would be available for distribution and attached a purchase confirmation referencing the\n\nprospectus\u2014facts wholly absent here.\n\n Because Plaintiffs\u2019 allegations fail to establish a plausible inference of traceability, their\n\nSection 11 claim must be dismissed.\n\nIII. THE OPPOSITION HIGHLIGHTS PLAINTIFFS\u2019 INSUFFICIENT SECTION 15\n ALLEGATIONS\n\n The Opposition confirms that the Section 15 claim is derivative and fails for want of a\n\nprimary violation under Section 11. Plaintiffs do not respond, thereby conceding the point. See\n\nStenlund v. Marriott Int\u2019l, Inc., 172 F. Supp. 3d 874, 887 (D. Md. 2016) (\u201cIn failing to respond to\n\nthis argument. Plaintiff concedes the point.\u201d).\n\n Even apart from that concession, the Amended Complaint fails to allege that the\n\nIndependent Directors were \u201ccontrol persons.\u201d Plaintiffs rely solely on their board positions and\n\nsignatures\u2014allegations that courts in this Circuit consistently deem inadequate. See In re\n\nConstellation Energy Grp., 738 F. Supp. 2d 614, 639 (D. Md. 2010); In re Creditrust Corp., 2002\n\nWL 35691716, at *19. Plaintiffs\u2019 out-of-circuit authorities do not save their claim; each include\n\nfar richer factual allegations about participation in drafting, solicitation, or operational control.\n\nSee, e.g., In re Alstom, 406 F. Supp. 2d at 476-77; In re Evergreen, 705 F. Supp. 2d at 97.8 Here,\n\nPlaintiffs allege none. The Section 15 claim must be dismissed.\n\n\n8\n Plaintiffs raise a straw-man argument and incorrectly assert that the Independent Directors are\n\n\n 8\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 14 of 16\n\n\n\n None of Plaintiffs\u2019 cited cases supports their position. For example, in In re Sourcefire,\n\nInc. Securities Litigation, the complaint alleged far more than the defendants\u2019 corporate titles. The\n\nplaintiffs there pleaded that \u201cIndividual Defendants each had a series of direct and/or indirect\n\nbusiness and/or personal relationships with other directors and/or officers and/or major\n\nshareholders of Sourcefire.\u201d In re Sourcefire, Inc. Sec. Litig., No. CIV. JFM 07-1210, 2008 WL\n\n1827484, at *7 (D. Md. Apr. 23, 2008). Plaintiffs here allege nothing comparable. Their sole\n\nallegation is the conclusory statement that the \u201cIndividual Defendants, in part because of their\n\nposition with iLearningEngines, possess the power and authority to control the contents of\n\niLearningEngines\u2019 reports and registration statements.\u201d AC \u00b6\u00b6 40, 453\u201354. This bare assertion\n\nlacks the factual underpinnings that are central to the Rule 12(b)(6) analysis in this District.\n\n Plaintiffs\u2019 reliance on In re Alstom S.A. Securities Litigation, is equally misplaced. Apart\n\nfrom being out-of-circuit and decided before both Twombly and Iqbal, Alstom underscores what is\n\nmissing here. The complaint in Alstom alleged that (i) the misrepresented topic was \u201cextremely\n\nimportant\u201d to the company\u2019s liquidity and profile; (ii) the defendant was involved in day-to-day\n\noperations; and (iii) the vendor-financing arrangements at issue were large and longstanding. 406\n\nF. Supp. at 496. Plaintiffs here allege none of these particulars.\n\n Similarly, In re Evergreen, 705 F. Supp. 2d at 97, does not advance Plaintiffs\u2019 cause. In\n\nEvergreen, the plaintiffs alleged that the defendants not only signed the relevant filings but also\n\nparticipated in drafting and approving the misstatements themselves. No such allegations appear\n\nhere.\n\n\n\n\narguing that Rule 9 applies to the Section 15 claim. Opp. at 22. Not so. The Independent Directors\ndid not argue this in their moving papers, and tellingly, Plaintiffs offer no supporting citation. The\nIndependent Directors did however argue that Plaintiffs\u2019 conclusory allegations of control did not\nmeet even Rule 8\u2019s more lenient standard.\n\n\n 9\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 15 of 16\n\n\n\n Plaintiffs\u2019 invitation for this Court to disregard Fourth Circuit precedent and follow district\n\ncourt decisions from Washington and California is not persuasive, as those decisions involved far\n\nmore substantial factual allegations than those present here. See ECF No. 90 at 31 (citing In re\n\nCharles Schwab Corp. Sec. Litig., 257 F.R.D. 534, 555 (N.D. Cal. 2009); In re Metropolitan Sec.\n\nLitig., 532 F. Supp. 2d 1260, 1296 (E.D. Wash. 2007)). In Charles Schwab, for example, the\n\ncomplaint alleged that defendants participated in the distribution of fund shares, directly offered\n\nand sold those shares, and actively solicited their sale\u2014facts entirely absent from Plaintiffs\u2019\n\npleading. 257 F.R.D. at 549.\n\n Plaintiffs\u2019 reliance on conclusory and vague allegations concerning the Independent\n\nDirectors\u2019 titles and signatures\u2014without any facts suggesting control\u2014is insufficient under\n\ncontrolling case law in this District. See In re Constellation Energy Grp., 738 F. Supp. 2d at 639\n\n(\u201cAn individual\u2019s position alone does not establish control person liability.\u201d). The Section 15\n\nclaim should be dismissed.\n\nIV. CONCLUSION\n\n The Independent Directors respectfully request that the Court dismiss with prejudice all\n\nclaims against them in the Amended Class Action Complaint.\n\n\n\n\n 10\n\f Case 8:24-cv-02900-DKC Document 105 Filed 10/22/25 Page 16 of 16\n\n\n\nDated: October 22, 2025 PAUL HASTINGS LLP\n\n s/ Bradley J. Bondi\n Bradley J. Bondi (Bar No. 16071)\n Lawrence E. Slusky (Bar No. 21745)\n Ronald K. Anguas, Jr. (admitted pro hac vice)\n 2050 M Street N.W.\n Washington, D.C. 20036\n Tel: 202-551-1700\n Fax: 202-551-1705\n Email: bradbondi@paulhastings.com\n Email: lawrenceslusky@paulhastings.com\n Email: ronaldanguas@paulhastings.com\n\n D. Scott Carlton (admitted pro hac vice)\n 515 South Flower Street, 25th Floor\n Los Angeles, CA 90071\n Tel: 213-683-6000\n Fax: 213-627-0705\n Email: scottcarlton@paulhastings.com\n\n Attorneys for Defendants Matthew Barger, Ian\n Davis, Bruce Mehlman, and Michael Moe\n\n\n\n\n 11\n\f","ocr_status":2,"date_upload":"2026-05-19T22:32:04.606332-07:00","document_number":"105","attachment_number":null,"pacer_doc_id":"093015255732","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.944761-08:00","date_modified":"2026-05-18T23:59:56.168429-07:00","date_filed":"2025-10-22","time_filed":null,"entry_number":105,"recap_sequence_number":"2025-10-22.005","pacer_sequence_number":306,"description":"REPLY to Response to Motion re 85 MOTION to Dismiss the Amended Complaint filed by Matthew Barger, Ian Davis, Bruce Mehlman, Michael Moe.(Bondi, Bradley) (Entered: 10/22/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475316/","id":447475316,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228766/","id":462228766,"tags":[],"absolute_url":"/docket/69233925/104/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.862566-08:00","date_modified":"2026-05-22T08:05:53.228847-07:00","sha1":"f01332db395de029a96ba6b9d9c4d5a942a2bf70","page_count":16,"file_size":132748,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.104.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.104.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 1 of 16\n\n\n\n IN THE UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n (Southern Division)\n\nDANNY WALKER,\nIndividually and on Behalf of All Others\nSimilarly Situated,\n Plaintiff, Civil No. 8:24-cv-24-02900\nv.\nILEARNINGENGINES, INC., et al.\n Defendants.\n\n DEFENDANT SAYYED FARHAN NAQVI\u2019S\n NAQVI'S\n REPLY MEMORANDUM IN FURTHER SUPPORT OF HIS\n MOTION TO DISMISS THE AMENDED COMPLAINT\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 2 of 16\n\n\n\n TABLE OF CONTENTS\n\n Page\n\nI. The Amended Complaint Fails to Allege Facts That, If Proved, Would Show That\n Any of the Challenged Statements Were Actionably False. ............................................... 1\n A. The PSLRA Requires More Than Conclusory Allegations of Falsity.\n (Opp\u2019n at 14-15.) .................................................................................................... 2\n (Opp'n\n B. Possibility Is Not Plausibility. (Opp'n\n (Opp\u2019n at 11-14.) ................................................... 2\n C. The Disconnect Between Plaintiffs' Plaintiffs\u2019 Allegations About \"Fake\" \u201cFake\u201d Revenues\n and Expenses and His Allegations About Violations Of GAAP. (Opp'n (Opp\u2019n at\n 14-16.) ..................................................................................................................... 4\n D. Plaintiffs Did Not Do the Work, And Nobody Did It for Them. (Opp'n (Opp\u2019n at\n 16-17.) ..................................................................................................................... 7\nII. The Amended Complaint Does Not Allege Facts That, If Proved, Would Support\n the Strong Inference of Scienter Required by the PSLRA. ................................................ 8\nIII. The Amended Complaint Does Not Adequately Allege Loss Causation. .......................... 9\nIV. Plaintiffs Have Waived Any Argument That They Have Standing to Pursue a\n Section 11 Claim Against Mr. Naqvi. ............................................................................... 12\nCONCLUSION\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026..13\n\n\n\n\n i\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 3 of 16\n\n\n\n TABLE OF AUTHORITIES\n\n Page(s)\n\nCases\n\nAshcroft v. Iqbal,\n 556 U.S. 662 (2009) ...............................................................................................................2, 3\n\nCupat v. Palantir Techs., Inc.,\n 2025 U.S. Dist. LEXIS 75800 (D. Colo. Apr. 4, 2025) .............................................................3\n\nGBR Grp., Ltd. v. Biogen Inc. (In re Biogen Inc. Sec. Litig.),\n 857 F.3d 34 (1st Cir. 2017) ......................................................................................................13\n\nHarris v. Amtrust Fin. Servs., Inc.,\n 135 F. Supp. 3d 155 (S.D.N.Y. 2015)....................................................................................2, 7\n\nHeck v. Orion Group Holdings, Inc.,\n 468 F. Supp. 3d 828 (S.D. Tex. 2020) .......................................................................................2\n\nLambertus v Nuvo Sols., Inc.,\n 2025 U.S. Dist. LEXIS 191793 (E.D.N.C. Sept. 29, 2025) .....................................................12\n\nNektar Therapeutics Sec. Litig.,\n 34 F.4th 828 (9th Cir. 2022) ..............................................................................................11, 12\n\nParkman v. Elam,\n 2009 U.S. Dist. LEXIS 21578 (E.D. Va. Mar. 17, 2009) ..........................................................2\n\nPension Plan v. KE Holdings, Inc.,\n 718 F. Supp. 3d 344 (S.D.N.Y. 2024)........................................................................................5\n\nPub. Emps. Ret. Sys. of Mississippi v. Amedisys, Inc.,\n 769 F.3d 313 (5th Cir. 2014) .............................................................................................10, 11\n\nTeachers\u2019\nTeachers' Ret. Sys. of Louisiana v. Hunter,\n 477 F.3d 162 (4th Cir. 2007) .....................................................................................................2\n\nStatutes\n\n15 U.S.C. \u00a7 78u-4(b)(1) ...............................................................................................................2, 6\n\n\n\n\n ii\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 4 of 16\n\n\n\nI. The Amended Complaint Fails to Allege Facts That, If Proved, Would Show That\n Any of the Challenged Statements Were Actionably False.\n\n Plaintiffs\u2019 theory of falsity rests entirely on two oft-repeated allegations: (1) that\n Plaintiffs'\n\n (\u201ciLE\u201d) reported \"largely\niLearningEngines (\"iLE\") \u201clargely fake\"\n fake\u201d revenues and expenses in its financial\n\nstatements,'1 and (2) that while iLE disclosed both the substance and extent of its interactions with\nstatements,\n\nthe Technology Partner\u2014which the Amended Complaint alleges was an entity known as\n\nExperion\u2014the company nonetheless violated GAAP by failing to designate the Technology\n\nPartner as a \"related party.\"22\n \u201crelated party.\u201d\n\n As Mr. Naqvi explained in his Memorandum in Support of His Motion to Dismiss the\n\nAmended Complaint [ECF No. 84] (\"Opening\n (\u201cOpening Br.\"),\n Br.\u201d), these allegations fail to satisfy Plaintiffs'\n Plaintiffs\u2019\n\npleading burden under the Private Securities Litigation Reform Act of 1995 (\"PSLRA\")\n (\u201cPSLRA\u201d) for two\n\nrelated reasons. First, the \"largely\n \u201clargely fake\u201d\n fake\" accusation is conclusory: like the Hindenburg Report (the\n\nshort-seller\u2019s\nshort-seller's attack piece that Plaintiffs largely copied and pasted into the Amended Complaint),\n\nthe operative pleading alleges no objective facts describing either the \"how\"\n \u201chow\u201d or the \"how\n \u201chow much\u201d\n much\"\n\nof the supposed financial fraud. Second, the allegations about an alleged GAAP violation do not\n\nfill the substantive void because the failure to label iLE's\n iLE\u2019s Technology Partner as a \"related\n \u201crelated party\u201d\n party\"\n\nsays nothing about whether, how, or to what extent the Company supposedly falsified its revenues\n\nand expenses. Plaintiffs instead ask the Court to take a speculative leap and assume\u2014again, in the\n\nabsence of any allegations about how the alleged financial fraud was accomplished\u2014that some\n\nunspecified portion of iLE's\n iLE\u2019s transactions with the Technology Partner must have been fraudulent\n\nbecause, given the relationship between the entities, they could have been fraudulent.\n\n\n\n11 Am. Comp. \u00b6\u00b6 322, 336, 344, 355, 384, 395, 463, 467, 473, 476, 480, 483, 486, 489, 494, 499, 501, 506, 509,\n513, 516.\n2\n Am. Comp. \u00b6\u00b6 322, 330, 332, 336, 337, 344, 346, 355, 357, 384, 386, 395, 397, 467, 469, 473, 476, 478, 480,\n489, 491, 494, 496, 499, 501, 503, 506, 509, 513.\n\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 5 of 16\n\n\n\n Plaintiffs\u2019 Consolidated Memorandum of Law In Opposition to Defendants\n Nothing in Plaintiffs'\n\nChidambaran\u2019s\nChidambaran's and Naqvi\u2019s\n 's Motions to Dismiss the Amended Complaint [ECF No. 92] (\"Opp'\n (\u201cOpp\u2019n\u201d)\n n\")\n\ncures these defects or gives the Court reason to ignore them.\n\n A. The PSLRA Requires More Than Conclusory Allegations of Falsity. (Opp'n\n (Opp\u2019n\n at 14-15.)\n\n Plaintiffs try to excuse the factual paucity of the Amended Complaint by arguing that Rule\n\n9(b) requires them to plead only \"the\n \u201cthe time, place, and contents of the false representations.\u201d Opp\u2019n\n representations.\" Opp'n\n\nat 14.33 But Plaintiffs fail to mention, much less account for, the impact of the PSLRA in a case like\n\nthis one. The PSLRA requires not just the superficial particulars of \"each\n \u201ceach statement alleged to have\n\nbeen misleading,\"\n misleading,\u201d but also the underlying \"reason\n \u201creason or reasons why the statement is misleading...\u201d\n misleading...\"\n\n15 USC 78u-4(b)(1) (emphasis added). To satisfy this deeper explanatory element of the statutory\n\npleading burden, a securities fraud plaintiff must do more than simply allege the time, place, and\n\ncontents of the alleged misstatements; he must supply \"objective\n \u201cobjective facts,\u201d\n facts,\" Harris v. Amtrust Fin.\n\nServs., Inc., 135 F. Supp. 3d 155, 172 (S.D.N.Y. 2015), indicating both \"the\n \u201cthe amount of revenue\n\nfalsely booked and reported\u201d\n reported\" and \"why\n \u201cwhy that amount was false.\"\n false.\u201d Heck v. Orion Group Holdings,\n\nInc., 468 F. Supp. 3d 828, 851 (S.D. Tex. 2020). This is precisely the flaw that Mr. Naqvi identified\n\nin his opening memorandum, Opening Br. at 5, and precisely the flaw that Plaintiffs ignore in\n\ntheir opposition.\n\n B. Possibility Is Not Plausibility. (Opp'n\n (Opp\u2019n at 11-14.)\n\n The pleading standard in federal court \"asks\n \u201casks for more than a sheer possibility that a\n\n defendant has acted unlawfully.\"\n unlawfully.\u201d Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To survive a motion\n\n\n\n3\n To support this argument, Plaintiffs cite Teachers\u2019\n Teachers' Ret. Sys. of Louisiana v. Hunter, 477 F.3d 162 (4th Cir.\n2007). Opp\u2019n'n at 14. Hunter was decided before the Supreme Court issued its landmark decisions in Iqbal and Twombly,\nand its validity with respect to pleading standards has therefore been questioned. Parkman v. Elam, 2009 U.S. Dist.\nLEXIS 21578, at *7, n. 4 (E.D. Va. Mar. 17, 2009).\n\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 6 of 16\n\n\n\n to dismiss, a complaint must contain sufficient factual matters to \"state\n \u201cstate a claim for relief that is\n\n plausible on its face.\"\n face.\u201d Id. A complaint which pleads facts that are \"merely\n \u201cmerely consistent\u201d\n consistent\" with a\n\n defendant\u2019s \u201cstops short of the line between possibility and plausibility,\u201d\n defendant's liability \"stops plausibility,\" id., and it\n\n follows that allegations which simply suggest that a defendant could have done something\u2014for\n\n example, that a company could have used a commercial relationship as a vehicle for financial\n\n fraud\u2014do not plausibly establish, even for pleading purposes, that the defendant actually did so.\n\n See, e.g., Cupat v. Palantir Techs., Inc., 2025 U.S. Dist. LEXIS 75800, at * 29 (D. Colo. Apr. 4,\n\n (\u201cSimply because Defendants could have accessed data that contradicted their statements\n 2025) (\"Simply\n\n ... does not mean Defendants knew what the data reflected...\u201d).\n reflected...\").\n\n \u201ccould haves\u201d\n But \"could haves\" are all that the Amended Complaint offers when it comes to the\n\n supposed misstatement of iLE's\n iLE\u2019s revenues and expenses. The only disclosed source of Plaintiffs'\n Plaintiffs\u2019\n\n allegations was the hit piece published by Hindenburg Research, and the only disclosed basis for\n\n short-seller\u2019s \"suspicion\"\n the short-seller's \u201csuspicion\u201d that iLE had reported \"fake\"\n \u201cfake\u201d revenues and expenses was the nature\n\n of iLE's\n iLE\u2019s relationship with its Technology Partner\u2014in particular, the counterparties\u2019\n counterparties' practice of\n\n \u201cnetting\u201d offsetting payment obligations. According to Hindenburg, such a practice could have\n \"netting\"\n\n \u201can elegant solution\"\n been \"an solution\u201d for a corporation looking to \"hid[e]\n \u201chid[e] a fake revenue scheme.\u201d\n scheme.\" See\n\n (\u201cSylvia Decl.\"),\n Declaration of John F. Sylvia [ECF No. 84-2] (\"Sylvia Decl.\u201d), Exhibit A [ECF No. 84-3]\n\n (\u201cHindenburg Report\")\n (\"Hindenburg Report\u201d) at 18. Thus, in their Opposition, Plaintiffs can say no more than that \"[t]he\n \u201c[t]he\n\n relationship between iLearningEngines and Experion allowed iLearningEngines to record fake\n\n expenses and revenues. . . .\u201d\n .\" Opp\u2019n\n Opp'n at 12 (emphasis added). Under /ghat\n Iqbal and Twombly, this is not\n\n enough. The allegation that iLE's\n iLE\u2019s relationship with Experion made it possible\n possible for iLE to record\n\n \"fake\" plausible that iLE did so.44\n \u201cfake\u201d revenues and expenses does not make it plausible\n\n\n4\n Thus, Plaintiffs simply and improperly assume an unsupported conclusion\u2014that every dollar of revenue\nobtained from the Technology Partner was fictitious\u2014when they assert that \"this\n \u201cthis improperly recognized revenue\n\n\n 3\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 7 of 16\n\n\n\n C. The Disconnect Between Plaintiffs\u2019 \u201cFake\u201d Revenues and\n Plaintiffs' Allegations About \"Fake\"\n Expenses and His Allegations About Violations Of GAAP. (Opp'n\n (Opp\u2019n at 14-16.)\n\n In his opening memorandum of law, Mr. Naqvi not only documented the Amended\n\nComplaint\u2019s\nComplaint's virtually exclusive reliance on the Hindenburg Report for its allegations, but also\n\ndescribed the caution with which federal courts approach claims based on such self-interested\n\npolemics. Opening Br. at 1-2, 9-14. Plaintiffs cannot, and do not, dispute the inherent weakness\n\nof a short-seller's\n short-seller\u2019s report as a source in securities-fraud cases; instead, they attempt to distance\n\nthemselves and their claims from the Hindenburg Report, contending that \"the\n \u201cthe Amended\n\nComplaint goes beyond merely repackaging the Hindenburg Report's\n Report\u2019s claims. . . .\u201d\n .\" Opp\u2019n\n Opp'n at 15.\n\nBut the effort fails. Plaintiffs can identify only a single way in which the Amended Complaint\n\nsupposedly went \"beyond\"\n \u201cbeyond\u201d the short-seller\u2019s\n short-seller's claims: they say that \"it\n \u201cit specifically pleads that\n\niLearningEngines\u2019 revenues and expenses were misstated because they do not comply with\niLearningEngines'\n\nGAAP.\u201d\nGAAP.\" Id.\n\n This does not \"go[]\n \u201cgo[] beyond\"\n beyond\u201d the Hindenburg Report, which likewise claimed that the\n\nTechnology Partner was \"an\n \u201can undisclosed related party.\u201d\n party.\" Sylvia Decl., Ex. A at 1 (fourth bullet\n\npoint). The Hindenburg Report identified four purported \"signs\"\n \u201csigns\u201d that \"Experion\n \u201cExperion Is An Undisclosed\n\n Party\u201d\u2014 (1) that iLE served as the American \"contact\"\nRelated Party\"\u2014 \u201ccontact\u201d for Experion, (2) that some iLE\n\nemployees are directors and shareholders of Experion India, (3) that another Experion shareholder\n\nis the brother of an iLE employee, and (4) that iLE's\n iLE\u2019s president and another iLE employee\n\npreviously worked for Experion. Id. at 9-17. The Amended Complaint echoes the Hindenburg\n\nReport in every particular, alleging that iLE and Experion were \"related\n \u201crelated parties\u201d\n parties\" for exactly the\n\n\n\namounted to 94% of total revenue in 2021, 96.3% in 2022, and 92.6% in 2023,\" 2023,\u201d simply because those percentages\nreflected the amount of revenue iLE received in its transactions with Experion. Opp\u2019n\n 'n at 13; see also id. at 15 (claiming\n \u201cexplain[ed] why the revenue was improperly recognized\u201d\nthat bankruptcy filings \"explain[ed] recognized\" because they detailed the receipt of\n$87.425 million from Experion).\n\n\n\n 4\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 8 of 16\n\n\n\nsame reasons. Am. Comp. \u00b6\u00b6 113-114, 121, 124, 127, 129. Here as elsewhere, therefore, Plaintiffs\n\ncannot escape the consequences of their dependence on the short-seller\u2019s\n short-seller's self-interested report,\n\nand these allegations, too, must be \"viewed\n \u201cviewed with caution.\u201d\n caution.\" Saskatchewan Healthcare Emp.\u2019s\n 's\n\nPension Plan v. KE Holdings, Inc., 718 F. Supp. 3d 344, 381 (S.D.N.Y. 2024).\n\n Apart from their reliance on the Hindenburg Report, Plaintiffs'\n Plaintiffs\u2019 argument is defective\n\nbecause even if iLE did not \"comply\n \u201ccomply with GAAP\u201d \u201crelated party,\u201d\n GAAP\" by labeling Experion as a \"related party,\"\n\nnothing in either the Amended Complaint or the Opposition explains how this alleged violation of\n\nGAAP caused iLE\u2019s\n iLE's revenues and expenses to be misstated. Again, the Amended Complaint fails\n\nbasic logic: the fact that a balloon can be circular does not mean that every balloon is circular (in\n\nskilled hands, a balloon can look more like a dog than a ball). Likewise, the (alleged) fact that\n\nrelated party transactions can be a vehicle for fraud does not mean that every related party\n\ntransaction is fraudulent in intent or outcome. (If that were so, then GAAP would ban related party\n\ntransactions, not merely require their designation as such.) And it is simply untrue that the\n\n\u201cAmended Complaint contains over eighty paragraphs of detailed allegations explaining why the\n\"Amended\n\nrevenue was improperly recognized.\u201d Opp\u2019n at 15, citing Am. Comp. \u00b6\u00b6 111-133, 254-313. The\n recognized.\" Opp'n\n\ncited allegations speak for themselves: they merely parrot the Hindenburg Report's\n Report\u2019s putative\n\n\u201csigns\u201d that Experion was a related party, Am. Comp. \u00b6\u00b6111-133, summarizing the accounting\n\"signs\"\n\nguidance about related parties, Am. Comp. \u00b6\u00b6 254-290, summarizing iLE's\n iLE\u2019s own disclosures about\n\nthe dual customer-vendor nature of its commercial relationship with the Technology Partner, Am.\n\nComp. \u00b6\u00b6 291-297, and concluding that the \"netting\n \u201cnetting of amounts due to and from Experion presents\n\na method [that is, an opportunity] for recording both fake revenues and fake expenses. . . .\u201d\n .\" Am.\n\nComp. 11305.\n \u00b6 305.\n\n\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 9 of 16\n\n\n\n Nowhere, however, does the Amended Complaint supply what the statute requires: facts\n\ndemonstrating \"why\"\n \u201cwhy\u201d any particular item was misstated, much less explaining why iLE's\n iLE\u2019s revenues\n\nand expenses were \"largely\n \u201clargely fake.\"\n fake.\u201d 15 U.S.C. \u00a7 78u-4(b)(1). Plaintiffs simply claim that \"revenue\n \u201crevenue\n\nand expenses flowing through a related party and netted from amounts owed the related party does\n\nnot comply with GAAP for reporting revenue and is therefore materially misleading.\u201d\n misleading.\" Opp\u2019n\n Opp'n at\n\n16. But this misstates GAAP, which only requires that \"related\n \u201crelated party\u201d\n party\" transactions be designated\n\nas such; nothing in the accounting guidance says that such transactions themselves \"do[]\n \u201cdo[] not\n\ncomply with GAAP.\u201d\n GAAP.\" Plaintiffs do not and cannot cite any case law or accounting guidance for\n\nthe notion that whenever an entity fails to attach the \"related\n \u201crelated party\u201d\n party\" label to a transaction, the\n\nrevenues and expenses associated with the transaction are ipso facto\n facto fraudulent (or as Plaintiffs\n\nput it, are \"therefore\n \u201ctherefore materially misleading\u201d).\n misleading\"). Indeed, one can imagine a number of reasons (e.g.,\n\nlack of knowledge, simple oversight) why a reporting entity might not attach the \"related\n \u201crelated party\u201d\n party\"\n\nlabel to an otherwise legitimate and properly recorded transaction.\n\n Nor can Plaintiffs rescue their failed pleading by pointing to iLE's\n iLE\u2019s supposed \"admission\n \u201cadmission of\n\nthe falsity of its financial statements through its on [sic] November 18, 2024 announcement that\n\nits financial statements from 2020 through the second quarter should no longer be relied upon \u2014\n \u2013a\n\nrevelation that occurred as a result of iLearningEngines'\n iLearningEngines\u2019 own investigation of the Hindenburg\n\nReport\u2019s allegations.\u201d\nReport's allegations.\" Opp\u2019n\n Opp'n at 15-16. This contention is misleading in two ways. First, the\n\nstatement that iLE made on November 18, 2024 did not\u2014because it could not\u2014concern the result\n\nof the company\u2019s\n company's investigation: the November 18 announcement made clear that \"[t]he\n \u201c[t]he\n\nInvestigation is ongoing and no conclusions have been reached at this time.\"\n time.\u201d Am. Comp. \u00b6 200\n\n(quoting iLE\u2019s\n iLE's November 18, 2024 Form 8-K). Second, because the investigation was ongoing\n\nand had not produced any results, the statement that iLE\u2019s\n iLE's previous financial statements \"should\n \u201cshould\n\n\n\n\n 6\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 10 of 16\n\n\n\nno longer be relied upon\"\n upon\u201d was explicitly provisional: \"At\n \u201cAt this time, the Company is unable to\n\ndetermine whether it must correct financial statements for the Non-Reliance Period, or if such\n\ncorrections are necessary, the quantification of such corrections.\u201d\n corrections.\" Id. The fact that Plaintiffs have\n\nto misrepresent the record in order to conjure up an alleged \"admission\"\n \u201cadmission\u201d of falsity speaks loudly\n\nto the weakness of their pleading.\n\n D. Plaintiffs Did Not Do the Work, And Nobody Did It for Them. (Opp'n\n (Opp\u2019n at 16-\n 17.)\n\n Finally, Plaintiffs have accused Mr. Naqvi of \"misleadingly\"\n \u201cmisleadingly\u201d pointing out that because\n\niLE\u2019s financial statements have never been restated, there is no external support for an allegation\niLE's\n\nthat the reported revenues and expenses were materially false. Opp\u2019n\n Opp'n at 16, citing Opening Br. at\n\n10. The accusation itself is misleading. In noting the absence of a restatement, Mr. Naqvi was\n\nsimply following the case law, cited in his brief and not mentioned (much less refuted) by\n\nPlaintiffs, applying the commonsense proposition that, \"[i]n\n \u201c[i]n the absence of a restatement or\n\nallegations pointing to objective facts,\u201d\n facts,\" claims that a defendant violated GAAP do \"not\n \u201cnot permit the\n\nCourt to infer that Defendants committed accounting fraud.\"\n fraud.\u201d Harris, 135 F. Supp. 3d at 172 (cited\n\nin Opening Br. at 10, 15, 19). The courts recognize, in other words, that the facts demonstrating\n\nwhy a challenged statement is misleading must come from somewhere; in a case like this one, for\n\nexample, where an essential element is \"objective\n \u201cobjective facts\u201d\n facts\" demonstrating why a company\u2019s\n company's reported\n\nrevenues and expenses are \"largely\n \u201clargely fake,\"\n fake,\u201d someone must have done the digging and the math\n\nneeded to develop such facts, and if the plaintiff has not done the work himself, and if he hasn\u2019t\n hasn't\n\ngotten the facts from either a corporate insider with relevant knowledge, see Opening Br. at 11\n\n(noting that Amended Complaint does not attribute any factual allegations to \"confidential\n \u201cconfidential\n\nwitnesses\u201d), or from an outsider who has examined the company\u2019s\nwitnesses\"), company's finances in the course of\n\nperforming an audit or a restatement, then there is no basis for an inference of accounting fraud.\n\n\n\n 7\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 11 of 16\n\n\n\nII. The Amended Complaint Does Not Allege Facts That, If Proved, Would Support the\n Strong Inference of Scienter Required by the PSLRA.\n\n With respect to scienter, the Opposition is most notable for what it does not say: Plaintiffs\n\nfail entirely to address, much less to refute, a core element of Mr. Naqvi's\n Naqvi\u2019s motion: that the\n\ninference of scienter\u2014that is, the inference that iLE failed to identify Experion as a \"related\n \u201crelated party\u201d\n party\"\n\nbecause it wanted to hide the fact that the relationship was the vehicle for accounting fraud\u2014is\n\nnot just weakened, but rendered nonsensical, by the fact that iLE repeatedly and conspicuously\n\ndisclosed to investors the existence, terms (including the \"netting\"\n \u201cnetting\u201d arrangement) and financial\n\nscope of that relationship, mentioning the Technology Partner 129 times in the Form S-1\n\nRegistration Statement and 103 times in the Form S-4. Opening Br. at 19. Why would iLE have\n\ndisclosed all of the substantive details about a relationship it supposedly wanted to conceal? Why\n\nisn\u2019t the far more compelling inference the non-culpable conclusion that there was no subterfuge,\nisn't\n\nand that the failure to designate Experion as a \"related\n \u201crelated party\u201d\n party\" was at most an honest mistake?\n\nPlaintiffs simply ignore these essential questions, and their inability to even attempt an answer\u2014\n\ninstead devoting this section of the Opposition to nit-picking objections about Mr. Naqvi's\n Naqvi\u2019s role in\n\nand departure from the company\u2014should be dispositive of the scienter issue.\n\n Mr. Naqvi also argued that the alleged GAAP violation is at best weakly indicative of\n\nscienter because financial accounting is not a science; it's\n it\u2019s an arena in which judgment calls are\n\nmade and mistakes can happen without any fraudulent intent. Opening Br. at 19. Plaintiffs do\n\nattempt a counter-argument, but trip over their own shoelaces in doing so. According to them,\n\n\u201c[t]he GAAP test is simple\u201d\n\"[t]he simple\" because one provision of the related party guidance\u2014the\n\nsubparagraph that defines related parties to include managers of the reporting entity and members\n\nof their immediate families\u2014\u201crequires\n families\u2014\"requires no complicated analysis and leaves no room for subjective\n\njudgment.\u201d Opp'n\njudgment.\" Opp\u2019n at 21, citing GAAP Accounting Standards Codification (\"ASC\")\n (\u201cASC\u201d) 850-10-20(e).\n\n\n\n 8\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 12 of 16\n\n\n\n Plaintiffs are half-right: that particular subparagraph is simple and does not leave room for\n\nsubjective judgment. But Section 850-10-20(e), by its simple and objective terms, also leaves no\n\nroom for the conclusion that iLE and Experion were related parties. iLE was the reporting entity\n\nhere. The question, then, is whether, in its transactions with Experion, iLE did business with either\n\n(i) its own managers, or (ii) members of their immediate families. The answer is clear: it did not.\n\nMessrs. Nair, Thomas, and Arackal may have served as directors of Experion entities while\n\nemployed by iLE, Am. Comp. \u00b6\u00b6298-299, but iLE did not do any business with its putative\n\nmanagers: the transactions in question were strictly at the corporate level.\n\n The attenuated connection precludes application of ASC 850-10-20(e), and means that the\n\nanswer to the related party question must be found in subparagraphs 850-10-20(f) and (g). These\n\nprovisions, however, are not \"simple\"\n \u201csimple\u201d and do leave room for subjective judgment. Both provide\n\nthat another party may be related to the reporting entity only if one party has such control or\n\ninfluence over the other that it might be \"prevented\n \u201cprevented from fully pursuing its own separate interests.\"\n interests.\u201d\n\nASC 850-10-20(f) and (g). Again, Plaintiffs have studiously ignored the real issue, and their\n\nsilence is telling.\n\nIII. The Amended Complaint Does Not Adequately Allege Loss Causation.\n\n In his opening memorandum, Mr. Naqvi demonstrated that the Amended Complaint failed\n\nto adequately allege the essential element of loss causation because of the combined impact of\n\nthree shortcomings: (1) the alleged corrective disclosure was the Hindenburg Report; (2) the\n\ninformation in the Hindenburg Report had been obtained from public sources, and therefore had\n\nalready been incorporated into iLE's\n iLE\u2019s stock price; and (3) the Hindenburg Report was a self-\n\ninterested screed by an admitted short seller who had disclaimed any intention to cause investors\n\nto rely thereon.\n\n\n\n\n 9\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 13 of 16\n\n\n\n Plaintiffs do not deny the factual predicates of Mr. Naqvi's\n Naqvi\u2019s argument. Opp\u2019n (\u201cThis\n Opp'n at 25 (\"This\n\nstock price decline immediately followed the publication of an investigative report from\n\n Research\u201d), id. (the Report was based on \"domestic\nHindenburg Research\"), \u201cdomestic and foreign corporate records ...,\n\ncourt records, patent records, archived internet pages..., social media postings, and a report from\n\n\u2018corporate Diligencia\u201d); Id. at 27 (\"Hindenburg\n`corporate intelligence firm Diligencia\"); (\u201cHindenburg Research were [sic] short\n\niLearningEngines\u2019 stock when it published its report\u201d);\niLearningEngines' (\u201cthe information used by Hindenburg\n report\"); id. (\"the\n\n sources\u201d).5 They argue, however, that the Hindenburg\nin drafting the report came from public sources\").5\n\nReport nonetheless qualifies as a corrective disclosure because: (1) \"[a]nalysis\n \u201c[a]nalysis based on public\n\ninformation can form a corrective disclosure if it is plausible that the information was not already\n\nincorporated into a company\u2019s\n company's stock price,\u201d Opp\u2019n at 29; and (2) that no \"bright-line\n price,\" Opp'n \u201cbright-line rule\u201d\n rule\"\n\nprecludes a short seller\u2019s\n seller's report from functioning as a corrective disclosure. Opp'n\n Opp\u2019n at 27.\n\n Neither contention passes muster under the circumstances. First, nothing in the Amended\n\nComplaint or the Hindenburg Report itself suggests that Hindenburg's\n Hindenburg\u2019s conclusions were based on\n\n\u201ccomplex economic data understandable only through expert analysis....\u201d\n\"complex Opp\u2019n at 29, quoting\n analysis....\" Opp'n\n\nPub. Emps. Ret. Sys. of Mississippi v. Amedisys, Inc., 769 F.3d 313, 323 (5th Cir. 2014). In\n\nAmedisys, however, the public disclosures included a Wall Street Journal analysis based on\n\nMedicare data. Although the raw data was \"technically\n \u201ctechnically available to the public\u201d\n public\" in its raw form, it\n\n\u201chad little to no probative value in its native state,\u201d\n\"had state,\" and a supporting affidavit from the expert who\n\nanalyzed it established that the data \"was\n \u201cwas difficult to obtain and that his analysis required\n\nsignificant professional expertise to accomplish.\u201d\n accomplish.\" Id. at 323 and n. 3. Under these circumstances,\n\n\n5\n Plaintiff omits one other significant source for the Hindenburg Report: iLE's\n iLE\u2019s own financial statements and\nother SEC filings, which provided all of the information\n infoimation in the Report about (1) iLE's\n iLE\u2019s reported financials, and (2) the\nterms and extent of its relationship with the Technology Partner. See Sylvia Decl., Ex. A at 7. Plaintiffs'\nteims Plaintiffs\u2019 contention\nthat the information\n infoimation Hindenburg gleaned from Diligencia was not publicly available, Opp\u2019n Opp'n at 29, is belied by\nHindenburg\u2019s own assertion that \"all\nHindenburg's \u201call information\n infoimation contained herein . . . has been obtained from public sources.\"\n sources.\u201d Sylvia\nDecl., Ex. A at 30 (emphasis added).\n\n\n\n 10\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 14 of 16\n\n\n\nthe Fifth Circuit concluded that \"it\n \u201cit is plausible that complex economic data understandable only\n\nthrough expert analysis may not be readily digestible by the marketplace.\u201d\n marketplace.\" Id.\n\n This case is nothing like Amedisys. The only economic data \"analyzed\"\n \u201canalyzed\u201d by Hindenburg\n\n iLE\u2019s own financial statements, and the Amended Complaint\nResearch was the information in iLE's\n\nconveyed Plaintiffs'\n Plaintiffs\u2019 own admission that such data was \"readily\n \u201creadily digestible by the marketplace.\u201d\n marketplace.\"\n\nAm. Compl. \u00b6\u00b6 159-178. In the section entitled \"Applicability\n \u201cApplicability of Presumption of Reliance\u2014Fraud\n\non the Marketplace,\"\n Marketplace,\u201d the Amended Complaint alleges that \"the\n \u201cthe market for iLearningEngines\n\nsecurities promptly digested current information regarding iLearningEngines from publicly\n\navailable sources and reflected such information in [the price of] iLearningEngines securities.\u201d\n securities.\"\n\nAm. Comp. \u00b6 544. Plaintiffs cannot have it both ways. Either (1) the data in iLE's\n iLE\u2019s financial\n\nstatements was digestible by the market (and therefore could not have been the basis for a\n\ncorrective disclosure), or (2) it was not digestible by the market (and therefore could not justify\n\nPlaintiffs\u2019 reliance on a fraud-on-the-market theory). Either way, the Amended Complaint fails to\nPlaintiffs'\n\nstate a viable claim for securities fraud.\n\n Second, Plaintiffs once again cannot escape the implications of their reliance on the\n\nHindenburg Report. They admit that the \"relevant\n \u201crelevant factors\"\n factors\u201d for loss-causation analysis include both\n\n\u201cthe source of the new information entering the market\u201d\n\"the market\" and \"its\n \u201cits credibility,\u201d\n credibility,\" Opp\u2019n\n Opp'n at 24, citing\n\nKatyle v. Penn Nat. Gaming, Inc., 637 F3d 462, 472 (4th Cir. 2011), and the case law cited in the\n\nOpposition itself undermines their contention that the market may plausibly have relied on a\n\n\u201creport\u201d published by an admittedly self-interested short seller, whose authors took pains to\n\"report\"\n\ndisclaim any warranty of accuracy and to warn readers to \"do\n \u201cdo your own research and due diligence\u201d\n diligence\"\n\nrather than rely on their analysis and opinion. Sylvia Decl., Ex. A. at 30. In Nektar Therapeutics\n\n Opp\u2019n at 29), the panel affirmed dismissal on\nSec. Litig., 34 F.4th 828 (9th Cir. 2022) (cited in Opp'n\n\n\n\n\n 11\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 15 of 16\n\n\n\nloss-causation grounds, emphasizing \"the\n \u201cthe high bar that plaintiffs must meet in relying on self-\n\ninterested and anonymous short sellers.\u201d\n sellers.\" Id. at 839-40. Acknowledging that the short seller had\n\n\u201cpulled together disparate sources and connected data in ways that were not plainly obvious,\u201d\n\"pulled obvious,\" and\n\nthus, in that narrow sense, might \"[p]erhaps\"\n \u201c[p]erhaps\u201d have \"provide[d]\n \u201cprovide[d] new information to the market,\u201d\n market,\"\n\nthe Ninth Circuit concluded that it was still \"not\n \u201cnot plausible that the market would perceive the [short\n\nseller\u2019s\nseller's report] as revealing false statements....\u201d\n statements....\" Id. at 840. Given the author's\n author\u2019s \"financial\n \u201cfinancial incentive\n\nto convince others to sell,\u201d\n sell,\" as well as the short seller\u2019s\n seller's disclaimers that it made \"no\n \u201cno representation\n\nas to the accuracy or completeness of the information set forth in this article,\u201d\n article,\" investors \"would\n \u201cwould\n\nhave taken its \u2018contents\n `contents with a healthy grain of salt.\u2019\u201d\n salt.'\" Id., quoting In re Bofl Holding Inc. Sec.\n\nLitig., 977 F.3d 781, 797 (9th Cir. 2020).\n\n The most that can be said about the relationship between the Amended Complaint and the\n\nHindenburg Report is that it mirrors the relationship between the complaint and the short-seller\u2019s\n short-seller's\n\narticle in Nektar Therapeutics. In this case as in that one, therefore, the Court should dismiss for\n\nfailure to plead loss causation.\n\nIV. Plaintiffs Have Waived Any Argument That They Have Standing to Pursue a Section\n 11 Claim Against Mr. Naqvi.\n\n In his opening memorandum, Mr. Naqvi also argued that Plaintiffs lacked standing to\n\npursue the Section 11 claim against him. Opening Br. at 21-27. The Opposition does not respond\n\nto that argument, nor does it incorporate by reference arguments that Plaintiffs have made\n\nelsewhere on the standing element. See, e.g., [ECF No. 90] at 9-22. Plaintiffs have therefore waived\n\nthe issue. Lambertus v Nuvo Sols., Inc., 2025 U.S. Dist. LEXIS 191793, at *19, n. 2 (E.D.N.C.\n\nSept. 29, 2025). In any event, Mr. Naqvi adopts and incorporates by reference the arguments made\n\nby co-defendants as to whom Plaintiffs have addressed the standing issue.\n\n\n\n\n 12\n\f Case 8:24-cv-02900-DKC Document 104 Filed 10/22/25 Page 16 of 16\n\n\n\n CONCLUSION\n\n For the foregoing reasons, and those contained in movant\u2019s\n movant's opening brief, Mr. Naqvi\n\nrespectfully requests that the Court dismiss the Amended Complaint in its entirety with prejudice.\n\nGBR Grp., Ltd. v. Biogen Inc. (In re Biogen Inc. Sec. Litig.), 857 F.3d 34, 46 (1st Cir. 2017)\n\n(denying plaintiff\u2019s\n plaintiff's second motion to amend where \"the\n \u201cthe district court gave the plaintiffs the full\n\ntime they requested in order to file the initial amendment and allowed that amended complaint,\n\nand the plaintiffs had the motion to dismiss in hand for nearly four months before the district court\n\nruled.\u201d) ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 57 (1st Cir. 2008) (denying\nruled.\") (citing ACA\n\nleave to replead, as plaintiffs are in no way entitled to \"leisurely\n \u201cleisurely repeated bites at the apple.\u201d)).\n apple.\")).\n\n\n\n Date: October 22, 2025 Respectfully submitted,\n\n\n MINTZ, LEVIN, COHN, FERRIS,\n GLOVSKY and POPEO, P.C.\n\n\n /s/\n /5/ Castell Abner, III\n Castell Abner, III\n Federal Bar No. 22328\n 555 12th Street, NW\n 11th Floor\n Washington, DC 20004\n (202) 434-7300\n CAbner@Mintz.com\n\n John F. Sylvia (pro hac vice)\n One Financial Center\n Boston, MA 02111\n (617) 542-6000\n JFSylvia@Mintz.com\n\n for Defendant Sayyed Farhan\n Attorneysfor\n Naqvi\n\n\n\n\n 13\n\f","ocr_status":2,"date_upload":"2026-05-19T22:32:06.863406-07:00","document_number":"104","attachment_number":null,"pacer_doc_id":"093015255727","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.829790-08:00","date_modified":"2026-05-18T23:59:56.134639-07:00","date_filed":"2025-10-22","time_filed":null,"entry_number":104,"recap_sequence_number":"2025-10-22.004","pacer_sequence_number":303,"description":"REPLY to Response to Motion re 84 MOTION to Dismiss for Failure to State a Claim Plaintiff's Amended Class Action Complaint filed by Sayyed Farhan Naqvi.(Abner, Castell) (Entered: 10/22/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475315/","id":447475315,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228765/","id":462228765,"tags":[],"absolute_url":"/docket/69233925/103/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.796396-08:00","date_modified":"2026-05-22T08:52:51.504968-07:00","sha1":"9f3fc601db88235847df652ba9822c5c6e2c7c52","page_count":20,"file_size":189165,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.103.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.103.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 1 of 20\n\n\n\n UNITED STATES DISTRICT COURT\n DISTRICT OF MARYLAND\n (Southern Division)\n\nDANNY WALKER, individually and on\nbehalf of all others similarly situated,\n\n Plaintiff,\n\n v. Civil Action No. 24-2900-DKC\n\nILEARNINGENGINES, INC., Harish\nChidambaran, and Sayyed Farhan Naqvi,\n\n Defendants.\n\n DEFENDANT HARISH CHIDAMBARAN\u2019S REPLY IN SUPPORT OF\n HIS MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT\n\n\n\n\nDate: October 22, 2025 Laura G. Ferguson\n Katherine E. Pappas\n Bradley E. Markano (admitted pro hac vice)\n MILLER & CHEVALIER CHARTERED\n 900 16th St., NW\n Washington, DC 20006\n P: (202) 626-5567\n F: (202) 626-5801\n lferguson@milchev.com\n\n Attorneys for Defendant Harish\n Chidambaran\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 2 of 20\n\n\n\n TABLE OF CONTENTS\n\n Page\n\nI. THE EXCHANGE ACT CLAIMS MUST BE DISMISSED BECAUSE THE\n AMENDED COMPLAINT FAILS TO ALLEGE WITH SUFFICIENT\n PARTICULARITY ANY MATERIAL MISSTATEMENTS BY MR.\n CHIDAMABARAN ........................................................................................................... 1\n A. The Amended Complaint Does Not Allege with Particularity That the\n Non-Disclosure of the Technology Partner as a Related Party Was a\n Material Misstatement ............................................................................................ 2\n B. The Amended Complaint Does Not Allege with Particularity That Mr.\n Chidambaran Made a Material Misstatement Regarding iLE\u2019s Revenues\n from the Technology Partner, Experion Technologies ........................................... 5\nII. THE EXCHANGE ACT CLAIMS MUST BE DISMISSED BECAUSE THE\n AMENDED COMPLAINT FAILS TO PLEAD WITH PARTICULARITY\n FACTS GIVING RISE TO A STRONG INFERENCE OF SCIENTER ........................... 7\n A. Mr. Chidambaran\u2019s \u201cBackground and Role\u201d Do Not Support a Strong\n Inference of Intent to Defraud................................................................................. 8\n B. The Timing of Mr. Chidambaran\u2019s Resignation Does Not Support a\n Strong Inference of Scienter ................................................................................. 10\n C. Plaintiffs Fail to Plead a Qualifying Motive to Defraud ....................................... 11\nIII. THE AMENDED COMPLAINT FAILS TO ADEQUATELY PLEAD LOSS\n CAUSATION ................................................................................................................... 12\nCONCLUSION ............................................................................................................................. 15\n\n\n\n\n i\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 3 of 20\n\n\n\n TABLE OF AUTHORITIES\n\n Page(s)\n\nCases\n\nIn re BofI Holding, Inc. Sec. Litig.,\n 977 F.3d 781 (9th Cir. 2020) ...................................................................................................13\n\nDefeo v. IonQ, Inc.,\n 134 F.4th 153 (4th Cir. 2025) ............................................................................................12, 13\n\nEpstein v. World Acceptance Corp.,\n 203 F.Supp.3d 655 (D.S.C. 2016) ............................................................................................15\n\nIn re Hebron Tech. Co. Sec. Litig.,\n No. 20-cv-4420, 2021 WL 4341500 (S.D.N.Y. Sept. 22, 2021) ...............................................4\n\nIn re ILearningEngines, Inc.,\n No. 24-12826 (Bank. D. Del. Apr. 11, 2025) ............................................................................5\n\nKatyle v. Penn Nat\u2019l Gaming, Inc.,\n 637 F.3d 462 (4th Cir. 2011) .............................................................................................12, 14\n\nMaguire Fin., LP v. PowerSecure Int\u2019l, Inc.,\n 876 F.3d 541 (4th Cir. 2017) ...................................................................................................10\n\nIn re Nektar Therapeutics Sec. Litig.,\n 34 F.4th 828 (9th Cir. 2022) ....................................................................................................13\n\nOttmann v. Hanger Orthopedic Grp., Inc.,\n 353 F.3d 338 (4th Cir. 2003) ...................................................................................................11\n\nSan Antonio Fire & Police Pension Fund v. Syneos Health Inc.,\n 75 F.4th 232 (4th Cir. 2023) ..............................................................................................10, 11\n\nSherman v. Abengoa, S.A.,\n No. 22-2438 (2d Cir. Oct. 6, 2025) ............................................................................................7\n\nStenlund v. Marriott Int\u2019l, Inc.,\n 172 F.Supp.3d 874 (D. Md. 2016) .............................................................................................1\n\nIn re Triangle Cap. Corp. Sec. Litig.,\n 988 F.3d 743 (4th Cir. 2021) ...................................................................................................11\n\nUnited States ex rel. Wilson v. Kellogg Brown & Root, Inc.,\n 525 F.3d 370 (4th Cir. 2008) .....................................................................................................6\n\n\n\n\n ii\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 4 of 20\n\n\n\nYates v. Mun. Mortg. & Equity, LLC,\n 744 F.3d 874 (4th Cir. 2014) ..................................................................................................11\n\nStatutes\n\n15 U.S.C. \u00a7 78u-4(b)(2) .................................................................................................................10\n\n\n\n\n iii\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 5 of 20\n\n\n\n This reply responds to Plaintiffs\u2019 \u201cConsolidated Memorandum of Law in Opposition to\n\nDefendants Chidambaran\u2019s and Naqvi\u2019s Motions to Dismiss the Amended Complaint,\u201d ECF No.\n\n92 (\u201cOpp.\u201d). To avoid duplication, Mr. Chidambaran adopts and incorporates by reference the\n\nother Defendants\u2019 reply briefs, including their arguments for dismissing the Securities Act claims.\n\nI. The Exchange Act Claims Must Be Dismissed Because the Amended Complaint Fails\n to Allege with Sufficient Particularity Any Material Misstatements by Mr.\n Chidamabaran\n\n Plaintiffs contend that financial statements submitted with iLE\u2019s offering documents\n\nconstitute material misstatements because they allegedly (1) failed to disclose transactions with\n\niLE\u2019s \u201cTechnology Partner\u201d as related party transactions, and (2) misstated iLE\u2019s revenues and\n\nexpenses related to transactions with the Technology Partner. Opp. at 11-14. As explained below,\n\nPlaintiffs fail to identify any alleged facts that, if true, would establish that the Technology Partner\n\nwas a related party or that iLE materially misstated its revenues or expenses.\n\n Plaintiffs previously alleged Mr. Chidambaran also made material misstatements in press\n\nreleases dated September 5 and 10, 2024, Amended Complaint (\u201cAC\u201d), ECF No. 41 \u00b6\u00b6 512-517,\n\nbut provide no opposition to Mr. Chidambaran\u2019s argument that those statements cannot be deemed\n\nmaterial misstatements as a matter of law. See Memorandum of Law in Support of Defendant\n\nHarish Chidambaran\u2019s Motion to Dismiss Amended Class Action Complaint, (\u201cMot.\u201d), ECF No.\n\n83-1 at 16-17. Plaintiffs have thus conceded that the September 5 and 10 press releases are not\n\nmaterial misstatements. Stenlund v. Marriott Int\u2019l, Inc., 172 F.Supp.3d 874, 887 (D. Md. 2016)\n\n(concluding that where a plaintiff \u201cfailed to respond to Defendant\u2019s argument,\u201d the \u201cPlaintiff\n\nconcedes the point.\u201d).\n\n\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 6 of 20\n\n\n\n A. The Amended Complaint Does Not Allege with Particularity That the Non-\n Disclosure of the Technology Partner as a Related Party Was a Material\n Misstatement\n\n iLE\u2019s financial statements disclosed that iLE had a five-year contract with a \u201cTechnology\n\nPartner\u201d and further disclosed that this partner \u201ccontributed a material part of iLeaningEngines\u2019\n\nrevenues and its expenses.\u201d Mot. at 3 (citing AC \u00b6 12). The Hindenburg Report identified Dubai-\n\nbased Experion Technologies, FZ LLC (\u201cExperion Technologies\u201d or \u201cExperion\u201d), as the\n\n\u201cTechnology Partner.\u201d AC \u00b6 167; see also AC Ex. B (Master Agreement between iLE and\n\nExperion Technologies). Plaintiffs allege that Experion Technologies was a \u201crelated party\u201d to iLE\n\nas defined under Financial Accounting Standards Board Accounting Standards Codification\n\n(\u201cASC\u201d) 850, Related Party Disclosures, see AC \u00b6\u00b6 282-283, and that iLE made a material\n\nmisstatement when it did not disclose this related party relationship.\n\n The Amended Complaint alleged that Experion Technologies falls within one or more of\n\nthree categories of related parties as defined by ASC 850: (1) \u201cManagement of the entity and\n\nmembers of their immediate families,\u201d ASC 850-10-20(e); (2) \u201cOther parties with which the entity\n\nmay deal if one party controls or can significantly influence the management or operating policies\n\nof the other to an extent that one of the transacting parties might be prevented from fully pursuing\n\nits own separate interests,\u201d ASC 850-10-20(f); and (3) \u201cOther parties that can significantly\n\ninfluence the management or operating policies of the transacting parties or that have an\n\nownership interest in one of the transacting parties and can significantly influence the other to an\n\nextent that one or more of the transacting parties might be prevented from fully pursuing its own\n\nseparate interests,\u201d ASC 850-10-20(g). AC \u00b6 283 (quoting ASC 850-10-20) (emphasis added by\n\nAmended Complaint).\n\n Plaintiffs largely disclaim their past reliance on ASC 850-10-20(f) and (g), arguing instead\n\nthat related party status is established under ASC 850-10-20(e). Opp. at 18, 21. Plaintiffs cannot,\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 7 of 20\n\n\n\nhowever, articulate how Experion Technologies conceivably could be \u201cmanagement\u201d of the\n\nreporting entity (iLE) or an \u201cimmediate family member\u201d of iLE management. Plaintiffs allege that\n\nthree iLE executives (Bala Arackal, Ratish Nair, and Tom Thomas) served as directors of Experion\n\nIndia. Opp. at 18-19. Plaintiffs also note that Nair and Thomas were Experion India shareholders\n\nand Jojo Philip, brother of iLE\u2019s Head of Channel Partnerships, was a shareholder of Experion\n\nIndia and Experion MEA. Id. But these allegations cannot show related party status under ASC\n\n850-10-20(e) for at least two reasons.\n\n First, neither Experion India nor Experion MEA is the same legal entity as the alleged\n\nrelated party \u2014 Experion Technologies \u2014 and Plaintiffs allege no basis for disregarding corporate\n\nform. Second, simply alleging that an individual serving in management of the reporting entity is\n\nalso a director or minority shareholder of another company does not, standing alone, make the\n\nreporting entity and the company related parties. Even assuming that Arackal, Nair, and Thomas\n\nare members of \u201cmanagement\u201d of iLE and Philip is an immediate family member of an iLE\n\nmanager (see Opp. at 18-10), those facts would, at most, make those individuals related parties to\n\niLE under ASC 850-10-20(e). There is no basis for imputing their status as related parties to iLE\n\nto Experion India, Experion MEA, or Experion Technologies. Plaintiffs\u2019 assertion that parties are\n\nrelated for GAAP purposes simply because an individual who is in management of the reporting\n\nentity is on the board of directors or is a shareholder of an affiliate or subsidiary of another party\n\nruns counter to the plain meaning of ASC 850-10-20(e)\u2019s \u201crelated party\u201d definition. Moreover,\n\nPlaintiffs cite no cases that support their novel claim.\n\n Plaintiffs also argue briefly, and without support, that ASC 850-10-20 (f) and (g) can be\n\nsatisfied simply where someone in \u201cmanagement\u201d at iLE has also served as director (or\n\nshareholder) of an entity owned by or affiliated with Experion Technologies. Opp. at 19. Plaintiffs\n\n\n\n\n 3\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 8 of 20\n\n\n\nsimply ignore the cases cited by Mr. Chidambaran, which establish what constitutes sufficient\n\nallegations of control as to related party status. Mot. at 11-12. As is set out in those cases, more\n\nmust be alleged regarding control and significant influence to establish related party status. See,\n\ne.g., In re Hebron Tech. Co. Sec. Litig., No. 20-cv-4420, 2021 WL 4341500, at *14 (S.D.N.Y.\n\nSept. 22, 2021) (complaint failed to allege controlling shareholder of the reporting entity had\n\n\u201cpossession, direct or indirect, of the power to direct or cause the direction of the management and\n\npolicies of\u201d the alleged related party (citation modified)). The Amended Complaint does not allege\n\nfacts that meet either the ASC 850-10-20(f) or (g) standard.\n\n Improperly conflating ASC 850-10-20(e) and (g), Plaintiffs next assert that \u201cthe roles of\u201d\n\nChidambaran, Arackal, Nair, and Philip \u201cmake them \u2018[o]ther parties that can significantly\n\ninfluence the management or operating policies\u2019\u201d of Experion India and Experion MEA and \u201c\u2018can\n\nsignificantly influence\u2019 iLE.\u201d Opp. at 19 (quoting ASC 850-10-20(g)). But is not clear what roles\n\nat which entity Plaintiffs are referencing, because Mr. Chidambaran is not alleged to have any role\n\nat any Experion entity and Mr. Philip is not alleged to have any role at iLE. In any event, the\n\nAmended Complaint does not allege that any of these four individuals could \u201csignificantly\n\ninfluence\u201d Experion Technologies \u201cto an extent that [it] might be prevented from fully pursuing\n\nits own separate interests,\u201d as ASC 850-10-20(g) requires.\n\n Unable to allege facts that would, if true, make Experion Technologies a related party,\n\nPlaintiffs point to a Statement of Financial Affairs submitted in the bankruptcy proceeding by the\n\n\u201ciLearningEngines Debtors,\u201d which lists \u201cinsiders\u201d who received payments from iLE within one\n\nyear of iLE filing for bankruptcy. The Statement identifies Experion MEA as an \u201cinsider\u201d and\n\ncharacterizes its relationship to the debtor as \u201crelated party.\u201d AC \u00b6\u00b6 224-40; see also Opp. at 10.\n\nPlaintiffs contend that this statement is an admission by iLE that Experion Technologies was a\n\n\n\n\n 4\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 9 of 20\n\n\n\nrelated party under ASC 850-10-20. Opp. at 1, 19. But as Mr. Chidambaran has already explained,\n\nthe bankruptcy disclosure of Experion MEA as an \u201cinsider\u201d for bankruptcy purposes cannot be\n\ndeemed an admission that Experion Technologies is a \u201crelated party\u201d for GAAP purposes. Mot. at\n\n12-13. Plaintiffs do not respond to those arguments.\n\n Plaintiffs further ignore that the \u201cGlobal Notes, Methodology, and Specific Disclosures\n\nRegarding the Debtors\u2019 Schedules of Assets and Liabilities and Statements of Financial Affairs\u201d\n\npreclude treating any characterization in the Statement of Financial Affairs of iLE\u2019s relationship\n\nwith Experion MEA as an admission. The Global Notes state: \u201cPersons listed as \u2018insiders\u2019 have\n\nbeen included for informational purposes only and the inclusion of them in the Schedules and\n\nStatements, shall not constitute an admission that those persons are insiders for purposes of section\n\n101(31) of the Bankruptcy Code.\u201d In re ILearningEngines, Inc., No. 24-12826, ECF No. 184 at 5\n\n(Bank. D. Del. Apr. 11, 2025 (emphasis added). The Global Notes also state:\n\n [T]he Debtors do not take any position with respect to: (a) any insider\u2019s influence\n over the control of the Debtors; (b) the management responsibilities or functions of\n any such insider; (c) the decision making or corporate authority of any such insider;\n or (d) whether the Debtors or any such insider could successfully argue that he or\n she is not an \u201cinsider\u201d under applicable law or with respect to any theories of\n liability or for any other purpose.\n\nId. Plaintiffs thus have no basis for treating the bankruptcy filing as an admission even of Experion\n\nMEA\u2019s status as an insider, let alone Experion Technologies\u2019 status as a related party for GAAP\n\npurposes.\n\n B. The Amended Complaint Does Not Allege with Particularity That Mr.\n Chidambaran Made a Material Misstatement Regarding iLE\u2019s Revenues from\n the Technology Partner, Experion Technologies\n\n Plaintiffs\u2019 claims about material misstatements concerning iLE\u2019s revenues are based\n\nalmost exclusively on the Hindenburg Report\u2019s speculations that \u201cthe vast majority of iLearning\n\nEngines\u2019 revenue is fake.\u201d See Mot. at 13. This inference by the Hindenburg Report\u2019s authors, in\n\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 10 of 20\n\n\n\nturn, was based on \u201cnetting off\u201d provisions in the Experion Technologies-iLE Master Agreement,\n\nwhich allowed Experion to \u201coffset the revenue it owed to [iLE] by the costs of the services it\n\nincurred.\u201d AC \u00b6\u00b6 159, 162-63; see also id. \u00b6\u00b6 297-307 (captioned \u201ciLearningEngines Fake\n\nRevenue and Round-Trips\u201d); Mot. at 13-16. Distancing themselves from their \u201cround-trip\u201d\n\nallegations, Plaintiffs now contend that Mr. Chidambaran is \u201cfocus[ed] on round-tripping i[n] an\n\nattempt to distract from the core of the amended complaint\u2019s allegations\u201d that the \u201ctransactions\n\nbetween Experion and iLearningEngines lacked economic substance, regardless whether the\n\nround-trip constituted a 100% offset of revenue.\u201d Opp. at 17. But, contrary to Plaintiffs\u2019 assertion,\n\nMr. Chidambaran addressed the inadequacy of the Amended Complaint\u2019s allegations that the\n\ntransactions with Experion lacked economic substance. Mot. at 14-15. Plaintiffs ignore those\n\narguments. Opp at 17.\n\n Now attempting to de-emphasize their reliance on the Hindenburg Report, Plaintiffs insist\n\n\u201c[t]his is not merely a short seller report case.\u201d Id. As to Mr. Chidambaran, Plaintiffs now maintain\n\nthat it is \u201cthe withdrawal of the financial statements, the resignation of auditors, the special\n\ninvestigation\u2019s focus on [Mr. Chidambaran], and his departure under highly suspicious\n\ncircumstances in the midst of the Special Committee\u2019s investigation\u201d that support \u201cthe falsity of\n\nhis statements.\u201d Id. at 18.\n\n As an initial matter, the Amended Complaint does not allege that the Special Committee\u2019s\n\ninvestigation focused on Mr. Chidambaran. In any event, these alleged developments, which\n\nfollowed in the wake of the publication of the Hindenburg Report, do not satisfy the requirement\n\nthat Plaintiffs plead \u201cthe who, what, when, where and how\u201d of the alleged fake revenue scheme.\n\nUnited States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008)\n\n(citation modified). Tellingly, the Opposition cites no cases holding that allegations regarding\n\n\n\n\n 6\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 11 of 20\n\n\n\nwithdrawal of financial statements, resignation of an accounting firm, an internal investigation, or\n\nresignation of senior executives satisfy the PSLRA requirement for pleading a material\n\nmisstatement with particularity. In their Notice of Supplemental Authority, Plaintiffs cite Sherman\n\nv. Abengoa, S.A., No. 22-2438 (2d Cir. Oct. 6, 2025), for the proposition that, \u201cat the pleading\n\nstage, courts should credit detailed factual allegations drawn from internal audits and government\n\nregulatory or criminal proceedings.\u201d ECF No. 97 at 1. Abengoa involved findings from an internal\n\naudit and a ruling from a Spanish criminal court which relied on an expert report prepared by an\n\nauditing firm, an investigation report from Spain\u2019s financial accounting regulator, and a forensic\n\nreport completed by two financial-consulting firms. ECF No. 97-1 at 11-13. Here, in contrast,\n\nPlaintiffs merely point to the existence of an internal investigation; they allege no findings from\n\nany internal audit, government regulatory, or criminal proceedings, making Abengoa entirely\n\ninapposite.\n\nII. The Exchange Act Claims Must Be Dismissed Because the Amended Complaint Fails\n to Plead with Particularity Facts Giving Rise to a Strong Inference of Scienter\n\n Plaintiffs wrongly contend they meet the demanding PSLRA pleading standard because\n\nthe Amended Complaint \u201calleges a holistic set of facts\u201d supposedly creating a strong inference of\n\nscienter. Opp. at 19. The Opposition, however, fails to identify specific allegations, either taken\n\nalone or collectively, that adequately plead Mr. Chidambaran acted with the requisite intent to\n\ndeceive, manipulate, or defraud. Plaintiffs\u2019 principal argument boils down to this: Because Mr.\n\nChidambaran was a CEO of iLE, he (1) would have known Experion Technologies was a related\n\nparty, and (2) would have known that there was no economic substance to iLE\u2019s transactions with\n\nExperion Technologies. Id. at 20-22. Plaintiffs also claim that Mr. Chidambaran\u2019s resignation\n\nsupports a strong inference of culpable scienter. Id. at 22. As explained below, neither Mr.\n\nChidambaran\u2019s status as CEO, nor his resignation, supports a strong inference of intent to defraud.\n\n\n\n 7\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 12 of 20\n\n\n\nIn addition, Plaintiffs fail to adequately address Mr. Chidambaran\u2019s argument that they did not\n\nadequately plead a qualifying motive to defraud.\n\n A. Mr. Chidambaran\u2019s \u201cBackground and Role\u201d Do Not Support a Strong\n Inference of Intent to Defraud\n\n In his motion to dismiss, Mr. Chidambaran cited several cases holding that failure to\n\nobserve GAAP and other accounting guidelines is not enough, standing alone, to satisfy the\n\nPSLRA\u2019s heightened pleading standards for scienter. Mot. at 18-19. This is especially true where,\n\nas here, the defendant is not an accounting professional and the accounting question is complex.\n\nId. at 19. In response, Plaintiffs ignore the cases cited by Mr. Chidambaran. Opp. at 20-21.\n\nRemarkably, Plaintiffs assert that the \u201cGAAP test is simple, and ASC 850-10-20(e), defining a\n\nrelated party as \u2018[m]anagement of the entity and members of their immediate families,\u2019 requires\n\nno complicated analysis and leaves no room for subjective judgment.\u201d Opp. at 21 (citation\n\nomitted). As discussed in Part I.A., applying the plain meaning of ASC 850-10-20(e), Experion\n\nTechnologies is not a related party to iLE because it is not \u201c[m]anagement of the entity and\n\nmembers of their immediate families.\u201d Plaintiffs\u2019 assertion that Experion Technologies is a related\n\nparty to iLE is based on a tortured interpretation of ASC 850-10-20. Plaintiffs draw undue\n\ninferences about an individual\u2019s ability to significantly control an entity simply by being a director\n\nor shareholder, and ignore corporate form by treating relationships with Experion affiliates or\n\nsubsidiaries as relationships with Experion Technologies itself. There is nothing simple about\n\nPlaintiffs\u2019 interpretation of the related party test, and it is implausible that Mr. Chidambaran could\n\nbe expected to (1) be familiar with ASC 850-10-20, and (2) interpret it in the counter-textual\n\nmanner that Plaintiffs do.\n\n Although Plaintiffs vaguely refer to Mr. Chidambaran\u2019s \u201cbackground\u201d as supporting a\n\nstrong inference of culpable scienter (Opp. at 20), the Amended Complaint does not allege that\n\n\n\n 8\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 13 of 20\n\n\n\nMr. Chidambaran has any accounting background. As argued in the motion to dismiss (Mot. at 23-\n\n24), the substantially more plausible inference is that Mr. Chidambaran relied on the certification\n\nfrom independent registered public accounting firm Marcum LLP that \u201cthe financial statements\n\nwere properly stated in accordance with generally accepted accounting principles.\u201d AC \u00b6 11.\n\n Plaintiffs next argue that Mr. Chidambaran\u2019s role as CEO supports a strong inference of\n\nculpable scienter because, as CEO, he would have been aware of 50 wire transfers from iLE to\n\nExperion MEA Corporation between December 22, 2023, and November 8, 2024, totaling $87.425\n\nmillion. Opp. at 21 (citing AC \u00b6 532). The Amended Complaint alleges that iLE\u2019s CFO, not Mr.\n\nChidambaran, would have known or recklessly disregarded, based on these wire transfers, that\n\nExperion Technologies was a related party. AC \u00b6 533. In any event, wire transfers from iLE to\n\nanother entity do not, standing alone, establish a related party relationship under GAAP principles.\n\nMoreover, Plaintiffs again disregard corporate form by treating Experion Technologies as the same\n\nlegal entity as Experion MEA. There is no basis for any inference that Mr. Chidambaran knew that\n\nExperion Technologies was a related party to iLE because iLE made a series of wire transfers to\n\nExperion MEA.\n\n Even though they did not allege the wire transfers as supporting an inference of scienter as\n\nto the alleged material misstatement of revenue from the Technology Parter, Plaintiffs now assert\n\nin their opposition that it is \u201cimplausible that a CEO and CFO would be unaware of the lack of\n\neconomic substance for such transactions.\u201d Opp. at 21. The Amended Complaint, however, asserts\n\nthat the reporting of revenue from Experion constitutes the material misstatement. AC \u00b6\u00b6 297-\n\n307. Accordingly, Plaintiffs must establish Mr. Chidambaran\u2019s scienter as to those alleged\n\nmisstatements. Knowledge of the wire transfers to Experion does not lead to a strong inference of\n\nculpable scienter as to \u201cfake revenue\u201d from Experion, especially where the Amended Complaint\n\n\n\n\n 9\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 14 of 20\n\n\n\ndoes not adequately plead that the revenue from Experion was \u201cfake,\u201d or that Mr. Chidambaran\n\nknew that the revenue was fake. Absent allegations of facts that would support treating the iLE-\n\nExperion relationship as lacking economic substance and Mr. Chidambaran\u2019s scienter as to the\n\nsame, the wire transfers do not support a strong inference of culpable scienter but rather are\n\nconsistent with iLE\u2019s disclosure in its Form S-1 Registration Statement that the \u201cTechnology\n\nPartner is a customer in some arrangements and a vendor in other arrangements.\u201d AC \u00b6 92.\n\n More fundamentally, \u201c[a] plaintiff may not stack inference upon inference to satisfy the\n\nPSLRA\u2019s pleading standard.\u201d Maguire Fin., LP v. PowerSecure Int\u2019l, Inc., 876 F.3d 541, 548 (4th\n\nCir. 2017). A securities fraud plaintiff must \u201cstate with particularity facts giving rise to a strong\n\ninference that the defendant acted with the required state of mind.\u201d 15 U.S.C. \u00a7 78u-4(b)(2)\n\n(emphasis added). In Maguire, the plaintiff \u201callege[d] facts that permit[ted] an inference that [the\n\ndefendant] knew his statement was false, and then ask[ed] [the court] to infer from that\n\ninference that [the defendant] acted with scienter.\u201d 876 F.3d at 548. The Court of Appeals\n\n\u201cdecline[d] to do so because stacking inference upon inference in this manner violates the statute\u2019s\n\nmandate that the strong inference of scienter be supported by facts, not other inferences.\u201d Id.\n\nSimilarly, here Plaintiffs may not ask the court to infer from an inference that Mr. Chidambaran\n\nknew about wire transfers to Experion, a further inference that he acted with the required state of\n\nmind when signing off on financial statements reporting iLE\u2019s revenue from Experion.\n\n B. The Timing of Mr. Chidambaran\u2019s Resignation Does Not Support a Strong\n Inference of Scienter\n\n In his motion to dismiss, Mr. Chidambaran argued that his resignation from iLE in\n\nDecember 2024 does not support a strong inference of culpable scienter. Mot. at 22. Mr.\n\nChidambaran cited San Antonio Fire & Police Pension Fund v. Syneos Health Inc., 75 F.4th 232,\n\n244 (4th Cir. 2023), which held that \u201cexecutive departures are, at best, weak evidence of scienter,\u201d\n\n\n\n 10\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 15 of 20\n\n\n\nbecause there are other more plausible non-culpable inferences. Plaintiffs ignore San Antonio Fire\n\nand instead simply assert that the timing of Mr. Chidambaran\u2019s departure \u201clends further weight to\n\nthe inference\u201d that he \u201cresigned in lieu of termination for cause.\u201d Opp. at 22. Such an inference is\n\nnot, however, the inference required to adequately plead scienter for securities fraud. There must\n\nbe a strong inference that the resignation demonstrates Mr. Chidambaran\u2019s intent to deceive\n\ninvestors with respect to the alleged material misstatements.\n\n Plaintiffs are again impermissibly stacking inferences by inferring that Mr. Chidambaran\n\nwould have been removed for cause, further inferring that he would have been removed for cause\n\nfor engaging in material misstatements, and further inferring that Mr. Chidambaran engaged in\n\nthose material misstatements with the requisite intent. Even if stacking inferences were permitted\n\n\u2014 and it is not \u2014 Mr. Chidambaran\u2019s resignation does not support an inference as to his state of\n\nmind about the alleged material misstatements. See, e.g., Yates v. Mun. Mortg. & Equity, LLC,\n\n744 F.3d 874, 889 (4th Cir. 2014) (\u201cWhile [CFO]\u2019s resignation is evidence of the substantial\n\naccounting challenges the Company then faced, it does not compel an inference that she and the\n\nother individual defendants were bent on committing fraud\u201d).\n\n C. Plaintiffs Fail to Plead a Qualifying Motive to Defraud\n\n In his motion to dismiss, Mr. Chidambaran explained that Plaintiffs failed to allege that\n\nMr. Chidambaran would realize \u201c\u2018concrete benefits . . . by one or more of the false statements and\n\nwrongful non-disclosures alleged\u2019 that were not shared by shareholders at large.\u201d Mot. at 22\n\n(quoting Ottmann v. Hanger Orthopedic Grp., Inc., 353 F.3d 338, 352 (4th Cir. 2003)).\n\nGeneralized motives to raise capital, make the corporation appear profitable, and keep share prices\n\nhigh are insufficient to plead scienter under the PSLRA because the same motives are shared by\n\nall corporations. Id.; In re Triangle Cap. Corp. Sec. Litig., 988 F.3d 743, 754 (4th Cir. 2021).\n\n\n\n\n 11\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 16 of 20\n\n\n\n In response, Plaintiffs again ignore the cases cited by Mr. Chidambaran, cite no cases\n\nsupporting their position, and instead simply assert that Mr. Chidambaran had an incentive to\n\nmaximize the company\u2019s valuation. Opp. at 22. Plaintiffs\u2019 response is deficient in two respects.\n\nFirst, they fail to cite any allegations that Mr. Chidambaran sought to artificially inflate the value\n\nof iLE. Id. at 22-23. Second, this claim of generalized motive is the very sort of allegation the\n\nFourth Circuit has deemed insufficient to plead scienter under the PSLRA.\n\nIII. The Amended Complaint Fails to Adequately Plead Loss Causation\n\n Loss causation is an essential element of Plaintiffs\u2019 Exchange Act claims. See Mot. at 23.\n\nAllegations of loss causation are reviewed for \u201csufficient specificity,\u201d a \u201cstandard largely\n\nconsonant with Fed. R. Civ. P. 9(b)\u2019s requirement that averments of fraud be pled with\n\nparticularity.\u201d Katyle v. Penn Nat\u2019l Gaming, Inc., 637 F.3d 462, 471 (4th Cir. 2011). As the Fourth\n\nCircuit recently explained, \u201cif a plaintiff fails to plausibly and with sufficient specificity allege that\n\nany new truth was exposed to the market, he fails to plead loss causation.\u201d Defeo v. IonQ, Inc.,\n\n134 F.4th 153, 162 (4th Cir. 2025).\n\n In response to Mr. Chidambaran\u2019s argument that the Amended Complaint fails to\n\nadequately plead loss causation, Mot. at 24-27, Plaintiffs first contend that loss causation is usually\n\nreserved for the trier of fact. Opp. at 24-25. But two of the Fourth Circuit cases that Plaintiffs\n\ncite\u2014Defeo, 134 F.4th 153, and Katyle, 637 F.3d 462\u2014affirmed dismissal of Exchange Act\n\nSection 10(b) claims on motions to dismiss.\n\n The Amended Complaint identified four disclosures that supposedly revealed a \u201cnew truth\u201d\n\nto the market: (1) the August 28, 2024, publication of the Hindenburg Report; (2) iLE\u2019s November\n\n18, 2024, Form 8-K; (3) iLE\u2019s December 10, 2024, Form 8-K, and (4) iLE\u2019s December 23, 2024,\n\npress release. AC \u00b6 535; id. \u00b6\u00b6 200, 206, 208; see also Opp. at 25-27. As to the Hindenburg Report,\n\nMr. Chidambaran argued that Defeo, 134 F.4th 134, supports dismissal here because, as in Defeo,\n\n\n 12\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 17 of 20\n\n\n\nthe short-seller report was prepared by unnamed individuals who disclaimed the accuracy of the\n\nreport. Mot. at 25-26.\n\n Despite Defeo being a recent Fourth Circuit case on the pleading standard for loss causation\n\nbased on short-seller reports, Plaintiffs are largely silent about the case. The most they can say is\n\nthat Defeo did not impose a \u201ccategorical ban\u201d on using short-seller reports to plead loss causation.\n\nOpp. at 27. Plaintiffs ignore that the Hindenburg Report contained disclaimer language similar to\n\nthat in Defeo. Instead, they assert that the Report has sufficient indicia of reliability because its\n\npublication resulted in a drop in iLE\u2019s stock price (Opp. at 28), but that is also true in Defeo, where\n\nthe company\u2019s stock price dropped substantially within days of the publication of the short seller\n\nreport. 134 F.4th at 159.\n\n Plaintiffs also claim that the Report has indicia of reliability because it identified sources\n\nof the information. Opp. at 28. But it is the anonymity and self-interest of the short-sellers that sets\n\nthe high bar plaintiffs must meet when relying on short-seller reports to plead loss causation.\n\nDefeo, 134 F.4th at 163 (\u201cIt is appropriately a high bar that plaintiffs must meet in relying on self-\n\ninterested and anonymous short-sellers when attempting to plead loss causation.\u201d) (internal\n\nquotation omitted); In re Nektar Therapeutics Sec. Litig., 34 F.4th 828, 840 (9th Cir. 2022) (when\n\nauthors of a report are \u201canonymous and self-interested short-sellers who disavowed any accuracy,\u201d\n\ntheir reports are \u201crendered . . . inadequate\u201d for purposes of pleading loss causation); In re BofI\n\nHolding, Inc. Sec. Litig., 977 F.3d 781, 794-95 (9th Cir. 2020) (holding that, where blog posts\n\nwere \u201cauthored by anonymous short-sellers who had a financial incentive to convince others to\n\nsell, and the posts included disclaimers from the authors stating that they made \u2018no representation\n\nas to the accuracy or completeness of the information set forth in this article,\u2019\u201d the posts could not\n\nconstitute corrective disclosures for purposes of pleading loss causation).\n\n\n\n\n 13\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 18 of 20\n\n\n\n Mr. Chidambaran also argued that Plaintiffs could not rely on the Hindenburg Report to\n\nestablish loss causation because it was based on publicly available information and thus did not\n\nreveal new information to the market. Mot. at 26-27. In response, Plaintiffs assert that \u201cnot all the\n\ndata relied on [by] Hindenburg is public as it also includes information obtained from \u2018corporate\n\nintelligence firm Diligencia.\u2019\u201d Opp. at 29. But the Amended Complaint references Diligencia only\n\nonce, as the source for Hindenburg\u2019s claim that Jojo Philip, the brother of an iLE employee, held\n\na minority interest in Experion MEA. AC \u00b6 132. It is implausible that the disclosure of this entirely\n\nirrelevant fact was a substantial cause for the decline in value of Plaintiffs\u2019 iLE shares. See Katyle,\n\n637 F.3d at 472 (\u201cWhat we do require the alleged facts to show is that the misrepresentation or\n\nomission was one substantial cause of the investment\u2019s decline in value.\u201d (internal quotation\n\nomitted).\n\n As to the publicly available information that forms the basis for the Hindenburg Report,\n\nPlaintiffs claim it constitutes \u201cnew facts\u201d because Hindenburg \u201ccompiled far-flung pieces of data\n\nand put them together for the market to understand their meaning for iLearningEngines.\u201d Opp. at\n\n29. The Amended Complaint does not allege facts that would support that conclusion. To the extent\n\nthe Hindenburg Report could be said to have compiled \u201cfar-flung pieces of data,\u201d the \u201cdata\u201d relates\n\nto trying to connect employees of iLE with various Experion affiliates or subsidiaries. But these\n\nattenuated connections are not evidence of any material misrepresentation so their disclosure\n\ncannot establish loss causation. As to the Report\u2019s claim that iLE\u2019s revenue was \u201clargely fake,\u201d\n\nthe Amended Complaint does not allege facts showing that Hindenburg relied on far-flung pieces\n\nof data that took substantial effort to compile.\n\n With regard to the Form 8-Ks and the December 23, 2024 press release, which addressed\n\nthe internal investigation, withdrawal of the financial statements, and the initiation of Chapter 11\n\n\n\n\n 14\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 19 of 20\n\n\n\nbankruptcy proceedings, Mr. Chidambaran argued that these statements did not disclose any new\n\nfacts to the market regarding any alleged material misrepresentations. Mot. at 27. In response,\n\nPlaintiffs fail to identify any facts in these three statements that disclosed new facts to the market.\n\nOpp. at 29-20. Instead, they cite Epstein v. World Acceptance Corp., 203 F.Supp.3d 655, 675\n\n(D.S.C. 2016), for the proposition that \u201ccourts have held resignation announcements can be\n\ncorrective disclosures where they are viewed collectively with other disclosures.\u201d Opp. at 30. But\n\nthe announcement of the resignation of Mr. Chidambaran and others was not disclosed in the\n\nNovember 18 or December 10 Form 8-Ks or in the December 23 press release. The resignations\n\nwere disclosed in a December 27, 2024 Form 8-K (AC \u00b6 214), which Plaintiffs did not allege as a\n\ncorrective disclosure. See AC \u00b6\u00b6 535, 537. In any event, Epstein involved several other corrective\n\ndisclosures found to be qualifying, including a quarterly earnings call that \u201crevealed specifics\n\nsurrounding the nature and impact of the material weakness and disclosed the significance of the\n\nportion of the Company\u2019s loan renewal portfolio this weakness would affect.\u201d 203 F. Supp. 3d at\n\n674 (internal quotation omitted). Here, in contrast, the two Form 8-Ks and the December 23 press\n\nrelease did not disclose any specific facts about the alleged material misstatements.\n\n CONCLUSION\n\n For the foregoing reasons and for the reasons stated in the motion to dismiss, Plaintiffs\u2019\n\nclaims against Defendant Chidambaran should be dismissed in their entirety with prejudice.\n\n\n\n\n 15\n\f Case 8:24-cv-02900-DKC Document 103 Filed 10/22/25 Page 20 of 20\n\n\n\n\nDATED: Oct. 22, 2025 Respectfully Submitted:\n\n\n /s/ Laura G. Ferguson\n Laura G. Ferguson (Bar No. 20828)\n Katherine E. Pappas (Bar No. 31788)\n Bradley E. Markano (admitted pro hac vice)\n Miller & Chevalier Chartered\n 900 16th St., NW\n Washington, DC 20006\n P: (202) 626-5567\n F: (202) 626-5801\n lferguson@milchev.com\n kpappas@milchev.com\n bmarkano@milchev.com\n\n Attorneys for Defendant Harish\n Chidambaran\n\n\n\n\n 16\n\f","ocr_status":2,"date_upload":"2026-05-19T22:32:07.690273-07:00","document_number":"103","attachment_number":null,"pacer_doc_id":"093015255175","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.768039-08:00","date_modified":"2026-05-18T23:59:56.099764-07:00","date_filed":"2025-10-22","time_filed":null,"entry_number":103,"recap_sequence_number":"2025-10-22.003","pacer_sequence_number":300,"description":"RESPONSE in Support re 83 MOTION to Dismiss Amended Class Action Complaint filed by Harish Chidambaran.(Ferguson, Laura) (Entered: 10/22/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475314/","id":447475314,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228764/","id":462228764,"tags":[],"absolute_url":"/docket/69233925/102/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.736813-08:00","date_modified":"2026-05-18T23:59:56.075272-07:00","sha1":"d9af220e1876109932f71edd22bb4dcc8772e026","page_count":22,"file_size":304483,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.102.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.102.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 1 of 22\n\n\n\n IN THE UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n\n\nDANNY WALKER, Individually and on Civil Action No. 8:24-cv-02900-DKC\nBehalf of All Others Similarly Situated,\n Hon. Deborah K. Chasanow\n Plaintiff,\n\n v.\n\nILEARNINGENGINES, INC., et al.,\n\n Defendants.\n\n\n REPLY IN SUPPORT OF DEFENDANT MARCUM LLP\u2019S\n MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT\n FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 2 of 22\n\n\n\n TABLE OF CONTENTS\n\nI. THE AMENDED COMPLAINT DOES NOT ADEQUATELY PLEAD\n SECTION 11 LIABILITY AS TO MARCUM. ............................................................... 2\n A. Plaintiffs Admit Their Claim Against Marcum Fails Under Omnicare. ....................... 2\n B. Plaintiffs\u2019 Embedded Facts Alternative is a Non-Starter. ............................................. 3\n C. Plaintiffs\u2019 Strict Liability Theory Under Section 11 Is Novel, and, Like The\n Embedded Facts Theory, Wrong. .................................................................................. 5\n D. Plaintiffs\u2019 Attacks on the Majority Interpretation Are Unfounded. .............................. 8\nII. THE AMENDED COMPLAINT DOES NOT ADEQUATELY PLEAD\n TRACEABILITY.............................................................................................................. 11\n A. Slack Demands That Actual, Not Hypothetical, Traceability be Pled......................... 11\n B. Plaintiffs\u2019 \u201cStatistical Probability\u201d Approach is Legally Deficient............................. 12\n C. Speculation About Discovery Cannot Cure Plaintiffs\u2019 Pleading Defect. .................... 14\nCONCLUSION .......................................................................................................................... 15\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 3 of 22\n\n\n\n TABLE OF AUTHORITIES\n\n Page\n\nCASES\n\nBarbour v. Garland,\n 105 F.4th 579 (4th Cir. 2024) ..................................................................................................15\n\nBarnes v. Osofsky,\n 373 F.2d 269 (2d Cir. 1967).....................................................................................................12\n\nCozzarelli v. Inspire Pharms. Inc.,\n 549 F.3d 618 (4th Cir. 2008) ...................................................................................................15\n\nCupat v. Palantir Techs., Inc.,\n 2025 WL 1141534 (D. Colo. Apr. 4, 2025) .............................................................................14\n\nDeephaven Private Placement Trading, Ltd. v. Grant Thornton & Co.,\n 454 F.3d 1168 (10th Cir. 2006) ...............................................................................................10\n\nHunt v. Bloom Energy Corp.,\n 2021 WL 4461171 (N.D. Cal. Sept. 29, 2021) ..................................................................2, 4, 6\n\nIBEW Loc. No. 58 Annuity Fund v. EveryWare Glob., Inc.,\n 849 F.3d 325 (6th Cir. 2017) ...................................................................................................13\n\nIn re Ariad Pharms., Inc. Sec. Litig.,\n 842 F.3d 744 (1st Cir. 2016) ....................................................................................................12\n\nIn re Century Aluminum Co. Sec. Litig.,\n 729 F.3d 1104 (9th Cir. 2013) .....................................................................................11, 12, 13\n\nIn re Coinbase Glob., Inc. Sec. Litig.,\n 2024 WL 4053009 (D.N.J. Sept. 5, 2024) ...............................................................................14\n\nIn re Everyware Glob., Inc. Sec. Litig.,\n 175 F. Supp. 3d 837 (S.D. Ohio 2016) ....................................................................................13\n\nIn re Honest Co. Sec. Litig.,\n 2023 WL 3190506 (C.D. Cal. May 1, 2023) ...........................................................................12\n\nIn re Ikon Off. Sols., Inc.,\n 277 F.3d 658 (3d Cir. 2002).....................................................................................................10\n\n\n i\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 4 of 22\n\n\n\nIn re Lehman Bros. Sec. & ERISA Litig.,\n 131 F. Supp. 3d 241 (S.D.N.Y. 2015)................................................................................6, 7, 8\n\nIn re OSG Sec. Litig.,\n 971 F. Supp. 2d 387 (S.D.N.Y. 2013)........................................................................................6\n\nIn re Petrobras Sec. Litig.,\n 2016 WL 1533553 (S.D.N.Y. Feb. 19, 2016) ........................................................................4, 5\n\nIn re Suprema Specialties, Inc. Sec. Litig.,\n 438 F.3d 256 (3d Cir. 2006).....................................................................................................15\n\nIn re Ubiquiti Networks, Inc. Sec. Litig.,\n 33 F. Supp. 3d 1107 (N.D. Cal. 2014) .....................................................................................13\n\nIn re Velti PLC Sec. Litig.,\n 2015 WL 5736589 (N.D. Cal. Oct. 1, 2015)..............................................................................6\n\nIn re Worlds of Wonder Securities Litig.,\n 35 F.3d 1407 (9th Cir. 1994) .....................................................................................................7\n\nJohnson v. CBD Energy Ltd.,\n 2016 WL 3654657 (S.D. Tex. July 6, 2016).................................................................... passim\n\nKrim v. pcOrder.com, Inc.,\n 402 F.3d 489 (5th Cir. 2005) .................................................................................11, 12, 13, 14\n\nLee v. Ernst & Young, LLP,\n 294 F.3d 969 (8th Cir. 2002) .....................................................................................................7\n\nLevy v. Luo,\n 2025 WL 437022 (D. Del. Feb. 7, 2025) ...................................................................................4\n\nMcCaffery v. Cnty.,\n 2024 WL 4045450 (E.D. Va. Sept. 4, 2024)............................................................................14\n\nOmnicare, Inc. v. Laborers District Council Construction Industry Pension Fund,\n 575 U.S. 175 (2015) ......................................................................................................... passim\n\nOrient Plus Int\u2019l Ltd. v. Baosheng Media Grp. Holdings Ltd.,\n --- F. Supp. 3d ---, 2025 WL 2613530 (S.D.N.Y. Sept. 10, 2025) ..................................6, 7, 10\n\nPirani v. Slack Techs., Inc.,\n 127 F.4th 1183 (9th Cir. 2025) ................................................................................................12\n\n\n ii\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 5 of 22\n\n\n\nQuerub v. Hong Kong,\n 649 F. App\u2019x 55 (2d Cir. 2016) ....................................................................................... passim\n\nS.E.C. v. Seaboard Corp.,\n 677 F.2d 1301 (9th Cir. 1982) ...................................................................................................7\n\nSlack Technologies, LLC v. Pirani,\n 598 U.S. 759 (2023) .......................................................................................................1, 11, 14\n\nSpecial Situations Fund III QP, L.P. v. Marrone Bio Innovations, Inc.,\n 243 F. Supp. 3d 1109 (E.D. Cal. 2017)..............................................................................5, 6, 7\n\nUnited States v. Weiner,\n 578 F.2d 757 (9th Cir. 1978) ...................................................................................................10\n\nWebster v. Fall,\n 266 U.S. 507 (1925) ...................................................................................................................8\n\nSTATUTES\n\n15 U.S.C. \u00a7 77k(a) ................................................................................................................. passim\n\nREGULATIONS\n\n17 C.F.R. \u00a7 210.1-02(f) ...............................................................................................................7, 9\n\nOTHER AUTHORITIES\n\nPublic Company Accounting Oversight Board (\u201cPCAOB\u201d), AS 1000.14 ....................................10\n\nMerriam-Webster\u2019s Online Dictionary, Respecting ........................................................................9\n\n\n\n\n iii\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 6 of 22\n\n\n\n Plaintiffs\u2019 opposition memorandum confirms that their Section 11 claim against Marcum\n\nis fatally deficient in two independent respects, each of which warrants dismissal with prejudice\n\nof Count One of the Amended Complaint as to Marcum. 1\n\n First, Plaintiffs cannot escape the import of Omnicare, Inc. v. Laborers District Council\n\nConstruction Industry Pension Fund, 575 U.S. 175 (2015). Under the framework articulated by\n\nthe Supreme Court, Section 11 liability for an opinion statement arises only where a plaintiff\n\nplausibly alleges either subjective falsity or that the opinion omitted material facts going to the\n\nbasis for the opinion. Here, Plaintiffs concede that they do not allege either. Instead, Plaintiffs\n\nattempt to circumvent Omnicare by invoking a narrow \u201cembedded facts\u201d exception and by\n\nadvancing a novel theory of strict liability for auditors for the allegedly fraudulent behavior of the\n\npreparers of such financial records. Neither works. The Marcum Opinion does not embed any\n\ndistinct, verifiable facts in the manner contemplated by Omnicare, and Plaintiffs\u2019 strict liability\n\ntheory finds no support in the text of Section 11, SEC regulations, any decision in this Circuit, or\n\nany appellate decision in any circuit. Indeed, the only circuit court to address this precise issue\u2014\n\nthe Second Circuit in Querub v. Hong Kong, 649 F. App\u2019x 55 (2d Cir. 2016)\u2014squarely rejected\n\nPlaintiffs\u2019 position. District courts across the country have followed suit, dismissing Section 11\n\nclaims against auditors where, as here, the complaint fails to meet the Omnicare pleading standard.\n\n Second, Plaintiffs\u2019 claim against Marcum independently fails because the Amended\n\nComplaint does not plausibly allege that Plaintiffs\u2019 shares are traceable to the supposedly defective\n\nRegistration Statements as required by the Supreme Court in Slack Technologies, LLC v. Pirani,\n\n598 U.S. 759, 770 (2023). Plaintiffs\u2019 reliance on its \u201cstatistical probability\u201d theory and the promise\n\n\n\n\n 1\n Capitalized terms retain the meaning given them in Marcum\u2019s Memorandum in Support of its Motion to\nDismiss (the \u201cMTD\u201d), Dkt. 80-1.\n\n 1\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 7 of 22\n\n\n\nthat future discovery will fill the traceability gap cannot substitute for well pleaded facts.\n\nPlaintiffs\u2019 own allegations confirm that they purchased shares in the open market, which both\n\nrenders tracing virtually impossible and leaves them without well pleaded facts on which to stand.\n\nFor this reason, too, the Court should dismiss with prejudice Count One of the Amended Complaint\n\nas to Marcum.\n\nI. THE AMENDED COMPLAINT DOES NOT ADEQUATELY PLEAD SECTION 11\n LIABILITY AS TO MARCUM.\n\n The Supreme Court\u2019s decision in Omnicare sets forth the standard for pleading Section 11\n\nliability based on statements of opinion, including those made by auditors. See 575 U.S. at 182-\n\n90. Under Omnicare, a plaintiff in a Section 11 case involving an opinion must plausibly allege\n\neither (1) that the speaker did not actually hold the stated belief at the time the opinion was\n\nexpressed (subjective falsity), or (2) that the opinion omitted material facts about the basis for the\n\nopinion in a manner that would mislead a reasonable investor, when the statement is read in\n\ncontext. See id. See also MTD at 12\u201316.\n\n A. Plaintiffs Admit Their Claim Against Marcum Fails Under Omnicare.\n\n Several courts to have squarely addressed the issue\u2014including the only federal appellate\n\ncourt to do so\u2014have held that auditor reports, such as the Marcum Opinion, are classic statements\n\nof opinion governed by Omnicare. See, e.g., Querub, 649 F. App\u2019x at 58 (\u201cAudit reports, labeled\n\n\u2018opinions\u2019 and involving considerable subjective judgment, are statements of opinion subject to\n\nthe Omnicare standard for Section 11 claims.\u201d); Johnson v. CBD Energy Ltd., 2016 WL 3654657,\n\nat *10 (S.D. Tex. July 6, 2016) (noting Omnicare \u201cmakes no mention of an \u2018auditor certification\u2019\n\nexception\u201d); Hunt v. Bloom Energy Corp., 2021 WL 4461171, at *14 (N.D. Cal. Sept. 29, 2021)\n\n(\u201cThe Court sees no meaningful distinction between [the opinion in Omnicare] and the opinions\n\n[an auditor] offers about a company\u2019s financial statements.\u201d). Omnicare governs.\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 8 of 22\n\n\n\n As they now tacitly concede, Plaintiffs plead neither prong of the well-worn Omnicare\n\ntest. 2 This failure is fatal. Federal courts applying Omnicare have consistently dismissed Section\n\n11 claims against auditors where, as here, the complaint disclaims fraud and pleads no facts\n\nsuggesting the auditor disbelieved its opinion when rendered or omitted particular, material facts\n\nabout the basis for the opinion. See, e.g., Querub, 649 F. App\u2019x at 58; Johnson, 2016 WL 3654657,\n\nat *11. The Court\u2019s inquiry can end here and the Section 11 claim against Marcum be dismissed\n\nwith prejudice.\n\n B. Plaintiffs\u2019 Embedded Facts Alternative is a Non-Starter.\n\n Recognizing the weakness of their argument if Omnicare does apply, Plaintiffs now try to\n\nrecast iLearningEngines\u2019 financial statements as \u201cembedded facts\u201d within the Marcum Opinion.\n\nSee Opp. at 20. This attempt is at odds with Omnicare\u2019s narrow \u201cembedded facts\u201d exception and\n\nthe overwhelming weight of post-Omnicare jurisprudence. The Omnicare Court recognized that\n\nan opinion statement may be actionable under Section 11 if it \u201ccontains embedded statements of\n\nfact\u201d that are themselves false. 575 U.S. at 185. Omnicare\u2019s illustrative example\u2014\u201cI believe our\n\nTVs have the highest resolution available because we use a patented technology to which our\n\ncompetitors do not have access\u201d\u2014demonstrates that \u201cembedded facts\u201d liability attaches only\n\nwhere the opinion embeds a distinct, verifiable fact (like the use of a patented technology) as the\n\nbasis for the opinion. Id.\n\n But here, Plaintiffs do not\u2014and cannot\u2014identify in the Marcum Opinion any such\n\nembedded fact. The Marcum Opinion does not purport to certify the truth of any particular line\n\nitem or \u201cfact\u201d contained in iLearningEngines\u2019 financial statements. See Am. Compl. \u00b6 246.\n\n\n\n 2\n See Dkt. 91 (\u201cOpp.\u201d) at 3 (Plaintiffs \u201cdo not base liability under \u00a7 11(a)(4) on any misrepresentation or\nomission contained within Marcum\u2019s opinion itself\u201d). As further explained in Marcum\u2019s Motion to Dismiss, Plaintiffs\ndo not allege either subjective falsity or any actionable omissions by Marcum. See MTD at 12\u201316.\n\n 3\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 9 of 22\n\n\n\nInstead, as is standard, the Marcum Opinion expressly distinguishes between iLearningEngines\u2019\n\nresponsibility for preparing the financial statements and Marcum\u2019s responsibility to express an\n\nopinion based on its audit. See id. (\u201cThese financial statements are the responsibility of the\n\nCompany\u2019s management. Our responsibility is to express an opinion\u2026\u201d). Nor would the\n\nembedded facts theory make sense as applied to an audit opinion. An audit opinion with embedded\n\nfinancial statements would be both circular and redundant: \u201cour opinion is that the financial\n\nstatements are accurate because they are accurate.\u201d The numbers in iLearningEngines\u2019 financial\n\nstatements, on which Marcum expressed its opinion, do not appear in the Marcum Opinion and\n\nare not \u201cembedded\u201d in a subordinate clause in the Marcum Opinion in the way the Court in\n\nOmnicare set out. Plaintiffs\u2019 failure to quote any specific language from the Marcum Opinion that\n\nsupposedly embeds a verifiable fact is confirmation of this reality.\n\n Plaintiffs\u2019 hopes of prevailing on this narrow exception rest on a single out-of-circuit\n\ndistrict court case: In re Petrobras Sec. Litig., 2016 WL 1533553 (S.D.N.Y. Feb. 19, 2016). The\n\nPetrobras court fundamentally misunderstood the nature of an audit opinion, which is not based\n\non \u201cthe content of the financial statements,\u201d id. at *4, but instead on the audit itself. The audit\n\nopinion recognizes the audit\u2014not the financial statements\u2014as the \u201creasonable basis\u201d on which\n\nthe opinion sits, Am. Compl. \u00b6 246, which is why it is unsurprising that Petrobras\u2019 reasoning has\n\nbeen repeatedly (and roundly) rejected by courts. See, e.g., Johnson, 2016 WL 3654657, at *12\n\n(noting Petrobras \u201cmisreads the \u2018embedded statement of fact\u2019 concept discussed in Omnicare\u201d\n\nand that the \u201c[t]he numbers in CBD\u2019s financial statements \u2026 do not appear in the audit report and\n\nare not \u2018embedded\u2019 in a subordinate clause in any of PwC Australia\u2019s sentences in the way the\n\nOmnicare Court set out.\u201d); see also Hunt, 2021 WL 4461171, at *15; Levy v. Luo, 2025 WL\n\n437022, at *10 (D. Del. Feb. 7, 2025) (both rejecting Petrobras). Indeed, even the case Plaintiffs\n\n\n\n 4\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 10 of 22\n\n\n\ncite as their preeminent authority on Omnicare\u2014Special Situations Fund III QP, L.P. v. Marrone\n\nBio Innovations, Inc.\u2014rejected the notion that financial statements are embedded in audit\n\nopinions. See 243 F. Supp. 3d 1109, 1119 (E.D. Cal. 2017). And the Marrone court was\n\nunequivocal: \u201cThis Court \u2026 disagrees [with Petrobras] that financial statements are embedded in\n\naudit opinions under Omnicare.\u201d Id. Like the auditor in Marrone, Marcum\u2019s \u201caudit opinion\n\nprovide[d] an opinion on the accuracy of the financial statements; it did not use the facts of the\n\nfinancial statements to opine on something else.\u201d Id.\n\n C. Plaintiffs\u2019 Strict Liability Theory Under Section 11 Is Novel, and, Like The\n Embedded Facts Theory, Wrong.\n\n Unable to satisfy the pleading standards articulated by Omnicare, Plaintiffs attempt to\n\nimpose strict liability on Marcum for alleged misstatements in iLearningEngines\u2019 financial\n\nstatements by virtue of Marcum\u2019s role as iLearningEngines\u2019 auditor and certifier. According to\n\nPlaintiffs, the \u201clegal effect of [Marcum\u2019s] certification\u201d is that Marcum is liable for the falsity of\n\nthe company\u2019s financial statements. Opp. at 12. This attempt to skirt Omnicare is an outlier and\n\nfundamentally misconstrues both Section 11 and the caselaw.\n\n Plaintiffs\u2019 theory of auditor liability has been rejected by the only appellate court to\n\nconsider it and by the overwhelming majority of district courts. The Second Circuit in Querub\n\naddressed the very question presented to this Court. Indeed, the investors in Querub made the\n\nexact argument Plaintiffs advance here: that auditors are liable for \u201cfalse statements contained in\n\nthe financial statements [they] certified.\u201d Brief for Plaintiffs-Appellants at 46, No. 15-2100 (2d\n\nCir. 2016). The Second Circuit rejected that argument and analyzed the Section 11 claim\n\nexclusively under Omnicare\u2019s framework. Querub, 649 F. App\u2019x at 58 (\u201cAudit reports, labeled\n\n\u2018opinions\u2019 and involving considerable subjective judgment, are statements of opinion subject to\n\nthe Omnicare standard for Section 11 claims\u201d). The Second Circuit then affirmed the district\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 11 of 22\n\n\n\ncourt\u2019s dismissal of the Section 11 claim because there was \u201cno evidence that [the auditor] did not\n\nbelieve its \u2018clean audit opinions\u2019 for [the] financial statements. Nor is there evidence that [the\n\nauditor] omitted material facts about the basis for its audit reports.\u201d Id. The Second Circuit, as\n\nthe only appellate court in the country to consider Plaintiffs\u2019 theory, rejected it. 3\n\n The weight of authority agrees, with courts holding over and over that Section 11 claims\n\nagainst auditors must be analyzed under Omnicare\u2019s opinion liability framework and not under a\n\nstrict liability regime. Hunt, 2021 WL 4461171, at *15 (\u201cthe Omnicare framework applies to\n\nPwC\u2019s statements in its audit report and the 2017 financial statements.\u201d); Johnson, 2016 WL\n\n3654657, at *11 (same); 4 In re Velti PLC Sec. Litig., 2015 WL 5736589, at *14\u201324 (N.D. Cal. Oct.\n\n1, 2015) (same); Orient Plus Int\u2019l Ltd. v. Baosheng Media Grp. Holdings Ltd., --- F. Supp. 3d ---,\n\n2025 WL 2613530, at *28\u201329 (S.D.N.Y. Sept. 10, 2025) (same). This Court should follow suit\n\nand reject Plaintiffs\u2019 strict liability theory.\n\n Plaintiffs are left with citation to only one post-Omnicare district court decision in support\n\nof their theory. See Marrone, 243 F. Supp. 3d at 1118 n.6 (acknowledging Querub, 649 F. App\u2019x\n\n55 and Johnson, 2016 WL 3654657 as contrary authority). The more recent, Omnicare-faithful\n\ndecisions have rejected Marrone. See Hunt, 2021 WL 4461171, at *14 (rejecting Marrone\u2019s\n\n\u201cauditor exception\u201d to Omnicare because \u201c[t]he Supreme Court did not recognize any \u2018auditor\u2019\n\nexception to its holding [in Omnicare], and the Court finds no basis for creating such an\n\n\n\n 3\n While the Second Circuit\u2019s decision in Querub is not controlling, it stands as the only appellate decision to\naddress Plaintiffs\u2019 theory, and at the very least calls into question earlier authorities Plaintiffs cite in that circuit. See\nOpp. at 4, 12, 13, and 19 (citing In re OSG Sec. Litig., 971 F. Supp. 2d 387 (S.D.N.Y. 2013) and In re Lehman Bros.\nSec. & ERISA Litig., 131 F. Supp. 3d 241 (S.D.N.Y. 2015)). In any event, none of the cases cited by Plaintiffs on this\nquestion are binding law on this Court\u2014save Omnicare itself.\n 4\n The Johnson court treated the Second Circuit\u2019s decision in Querub as superseding the cases on which\nPlaintiffs rely (such as OSG) and observed that, since Omnicare, district courts have applied Querub to dismiss claims\nagainst auditors in the absence of allegations that the auditor did not sincerely hold its opinion. 2016 WL 3654657,\nat *10-11.\n\n 6\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 12 of 22\n\n\n\nexception.\u201d); cf. Orient Plus, 2025 WL 2613530 at *27\u201328 (dismissing Section 11 claim against\n\nauditor and rejecting argument that auditors may be liable for financial statements because audit\n\nopinion did not embed those statements as facts). And for good reason: Marrone demonstrates a\n\nfundamental misunderstanding of audit reports, saying that the auditor was \u201ccouching\u201d them \u201cas\n\nan opinion.\u201d Marrone, 243 F. Supp. 3d at 1116. But audit reports are, by definition, opinions.\n\nSee Querub, 649 F. App\u2019x at 58 (\u201cAudit reports, labeled \u2018opinions\u2019 and involving considerable\n\nsubjective judgment, are statements of opinion.\u201d); 17 C.F.R. \u00a7 210.1-02(f) (\u201cThe term certified,\n\nwhen used in regard to financial statements, means examined and reported upon with an opinion\n\nexpressed by an independent public or certified public accountant\u201d); Opp. at 7 (quoting id.,\n\nclassifying Marcum\u2019s audit report as an opinion). And on the ultimate question, even Marrone\n\npunted, saying that it did \u201cnot need to determine exactly the nature of audit opinions in relation to\n\nthe kinds of opinions addressed in Omnicare.\u201d Marrone, 243 F. Supp. 3d at 1118.\n\n Plaintiffs\u2019 other cited authorities are equally misplaced. None of those cases addressed the\n\nstrict liability theory Plaintiffs now advance. Instead, they involved questions about traceability, 5\n\nloss causation, 6 statute of limitations, 7 and whether an audit opinion constitutes a certification for\n\nthe purposes of Section 11, 8 questions not at issue here. Imposition of strict liability on auditors\n\n\n 5\n Plaintiffs curiously cite Lee v. Ernst & Young LLP, 294 F.3d 969, 973\u201378 (8th Cir. 2002), a case concerning\nonly traceability, for the proposition that auditors are \u201csubject to [a] \u00a7 11 claim based on misrepresentations contained\nin audited financial statements.\u201d Opp. at 13 (citing Lee, 294 F.3d at 978). Plaintiffs\u2019 proposed theory is nowhere to\nbe found in the Eighth Circuit\u2019s opinion, which\u2014in any event\u2014came down before Omnicare.\n 6\n In re Worlds of Wonder Securities Litig., another pre-Omnicare case, concerned an interpretation of the loss\ncausation element of Section 11. The Ninth Circuit there did not even consider whether or on what bases an auditor\ncan be liable for errors in a client\u2019s financial statement. 35 F.3d 1407, 1421\u201323 (9th Cir. 1994).\n 7\n The sole Section 11 issue in SEC v. Seaboard (yet another pre-Omnicare case) was whether the statute of\nlimitations barred the claim. 677 F.2d 1301, 1308 (9th Cir. 1982). Plaintiffs\u2019 citation to a passing reference\u2014in the\nbackground section\u2014to the auditor as having \u201ccertified the financial statements\u201d does nothing to support the\nproposition that auditors are somehow broadly liable for alleged misstatements in others\u2019 financials. Opp. at 12 (citing\nid. at 1305).\n 8\n Though In re Lehman Brothers Sec. and ERISA Litig., 131 F. Supp. 3d 241, 259\u201360 (S.D.N.Y. 2015) was\n\n\n 7\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 13 of 22\n\n\n\nfor the content of financial statements prepared by others is, charitably speaking, an outlier\n\napproach, and it should be rejected by this Court.\n\n D. Plaintiffs\u2019 Attacks on the Majority Interpretation Are Unfounded.\n\n Plaintiffs\u2019 criticisms of Marcum\u2019s reliance on the majority position are meritless.\n\nMarcum\u2019s interpretation faithfully applies the falsity requirement of Section 11 as interpreted by\n\nOmnicare, preserves the statutory distinction between preparers and certifiers, and leaves intact\n\nthe due diligence defense for both factual and opinion statements. Plaintiffs\u2019 real quarrel is with\n\nthe Supreme Court\u2019s decision in Omnicare, not with Marcum\u2019s\u2014or, for that matter, the weight of\n\nthe authorities\u2019\u2014reading of the law.\n\n First, Marcum does not seek to impose a scienter requirement on Section 11 liability.\n\nMarcum seeks to enforce the text\u2019s falsity requirement as it relates to statements of opinion.\n\nSection 11(a) requires a plaintiff to show an \u201cuntrue statement of a material fact.\u201d 15 U.S.C.\n\n\u00a7 77k(a) (emphasis added). And as the Supreme Court explained in Omnicare, an opinion can be\n\nan untrue statement of fact only when there are specific allegations going to the speaker\u2019s\n\nsubjective belief, embedding of facts within the opinion, or material omission(s) from the opinion\n\nthat would render the statement capable of being false or misleading. See Omnicare, 575 U.S. at\n\n182\u201390. Plaintiffs concede they do not \u201cbase liability under \u00a7 11(a)(4) on any misrepresentation\n\nor omission contained within Marcum\u2019s opinion itself.\u201d Opp. at 3.\n\n Second, Marcum\u2019s interpretation is faithful to Section 11(a)(4) as a whole. Section 11\n\nallows investors to sue both preparers and certifiers of financial statements but requires that any\n\nsuch suit be \u201cwith respect to\u201d the statements prepared or certified. \u201cWith respect to\u201d merely\n\n\nissued post-Omnicare, and though Omnicare is cited elsewhere in the opinion, the court did not consider\u2014and indeed\nwas not prompted to consider\u2014the argument presented squarely to this Court. See Webster v. Fall, 266 U.S. 507, 511\n(1925) (\u201cQuestions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are\nnot to be considered as having been so decided as to constitute precedents.\u201d).\n\n 8\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 14 of 22\n\n\n\nconnotes a relationship. See Merriam-Webster\u2019s Online Dictionary, Respecting,\n\nhttps://www.merriam-webster.com/dictionary/respecting (\u201cwith respect to: concerning.\u201d). It\n\nrequires that any lawsuit relate to the auditor\u2019s role in the securities registration process. But\n\nPlaintiffs take Section 11(a)(4)\u2019s language one step further. They assume that Section 11\u2019s\n\nrequirement that a suit must relate to the underlying financial statements provides a rule of liability:\n\nthat a plaintiff need only show that a line item in a financial statement is wrong to make an auditor\n\nliable, regardless of whether the auditor issued a separate and distinct opinion about that statement.\n\n But that interpretation would completely erase the distinction between preparers and\n\ncertifiers. Under Plaintiffs\u2019 view, the content of an audit opinion is utterly irrelevant because a\n\ncertification functions like a checkbox: so long as it exists, the auditor is liable. Their interpretation\n\nassumes, despite the textual distinction in the statute between preparers and certifiers, that there is\n\nalways only one statement at issue\u2014the financial statements. But SEC regulations say otherwise,\n\ncategorizing a certification as its own distinct opinion. See 17 C.F.R. \u00a7 210.1-02(f) (emphasis\n\nadded) (\u201cThe term certified \u2026 means examined and reported upon with an opinion\u201d). Section\n\n11(a)(4), as it relates to a certifying auditor, deals with two statements: the issuer\u2019s financial\n\nstatement, and the auditor\u2019s opinion about those statements. Marcum\u2019s position gives effect to\n\nthis distinction. A suit against a preparer is predicated on one statement. A suit against a certifier\n\nis predicated on two distinct statements. And because Plaintiffs\u2019 suit is in part predicated on the\n\nMarcum Opinion, Omnicare requires that Plaintiffs allege the Marcum Opinion is false. See, e.g.,\n\nJohnson, 2016 WL 3654657, at *12 (rejecting analogous Section 11 claim where \u201cPlaintiffs do\n\nnot allege that PwC Australia did not subjectively believe any of the opinions it provided in its\n\nreport, and PwC Australia\u2019s opinions do not contain any embedded statements of fact that are\n\nuntrue\u201d).\n\n\n\n 9\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 15 of 22\n\n\n\n Plaintiffs\u2019 strained interpretation would transform auditors into guarantors of the accuracy\n\nof every fact in the financial statements they audit\u2014a result that is not only unsupported by the\n\nstatutory text, but also contrary to the established role of the independent auditor and the\n\nprofessional standards governing their work. See MTD at 11. See also Deephaven Private\n\nPlacement Trading, Ltd. v. Grant Thornton & Co., 454 F.3d 1168, 1174 (10th Cir. 2006) (Auditors\n\ndo not, \u201cby virtue of auditing a company\u2019s financial statements, somehow make, own or adopt the\n\nassertions contained therein.\u201d). Auditors are required to exercise \u201cdue professional care\u201d and to\n\nprovide \u201creasonable assurance\u201d that financial statements are free of material misstatement, not to\n\nguarantee accuracy. PCAOB AS 1000.14. This is neither what auditors do nor what they should\n\nbe forced to do. See In re Ikon Off. Sols., Inc., 277 F.3d 658, 673 (3d Cir. 2002) (affirming\n\ndismissal of securities action; explaining that audits require \u201conly due professional care\u201d rather\n\nthan flawlessness); United States v. Weiner, 578 F.2d 757, 786 (9th Cir. 1978) (quotation marks\n\nomitted) (\u201c[T]he auditor is not responsible for fraud that has gone undetected despite his utilization\n\nof generally accepted auditing standards.\u201d).\n\n Third, the due diligence defense in Section 11(b) has not been rendered null by Omnicare.\n\nThe due diligence defense is a fact-intensive defense generally invoked after an unsuccessful\n\nmotion to dismiss, see, e.g., Orient Plus, 2025 WL 2613530, at *21 (collecting cases), while\n\nOmnicare imposes a pleading requirement interpreting the statutory language with reference to\n\nopinions, see Omnicare, 575 U.S. at 196 (discussing the sufficiency of allegations in the relevant\n\ncomplaint). That a defendant, at the discovery and, if necessary, trial stage, can defend itself by\n\ndemonstrating due diligence in no way excuses a plaintiff\u2019s failure to allege in the first instance\n\nthat the statement of opinion \u201ccontained an untrue statement of a material fact or omitted to state\n\na material fact,\u201d as required by Section 11. See 15 U.S.C. \u00a7 77k(a)(4). Plaintiffs fail to meet that\n\n\n\n 10\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 16 of 22\n\n\n\npleading requirement here. Plaintiffs\u2019 strict liability theory should be rejected, and the Amended\n\nComplaint should be dismissed for failure to state a Section 11 claim as to Marcum.\n\nII. THE AMENDED COMPLAINT DOES NOT ADEQUATELY PLEAD\n TRACEABILITY.\n\n The Section 11 claim should be dismissed for another, independent reason: Plaintiffs have\n\nnot plausibly alleged traceability of their shares to the allegedly defective iLearningEngines\n\nregistration statements. Slack, 598 U.S. at 770; see Opp. at 25 (recognizing that Section 11\n\nplaintiffs must \u201cplausibly allege that [p]laintiffs[\u2019] shares are traceable to [the allegedly\n\nmisleading] offering documents\u201d). That burden is exacting and cannot be met where, as here,\n\nPlaintiffs allege aftermarket purchases in a market with commingled shares issued at various times.\n\nSee Am. Compl. \u00b6\u00b6 423\u201324.\n\n A. Slack Demands That Actual, Not Hypothetical, Traceability be Pled.\n\n The Supreme Court and, consequently, every circuit to consider the issue have concluded\n\nthat Section 11 standing is strictly limited to plaintiffs who can plausibly allege at the pleading\n\nstage that their shares are directly traceable to the specific registration statement alleged to be\n\ndefective. See Slack, 598 U.S. at 770; Krim v. pcOrder.com, Inc., 402 F.3d 489, 498 (5th Cir.\n\n2005); In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104, 1107 (9th Cir. 2013). This\n\nrequirement is straightforward for plaintiffs who purchased shares directly in the offering or at a\n\ntime when only registered shares were available for purchase. However, where, as here, Plaintiffs\n\npurchased shares in the aftermarket (see Am. Compl. \u00b6\u00b6 423\u201324)\u2014after commingling with other\n\nshares has occurred\u2014traceability becomes not only difficult, but, as courts have repeatedly\n\nrecognized, \u201cvirtually impossible.\u201d See Krim, 402 F.3d at 498; Century Aluminum, 729 F.3d at\n\n1107. The realities of modern securities markets, where shares are held in fungible bulk and traded\n\nthrough intermediaries, preclude any meaningful ability to trace the origin of specific shares. As\n\n\n 11\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 17 of 22\n\n\n\nthe Ninth Circuit observed, \u201cmost trading is done through brokers who neither know nor care\n\nwhether they are getting newly registered or old shares,\u201d and \u201cmany brokerage houses do not\n\nidentify specific shares with particular accounts but instead treat the account as having an\n\nundivided interest in the house\u2019s position.\u201d Century Aluminum, 729 F.3d at 1107 (quoting Barnes\n\nv. Osofsky, 373 F.2d 269, 271\u201372 (2d Cir. 1967)). Once shares are commingled, their origin is\n\n\u201ceffectively impossible to determine.\u201d In re Honest Co. Sec. Litig., 2023 WL 3190506, at *4 (C.D.\n\nCal. May 1, 2023). See also Dkt. 90 (\u201cIndep. Dir. Opp.\u201d) at 10 (quoting Pirani v. Slack Techs.,\n\nInc., 127 F.4th 1183, 1190 (9th Cir. 2025)) (acknowledging that Plaintiffs must \u201ctrace the chain of\n\ntitle for their shares back to the secondary offering\u201d).\n\n B. Plaintiffs\u2019 \u201cStatistical Probability\u201d Approach is Legally Deficient.\n\n Plaintiffs attempt to circumvent the traceability requirement by pointing to statistical\n\nprobability 9\u2014arguing that, because a large portion of shares in the market were issued under the\n\nchallenged registration statement, it is likely that their shares were as well. E.g. Opp. at 25. As\n\nexplained in Marcum\u2019s opening brief\u2014and as Plaintiffs cannot dispute\u2014every court of appeals to\n\nhave addressed this issue has deemed such probabilistic pleading insufficient as a matter of law.\n\nSee MTD at 21\u201324; see also Krim, 402 F.3d at 496 (\u201caccepting such \u2018statistical tracing\u2019 would\n\nimpermissibly expand the statute\u2019s standing requirement\u201d); In re Ariad Pharms., Inc. Sec. Litig.,\n\n842 F.3d 744, 755\u201356 (1st Cir. 2016); Century Aluminum, 729 F.3d at 1106\u201309 (rejecting\n\narguments based on numbers of shares outstanding). Deeming the statistical tracing theory\n\nPlaintiffs promote as \u201cgood enough\u201d would impermissibly expand Section 11\u2019s actual standing\n\nrequirement and render the Supreme Court\u2019s traceability mandate meaningless.\n\n\n 9\n Though Plaintiffs now seek to relabel it, Plaintiffs are effectively pursuing a statistical probability argument.\nSpecifically, Plaintiffs claim that because they do not intend to \u201cprove their Section 11 standing through statistical\nprinciples,\u201d their allegations based on statistical claims are not claims of \u201cstatistical proof.\u201d Opp. at 27. In either\nevent: Plaintiffs need to plausibly allege traceability. They do not. See MTD at 20.\n\n 12\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 18 of 22\n\n\n\n Plaintiffs\u2019 efforts to distinguish Krim are unavailing. Plaintiffs argue against Krim and\n\nCentury Aluminum, urging that their shares are statistically \u201cmore likely\u201d to have been registered\n\nthan those in Krim and Century Aluminum. Opp. at 26. But even if \u201cthere is a 99.83% chance\u201d of\n\ntraceability, it would be insufficient to plead standing, because \u201cgeneral statistics say nothing about\n\nthe shares that a specific person actually owns and have no ability to separate those shares upon\n\nwhich standing can be based from those for which standing is improper.\u201d Krim, 402 F.3d at 497,\n\n501. Century Aluminum expeditiously dispensed with Plaintiffs\u2019 same argument: \u201cwhen a\n\ncompany has offered shares under more than one registration statement, aftermarket purchasers\n\nusually will not be able to trace their shares back to a particular offering. Thus, \u2026 plaintiffs had\n\nto allege facts from which we can reasonably infer that their situation is different.\u201d 729 F.3d at\n\n1107\u201308 (emphasis added). These Plaintiffs, like those in Krim and Century Aluminum, have pled\n\nnothing to show that their particular shares are plausibly within the category of shares whose\n\nholders Congress has allowed access to Section 11 claims.\n\n Plaintiffs rely on a handful of district court cases with unique factual allegations in asking\n\nthe Court to bless their statistical probability pleading theory; their attempt should fail. In In re\n\nEveryWare Glob., Inc. Sec. Litig., plaintiffs alleged that they had \u201cpurchased 15% of the shares\n\ntraded on the first day of the Secondary Offering\u201d and \u201cthat they paid a uniform price through their\n\nbroker of just four cents above the asking price\u201d in the offering. 175 F. Supp. 3d 837, 866 (S.D.\n\nOhio 2016). 10 The same is true of In re Ubiquiti Networks, Inc. Sec. Litig., where all of the\n\ncompany\u2019s shares were either released in the allegedly defective registration statement or subject\n\nto a lock-up period at the time of plaintiffs\u2019 purchases. 33 F. Supp. 3d 1107, 1118 (N.D. Cal.\n\n\n\n\n 10\n On appeal, the Sixth Circuit affirmed dismissal of the case and, \u201caccordingly,\u201d did not address the question\nof standing. IBEW Loc. No. 58 Annuity Fund v. EveryWare Glob., Inc., 849 F.3d 325, 328 n.3 (6th Cir. 2017).\n\n 13\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 19 of 22\n\n\n\n2014). And In re Coinbase Glob., Inc. Sec. Litig., where the court relied in part on allegations that\n\none plaintiff had purchased shares \u201con the first day of the defendant company\u2019s secondary offering\n\nat prices near the opening price\u201d provides Plaintiffs no cover. 2024 WL 4053009, at *19 (D.N.J.\n\nSept. 5, 2024). Plaintiffs here allege no analogous facts. Indeed, the named Plaintiff who signed\n\nthe certification needed to file this complaint affirmatively swore that he bought shares in a series\n\nof transactions which all took place well after the offering was issued and were conducted at\n\nvarious prices. See Dkt. 41-1 at 2. Left without any plausible facts to establish traceability, and\n\nhaving admitted that their shares were purchased in the aftermarket (Am. Compl. \u00b6\u00b6 423\u201324),\n\nPlaintiffs can do no more than offer precisely the kind of statistics that have been repeatedly held\n\nto be insufficient, see Krim, 402 F.3d at 497. That is not enough to clear the traceability hurdle.\n\n C. Speculation About Discovery Cannot Cure Plaintiffs\u2019 Pleading Defect.\n\n Plaintiffs\u2019 final argument\u2014that discovery may reveal facts supporting traceability\u2014is no\n\nsalvation. See Dkt. 94 at 13\u201315. Section 11 requires Plaintiffs to \u201cplead ... that [they] purchased\n\nshares traceable to the allegedly defective registration statement.\u201d Slack, 598 U.S. at 770\n\n(emphasis added). Courts have consistently rejected the notion that a plaintiff may proceed to\n\ndiscovery in the mere hope of uncovering facts necessary to establish standing. See, e.g., Cupat v.\n\nPalantir Techs., Inc., 2025 WL 1141534, at *16 (D. Colo. Apr. 4, 2025) (rejecting \u201ca plea to let\n\nthe case proceed to discovery so that the plaintiff may locate the documents that may establish\n\nstanding\u201d); McCaffery v. Cnty., 2024 WL 4045450, at *12 (E.D. Va. Sept. 4, 2024) (plaintiffs may\n\nnot rely on \u201chopes\u201d of what discovery will show to plead a sufficient case). 11\n\n\n 11\n Nor can Plaintiffs look to discovery now. Cognizant of the strength of the traceability argument set forth\nin the opening brief in support of Marcum\u2019s motion to dismiss the Section 11 claim against it (MTD at 21\u201324),\nPlaintiffs filed a motion to lift the PSLRA\u2019s discovery stay (Dkt. 93). That motion should be denied for the reasons\nset forth in Marcum\u2019s opposition (Dkt. 94). Plaintiffs should not be permitted to begin a scavenger hunt now\u2014in\nviolation of the automatic stay under the PSLRA\u2014for facts that might allow them someday to sufficiently plead\ntraceability. The Amended Complaint against Marcum should stand or fall on the allegations contained within it. On\n\n\n 14\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 20 of 22\n\n\n\n Plaintiffs argue that the question of traceability is \u201ca factual one, to be resolved through\n\ndiscovery,\u201d Indep. Dir. Opp. at 12 (quoting In re Suprema Specialties, Inc. Sec. Litig., 438 F.3d\n\n256, 274 n.7 (3d Cir. 2006)). But plaintiffs in In re Suprema Specialties plausibly alleged\n\ntraceability in the first instance: in their complaint, plaintiffs alleged that they purchased their\n\nshares in the relevant offerings (exactly what is required to plausibly plead traceability). See 438\n\nF.3d at 274 n.7 (emphasis in original; record citation omitted). Here, in contrast, Plaintiffs allege\n\naffirmatively that they purchased their shares in the open market. See Am. Compl. \u00b6\u00b6 423\u201324. To\n\nsurvive Marcum\u2019s Motion to Dismiss, Plaintiffs need something more than speculation about to\n\nwhat discovery \u201cmay\u201d show, see Dkt. 93-1 at 5, to \u201cnudg[e] the[ir] claims across the line from\n\nconceivable to plausible,\u201d Indep. Dir. Opp. at 14 (quoting Barbour v. Garland, 105 F.4th 579, 589\n\n(4th Cir. 2024)). They do not have it.\n\n CONCLUSION\n\n For these reasons, and those set forth in Marcum\u2019s Memorandum of Law in Support of its\n\nMotion to Dismiss, Marcum respectfully requests that the Court dismiss with prejudice 12 Count\n\nOne of Plaintiffs\u2019 Amended Complaint. 13\n\n\n\n\nthe question of whether Plaintiffs sufficiently pled traceability (supra at pp. 11\u201315), it falls.\n 12\n Dismissal with prejudice is warranted because of the \u201cfundamental deficiencies\u201d in Plaintiffs\u2019 claims,\nincluding that they purchased their shares on the open market and that they have demonstrated no means of pleading\nliability under Omnicare. See Cozzarelli v. Inspire Pharms. Inc., 549 F.3d 618, 630 (4th Cir. 2008). It is likewise\nwarranted because Plaintiffs have not represented, in their oppositions or otherwise, that they possess facts which\ncould cure their pleading deficiencies. See id.\n As Marcum argues neither the question of materiality nor falsity in its MTD, Plaintiffs\u2019 recent Notice of\n 13\n\nSupplemental Authority (Dkt. 97) is of no moment to Marcum\u2019s Motion.\n\n 15\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 21 of 22\n\n\n\nDated: October 22, 2025 Respectfully submitted,\n\n /s/ Shirlethia V. Franklin\n Shirlethia V. Franklin\n D. Md. Bar No. 28662\n JONES DAY\n 51 Louisiana Avenue, N.W.\n Washington, D.C. 20001\n T: 202.879.3892\n E: sfranklin@jonesday.com\n\n Adrienne Ferraro Mueller\n Jacob J. Thackston\n Admitted Pro Hac Vice\n JONES DAY\n 901 Lakeside Ave.\n Cleveland, OH 44114\n T: 216.586.3939\n E: afmueller@jonesday.com\n jthackston@jonesday.com\n\n Samir Kaushik\n Admitted Pro Hac Vice\n JONES DAY\n 2727 North Harwood Street, Suite 500\n Dallas, Texas 75201-1515\n T: 214.220.3939\n E: skaushik@jonesday.com\n\n Attorneys for Defendant Marcum LLP\n\n\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 102 Filed 10/22/25 Page 22 of 22\n\n\n\n CERTIFICATE OF SERVICE\n\n I hereby certify that on October 22, 2025, I electronically filed the foregoing Reply in\n\nSupport of Defendant Marcum LLP\u2019s Motion to Dismiss by using the CM/ECF system which will\n\nsend a notice of electronic filing to all counsel or parties of record.\n\n /s/ Shirlethia V. Franklin\n Shirlethia V. Franklin\n\n\n\n\n 1\n\f","ocr_status":2,"date_upload":"2025-12-17T07:53:57.499629-08:00","document_number":"102","attachment_number":null,"pacer_doc_id":"093015255153","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.705740-08:00","date_modified":"2026-05-18T23:59:56.056411-07:00","date_filed":"2025-10-22","time_filed":null,"entry_number":102,"recap_sequence_number":"2025-10-22.002","pacer_sequence_number":297,"description":"REPLY to Response to Motion re 80 MOTION to Dismiss for Failure to State a Claim filed by Marcum LLP.(Franklin, Shirlethia) (Entered: 10/22/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475313/","id":447475313,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228763/","id":462228763,"tags":[],"absolute_url":"/docket/69233925/101/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.672552-08:00","date_modified":"2026-05-22T08:05:58.551565-07:00","sha1":"a37e1afa69815aafde8bd4ce62e574e7626f823d","page_count":9,"file_size":165746,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.101.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.101.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 101 Filed 10/22/25 Page 1 of 9\n\n\n\n UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n\n\n )\nDANNY WALKER, )\n )\n Plaintiff, )\n )\n v. ) Civil Action No. 8:24-cv-02900-DKC\n )\niLEARNING ENGINES, INC., et al., )\n )\n Defendants. )\n )\n\n\n\nDEFENDANT THOMAS OLIVIER\u2019S REPLY IN SUPPORT OF MOTION TO DISMISS\n\n\n\n\nJorge L. Piedra (Pro Hac Vice) Philip A. Selden (Bar No. 28596)\nRasheed K. Nader (Pro Hac Vice) Alicia L. Shelton (Bar No. 11538)\nAlexa G. Chinchilla (Pro Hac Vice) Cole Schotz P.C.\nKOZYAK TROPIN THROCKMORTON 1201 Wills Street, Suite 320\n2525 Ponce de Leon Blvd., Floor 9 Baltimore, Maryland 21231\nCoral Gables, Florida 33134 (410) 528-2987 (phone)\n(305) 372-1800 (phone) (410) 528-9407\njpiedra@kttlaw.com pselden@coleschotz.com\nrnader@kttlaw.com ashelton@coleschotz.com\nachinchilla@kttlaw.com\n Counsel for Defendant Thomas Olivier\nCounsel for Defendant Thomas Olivier\n\f Case 8:24-cv-02900-DKC Document 101 Filed 10/22/25 Page 2 of 9\n\n\n\n I. Plaintiffs Have Not Plausibly Alleged That Their Shares Are \u201cTraceable\u201d to the\n Registration Statements.\n\n Plaintiffs argue that they need not offer affirmative proof at the pleading stage that their\n\nshares are traceable to the allegedly defective registration statement. (See Opp.1 at 9). Instead of\n\nalleging such, Plaintiffs maintain that they only need to plausibly allege that the shares are\n\ntraceable to the Form S-1 and Form S-8, the \u201cOffering Documents.\u201d (See Opp. at 2). Plaintiffs\n\nmiss the mark. Even though plausibility, not proof, is the standard at this stage, Plaintiffs\u2019\n\nconclusory allegations of traceability are not sufficient to plausibly allege that their shares are\n\ntraceable to the registration statements.\n\n This Court has explicitly held that a plaintiff seeking to establish Section 11 liability must\n\neither (1) \u201cprove that the shares at issue were purchased directly in the secondary offering\u201d or, (2)\n\n\u201cif the shares were purchased in the aftermarket, prove that the chain-of-title for the shares can be\n\ntraced back to the secondary offering, starting with the plaintiff\u2019s purchase and ending with\n\nsomeone who purchased directly in the secondary offering.\u201d Fanucchi v. Enviva Inc., No. DKC\n\n22-2844, 2024 WL 3302564, at *18 (D. Md. July 3, 2024) (emphasis added). The traceability of\n\npurchased shares to the offering documents, the Court continued, must be rendered plausible by\n\n\u201caccompanying factual enhancement\u201d in the complaint\u2019s allegations. Id. at *18. Plaintiffs\u2019\n\nallegations are devoid of the \u201cfactual enhancement\u201d required to make traceability plausible for\n\npurposes of Section 11 liability.\n\n Fanucchi is instructive here. In Fanucchi, Enviva, a \u201csustainability-focused biomass\n\nenergy company,\u201d issued 4,945,000 shares of Enviva common stock at $70.00 per share. Id. at *1-\n\n2. Following a short-seller\u2019s report published by investment firm Blue Orca, asserting that Enviva\n\n\n\n1\n Plaintiffs\u2019 Memorandum of Law in Opposition to Independent Defendants\u2019 Motions to Dismiss\nthe Amended Class Action Complaint [ECF No. 90] (\u201cOpposition\u201d or \u201cOpp.\u201d).\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 101 Filed 10/22/25 Page 3 of 9\n\n\n\nhad engaged in \u201cgreenwashing,\u201d Enviva\u2019s stock price fell $7.74 per share. Id. The value of\n\nEnviva\u2019s stock fell even further as a result of a subsequent whistleblower article, which included\n\ntestimony from a former Enviva employee concerning Enviva\u2019s false representations regarding its\n\nenvironmental impact. Id. The plaintiff in that case alleged that certain Enviva officers were strictly\n\nliable under Section 11 and Section 15 as signatories of the registration statements for material\n\nmisrepresentations and omissions contained therein. Id. at *3. In granting the defendants\u2019 motion\n\nto dismiss, this Court held that the plaintiff lacked standing to bring a Section 11 claim because\n\nthe facts alleged did not plausibly suggest that the plaintiff\u2019s shares originated from the offering.\n\nId. at *19.\n\n Faced with the Court\u2019s clear determination in Fanucchi, Plaintiffs\u2019 Opposition attempts to\n\ndistinguish Fanucchi by arguing that Plaintiffs have alleged more than the Fanucchi plaintiff, such\n\nas the amount of shares registered in the registration statement and the proportion of registered\n\nshares available in the market prior to the secondary offering. (See Opp. at 15-17). But taken as\n\ntrue for purposes of a motion to dismiss, Plaintiffs\u2019 allegations still fail to sufficiently allege facts\n\nfor traceability. As in Fanucchi, Plaintiffs attempt to substantiate their allegations concerning their\n\npurchases of shares \u201cpursuant and/or traceable\u201d to the Offering Documents with certifications from\n\nthe Lead Plaintiffs with the dates, number of shares, and prices of stock purchases. (See Compl. \u00b6\u00b6\n\n29-30, Exhibit A; DE 3-3). Plaintiffs\u2019 allegations here, like Fanucchi, do not \u201cplausibly suggest\n\nthat the shares Plaintiffs acquired must have originated\u201d from the Offering Documents. Fanucchi,\n\n2024 WL 3302564, at *18.\n\n\n\n\n 3\n\f Case 8:24-cv-02900-DKC Document 101 Filed 10/22/25 Page 4 of 9\n\n\n\n Plaintiffs also cannot distinguish their Complaint from that in Pirani v. Slack Techs., Inc.,\n\n127 F.4th 1183 (9th Cir. 2025) (\u201cPirani II\u201d),2 where the Ninth Circuit rejected the plaintiff\u2019s\n\n\u201cstatistical tracing\u201d theory, which purportedly connected his shares to the defendant\u2019s registration\n\nstatement. Id. at 1189-90. Specifically, in Pirani II, the plaintiff argued that he could \u201cplausibly\n\nallege that he purchased at least some registered shares\u201d and show traceability by \u201crelying on the\n\nstatistical inference that given the number of shares he purchased and the fraction of shares on the\n\nexchange that were registered (about 42 percent), the likelihood that none of the 30,000 shares was\n\nregistered is infinitesimally small.\u201d Id. at 1190 (internal citations omitted). The court found this\n\ntheory to be \u201cboth factually and legally flawed,\u201d and noted that the theory of statistical tracing is\n\n\u201ccontrary to [9th Circuit] precedent.\u201d Id.\n\n Plaintiffs contend that they do not allege statistical tracing, (Opp. at 18), but their\n\nComplaint says otherwise. Plaintiffs allege that \u201c[g]iven the substantial increase in the volume of\n\nshares being traded on June 21, 2024 and after August 9, 2025 . . . there is a high probability that\n\nthe shares Plaintiffs purchased after these dates were traceable to the Offering Documents.\u201d (See\n\nCompl. \u00b6\u00b6 422, 424) (emphasis added). Plaintiffs\u2019 allegations track the statistical theory espoused\n\nby the plaintiff in Pirani II, which the Ninth Circuit squarely rejected. See Pirani II, 127 F.4th at\n\n1190.\n\n Plaintiffs further contend that \u201cDefendants [have] concede[d] that Plaintiffs can establish\n\ntheir standing by tracing the chain-of-title of the shares they purchased to the Offering\n\nDocuments.\u201d (See Opp. at 10). Not so. Olivier simply acknowledges the two ways in which a\n\nplaintiff can establish Section 11 standing: by (1) alleging a direct purchase in the offering covered\n\n\n2\n Pirani v. Slack Techs., Inc., 13 F.4th 940, 951 (9th Cir. 2021) (\u201cPirani I\u201d) was reversed and\nremanded back to the Ninth Circuit by the Supreme Court in Slack Techs., LLC v. Pirani, 598 U.S.\n759 (2023).\n\n\n 4\n\f Case 8:24-cv-02900-DKC Document 101 Filed 10/22/25 Page 5 of 9\n\n\n\nby the registration statement, or (2) affirmatively tracing the chain of title of the securities back to\n\nthat offering. Def. Olivier\u2019s Mot. to Dismiss [ECF No. 82] (\u201cMot.\u201d) at 10 (citing Fanucchi, 2024\n\nWL 3302564, at *18).3 In his Motion to Dismiss, Olivier explains how Plaintiffs fail to meet either\n\nprong. First, though Plaintiffs allege that they purchased iLearningEngines common stock\n\n\u201cpursuant and/or traceable\u201d to the Offering Documents, they concede that they purchased shares\n\n\u201con the open market,\u201d which undermines any allegation of a direct purchase in the offering covered\n\nby Form S-1 or S-8. (See Compl. at \u00b6\u00b6 29-30; 423-424). Second, Plaintiffs\u2019 speculative allegations\n\nconcerning secondary market purchases do not constitute affirmative tracing of their chain of title\n\nback to the registration statement. (See id.); (Mot. at 10-11). For example, Plaintiffs assert that\n\nPlaintiff Al Hamid and Plaintiff Leveque purchased shares when the shareholders who registered\n\nshares through the Offering Documents were actively selling their shares (See Opp. at 14). But, as\n\nOlivier points out in his Motion, that was not the case: Leveque purchased 5,000 shares on July\n\n25, 2024\u2014one month after the S-8 issued. (See id. \u00b6 29; DE 3-3, at 3); (Mot. at 10-11). Al Hamid\n\npurchased a total of 4,500 shares between August 20 and September 18, 2024\u2014weeks to months\n\nafter the S-1 and S-8 issued\u2014and sold 2,500 of them within the same time frame. (See Compl.,\n\nEx. A); (Mot. at 10-11).\n\n Date Event Significance\n Registered ~16M shares for\n June 21, 2024 Form S-8 Effective\n employee/director plans.\n Leveque purchases 5,000 Open market. Before S-1.\n July 25, 2024\n shares Over a month after S-8.\n August 9, 2024 Form S-1 Declared Effective Registered ~131M shares for resale\n Al Hamid purchases 500 Open market. Months after S-8.\n August 20, 2024\n shares Weeks after S-1.\n\n3\n Plaintiffs also attempt to distinguish Ciarciello v. Bioventus, Inc., 1:23-CV-32, 2023 WL 7300081\n(M.D. N.C. Nov. 6, 2023), arguing that the plaintiff in Ciarciello \u201cmade only a bare bone assertion\nof traceability.\u201d (See Opp. at 17). For the reasons discussed as to Fanucchi, Plaintiffs\u2019 allegations,\nwhile not necessarily \u201cbare bone,\u201d still do not render the traceability conclusion plausible.\n\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 101 Filed 10/22/25 Page 6 of 9\n\n\n\n Al Hamid purchases 500\n August 23, 2024 Same as above.\n shares\n Al Hamid purchases 1,000\n August 27, 2024 Same as above.\n shares\n Al Hamid purchases 1,000;\n August 30, 2024 Same as above. Round-trip sale.\n sells 1,000 shares\n Al Hamid purchases 1,500 Open market. Months after S-8.\n September 16, 2024\n shares Over a month after S-1.\n September 18, 2024 Al Hamid sells 1,500 shares Sold majority of holdings.\n\n\nAccordingly, as in Fanucchi, Plaintiffs\u2019 allegations do not plausibly show the traceability of the\n\nshares to the Offering Documents.\n\n As to Section 15 of the Securities Act, Plaintiffs merely allege that because they have\n\nadequately alleged an underlying violation of Section 11, Plaintiffs state a claim under Section 15.\n\nBut, as Olivier states in his Motion, Plaintiff did not allege an underlying violation of Section 11,\n\nwhich forecloses relief under Section 15. (See Mot. at 13).\n\n II. Plaintiffs Fail to Establish That Olivier Is a Control Person Under Section 15.\n\n Plaintiffs argue they must do no more than \u201cmerely\u201d allege that Defendants had the power\n\nto control or influence a policy to establish Section 15 control person liability. (See Opp. at 22).\n\nNotably, Plaintiffs omit Olivier from the list of persons whom they claim had the power. (See id.)\n\n(\u201cThus, the Complaint must merely allege that Defendants Barger, Davis, Melham, and Moe had\n\n\u201cpossession, direct or indirect, of the power to direct or cause the direction of the management and\n\npolicies of a person . . .\u201d). Plaintiffs only mention Olivier in a footnote, arguing that one particular\n\nallegation from their Amended Complaint \u201cis applicable to Defendants Barger, Davis, Me[h]lman,\n\nMoe, and Olivier.\u201d (See Opp. at 23n.15.) In fact, Plaintiffs merely restate the control person-related\n\nallegations made in their Amended Complaint as to the Individual Defendants, which includes Mr.\n\nOlivier, but is not specific to him.\n\n\n\n\n 6\n\f Case 8:24-cv-02900-DKC Document 101 Filed 10/22/25 Page 7 of 9\n\n\n\n Regardless, this Court\u2019s holding in In re Constellation Energy Grp., Inc. Sec. Litig., 738 F.\n\nSupp. 2d 614 (D. Md. 2010), is directly on point. There, the lead plaintiff purchased common stock\n\nof Constellation, a publicly traded energy company. Id. at 620. Weeks after the offering,\n\nConstellation disclosed that it had miscalculated its collateral figures stated in the offering and had\n\na significant business relationship with a company that had just filed for Chapter 11 bankruptcy\n\nprotection\u2014both disclosures that had caused Constellation\u2019s stock price to fall. Id. at 621-22. The\n\nplaintiffs argued that defendants (Constellation\u2019s directors, officers, and underwriters) had failed\n\nto make these disclosures to plaintiffs during the class period, along with other allegedly\n\nmisleading statements about Constellation\u2019s future earnings, business outlook, risk management,\n\nand internal controls, which gave rise to their Section 11 and Section 15 claims. Id. at 623.\n\n This Court dismissed the plaintiffs\u2019 Section 15 claims because \u201c[a]n individual\u2019s position\n\nalone does not establish control person liability,\u201d and because the plaintiffs had not alleged that\n\nthe directors were directly involved in the day-to-day operations of the company. Id. at 639-40.\n\nThe Court noted that it could not \u201cinfer simply from the director defendants\u2019 positions on\n\nConstellation\u2019s board of directors that they [had] exercised the requisite control over the specific\n\ncorporate operation that resulted in the miscalculated downgrade collateral obligations to be liable\n\nunder \u00a7 15.\u201d Id. at 640; see also In re Creditrust Corp. Sec. Litig., 2002 WL 35691716, at *19 (D.\n\nMd. Aug. 1, 2002) (dismissing Section 15 claims against outside directors where claims were\n\nbased only on title and conclusory allegations of control).4\n\n\n\n4\n Plaintiffs cite In re Sourcefire, Inc. Sec. Litig., No. CIV. JFM 07-1210, 2008 WL 1827484 (D.\nMd. Apr. 23, 2008), for the proposition that their allegations of control are sufficient to plead\ncontrol liability. But unlike the defendants in Sourcefire, Olivier did not have, and is not alleged\nto have had, \u201ca series of direct and/or direct indirect business and/or personal relationships with\nother directors and/or officers and/or major shareholders\u201d of iLearningEngines. Id. at *7.\n\n\n\n\n 7\n\f Case 8:24-cv-02900-DKC Document 101 Filed 10/22/25 Page 8 of 9\n\n\n\n As in Constellation Energy, Plaintiffs\u2019 claims fail because they have brought Section 11\n\nand Section 15 claims against Olivier based on allegedly misleading statements or omissions\n\nwithout plausibly alleging that Olivier is a control person liable under Section 15. As established\n\nin Olivier\u2019s Motion, Plaintiffs\u2019 general allegations of control by the Individual Defendants do not\n\nsuffice to render Olivier a control person because they include no facts specific to Olivier: neither\n\nOlivier\u2019s position as an independent director of iLearningEngines nor his signing of the Forms S-\n\n1 and S-8 renders him a control person, and Plaintiffs do not allege Olivier\u2019s direct involvement\n\nin iLearningEngines\u2019 day-to-day operations. See Constellation Energy Grp., 738 F. Supp. 2d at\n\n638-40. Nor do Plaintiffs allege that Olivier influenced or controlled any specific Defendant\n\nalleged to have violated Section 11. (See id.); (Mot. at 15).\n\n Plaintiffs fail to establish that Olivier is a control person under Section 15.\n\n CONCLUSION\n\n For the reasons set forth herein, Defendant Thomas Olivier respectfully requests that the\n\nCourt grant his Motion and issue an Order dismissing with prejudice Counts I and II against him\n\nin the Amended Complaint.\n\n Respectfully submitted,\n\nDated: October 22, 2025 By: /s/ _Jorge L. Piedra _______\n Jorge L. Piedra (Pro Hac Vice)\n Rasheed K. Nader (Pro Hac Vice)\n Alexa G. Chinchilla (Pro Hac Vice)\n KOZYAK TROPIN THROCKMORTON\n 2525 Ponce de Leon Blvd., Floor 9\n Coral Gables, Florida 33134\n (305) 372-1800 (phone)\n jpiedra@kttlaw.com\n rnader@kttlaw.com\n achinchilla@kttlaw.com\n\n Counsel for Defendant Thomas Olivier\n\n\n\n\n 8\n\f Case 8:24-cv-02900-DKC Document 101 Filed 10/22/25 Page 9 of 9\n\n\n\n\n /s/ __________\n Philip A. Selden (Bar No. 28596)\n Alicia L. Shelton (Bar No. 11538)\n Cole Schotz P.C.\n 1201 Wills Street, Suite 320\n Baltimore, Maryland 21231\n (410) 528-2987 (phone)\n (410) 528-9407\n pselden@coleschotz.com\n ashelton@coleschotz.com\n\n Counsel for Defendant Thomas Olivier\n\n\n CERTIFICATE OF SERVICE\n\n I hereby certify that, on this 22nd day of October 2025, a copy of the foregoing was served\n\non counsel of record via the Court\u2019s CM/ECF system.\n\n /s/ _ _______\n Alicia L. Shelton\n\n\n\n\n 9\n\f","ocr_status":2,"date_upload":"2026-05-19T22:32:12.739355-07:00","document_number":"101","attachment_number":null,"pacer_doc_id":"093015254859","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.643596-08:00","date_modified":"2026-05-18T23:59:56.017308-07:00","date_filed":"2025-10-22","time_filed":null,"entry_number":101,"recap_sequence_number":"2025-10-22.001","pacer_sequence_number":294,"description":"RESPONSE in Support re 82 MOTION to Dismiss for Failure to State a Claim filed by Thomas Olivier.(Selden, Philip) (Entered: 10/22/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475312/","id":447475312,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228762/","id":462228762,"tags":[],"absolute_url":"/docket/69233925/100/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.608275-08:00","date_modified":"2026-05-18T23:59:55.996720-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"100","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.582138-08:00","date_modified":"2026-05-18T23:59:55.978435-07:00","date_filed":"2025-10-20","time_filed":null,"entry_number":100,"recap_sequence_number":"2025-10-20.002","pacer_sequence_number":null,"description":"PAPERLESS ORDER granting 99 Motion to Appear Pro Hac Vice on behalf of Bradley E. Markano. Directing attorney Bradley E. Markano to register for pro hac vice filing in the District of Maryland through PACER at https://pacer.uscourts.gov/ if attorney has not already done so. The Pro Hac Vice option must be selected when registering. Signed by Clerk on 10/20/2025. (mh4s, Deputy Clerk) (Entered: 10/20/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475311/","id":447475311,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228761/","id":462228761,"tags":[],"absolute_url":"/docket/69233925/99/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.553419-08:00","date_modified":"2026-05-18T23:59:55.959366-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"99","attachment_number":null,"pacer_doc_id":"093015244760","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.527536-08:00","date_modified":"2026-05-18T23:59:55.943824-07:00","date_filed":"2025-10-20","time_filed":null,"entry_number":99,"recap_sequence_number":"2025-10-20.001","pacer_sequence_number":289,"description":"MOTION to Appear Pro Hac Vice for Bradley E. Markano (Filing fee $100, receipt number AMDDC-12299401.) by Harish Chidambaran(Ferguson, Laura) (Entered: 10/20/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475310/","id":447475310,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228760/","id":462228760,"tags":[],"absolute_url":"/docket/69233925/98/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.450378-08:00","date_modified":"2026-05-22T08:30:50.015290-07:00","sha1":"a30957ee03c81e540f85f514253ae460f2324165","page_count":23,"file_size":261045,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.98.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.98.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 1 of 23\n\n\n\n\n UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n (Southern Division)\n\n\nDANNY WALKER, Individually and on )\nBehalf of All Others Similarly Situated, )\n )\n Plaintiff, )\n )\n v. ) Civil Action No. DKC 24-2900\n )\nHARISH CHIDAMBARAN, et al., )\n )\n Defendants. )\n )\n )\n )\n______________________________________ )\n\n\n MEMORANDUM OF LAW IN FURTHER SUPPORT OF LEAD PLAINTIFF\n LOUIS LEVEQUE\u2019S AND PLAINTIFF IQBAL AL HAMID\u2019S MOTION TO\nPARTIALLY LIFT THE DISCOVERY STAY AND PERMIT LIMITED DISCOVERY\n\fCase 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 2 of 23\n\n\n\n TABLE OF CONTENTS\n\n\nI. PRELIMINARY STATEMENT ......................................................................... 1\n\nII. ARGUMENT ......................................................................................................... 4\n\n A. THE POLICY REASONS FOR THE PSLRA DISCOVERY STAY SUPPORT THE\n\n REQUESTED RELIEF ........................................................................................ 4\n\n B. PLAINTIFFS WILL SUFFER UNDUE PREJUDICE ABSENT THE DISCOVERY ........ 5\n\n C. PLAINTIFFS ALLEGE THAT AND WILL PROVE THROUGH EVIDENCE THAT\n\n THEIR ILEARNINGENGINES PURCHASES ARE TRACEABLE TO THE OFFERING\n\n DOCUMENTS. ................................................................................................ 10\n\n D. THE REQUESTED DISCOVERY IS SUFFICIENTLY PARTICULARIZED. .............. 13\n\nIII. CONCLUSION ................................................................................................... 15\n\n\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 3 of 23\n\n\n\n TABLE OF AUTHORITIES\n\nCases\n\nAshcroft v. Iqbal,\n\n 556 U.S. 662 (2009) .................................................................................................................... 2\n\nBarnes v. Osofsky,\n\n 373 F.2d 269 (2d Cir. 1967)...................................................................................................... 10\n\nIn re Carnegie Int\u2019l Corp. Sec. Litig.,\n\n 107 F. Supp. 2d 676 (D. Md. 2000) ............................................................................................ 4\n\nIn re Century Aluminum Co. Sec. Litig.,\n\n 729 F.3d 1104 (9th Cir. 2013) .................................................................................................. 10\n\nIn re CFS-Related Sec. Fraud Litig.,\n\n 179 F. Supp. 2d 1260 (N.D. Okla. 2001) .................................................................................... 9\n\nCornielsen v. Infinium Cap. Mgmt., LLC,\n\n 916 F.3d 589 (7th Cir. 2019) ...................................................................................................... 9\n\nCremeen v. Schaefer,\n\n Civil Action No. 04\u20132519\u2013CM, 2005 WL 4703651 (D. Kan. Dec. 7, 2005) ............................. 9\n\nCremeen v. Schaefer,\n\n No. 04-2519-CM, 2005 WL 1925606 (D. Kan. Aug. 10, 2005) ................................................ 9\n\nCupat v. Palantir Techs., Inc.,\n\n No. 1:22-CV-02805-GPG-SBP, 2025 WL 1141534 (D. Colo. Apr. 4, 2025) .................... 12, 13\n\nFam. of Care Real Est. Holding Co. v. Chapman Prop., LLC,\n\n No. CV DKC 23-0574, 2023 WL 4134427 (D. Md. June 22, 2023)........................................ 12\n\n\n\n\n iii\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 4 of 23\n\n\n\nGardner v. Major Auto. Cos.,\n\n No. 11\u2013CV\u20131664 (FB), 2012 WL 1230135 (E.D.N.Y. Apr. 12, 2012) ..................................... 9\n\nGarnes v. Maryland,\n\n No. CV RDB-17-1430, 2018 WL 276425 (D. Md. Jan. 3, 2018) ............................................ 13\n\nHerman & MacLean v. Huddleston,\n\n 459 U.S. 375 (1983) .................................................................................................................... 2\n\nIn re Honest Co. Sec. Litig.,\n\n No. 221CV07405MCSPLA, 2023 WL 3190506 (C.D. Cal. May 1, 2023) .............................. 10\n\nKrim v. pcOrder.com, Inc.,\n\n 402 F.3d 489, 499 (5th Cir. 2005) ............................................................................................ 10\n\nMacLean v. Huddleston,\n\n 459 U.S. 375 (1983) .................................................................................................................... 2\n\nMedhekar v. U.S. Dist. Ct. for the N. Dist. of California,\n\n 99 F.3d 325 (9th Cir. 1996) ........................................................................................................ 9\n\nMishkin v. Ageloff,\n\n 220 B.R. 784 (S.D.N.Y. 1998).................................................................................................. 15\n\nMori v. Saito,,\n\n 802 F. Supp. 2d 520 (S.D.N.Y. 2011)....................................................................................... 15\n\nIn re Odyssey Healthcare, Inc.,\n\n No. CIV.A.3:04-CV-0844-N, 2005 WL 1539229 (N.D. Tex. June 10, 2005) ........................... 9\n\nPirani v. Slack Techs., Inc.,\n\n 127 F.4th 1183 (9th Cir. 2025) ................................................................................................... 2\n\n\n\n\n iv\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 5 of 23\n\n\n\nIn re Royal Ahold N.V. Securities & Erisa Litigation,\n\n 220 F.R.D. 246 (D. Md. 2004)............................................................................................ 14, 15\n\nSG Cowen Sec. Corp. v. U.S. Dist. Ct. for N. Dist. of CA,\n\n 189 F.3d 909 (9th Cir. 1999) ...................................................................................................... 9\n\nIn re Spectranetics Corp. Sec. Litig.,\n\n No. 08-CV-02078-MSK-BNB, 2009 WL 3346611 (D. Colo. Oct. 14, 2009)............................ 9\n\nIn re Suprema Specialties, Inc. Secs. Litig.,\n\n 438 F.3d 256 (3d Cir. 2006).................................................................................................. 8, 13\n\nThomas v. Metro. Life Ins. Co.,\n\n 540 F. Supp. 2d 1212 (W.D. Okla. 2008) ....................................................................... 3, 6, 7, 9\n\nIn re Thornburg Mortg., Inc. Sec. Litig.,\n\n No. CIV 07-0815 JB/WDS, 2010 WL 2977620 (D.N.M. July 1, 2010) .................................... 9\n\nVacold LLC v. Cerami,\n\n No. 00 CIV. 4024 (AGS), 2001 WL 167704 (S.D.N.Y. Feb. 16, 2001) ............................ 7, 8, 9\n\nWaldman v. Wachovia Corp.,\n\n No. 08 CIV. 2913(SAS), 2009 WL 86763 (S.D.N.Y. Jan. 12, 2009)................................. 14, 15\n\nIn re Williams Sec. Litig.,\n\n No. 02\u2013CV\u201372H(M), 2003 WL 22013464 (N.D. Okla. May 22, 2003) ................................ 8, 9\n\nStatutes\n\n15 U.S.C. \u00a7 77k(a) .......................................................................................................................... 7\n\n15 U.S.C. \u00a777k ................................................................................................................................ 1\n\n15 U.S.C. \u00a777z-1(b)(1) ................................................................................................................... 2\n\n\n\n\n v\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 6 of 23\n\n\n\nOther Authorities\n\nJohn C. Coffee, Jr. & Joshua Mitts, Slack v. Pirani and the Future of Section 11 Claims, at 1\n\n (Dec. 1, 2023) https://ssrn.com/abstract=4644888 ............................................................. 10, 11\n\nS. Rep. No. 104-98 (1995) .............................................................................................................. 4\n\nRegulations\n\n17 C.F.R. \u00a7240.10b-5 ...................................................................................................................... 6\n\n\n\n\n vi\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 7 of 23\n\n\n\n I. PRELIMINARY STATEMENT\n\n As set forth at length in Plaintiffs\u2019 Amended Class Action Complaint for Violations of the\n\nFederal Securities Laws (ECF No. 41), iLearningEngines, Inc. was a company that should never\n\nhave been able to go public. Its financial statements riddled with fictitious revenue and expenses\n\nreported in direct contravention of GAAP, it lasted just five months before a report by Hindenburg\n\nResearch caused the entire house of cards to quickly collapse. An investigation by the United\n\nStates Securities & Exchange Commission was commenced. An internal investigation by\n\niLearningEngines\u2019 Board of Directors led to the departures of senior management, including\n\nDefendants Chidambaran, Naqvi, and Arackal. iLearningEngines\u2019 prior financial statements that\n\nhad been included in its offering documents were withdrawn as unreliable. Finally, on December\n\n20, 2024, iLearningEngines filed for bankruptcy and self-reported potential violations of federal\n\nlaw to the United States Department of Justice. Defendants in this action are precisely the\n\ngatekeepers that Congress tasked with protecting investors from frauds like iLearningEngines; its\n\nofficers, directors, and auditor. See Securities Act of 1933, \u00a711, 15 U.S.C. \u00a777k. These gatekeepers\n\nconspicuously failed in their duties under the Securities Act, enabled iLearningEngines to go\n\npublic, and caused investors to lose millions of dollars.\n\n In moving to dismiss Plaintiffs\u2019 Securities Act claims, Defendants do not seriously contest\n\nthe falsity of representations contained in the Registration Statement, representations\n\niLearningEngines has already conceded were false. Instead, Defendants seek to shelter behind the\n\nconvoluted process by which iLearningEngines\u2019 shares became available to investors, a process\n\nthey were all involved in creating, and argue that Plaintiffs cannot trace their shares to a false\n\nregistration statement. In the Amended Complaint, Plaintiffs have pleaded sufficient facts to\n\nplausibly allege their shares were traceable: the newly registered shares of iLearningEngines\n\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 8 of 23\n\n\n\ncovered 87.1% of its total outstanding shares and 100% of the public float, and Plaintiffs purchased\n\ntheir shares at the time the newly registered shares were being actively sold into the market by the\n\nselling shareholders who shares were registered by the false registration statements. See ECF Nos.\n\n90, 91 at 25-28; see also \u00b6\u00b6137, 139, 241, 247, 418, 417-36, 439-440; ECF No. 90-1, Porritt Decl.,\n\nEx. A, at 45. This is all that is required at this stage. See, e.g., Pirani v. Slack Techs., Inc., 127\n\nF.4th 1183, 1188 (9th Cir. 2025) (stating if plaintiff had only alleged his purchases were traceable,\n\nthen the Ninth Circuit \u201cwould have to decide whether his allegation was sufficient to make the\n\nconclusion of traceability a plausible one under the pleading standards articulated by the Supreme\n\nCourt in Ashcroft v. Iqbal, [556 U.S. 662, 678 (2009)].\u201d); ECF Nos. 90-92 (Plaintiffs\u2019 oppositions\n\nto motions to dismiss).\n\n Defendants argue this is still insufficient. If the Court accepts their interpretation of the\n\nSecurities Act, a statute that is designed to place \u201cminimal burden\u201d on plaintiffs, Herman &\n\nMacLean v. Huddleston, 459 U.S. 375, 382 (1983), then it is likely impossible for any\n\niLearningEngines\u2019 investor to adequately plead a Securities Act claim against the Defendants, even\n\nthough proof of the claim, including tracing, will be readily apparent in discovery as\n\niLearningEngines\u2019 own Special Committee quickly concluded. And despite protestations to the\n\ncontrary, this is precisely Defendants\u2019 purpose: to avoid on a technical pleading requirement a\n\nmeritorious claim that they cannot defend on the merits.\n\n While confident that their Amended Complaint adequately pleads a claim under the\n\nSecurities Act as amended by the Private Securities Litigation Reform Act of 1995 and the Federal\n\nRules of Civil Procedure, Plaintiffs have nonetheless filed in the alternative this present motion to\n\nlift the statutory discovery stay imposed by the PSLRA. 15 U.S.C. \u00a777z-1(b)(1). In the event that\n\nthe Court finds Plaintiffs\u2019 extensive pleadings alleging tracing to be insufficient, Plaintiffs propose\n\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 9 of 23\n\n\n\nthat the stay should be lifted for the limited purpose of subpoenaing non-parties to enable plaintiffs\n\nto \u201cprove\u201d at the pleading stage that their share purchases are traceable to a registration statement\n\nas alleged in their pleadings. Contrary to Defendants\u2019 opposition, lifting the stay is not contrary to\n\nthe policy of the PSLRA which expressly contemplates the stay to be lifted under certain\n\ncircumstances. Indeed, the explicit purpose of the PSLRA discovery stay, avoiding undue\n\ndiscovery burdens being placed on defendants, is entirely absent here. Defendants have not\n\nattempted to argue that the proposed discovery is abusive or meant to coerce Defendants to an\n\nearly settlement, or places any burden whatsoever on Defendants. Similarly, the discovery does\n\nnot seek to uncover new claims but instead seeks only to evidence that Plaintiffs purchases are\n\ntraceable to the Registration Statements as already alleged in the Amended Complaint. In simple\n\nterms, the sought discovery does not impact Defendants excepting that they may be unable to\n\nescape liability by hiding behind the PSLRA discovery stay to prevent Plaintiffs obtaining the\n\nevidence to prove their existing allegations of traceability alleged in the Amended Complaint.\n\n In cases such as here, where the discovery does not contravene the policy reasons for\n\nenacting the PSLRA discovery stay and defendants may escape liability in the absence of the lifting\n\nthe stay, courts have found that undue prejudice exists and permitted the sought discovery. See\n\nThomas v. Metro. Life Ins. Co., 540 F. Supp. 2d 1212, 1222 (W.D. Okla. 2008). Furthermore, the\n\ndiscovery sought is sufficiently particularized. Plaintiffs seek precise trading records from two\n\ninitial custodians (with a possibility of limited further custodians) to establish Plaintiffs\u2019 chain-of-\n\ntitle of their shares to the registration statements. These are routine business records for the\n\ncustodians.\n\n Therefore, in the event the Court finds that Plaintiffs have not adequately alleged Section\n\n11 standing, Defendants should not be able to escape liability for the violations of Section 11 on\n\n\n\n 3\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 10 of 23\n\n\n\nan issue of fact at the pleading stage that is separate and apart from the merits. By permitting the\n\nlimited discovery sought by the Motion, Plaintiffs would avoid the undue prejudice they will\n\notherwise suffer in absence of allowing the requested limited discovery.\n\n II. ARGUMENT\n\n A. The Policy Reasons for the PSLRA Discovery Stay Support the Requested\n\n Relief\n\n Defendants argue that Plaintiffs must prove in the Amended Complaint that their purchases\n\nof iLearningEngines shares are traceable through a chain of title to the Registration Statements.\n\nMarcum Opp. at 2, 13. Here, Plaintiffs only seek such information from non-parties that would\n\npermit Plaintiffs to plead evidence of their chain of title to supplement the Amended Complaint.\n\n Defendants argue that the sought discovery is a \u201cfishing expedition\u201d that is contrary to the\n\nPSLRA. Defendants concede that the purpose of the PSLRA discovery stay is to prevent \u201cthe abuse\n\nof the discovery process to coerce settlement.\u201d Marcum Opp. at 5 (quoting In re Carnegie Int\u2019l\n\nCorp. Sec. Litig., 107 F. Supp. 2d 676, 682\u201383 (D. Md. 2000). Defendants make no attempt to\n\nshow that Plaintiffs\u2019 proposed discovery is designed to coerce early settlement. Defendants, rather,\n\nattempt to sway the Court that any request for discovery contravenes the PSLRA discovery stay in\n\nthe absence of a need to preserve evidence or plaintiffs being placed in an unfair position\n\nconcerning concurrent settlement discussions related to the facts at issue.\n\n In making this argument, however, Defendants conveniently truncate a key quote by the\n\nSenate Report finding that the PSLRA discovery stay was meant to prevent the filing of \u201cfrivolous\n\nlawsuits in order to conduct discovery in the hopes of finding a sustainable claim not alleged in\n\nthe complaint.\u201d Marcum Opp. at 4-5 (quoting S. Rep. No. 104-98, at 14 (1995) and truncating\n\nemphasized text (emphasis added)). This is simply not the case here. Plaintiffs seek discovery only\n\n\n\n 4\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 11 of 23\n\n\n\non the very facts that Defendants argue must be included in the Amended Complaint to prove\n\nstatutory standing under Section 11, which they contend is \u201cstrict chain-of-title tracing.\u201d Marcum\n\nOpp. at 13. The Amended Complaint contains Plaintiffs\u2019 allegations on how they will prove their\n\niLearningEngines shares trace to the Registration Statements. \u00b6\u00b6417-36.\n\n As apparent from the Motion, none of the merit elements of Plaintiffs\u2019 Section 11 claims\n\nare being sought by the limited discovery and it is not sought to uncover new claims not already\n\nalleged. In the Amended Complaint, Plaintiffs allege identical misstatements in the Registration\n\nStatements for both their claims under the Securities Act and the Exchange Act (see, e.g. \u00b6\u00b6316-\n\n394, 462-469, 492-96) and substantiate the reasons such statements are false over tens of pages.\n\nPlaintiffs are not seeking any discovery here to bolster or amend these allegations. Thus,\n\nDefendants do not argue, because they cannot, that such sought discovery is abusive, meant to\n\nforce an early settlement, or would result in any burden on Defendants.\n\n Simply put, the discovery sought only concerns the factual evidence that proves Plaintiffs\u2019\n\nexisting allegations of traceability of their shares to the Offering Documents as alleged in the\n\nAmended Complaint. Defendants seek to escape liability hiding behind the existence of a\n\ndiscovery stay and mere pretenses of discovery abuse. Given the requested discovery does not\n\ncontravene the PSLRA\u2019s discovery stay and the absence of it would result in undue prejudice for\n\nPlaintiffs, the Motion should be granted.\n\n B. Plaintiffs Will Suffer Undue Prejudice Absent the Discovery\n\n Defendants argue that Plaintiffs are seeking to establish the existence of their claims,\n\nstating \u201c[t]his is precisely the type of discovery\u2014where Plaintiffs can only know whether they\n\nhave a claim with the benefit of discovery\u2014the PSLRA\u2019s stay was designed to prevent.\u201d Marcum\n\nOpp. at 7-8. This is incorrect. The fact that iLearningEngines\u2019 Registration Statements contained\n\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 12 of 23\n\n\n\nmaterial misrepresentations is conceded by iLearningEngines itself and not seriously contested by\n\nDefendants here. Investors have a claim under Section 11 of the Securities Act for material\n\nmisrepresentations in a registration statement. Defendants\u2019 argument is solely concerning whether\n\nthe statutory standing element has been met and not the liability elements of the Section 11 claims.\n\nAs such, Defendants seek to conflate the PSLRA discovery stay\u2019s purpose of avoiding abusive\n\nlitigation by plaintiffs\u2019 attorneys seeking to find actionable misstatements with the situation\n\npresent here which is to merely establish the standing that Plaintiffs have already alleged.\n\n Accordingly, undue prejudice to Plaintiffs exists if the Court sides with Defendants\u2019\n\nposition requiring them to plead evidence of their standing despite having plausibly alleged it.\n\nDefendants\u2019 attempts to distinguish the on-point case of Thomas v. Metro. Life Ins. Co., 540 F.\n\nSupp. 2d 1212 (W.D. Okla. 2008), is unavailing. Defendants argue that Thomas is distinguishable\n\nbecause it dealt with Article III standing versus statutory standing and did not concern traceability.\n\nEven a cursory review of Thomas makes clear that the pertinent issue was whether Plaintiffs have\n\nstanding under the Securities Exchange Act of 1934 and under Rule 10b-5 to assert claims for\n\nplaintiffs\u2019 purchases of MetLife's proprietary mutual funds and not their Article III standing. Id. at\n\n1215. 1 First, the issues of Article III standing pertained to the state law claims, not the federal\n\nclaims, including the Section 10(b) claims. Id. at 1224-27 (discussing Article III for state law\n\nclaims); id. at 1219 (\u201cThis standing argument challenges the viability of any federal claims based\n\non the purchase of proprietary mutual funds . . . .\u201d). Second, Rule 10b-5 has a requirement that the\n\nfraud be \u201cin connection with the purchase or sale of any security\u201d (17 C.F.R. \u00a7240.10b-5) not\n\n\n\n\n1\n The remaining claims, where standing was also at issue, concerned alleged violations of investment advisory\ncontracts under the Investment Advisors Act, consumer protection and deceptive trade claims concerning proprietary\nterm insurance, and violations of Oklahoma Insurance Code for purchases of MetLife term life insurance products.\nId. at 1215-16.\n\n 6\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 13 of 23\n\n\n\nunlike Section 11\u2019s requirement that the claims for misstatements in a registration statement can\n\nbe brought by \u201cany person acquiring such security\u201d (15 U.S.C. \u00a7 77k(a)). Third and finally,\n\nDefendants fail to provide any explanation as to why such delineations between Article III and the\n\nstatutory standing are pertinent.\n\n Defendants attempt to further confuse and distract the Court by arguing that the case\n\nconcerns a \u201ccomplex matrix of claims\u201d, but this is a red-herring. The applicable issue in Thomas\n\nwas whether the court would lift the PSLRA\u2019s discovery to permit the plaintiffs to conduct limited\n\ndiscovery into their standing to pursue their Section 10(b) claims. The Thomas court determined\n\nthat undue prejudice did exist and permitted plaintiffs to conduct limited discovery to determine\n\n\u201cwhich, if any, MetLife proprietary products as defined in the complaint and as put in issue by\n\neither of the federal claims (mutual funds with respect to the 10(b) claims; . . . were purchased by\n\nwhich, if any, of the three named plaintiffs.\u201d Id. at 1222. Thus, Defendants\u2019 arguments fail. Here,\n\nthe Court should find undue prejudice as did the Thomas court because \u201cthe requested discovery\n\nis necessary to prevent undue prejudice. Absent particularized discovery on this subject, the\n\nfederal claims are subject to dismissal for lack of facts alleged in support of standing.\u201d Id.\n\n(emphasis added).\n\n Defendants\u2019 arguments concerning Vacold LLC v. Cerami are also misplaced. No. 00 CIV.\n\n4024 (AGS), 2001 WL 167704 (S.D.N.Y. Feb. 16, 2001). Again, unable to meaningfully\n\ndistinguish Vacold\u2019s opinion on the reason it found undue prejudice, Defendants merely state the\n\nfactual discovery sought did not concern standing or traceability. Marcum Opp. at 10.\n\n In Vacold, the court disagreed with defendants\u2019 argument, not unlike Defendants\n\narguments here, that \u201cplaintiffs are \u2018attempt[ing] ... to use discovery as a fishing expedition ... in\n\nthe desperate hope of finding something to justify their unfounded claim.\u2019\u201d Vacold, 2001 WL\n\n\n\n 7\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 14 of 23\n\n\n\n167704, at *7. The Vacold court found that undue prejudice existed because the failure to allow\n\ndiscovery on the limited issue of the nature and timing of J & J\u2019s interest and investment in AVT\n\nand VLN may unfairly insulate defendants from liability for securities fraud as alleged by plaintiffs\n\nin the Complaint.\u201d Id. Thus, as here, where the \u201crequest does not implicate a concern that plaintiffs\n\nare seeking discovery to coerce a settlement or to support a claim not alleged in the Complaint\u201d,\n\nthe Court should find undue prejudice exists and permit the sought discovery. See id.\n\n At issue is a mere question of fact: does the chain of title evidence that Plaintiffs purchased\n\nshares traceable to the Registration Statements. Although Defendants state otherwise, this is\n\nclearly a factual issue. See In re Suprema Specialties, Inc. Secs. Litig., 438 F.3d 256, 274 n.7 (3d\n\nCir. 2006) (the question of tracing in the secondary market is \u201ca factual one, to be resolved through\n\ndiscovery, as to whether plaintiffs can demonstrate that the shares they allegedly purchased are in\n\nfact traceable to the registration statement alleged to be false and misleading.\u201d).\n\n Defendants argue that Plaintiffs purchases cannot be traced to the Registration Statements\n\nin contrast to the detailed allegations in the Amended Complaint. The sought discovery will resolve\n\nthis issue. Contrary to Defendants arguments, in the absence of adequately alleging traceability of\n\nPlaintiffs\u2019 shares to the Registration Statement, Defendants are \u201cshielded from any liability\u201d for\n\nthe Section 11 claims. In fact, if the Court grants Marcum\u2019s motion to dismiss for want of\n\nadequately alleged Section 11 standing, it will be dismissed from this action as only Securities Act\n\nclaims are alleged Marcum. Thus, this is precisely what Defendants seek to do.\n\n Defendants further argue that In re Williams Securities Litigation, No. 02\u2013CV\u201372H(M),\n\n2003 WL 22013464 (N.D. Okla. May 22, 2003) is not supportive of a finding of undue prejudice\n\nbecause it concerns preservation of evidence from documents provided to regulators concerning\n\nthe allegations of fraud that Plaintiffs represented will not be used to defeat the motion to dismiss.\n\n\n\n 8\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 15 of 23\n\n\n\nMarcum Opp. at 9. Defendants miss the point. In re Williams evidences that when \u201cthe\n\nenforcement of the stay as to the particular documents sought would not serve any interest the\n\nPSLRA stay was enacted to advance\u201d that a delay caused by the discovery stay can result in undue\n\nprejudice warranting limited discovery. In re Williams Secs. Litig., 2003 WL 22013464, at *2-3.\n\n Here, Plaintiffs seek only non-merit evidence that Defendants argue must be included in\n\nthe Amended Complaint to prove the standing Plaintiffs have already alleged to bring their\n\nSecurities Act claims. This is not the type of discovery that Congress sought to prevent when\n\nenacting the PSLRA. All of the cases cited by Defendants go to pleading the merit elements of\n\ndefendants\u2019 fraud not to the plaintiffs\u2019 standing to pursue such claims. See Marcum Opp. at 8-9,\n\n(citing to cases in which plaintiffs sought leave to conduct discovery into the merit elements of the\n\nclaims). 2 Rather, the discovery sought by Plaintiffs is precisely the type of discovery that does not\n\ncontravene the PSLRA\u2019s policy for the discovery stay and that the Thomas and Vacold courts\n\nfound warrant that discovery stay be lifted.\n\n\n\n\n2\n See Medhekar v. U.S. Dist. Ct. for the N. Dist. of California, 99 F.3d 325, 328 (9th Cir. 1996) (finding initial\ndisclosures by defendants that identify individual and documents to subject to PSLRA discovery stay as it goes to\nelements of merit); SG Cowen Sec. Corp. v. U.S. Dist. Ct. for N. Dist. of CA, 189 F.3d 909, 912\u201313 (9th Cir. 1999)\n(discovery sought was to plead elements of alleged violations of insider trading laws); Gardner v. Major Auto. Cos.,\nNo. 11\u2013CV\u20131664 (FB), 2012 WL 1230135, at *3\u20135 (E.D.N.Y. Apr. 12, 2012) (seeking discovery into elements of\nrelated non-fraud claims); In re Spectranetics Corp. Sec. Litig., No. 08-CV-02078-MSK-BNB, 2009 WL 3346611, at\n*1 (D. Colo. Oct. 14, 2009) (seeking all documents defendant has provided or would provide to regulators concerning\nrelated claims); Cornielsen v. Infinium Cap. Mgmt., LLC, 916 F.3d 589, 601 (7th Cir. 2019) (denying discovery as to\nthe identity of speakers of misstatements); Cremeen v. Schaefer, Civil Action No. 04\u20132519\u2013CM, 2005 WL 4703651,\nat *2 (D. Kan. Dec. 7, 2005) (after previously been provided to conduct limited discovery to adequately allege Ponzi\nscheme allegations against defendant denying further opportunity for relief from discovery stay to conduct additional\ndiscovery); Cremeen v. Schaefer, No. 04-2519-CM, 2005 WL 1925606, at *1 (D. Kan. Aug. 10, 2005) (permitting\nlimited discovery to bolster merit allegations prior to denying additional leave from discovery stay); In re Thornburg\nMortg., Inc. Sec. Litig., No. CIV 07-0815 JB/WDS, 2010 WL 2977620, at *9 (D.N.M. July 1, 2010) (seeking \u201cto\nobtain additional evidence of the Defendants\u2019 wrongdoing\u201d); In re Odyssey Healthcare, Inc., No. CIV.A.3:04-CV-\n0844-N, 2005 WL 1539229, at *1 (N.D. Tex. June 10, 2005) (seeking documents from Department of Justice\ninvestigation on same facts at issue); In re CFS-Related Sec. Fraud Litig., 179 F. Supp. 2d 1260, 1268 (N.D. Okla.\n2001) (seeking all documents concerning relationship of parties as part of broad discovery requests).\n\n 9\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 16 of 23\n\n\n\n C. Plaintiffs Allege that and Will Prove Through Evidence that Their\n\n iLearningEngines Purchases are Traceable to the Offering Documents.\n\n In a last-ditch attempt, Defendants argue that Plaintiffs\u2019 Motion is futile as the sought\n\ndiscovery will not enable Plaintiffs to conduct a chain of title analysis to prove their\n\niLearningEngines shares are traceable to the Offering Documents. Marcum Opp. at 13-15.\n\nDefendants reach this opinion in a conclusory fashion arguing that conducting a chain of title\n\nanalysis in the secondary market is impossible based on the structure of the market and the opinion\n\nof one district court in Colorado. Id. Defendants are wrong.\n\n First, Defendants argue that the tracing is impossible in the secondary market given the\n\nmarket structure. Defendants rely on case excerpts where courts discussed the difficulties that\n\nexisted at those to prove tracing, namely from 1967, 2005, and 2013. See Marcum Opp. at (citing\n\nBarnes v. Osofsky, 373 F.2d 269 (2d Cir. 1967); Krim v. pcOrder.com, Inc., 402 F.3d 489, 499\n\n(5th Cir. 2005); In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104, 1107 (9th Cir. 2013); see\n\nalso id. (citing In re Honest Co. Sec. Litig., No. 221CV07405MCSPLA, 2023 WL 3190506, at *4\n\n(C.D. Cal. May 1, 2023) which relies upon Century.). Much has changed since these times and\n\ntracing is possible in the current market given the changes in computing power and improved data-\n\nreporting requirements. See John C. Coffee, Jr. & Joshua Mitts, Slack v. Pirani and the Future of\n\nSection 11 Claims, at 1 (Dec. 1, 2023) https://ssrn.com/abstract=4644888 (\u201cFuture of Section 11\n\nClaims\u201d).\n\n Furthermore, Defendants disregard that here the iLearningEngines shares that were\n\nregistered by the Registration Statements and offered into the market were of a continuous nature\n\nwhereby the iLearningEngines employees and the Selling Securityholders sold at various times\n\nafter the effectiveness of the respective registration statement and throughout the time at issue in\n\n\n\n 10\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 17 of 23\n\n\n\nthe Amended Complaint. As compared to a prototypical secondary offering where shares are\n\nregistered and sold into the market at a set price on the offering date to underwriters or other\n\ninvestors who subscribed in the offering, the sales under the Registration Statements were of a\n\ncontinuous nature whereby the selling shareholders sold their shares at a time and price of their\n\nchoosing. 3\n\n As a result, newly registered iLearningEngines shares entering into the public market\n\nwould be coming from non-commingled accounts of the selling shareholders to purchasers as part\n\nof these offerings at the relevant times. See \u00b6\u00b6428-30. Therefore, any of Plaintiffs purchases from\n\nthese sellers were in the \u201coffering.\u201d Defendants have admitted in the Marcum Opposition that\n\npurchasing in an offering is a way a plaintiff may prove traceability. Marcum Opp. at 15 (\u201cThis is\n\nnot to say that there is no way to plead or prove a Section 11 claim. To the contrary, a plaintiff\n\nwho \u2018purchased directly in [an] offering\u2019 . . . may plead traceability.\u201d); see also \u00b6417 (\u201cPlaintiffs .\n\n. . purchased iLearningEngines common stock issued in, or traceable to, the Offering Documents\n\n. . . .\u201d).\n\n Moreover, the offerings here are distinguishable from a prototypical secondary offering\n\nwhere shares not purchased on the offering date may have changed hands multiple times which\n\nwould require additional tracing analyses. In either case, tracing of purchases in the secondary\n\nmarket can be accomplished. See e.g., Future of Section 11 Claims, at 1 (\u201cMany judges, academics,\n\nplaintiffs\u2019 and defense attorneys still subscribe to the myth that it is impossible to trace chain of\n\ntitle for commingled securities in order to establish standing under Section 11. Unfortunately, this\n\n\n\n\n3\n Numerous amendments to the Prospectus evidence the ongoing nature of these sales. See, e.g., \u00b610 (\u201cForm S-1\nRegistration Statement . . . was declared effective by the United States Securities and Exchange Commission (\u201cSEC\u201d)\non August 9, 2024 and were offered for sale by prospectus pursuant to the Rule 424(b) (3) initially filed by\niLearningEngines with the SEC on August 12, 2024, and subsequently amended seven times thereafter through\nDecember 10, 2024.\u201d)\n\n 11\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 18 of 23\n\n\n\nis a misguided, out-of-date assumption because enhanced data-reporting requirements and modern\n\ncomputing power can realistically solve this problem.\u201d).\n\n Plaintiffs have alleged that they will prove their allegations that their iLearningEngines\n\nshares trace to the Registration Statements though a chain of title. At the motion to dismiss stage\n\nall well-pleaded allegations must be accepted as true. Fam. of Care Real Est. Holding Co. v.\n\nChapman Prop., LLC, No. CV DKC 23-0574, 2023 WL 4134427, at *4 (D. Md. June 22, 2023)\n\n(Chasanow, J.) (\u201c[A] plaintiff is not required to plead evidence or prove its case at the motion to\n\ndismiss stage. Alleging that a statement was made is enough, and the court must accept the\n\nallegation as true.\u201d). Notwithstanding, Defendants argue that the Court must accept their\n\nconclusions as true that tracing under the current factual positions impossible. Defendants,\n\nhowever, have not put forth any evidence that contradicts Plaintiffs\u2019 allegations.\n\n Defendants\u2019 reliance on Cupat v. Palantir Techs., Inc., is misplaced as it is distinguishable.\n\nNo. 1:22-CV-02805-GPG-SBP, 2025 WL 1141534 (D. Colo. Apr. 4, 2025). First, in Culpat, on\n\nthe date of the de-SPAC transaction, 47.5% of the shares entering the market were unregistered\n\nwith the other 52.5% registered by the registration statement. Id. at *2. This is not the case where\n\nthe Registration Statements registered over iLearningEngines entire public float and over 87.1%\n\nof iLearningEngines outstanding shares. \u00b6\u00b69, 137, 139, 241, 247-248, 439-440; ECF No. 90-1 at\n\n45. In contrast to Defendants\u2019 characterization of the sought discovery as a \u201cfishing expedition,\u201d\n\nthis is more akin to \u201cshooting fish in a barrel.\u201d Defendants do not dispute that over 100% of\n\niLearningEngines public float was registered by the Registration Statements or even grapple with\n\nthis in the Marcum Opposition.\n\n Second, denial of the motion for leave to lift of the discovery stay was in Culpat was limited\n\nto the specific reasons that Defendants raised as to the methodology of tracing proposed by\n\n\n\n 12\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 19 of 23\n\n\n\nplaintiffs and the reasons offered in opposition by defendants. See id. at *18 n.21 (\u201cthe Court is\n\nnot persuaded that actual chain-of-title tracing is feasible under the discovery approach Plaintiffs\n\nhave proposed\u201d). Here, no such representations have yet been made or argued by the parties or\n\ntheir experts. Rather, Plaintiffs allege in the Amended Complaint that they can prove their shares\n\ntrace to the Registration Statement by reconstructing the chain of title for their iLearningEngines\n\nshares. Any arguments whether or not the methodology proves tracing is one best reserved for\n\nexperts after discovery. See In re Suprema, 438 F.3d at 274 n.7 (3d Cir. 2006) (discussing tracing\n\nin the secondary market is a factual issue).\n\n D. The Requested Discovery is Sufficiently Particularized.\n\n The Motion seeks documents to evidence Plaintiffs\u2019 chain of title for their\n\niLearningEngines purchases to the Offering Documents. ECF No. 93 at 3-5. To that end, Plaintiffs\n\nhave identified specific documents and the non-parties that possess these documents in their\n\nMotion which was also alleged in the Amended Complaint. Notably, Defendants do not argue that\n\nPlaintiffs have misidentified the DTC, Continental, and AAI Solutions, or contend that these\n\nentities do not possess the sought documentation. See Marcum Opp. Defendants therefore have\n\nconceded this element as to these non-parties. See Garnes v. Maryland, No. CV RDB-17-1430,\n\n2018 WL 276425, at *3 (D. Md. Jan. 3, 2018) (treating failure by party to address arguments in\n\nmotion as \u201cabandon[ing] any opposition to those arguments.\u201d).\n\n Defendants\u2019 sole remaining argument is that Plaintiffs have not identified each of the\n\nbroker-dealers that they may seek chain of title documents from in the event that other documents\n\nthat Plaintiffs received do not complete Plaintiffs\u2019 chains of title. Marcum Opp. at 11-13.\n\nDefendants rely on conjecture that this necessitates \u201crounds of discovery\u201d and that the whole\n\n\n\n\n 13\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 20 of 23\n\n\n\ntracing analyses is \u201ca complex endeavor of unknown evolving, scope.\u201d Id. at 1, 12. Defendants\n\nhave not cited any support for their conclusory statements.\n\n Plaintiffs have alleged a \u201cclearly defined universe of documents\u201d consisting of Plaintiffs\u2019\n\nchains of title for their iLearningEngines purchases from the DTC to their own broker-dealers\n\nbetween the time immediately preceding the Form S-8 Registration Statement and the time of\n\nPlaintiffs purchases. As such, if additional brokers are needed beyond Plaintiffs\u2019 own broker-\n\ndealers, only the interim identities are unknown at this time. The fact that there may be an\n\nintervening broker-dealer between Plaintiffs\u2019 broker-dealers and the DTC or Continental, does not\n\nmean this is a seriatim request or is not particularized.\n\n In fact, Defendants cite to In re Royal Ahold N.V. Securities & Erisa Litigation, 220 F.R.D.\n\n246 (D. Md. 2004) which actually supports Plaintiffs\u2019 requested discovery. In Royal Ahold, the\n\ncourt found that plaintiffs sought documents as all those \u201cproduced to governmental, regulatory,\n\nor self regulatory agencies\u201d as particularized as it was a \u201cclearly defined universe of documents.\u201d\n\nId. at 250. Although the request was focused at the defendant, the scope of the information included\n\na number of unidentified entities and was found to be particularized. Id. Thus, Plaintiffs\u2019 subpoenas\n\nto brokers, DTC, and transfer agents seek precise trading records to establish Plaintiffs\u2019 chain-of-\n\ntitle to the Offering Documents is \u201cparticularized.\u201d Id.\n\n Defendants\u2019 reliance upon Waldman v. Wachovia Corporation, No. 08 CIV. 2913(SAS),\n\n2009 WL 86763 (S.D.N.Y. Jan. 12, 2009) is similarly misplaced. First, Waldman granted Plaintiffs\n\nrequests to lift the discovery stay. Id. at *2. Second, although Waldman recognized that seriatim\n\nrequests would be improper in that particular case when documents sought were those provided to\n\nstate and federal regulatory investigations would be a \u201ca means to identify other materials that\n\nwould be subject to further requests\u201d such as different types of \u201cdocuments solely in defendants'\n\n\n\n 14\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 21 of 23\n\n\n\npossession.\u201d Id. Here, the documents sought concern Plaintiffs\u2019 chain of title for their\n\niLearningEngines shares and it is merely the identity of certain non-parties that potentially possess\n\ndocuments that remains to be identified. As Royal Ahold, the universe of documents has already\n\nbeen identified and therefore is sufficiently particularized. See In re Royal Ahold, 220 F.R.D. at\n\n250.\n\n Defendants remaining authorities do not warrant a different outcome as Plaintiffs seek\n\ndiscovery concerning the traceability of their shares to the Registration Statements. See Mori v.\n\nSaito,, 802 F. Supp. 2d 520, 523-24 (S.D.N.Y. 2011) (finding sought discovery not particularized\n\nwhen type of documents and time period not defined); Mishkin v. Ageloff, 220 B.R. 784, 793\n\n(S.D.N.Y. 1998) (finding \u201cdiscovery sought by the Trustee encompass an open-ended, boundless\n\nuniverse of discovery\u201d as it is \u201ca request to continue any and all discovery that may arise\u201d and\n\n\u201cnecessary\u201d seeking testimony from defendants and non-parties alike).\n\nIII. CONCLUSION\n\n For the reasons stated in the Motion and herein, Plaintiffs would be unduly prejudiced if\n\nthe requested particularized discovery is not granted. Granting such request supports the intent of\n\nthe PSLRA and the securities laws. Plaintiffs\u2019 respectfully request that the Court grant their Motion\n\nif the Court finds that the Securities Act claims have not been adequately alleged.\n\n\n\nDated: October 17, 2025 Respectfully submitted,\n\n LEVI & KORSINSKY, LLP\n\n / s / Nicholas Porritt\n Nicholas I. Porritt\n Alexander A. Krot III (attorney admission\n application forthcoming).\n 1101 Vermont Ave, NW Suite 800\n Washington, DC 20005\n\n 15\n\fCase 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 22 of 23\n\n\n\n Tel: (202)-524-4290\n Fax: (212) 363-7171\n Email: nporritt@zlk.com\n Email: akrot@zlk.com\n\n Counsel for Lead Plaintiff Louis Leveque,\n Plaintiff Iqbal Al Hamid, and Lead\n Counsel for the Class\n\n\n\n\n 16\n\f Case 8:24-cv-02900-DKC Document 98 Filed 10/17/25 Page 23 of 23\n\n\n\n CERTIFICATE OF SERVICE\n\n I hereby certify that on October 17, 2025, I electronically filed the foregoing by using the\n\nCM/ECF system which will send a notice of electronic filing to all counsel or parties of record.\n\n\n\n /s/ Nicholas Porritt\n Nicholas I. Porritt\n\f","ocr_status":1,"date_upload":"2026-05-19T22:32:13.493384-07:00","document_number":"98","attachment_number":null,"pacer_doc_id":"093015243839","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.385557-08:00","date_modified":"2026-05-18T23:59:55.909079-07:00","date_filed":"2025-10-17","time_filed":null,"entry_number":98,"recap_sequence_number":"2025-10-17.002","pacer_sequence_number":286,"description":"REPLY to Response to Motion re 93 MOTION for Discovery to Partially Lift the Discovery Stay filed by Louis Leveque, Iqbal al Hamid.(Porritt, Nicholas) (Entered: 10/17/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475309/","id":447475309,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228759/","id":462228759,"tags":[],"absolute_url":"/docket/69233925/97/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.353645-08:00","date_modified":"2026-05-22T08:06:00.156089-07:00","sha1":"b78e07a3e6e85a83e535b4304111908610b12a83","page_count":6,"file_size":221577,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.97.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.97.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 97 Filed 10/17/25 Page 1 of 6\n\n\n\n UNITED STATES DISTRICT COURT\n DISTRICT OF MARYLAND\n (Southern Division)\n\n\nDANNY WALKER, Individually and on\nBehalf of All Others Similarly Situated,\n\n Plaintiff,\n Case No.: 8:24-cv-02900-DKC\n v.\n Hon. Deborah K. Chasanow\n HARISH CHIDAMBARAN, et al.,\n\n Defendants.\n\n\n\n LEAD PLAINTIFF LOUIS LEVEQUE\u2019S AND PLAINTIFF IQBAL AL HAMID\u2019S\nNOTICE OF SUPPLEMENTAL AUTHORITY IN SUPPORT OF THEIR OPPOSITIONS\n TO DEFENDANTS\u2019 MOTIONS TO DISMISS\n\n Lead Plaintiff Louis Leveque and Plaintiff Iqbal Al Hamid (collectively, \u201cPlaintiffs\u201d)\n\nrespectfully submit the attached opinion in Sherman v. Abengoa, S.A., No. 22\u20112438 (2d Cir. Oct.\n\n6, 2025). In reversing dismissal of plaintiffs\u2019 Securities Act claims and vacating in part the\n\ndismissal of plaintiffs\u2019 Exchange Act claims, the Second Circuit Court of Appeals held that: (i)\n\nmateriality is rarely resolvable on a Rule 12(b)(6) record; (ii) falsity of a widespread accounting\n\nscheme\u2019s impact on a company\u2019s financial statements need not be specifically quantified to\n\nadequately allege falsity of the financial statements when its impact on the company as whole is\n\notherwise alleged; (iii) generic cautionary language does not negate allegations of fraudulent\n\naccounting practices; and (iv) at the pleading stage, courts should credit detailed factual allegations\n\ndrawn from internal audits and governmental regulatory or criminal proceedings. Abengoa, slip\n\nop. at 29-31, 33-35.\n\f Case 8:24-cv-02900-DKC Document 97 Filed 10/17/25 Page 2 of 6\n\n\n\n I. Materiality and Falsity of Core Accounting (Netting/Round\u2011Tripping)\n In Abengoa, the Second Circuit emphasized that where plaintiffs plausibly allege a\n\ncompany\u2011wide accounting scheme affecting core financials, materiality \u201cwill rarely be dispositive\n\nin a motion to dismiss,\u201d and dismissal is improper unless misstatements are \u201cso obviously\n\nunimportant\u201d that reasonable minds could not differ. Slip op. at 35. The Abengoa court credited\n\nallegations \u2013 supported by witnesses and an internal audit \u2013 that Abengoa\u2019s \u201ctriangulation\u201d\n\naccounting scheme was widespread and systemic and precipitated bankruptcy, concluding\n\nplaintiffs adequately alleged an impact on the financial statements by the triangulation scheme. Id.\n\nat 33-35.\n\n In its opinion, the Second Circuit found that the district court erred by dismissing the third\n\namended complaint for failing to adequately allege falsity for the accounting misstatements by not\n\nspecifically alleging \u201cthe impact of the alleged triangulation scheme on the financial statements as\n\na whole.\u201d Id. at 34 (quoting in Francisco v. Abengoa, S.A., 624 F. Supp. 3d 365, 397 (S.D.N.Y.\n\n2022), rev\u2019d in part, vacated in part sub nom., Abengoa, slip op. The Second Circuit overturned\n\nthe district court\u2019s dismissal of plaintiffs\u2019 accounting misstatement claims on falsity grounds\n\nfinding it was not necessary to allege a specific quantification of the impact of the alleged\n\nmisstatements on the company\u2019s financial statements when the complaint\u2019s allegations show the\n\nmisstatements otherwise impacted the company. Id. at 34-35 (finding the third amended complaint\n\nadequately alleged the impact of the misstatements as they \u201cprecipitated\u201d Abengoa\u2019s bankruptcy).\n\n The Abengoa court\u2019s reasoning directly supports Plaintiff\u2019s falsity and materiality theory\n\nhere. iLearningEngines used a quarterly \u201cnetting\u201d scheme that routed most revenue and costs\n\nthrough the \u201cTechnology Partner,\u201d an undisclosed related party. As a result, its financial statements\n\nfailed to fairly present the company\u2019s results in all material respects - distorting revenues and\n\nexpenses and concealing that revenue originated from a related party. These misstatements directly\n\n 2\n\f Case 8:24-cv-02900-DKC Document 97 Filed 10/17/25 Page 3 of 6\n\n\n\ncontributed to iLearningEngines\u2019 bankruptcy. Defendants themselves describe that\n\niLearningEngines disclosed that over 90% of revenue in the first quarter of 2024 was collected by\n\nthe Technology Partner and over 94% of costs were invoiced by the Technology Partner; that the\n\nsecond quarter 2024 revenue was comprised of roughly $521 million with about $239 million\n\nattributable to Technology Partner collections and about $237 million in offsetting costs; and that\n\na ten\u2011year contract allowed quarterly netting of amounts owed to the Technology Partner. ECF No.\n\n84\u20111 at 11; ECF No. 83\u20111 at 10-11.\n\n The Amended Complaint likewise pleads the governing Master Agreement and\n\nfinancial\u2011statement notes showing that amounts collected by the Technology Partner were netted\n\nagainst \u201ccost of services\u201d charged by the Technology Partner; that the arrangement was long\u2011term\n\nand unusual (including deferred repayment of the resulting payable for up to ten years after\n\ntermination); and that, in practice, netting largely eliminated cash settlement, enabling revenue to\n\nbe recorded gross while costs offset nearly all collections. ECF No. 41 at \u00b6\u00b6105-08, 291-93; see\n\nalso id. at \u00b6\u00b693-94. Plaintiffs allege that iLearningEngines financial statements were false and/or\n\nmaterially misleading because the financial statements did not fairly present the financial\n\nconditions and results of operations of iLearningEngines, failed to disclose that transactions with\n\nthe Technology Partner, Experion, were related party transactions, and further misrepresented its\n\nrevenue and expenses because they were \u201clargely fake.\u201d See id. at \u00b6\u00b6322, 330, 336, 344, 355, 384,\n\n395, 467, 473, 476, 480, 494, 496, 499, 501, 509, 513, 516. Plaintiffs likewise allege that such\n\nmisstatements led to iLearningEngines\u2019 bankruptcy. See, e.g., id. at \u00b6461.\n\n Under Abengoa, such allegations readily clear the bar on falsity and materiality: they target\n\ncore accounting issues \u2013 revenue and expense recognition and presentation \u2013 and plausibly allege\n\n\n\n\n 3\n\f Case 8:24-cv-02900-DKC Document 97 Filed 10/17/25 Page 4 of 6\n\n\n\nan enterprise\u2011level impact that is false and quintessentially material to the reasonable investor.\n\nAbengoa, slip op. at 35.\n\n II. Cautionary Language and Partial Disclosures Do Not Cure Deliberate\n Manipulation\n The Abengoa court rejected the district court\u2019s reliance on generic \u201cuse of estimates\u201d\n\nwarnings, explaining it \u201cstrains credulity\u201d that such a tepid warning put investors on notice of\n\ndeliberate manipulation to inflate revenue, holding that even with such boilerplate disclaimers, a\n\nreasonable investor could be misled. Slip op. at 33-34. Here, Defendants point to disclosures that\n\nthe Technology Partner was both a customer and a vendor and that amounts could be netted, but\n\nthose generic disclosures do not inform investors that reported revenues and expenses lacked\n\ncommercial substance or were round\u2011tripped to inflate performance. See ECF No. 41 at \u00b6\u00b690-93,\n\n292-93.\n\n As pleaded and as reflected in Defendants\u2019 motions to dismiss, the same counterparty both\n\ncollected virtually all revenue and billed nearly all costs, while the Master Agreement permitted\n\nnetting and long\u2011deferred settlement \u2013 precisely the sort of round\u2011tripping mechanics Abengoa\n\nrecognizes as plausibly misleading when presented as ordinary revenue. ECF No. 84\u20111 at 11; ECF\n\nNo. 83\u20111 at 10-11; ECF No. 41 at \u00b6\u00b693-94, 292-93; Abengoa, slip op. at 33-35.\n\n III. The Court May Credit Auditor Actions, Special\u2011Committee Findings, and\n Government Investigations at the Pleading Stage\n Abengoa confirmed that courts may credit detailed allegations corroborated by internal\n\naudits and governmental or criminal proceedings in assessing falsity and scienter in a Rule 12(b)(6)\n\nmotion. Slip op. at 29-31. Plaintiff alleges and the record reflects: (i) the Audit Committee \u2013 based\n\non the Special Committee\u2019s investigation \u2013 determined that iLearningEngines\u2019 financial\n\nstatements for multiple periods \u201cshould no longer be relied upon\u201d; (ii) iLearningEngines\u2019\n\naccounting firm withdrew its audit opinions; (iii) the Company received an SEC subpoena; and\n\n 4\n\f Case 8:24-cv-02900-DKC Document 97 Filed 10/17/25 Page 5 of 6\n\n\n\n(iv) the Special Committee self\u2011reported potential violations to the DOJ. ECF No. 41 at \u00b6\u00b6196-\n\n201, 215, 218; see also ECF No. 83\u20111 at 13-14. The market\u2019s immediate reaction and\n\niLearningEngines\u2019 bankruptcy underscore the materiality of its false and misleading statements \u2013\n\nand support loss causation \u2013 just as Abengoa recognized when crediting comparable allegations of\n\nprice declines and insolvency following corrective disclosures. ECF No. 41 at \u00b6\u00b6202, 207, 209,\n\n220; Abengoa, slip op. at 9-11).\n\n For these reasons, Abengoa provides persuasive supplemental authority supporting denial\n\nof Defendants\u2019 motions to dismiss on materiality and falsity grounds.\n\n\n\nDated: October 17, 2025 Respectfully submitted,\n\n LEVI & KORSINSKY, LLP\n\n / s / Nicholas I. Porritt\n Nicholas I. Porritt (Bar No. 17078)\n Alexander A. Krot III\n (attorney admission application forthcoming)\n 1101 Vermont Ave, NW Suite 800\n Washington, DC 20005\n Tel: (202)-524-4290\n Fax: (212) 363-7171\n Email: nporritt@zlk.com\n Email: akrot@zlk.com\n\n Counsel for Lead Plaintiff Louis Leveque,\n Plaintiff Iqbal Al Hamid, and Lead Counsel for\n the Class\n\n\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 97 Filed 10/17/25 Page 6 of 6\n\n\n\n CERTIFICATE OF SERVICE\n\n I hereby certify that on October 17, 2025, I electronically filed the foregoing by using the\n\nCM/ECF system which will send a notice of electronic filing to all counsel or parties of record.\n\n\n\n /s/ Nicholas I. Porritt\n Nicholas I. Porritt\n\n\n\n\n 6\n\f","ocr_status":2,"date_upload":"2026-05-19T22:32:19.512595-07:00","document_number":"97","attachment_number":null,"pacer_doc_id":"093015243721","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/479807110/","id":479807110,"tags":[],"absolute_url":"/docket/69233925/97/1/walker-v-chidambaran/","date_created":"2026-05-19T22:32:16.816866-07:00","date_modified":"2026-05-22T08:52:48.512833-07:00","sha1":"06a494a900ec63d867c7083ad04ad130eaf35565","page_count":44,"file_size":594015,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.97.1.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.97.1.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 1 of 44\n\n\n\n\n (;+,%,7\u0003$\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page1 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 2 of 44\n22-2438\nSherman v. Abengoa, S.A.\n\n\n\n United States Court of Appeals\n For the Second Circuit\n\n August Term 2023\n\n Argued: March 1, 2024\n Decided: October 6, 2025\n\n No. 22-2438\n\n\n\n JESSE SHERMAN, ARLETTE SHERMAN,\n\n Lead Plaintiffs-Appellants,\n\n PAMCAH-UA LOCAL 675 PENSION FUND,\n\n Movant-Appellant,\n\nMICHAEL FRANCISCO, Individually and on Behalf of All Others Similarly Situated,\n\n Plaintiff,\n\n DANIEL LAMOUREAUX, Individually and on Behalf of All Others Similarly\n Situated,\n\n Consolidated Plaintiff,\n\n v.\n\n ABENGOA, S.A., MANUEL SANCHEZ ORTEGA, CANACCORD GENUITY INC., HSBC\n SECURITIES (USA) INC., MERRILL LYNCH INTERNATIONAL, SOCI\u00c9T\u00c9 G\u00c9N\u00c9RALE,\n\n Defendants-Appellees,\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page2 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 3 of 44\n\n\n\n SANTIAGO SEAGE, BARBARA ZUBIRIA, IGNACIO GARCIA ALVEAR, ALICIA VELARDE\n VALIENTE, BANCO SANTANDER, S.A., CARLOS SUNDHEIM LOSADA, CHRISTOPHER\n HANSMEYER, CLAUDI SANTIAGO PONSA, ENRIQUE BORRAJO LOVERA, FELIPE\n BENJUMEA LLORENTE, FERNANDO SOLIS MARTINEZ-CAMPOS, IGNACIO SOLIS\n GUARDIOLA, JAVIER BENJUMEA LLORENTE, JESUS GARCIA-QUILEZ GOMEZ, JOSE B.\nTERCEIRO, JOSE BORRELL FONTELLES, JOSE JOAQUIN ABAURRE LLORENTE, JOSE LUIS\n AYA ABAURRE, MARIA TERESA BENJUMEA LLORENTE, RICARDO MARTINEZ RICO,\n\n Defendants.\n\n\n Appeal from the United States District Court\n for the Southern District of New York\n No. 15-cv-6279, Edgardo Ramos, Judge.\n\n\nBefore: LIVINGSTON, Chief Judge, SULLIVAN, and MENASHI, Circuit Judges.\n\n Plaintiffs Jesse Sherman, Arlette Sherman, and PAMCAH-UA Local 675\nPension Fund \u2013 representatives of a class of investors who purchased American\nDepository Shares in Abengoa, S.A. \u2013 appeal from a judgment of the United States\nDistrict Court for the Southern District of New York (Ramos, J.) dismissing their\nclaims under sections 11 and 15 of the Securities Act of 1933 (the \u201cSecurities Act\u201d),\nsections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the \u201cExchange\nAct\u201d), and Securities and Exchange Commission Rule 10b-5. Plaintiffs\nprincipally alleged that Abengoa manipulated its financial records to conceal the\ncompany\u2019s liquidity crisis, thereby contributing to the firm\u2019s bankruptcy.\n\n We conclude that the district court erred in dismissing Plaintiffs\u2019 Securities\nAct claims on the grounds that they were untimely and, alternatively, failed to\nstate a claim. Specifically, we hold that Plaintiffs\u2019 claims were filed within the\none-year statute of limitations. We also hold that the district court failed to credit\nPlaintiffs\u2019 allegations from confidential witnesses and from Spanish criminal\nproceedings, which gave rise to the plausible inference that Defendants violated\nsection 11. To the extent that our prior case law is ambiguous, we clarify that a\ncomplaint may rely on factual allegations or reports incorporated in complaints\nfrom other proceedings, subject, of course, to the limitations of Federal Rule of\n 2\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page3 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 4 of 44\n\n\n\nCivil Procedure 11. While this is inherently a case-specific inquiry that will turn\non the nature and substance of the allegations made in the other proceedings, the\nallegations relied on by Plaintiffs here were detailed, independently corroborated,\nand the product of an independent investigation, which distinguishes them from\nthose of our prior precedents in which we rejected pleadings that merely relied on\nconclusory allegations asserted in other proceedings.\n\n We likewise conclude that the district court erred in dismissing Plaintiffs\u2019\nExchange Act claims against Abengoa, which was based on its refusal to consider\nthe same allegations from the confidential witnesses and Spanish proceedings; we\ntherefore vacate that dismissal. Nevertheless, we hold that the district court\nproperly denied Plaintiffs leave to assert Exchange Act claims against Abengoa\u2019s\nformer CEO, Manuel Sanchez Ortega, because such claims would have been futile.\nAccordingly, we AFFIRM in part, REVERSE in part, and VACATE in part the\njudgment of the district court.\n\n AFFIRMED IN PART, REVERSED IN PART, AND VACATED IN PART.\n\n ANDREW S. LOVE, Robbins Geller Rudman &\n Dowd LLP, San Francisco, CA (Robert M.\n Rothman, Erin W. Boardman, Robert D.\n Gerson, Robbins Geller Rudman & Dowd\n LLP, Melville, NY; Nicholas I. Porritt, Adam\n M. Apton, Levi & Korsinsky, LLP, New\n York, NY, on the brief), for Plaintiffs-\n Appellants and Movant-Appellant.\n\n JEFFREY D. ROTENBERG, Clark Smith Villazor\n LLP, New York, NY (Richard F. Hans, Marc\n A. Silverman, DLA Piper LLP, New York,\n NY, on the brief), for Defendant-Appellee\n Abengoa, S.A.\n\n STEPHEN A. RADIN (Ben Marcu, Liz Grefrath,\n on the brief), Weil, Gotshal & Manges LLP,\n New York, NY, for Defendant-Appellee\n Manuel Sanchez Ortega.\n\n\n 3\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page4 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 5 of 44\n\n\n\n KANNON K. SHANMUGAM, Paul, Weiss,\n Rifkind, Wharton & Garrison LLP,\n Washington, DC (Abigail Frisch Vice, E.\n Garrett West, Paul, Weiss, Rifkind, Wharton\n & Garrison LLP, Washington, DC; Richard\n Rosen, Patrick McCusker, Paul, Weiss,\n Rifkind, Wharton & Garrison LLP, New\n York, NY, on the brief), for Defendants-\n Appellees Canaccord Genuity Inc., HSBC\n Securities (USA) Inc., Merrill Lynch\n International, and Societe Generale.\n\nRICHARD J. SULLIVAN, Circuit Judge:\n\n Plaintiffs Jesse Sherman, Arlette Sherman, and PAMCAH-UA Local 675\n\nPension Fund \u2013 representatives of a class of investors who purchased American\n\nDepository Shares (\u201cADSs\u201d) in Abengoa, S.A. (\u201cAbengoa\u201d) \u2013 appeal from a\n\njudgment of the United States District Court for the Southern District of New York\n\n(Ramos, J.) dismissing their claims under sections 11 and 15 of the Securities Act\n\nof 1933 (the \u201cSecurities Act\u201d), sections 10(b) and 20(a) of the Securities Exchange\n\nAct of 1934 (the \u201cExchange Act\u201d), and Securities and Exchange Commission\n\n(\u201cSEC\u201d) Rule 10b-5. Plaintiffs principally alleged that Abengoa manipulated its\n\nfinancial records to conceal the company\u2019s liquidity crisis, thereby contributing to\n\nthe firm\u2019s bankruptcy.\n\n We conclude that the district court erred in dismissing Plaintiffs\u2019 Securities\n\nAct claims on the grounds that they were untimely and, alternatively, failed to\n\n 4\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page5 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 6 of 44\n\n\n\nstate a claim. Specifically, we hold that Plaintiffs\u2019 claims were filed within the\n\none-year statute of limitations. We also hold that the district court failed to credit\n\nPlaintiffs\u2019 allegations from confidential witnesses and from Spanish criminal\n\nproceedings, which gave rise to the plausible inference that Defendants violated\n\nsection 11. To the extent that our prior case law is ambiguous, we clarify that a\n\ncomplaint may rely on factual allegations or reports incorporated in complaints\n\nfrom other proceedings, subject, of course, to the limitations of Federal Rule of\n\nCivil Procedure 11. While this is inherently a case-specific inquiry that will turn\n\non the nature and substance of the allegations made in the other proceedings, the\n\nallegations relied on by Plaintiffs here were detailed, independently corroborated,\n\nand the product of an independent investigation, which distinguishes them from\n\nthose of our prior precedents in which we rejected pleadings that merely relied on\n\nconclusory allegations asserted in other proceedings.\n\n We likewise conclude that the district court erred in dismissing Plaintiffs\u2019\n\nExchange Act claims against Abengoa, which was based on its refusal to consider\n\nthe allegations from the confidential witnesses and Spanish proceedings; we\n\ntherefore vacate that dismissal. Nevertheless, we hold that the district court\n\nproperly denied Plaintiffs leave to assert Exchange Act claims against Abengoa\u2019s\n\n\n\n 5\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page6 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 7 of 44\n\n\n\nformer CEO, Manuel Sanchez Ortega, because such claims would have been futile.\n\nAccordingly, we AFFIRM in part, REVERSE in part, and VACATE in part the\n\njudgment of the district court.\n\n I. BACKGROUND\n\n Plaintiffs\u2019 cause of action stems from Abengoa\u2019s initial public offering of\n\nADSs on the NASDAQ Global Select Market (the \u201cNASDAQ\u201d) on October 17,\n\n2013. As relevant to this appeal, Abengoa was an engineering and construction\n\ncompany founded in 1941 and headquartered in Spain. Abengoa consisted of 532\n\nsubsidiary companies, seventeen associated companies, and thirty-four joint\n\nventures that operated in over seventy countries around the world. Abengoa\u2019s\n\nbusiness was divided into three core areas: (1) Engineering and Construction, (2)\n\nInfrastructure Concessions, and (3) Industrial Production. The Engineering and\n\nConstruction group was led by Abengoa\u2019s subsidiary, Abeinsa Ingenier\u00eda y\n\nConstrucci\u00f3n Industrial S.A. (\u201cAbeinsa\u201d), which controlled all of Abengoa\u2019s\n\noperations in the United States, Mexico, Argentina, Uruguay, Chile, and Brazil\n\nbetween 2013 and 2015. Within the Engineering and Construction group, another\n\nsubsidiary, Instalaciones Inabensa S.A. (\u201cInabensa\u201d), focused on electrical and\n\nmechanical infrastructure as well as instrumentation for use in the energy and\n\n\n\n 6\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page7 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 8 of 44\n\n\n\ntransport sectors. In total, the Engineering and Construction Group accounted\n\nfor over sixty percent of Abengoa\u2019s annual sales.\n\n Abengoa determined its gross operating margin by subtracting its operating\n\ncosts from its sales to determine the company\u2019s earnings before interest, taxes,\n\ndepreciation, and amortization. Gross operating margin is a metric frequently\n\nused by analysts, investors, and the general public to monitor the financial health\n\nof a business. Given the large number of projects that Abengoa carried out\n\naround the world, it was required to track the progress and costs of each project\n\nso that it could accurately determine the firm\u2019s earnings on a monthly, quarterly,\n\nand annual basis. Under the International Accounting Standards that are\n\napplicable to construction projects, \u201cincome equal[s] the costs incurred on the\n\nproject plus a pro-rated amount of the profit or operating margin that will\n\nultimately be recognized on the project.\u201d J. App\u2019x at 905. When the outcome of\n\na construction contract can be estimated reliably, contract revenues and expenses\n\nare to be \u201crecognized by reference to the stage of completion of a contract.\u201d Id.\n\nBut when such estimation is not possible, \u201crevenue is recognized only to the extent\n\nof recoverable contract costs [actually] incurred.\u201d Id. Abengoa referred to this\n\naccounting procedure as the \u201c\u2018percentage of completion\u2019 method.\u201d Id.\n\n\n\n 7\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page8 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 9 of 44\n\n\n\n On October 4, 2013, in preparation for the initial public offering of its ADSs\n\non the NASDAQ, Abengoa filed a Registration Statement with the SEC on Form\n\nF-1. Canaccord Genuity Inc., HSBC Securities (USA) Inc., Merrill Lynch\n\nInternational, and Soci\u00e9t\u00e9 G\u00e9n\u00e9rale (together, the \u201cUnderwriter Defendants\u201d)\n\nhelped to prepare and disseminate this Registration Statement, and Sanchez\n\nOrtega signed the document. As relevant to this case, the Registration Statement\n\nrepresented that Abengoa had \u201csuccessfully grown [its] business while seeking to\n\nenforce strict financial discipline to maintain [its] strong liquidity position.\u201d Id.\n\nat 942 (emphasis omitted). The Registration Statement further represented that\n\n\u201c[r]evenue from construction contracts is recognized using the percentage-of-\n\ncompletion method for contracts whose outcome can be reliably estimated and it\n\nis probable that they will be profitable\u201d; it also provided details on how Abengoa\n\nwould calculate the percentage of completion. Id. (emphasis omitted).\n\nSpecifically, the Registration Statement emphasized that Abengoa would only\n\n\u201crely on objective data such as physical inspections or third parties[\u2019]\n\nconfirmations\u201d and that costs \u201cwhich relate to future project activities are not\n\nincluded when determining the percentage of completion.\u201d Id. at 942\u201343\n\n(emphases omitted).\n\n\n\n 8\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page9 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 10 of 44\n\n\n\n In September 2014, Abengoa announced that it was \u201ctransitioning to an\n\n\u2018asset-light\u2019 business model\u201d that was \u201caimed at generating cash throughout the\n\nlifecycle of construction projects.\u201d Id. at 928. As part of this transition, Abengoa\n\ncreated a subsidiary called Abengoa Greenfield, S.A., which issued \u20ac500 million in\n\nbonds (the \u201cGreenfield Bonds\u201d) that the company announced would be classified\n\nas corporate recourse debt. In November 2014, Abengoa reported its financial\n\nresults, which prompted questions from investment analysts, who noted that the\n\nGreenfield Bonds did not appear to be included in Abengoa\u2019s corporate leverage\n\nratio. Abengoa later revealed that \u2013 contrary to its prior representations \u2013 it had\n\nclassified the Greenfield Bonds as non-recourse debt. In light of this admission,\n\nthe price of the Abengoa ADSs tumbled nearly fifty percent over the next three\n\ntrading days.\n\n Despite these developments, Abengoa continued to report healthy liquidity\n\nlevels and positive cash flow throughout 2015. On May 19, 2015, Sanchez Ortega\n\nresigned from his position as CEO of Abengoa. Then, during a conference call\n\nwith analysts and investors on July 31, 2015, Abengoa first suggested that it might\n\nbe experiencing financial difficulties, though it reassured those on the call that the\n\ncompany had \u201cno plan . . . to tap the capital markets in any manner.\u201d Id. at 987\n\n\n\n 9\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page10 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 11 of 44\n\n\n\n(emphasis omitted) (internal quotation marks omitted). Nevertheless, the very\n\nnext business day, Abengoa sought shareholder approval of a capital increase to\n\n\u201creduce corporate debt\u201d and \u201creinforce [its] balance sheet,\u201d a move that \u201cstunned\u201d\n\ninvestors because it indicated that Abengoa\u2019s \u201cliquidity position was in jeopardy.\u201d\n\nId. (internal quotation marks omitted). The price of Abengoa\u2019s ADSs again\n\nplummeted, falling more than forty-five percent in a two-day period.\n\nApproximately four months later, on November 25, 2015, Abengoa announced\n\nthat it was filing for preliminary creditor protection under the Spanish Insolvency\n\nLaw. Over the ensuing months, dozens of Abengoa\u2019s affiliates based in the\n\nUnited States filed for Chapter 11 bankruptcy protection, and Abengoa itself\n\nultimately filed for Chapter 15 bankruptcy protection in March 2016.\n\n In the wake of Abengoa\u2019s bankruptcy, various investors pursued both civil\n\nand criminal actions in Spain against Abengoa and some of its officers, directors,\n\nand subsidiaries. For example, on March 22, 2016, investors filed a criminal\n\ncomplaint in Spain alleging that Sanchez Ortega and Abengoa\u2019s former Executive\n\nChairman, Felipe Benjumea Llorente (\u201cBenjumea\u201d), had engaged in securities\n\nfraud. The National Court in Madrid, which handles \u201cparticularly severe\n\ncrimes,\u201d id. at 935, later granted a motion to expand the criminal complaint to\n\n\n\n 10\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page11 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 12 of 44\n\n\n\ninclude Abengoa as a defendant because there was sufficient evidence to indicate\n\nthat \u201csome type of criminal offense\u201d had occurred, id. at 937 (emphasis omitted)\n\n(internal quotation marks omitted). The National Court noted that there was\n\nevidence of \u201csystematic concealment of substantial losses of [Abengoa\u2019s] assets\u201d\n\nand \u201ca visible misrepresentation of the reality of [Abengoa\u2019s] economic and\n\nfinancial situation,\u201d which \u201cwould result in obvious damage to those who\n\ninvested, trusting in the truthfulness of the financial information provided by\n\nABENGOA.\u201d Id. at 937\u201338 (emphases omitted) (internal quotation marks\n\nomitted). In making these observations, the National Court relied on an expert\n\nreport prepared by the auditing firm Silva & Asociados; an investigation report\n\nfrom Spain\u2019s financial accounting regulator, the Institute of Accounting and\n\nAuditing of Accounts (\u201cICAC\u201d); and a forensic report completed by two financial-\n\nconsulting firms.\n\n During the pendency of those proceedings, a confidential whistleblower\n\nreferred to as \u201cFE7,\u201d who worked within Inabensa\u2019s Controller Department,\n\nsubmitted a letter to the Office of the Prosecutor of the National Court in Madrid\n\ndetailing widespread accounting fraud at Abengoa. According to that\n\nwhistleblower, Abengoa routinely inflated its estimated profit margin for\n\n\n\n 11\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page12 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 13 of 44\n\n\n\nconstruction projects by understating the entire cost of the project. These inflated\n\nprofit margins allowed Abengoa to recognize revenue prematurely over the\n\ncourse of its projects, with some projects being \u201chyper-inflated to rapidly\n\naccelerate project revenue.\u201d Id. at 907. As a result, Abengoa was able to\n\n\u201cportray[] a more profitable and liquid appearance to the public,\u201d and members\n\nof Abengoa\u2019s management were able to more easily \u201cmeet [their] bonus objectives\n\nby increasing project earnings.\u201d Id. At the same time that this false financial\n\ndata was being reported to the public, project managers at Abengoa maintained a\n\nseparate set of books using Excel spreadsheets that recorded the actual costs,\n\nexpenses, and margins of projects. According to FE7, this practice of keeping two\n\nsets of books was \u201ccommonplace and widely known within\u201d the company. Id.\n\n FE7 also alleged that Inabensa falsified cost provisions, which are\n\nplaceholder accounting entries that denote a cost or expense that has been incurred\n\nbut not yet registered for an account. Under International Accounting Standards,\n\na company can recognize revenue on a project in proportion to the costs incurred\n\non that project. In other words, the greater the costs incurred, the greater the\n\nrevenue that the company can recognize. According to FE7, Inabensa \u201centered\n\ncost provisions for materials that had not yet been ordered, purchased[,] or, in fact,\n\n\n\n 12\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page13 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 14 of 44\n\n\n\neven needed for a particular project\u201d so that it could recognize revenue\n\nprematurely. Id. at 908. FE7 identified several specific projects where Inabensa\n\nemployed this practice.\n\n FE7\u2019s allegations were corroborated by allegations from other former\n\nAbengoa employees who observed similar fraudulent accounting practices. For\n\nexample, one former Abengoa employee, \u201cFE5,\u201d who had been assigned to\n\nInabensa\u2019s Controller Department, described how the company engaged in a\n\npractice of triangulation whereby unrelated expenses were oftentimes transferred\n\nto new projects to \u201chid[e] undeclared losses from prior projects, increas[e] the\n\npercentage-of-completion of new projects[,] and recogniz[e] higher revenues for\n\nAbengoa.\u201d Id. at 913. According to FE5, the allocation of expenses from old\n\nprojects that were losing money to current projects led to a chain reaction in which\n\nthe actual expenses from current projects, which were already saddled with false\n\ncosts from the older projects, were then allocated to future projects. Of course,\n\nfuture projects were, by definition, speculative and might never materialize,\n\nraising the likelihood that the scheme would unravel as the losses hidden from\n\ninvestors could no longer be \u201cpassed on\u201d to newer projects. According to FE5,\n\nthis is precisely what occurred at Abengoa, leading the company to declare\n\n\n\n 13\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page14 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 15 of 44\n\n\n\nbankruptcy. FE5 further alleged that the accounting fraud was orchestrated by\n\ndirector-level employees, who were the only individuals high enough in the\n\ncompany to generate the invoices needed to pull off this scheme.\n\n The allegations of these corporate insiders were corroborated by an internal\n\naudit commissioned by Abengoa\u2019s new president, which \u201cconcluded that\n\naccounting fraud had occurred at Abengoa . . . at the direction of Abengoa\u2019s most\n\nsenior management, including its former Executive Chairman Benjumea.\u201d Id. at\n\n915. Specifically, the accounting firm Klynveld Peat Marwick Goerdeler\n\n(\u201cKPMG\u201d) observed that Abengoa manipulated the revenue recognized in its\n\nfinancial statements by altering project margins and advancing percentages of\n\ncompletion on projects to inflate Inabensa\u2019s earnings.\n\n II. PROCEDURAL HISTORY\n\n On August 10, 2015, Michael Francisco, an investor who owned Abengoa\n\nADSs, commenced a putative class action in the United States District Court for\n\nthe Southern District of New York against Abengoa and certain of its directors and\n\nofficers, alleging violations of the Exchange Act and Rule 10b-5 based on the\n\nmisrepresentations made during the July 31, 2015 conference call. The next\n\nmonth, another putative class action was filed in the Southern District of New\n\n\n\n 14\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page15 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 16 of 44\n\n\n\nYork, raising substantially the same claims. The proposed class in both cases\n\nconsisted of purchasers of Abengoa\u2019s ADSs between October 17, 2013 and August\n\n3, 2015. Jesse and Arlette Sherman and the PAMCAH-UA Local 675 Pension\n\nFund both moved to consolidate the actions and be appointed as lead plaintiffs.\n\nThe district court granted the consolidation motion and appointed the Shermans\n\nas lead plaintiffs. The Shermans, along with the PAMCAH-UA Local 675 Pension\n\nFund, filed a First Amended Complaint (\u201cFAC\u201d) asserting claims under both the\n\nExchange Act and the Securities Act against Abengoa, the Underwriter\n\nDefendants, and twenty-one former Abengoa executives. The FAC alleged that\n\nthe Registration Statement for the October 2013 ADS offering contained false\n\nstatements that \u201cmisled the market about Abengoa\u2019s liquidity and cash flow\u201d\n\nbecause Abengoa had, among other things, misclassified debt and overstated its\n\nfinancial position. Suppl. App\u2019x at 16. After a three-year stay during the\n\npendency of Abengoa\u2019s bankruptcy proceedings, Plaintiffs filed a Second\n\nAmended Complaint (\u201cSAC\u201d) that repeated many of the same allegations in the\n\nFAC but also alleged that Abengoa had made false statements in the Registration\n\nStatement because the company did not adhere to the percentage-of-completion\n\nmethod.\n\n\n\n 15\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page16 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 17 of 44\n\n\n\n Defendants moved to dismiss the SAC, and the district court granted the\n\nmotion, concluding that (1) the Securities Act claims were untimely, (2) Plaintiffs\n\nfailed to state a claim under the Securities Act because they did not identify any\n\nfalse financial statements, and (3) Plaintiffs failed to state a claim under the\n\nExchange Act because they neither identified any false statements nor adequately\n\nalleged scienter. The district court nevertheless granted Plaintiffs leave to file the\n\nThird Amended Complaint (the \u201cTAC\u201d), except as to the Exchange Act claims\n\nagainst Sanchez Ortega, which the court found did not support an inference of\n\nscienter and for which amendment would be futile.\n\n Defendants ultimately moved to dismiss the TAC, and on August 31, 2022,\n\nthe district court granted the motion and dismissed the TAC with prejudice. The\n\ndistrict court once again concluded that Plaintiffs\u2019 Securities Act allegations were\n\nbarred by the one-year statute of limitations and that their Exchange Act claims\n\nfailed to adequately allege any false statements or the existence of corporate\n\nscienter. Plaintiffs timely appealed the dismissal of the TAC as well as the district\n\ncourt\u2019s denial of leave to amend the Exchange Act claims against Sanchez Ortega.\n\n\n\n\n 16\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page17 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 18 of 44\n\n\n\n III. STANDARD OF REVIEW\n\n \u201cWe review de novo a district court\u2019s dismissal of a complaint for failure to\n\nstate a claim.\u201d Ark. Pub. Emps. Ret. Sys. v. Bristol-Myers Squibb Co., 28 F.4th 343,\n\n351 (2d Cir. 2022). In doing so, \u201cwe accept the material facts alleged in the\n\ncomplaint as true and draw all reasonable inferences in favor of the plaintiff.\u201d In\n\nre Nine W. LBO Sec. Litig., 87 F.4th 130, 140 (2d Cir. 2023). Nevertheless, we will\n\nnot credit \u201cmere conclusory statements,\u201d \u201c[t]hreadbare recitals of the elements of\n\na cause of action,\u201d or \u201ca legal conclusion couched as a factual allegation.\u201d Ashcroft\n\nv. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). \u201cTo survive\n\na motion to dismiss, a complaint must contain sufficient factual matter, accepted\n\nas true, to state a claim to relief that is plausible on its face.\u201d Id. (internal quotation\n\nmarks omitted). In other words, a plaintiff must \u201cplead[] factual content that\n\nallows the court to draw the reasonable inference that the defendant is liable for\n\nthe misconduct alleged\u201d and that establishes \u201cmore than a sheer possibility that a\n\ndefendant has acted unlawfully.\u201d Id.\n\n\n\n\n 17\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page18 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 19 of 44\n\n\n\n IV. DISCUSSION\n\nA. Securities Act Claims\n\n Plaintiffs asserted claims under section 11 of the Securities Act against\n\nAbengoa, the Underwriter Defendants, and Sanchez Ortega and under section 15\n\nagainst Sanchez Ortega. Section 11 \u201cprohibits materially misleading statements\n\nor omissions in registration statements filed with the SEC,\u201d while section 15\n\n\u201ccreates liability for individuals or entities that \u2018control[] any person liable\u2019 under\n\nsection 11.\u201d In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347, 358 (2d Cir.\n\n2010) (quoting 15 U.S.C. \u00a7 77o). The district court dismissed Plaintiffs\u2019 Securities\n\nAct claims on the grounds that they were untimely and, alternatively, that they\n\nfailed to state a claim. We disagree with each conclusion.\n\n 1. Timeliness\n\n Claims brought pursuant to section 11 of the Securities Act are subject to a\n\none-year statute of limitations, which begins to run upon \u201cthe discovery of the\n\nuntrue statement or the omission, or after such discovery should have been made\n\nby the exercise of reasonable diligence.\u201d 15 U.S.C. \u00a7 77m. We have explained\n\nthat \u201c[a] plaintiff in a federal securities case will be deemed to have discovered\n\nfraud for purposes of triggering the statute of limitations when a reasonable\n\n\n\n 18\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page19 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 20 of 44\n\n\n\ninvestor of ordinary intelligence would have discovered the existence of the\n\nfraud.\u201d Dodds v. Cigna Sec., Inc., 12 F.3d 346, 350 (2d Cir. 1993). Specifically,\n\nunder the so-called \u201cstorm warnings\u201d doctrine, \u201cwhen the circumstances would\n\nsuggest to an investor of ordinary intelligence the probability that she has been\n\ndefrauded, a duty of inquiry arises, and knowledge will be imputed to the investor\n\nwho does not make such an inquiry.\u201d Id.\n\n The district court concluded that Abengoa\u2019s November 2014 disclosure that\n\nit had mischaracterized some of its corporate debt provided such a storm warning\n\nand triggered Plaintiffs\u2019 duty to inquire. We disagree. We have previously held\n\nthat \u201c[i]nformation triggers the duty to inquire if it relates directly to the\n\nmisrepresentations and omissions the plaintiff alleges in its action against the\n\ndefendants.\u201d Fed. Hous. Fin. Agency v. Nomura Holding Am., Inc., 873 F.3d 85, 120\n\n(2d Cir. 2017) (emphasis added) (alterations accepted and internal quotation\n\nmarks omitted). Here, Abengoa\u2019s November 2014 disclosure \u2013 in which it\n\nacknowledged that it had misclassified its debt \u2013 did not \u201crelate directly\u201d to\n\nPlaintiffs\u2019 allegations in the FAC and SAC that Abengoa made false statements in\n\nits Registration Statement regarding its accounting practices. Rather, the storm\n\nwarning occurred on August 3, 2015, when Abengoa announced a massive capital\n\n\n\n 19\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page20 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 21 of 44\n\n\n\nincrease and asset divestiture, which raised concerns among investors regarding\n\nAbengoa\u2019s liquidity. Because the FAC was filed within one year of that storm\n\nwarning, Plaintiffs\u2019 section 11 claims are not barred by the one-year statute of\n\nlimitations.\n\n Defendants alternatively argue that even if the FAC was timely filed,\n\nPlaintiffs\u2019 Securities Act claims in the TAC \u2013 the operative complaint \u2013 are\n\nuntimely because they were filed outside the limitations period and do not relate\n\nback to those claims asserted in the FAC. Again, we disagree. It is true that a\n\nclaim asserted in an amended complaint \u201cis time-barred unless it relates back to\n\nthe filing of the initial complaint.\u201d ASARCO LLC v. Goodwin, 756 F.3d 191, 202 (2d\n\nCir. 2014). Under Federal Rule of Civil Procedure 15(c), \u201c[a]n amendment to a\n\npleading relates back to the date of the original pleading when . . . the amendment\n\nasserts a claim . . . that arose out of the conduct, transaction, or occurrence set out\n\n\u2013 or attempted to be set out \u2013 in the original pleading.\u201d As we have explained\n\npreviously, the \u201ccentral inquiry is whether adequate notice of the matters raised\n\nin the amended pleading has been given to the opposing party within the statute\n\nof limitations by the general fact situation alleged in the original pleading.\u201d\n\nSlayton v. Am. Express Co., 460 F.3d 215, 228 (2d Cir. 2006) (internal quotation marks\n\n\n\n 20\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page21 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 22 of 44\n\n\n\nomitted). Here, Plaintiffs\u2019 claims asserted in the TAC relate back because the\n\n\u201cfacts provable under the amended complaint arose out of the conduct alleged in\n\nthe original complaint.\u201d Id. at 227. As noted above, the FAC alleged that\n\nAbengoa \u201cobtained lines of credit utilizing erroneous financial reports that\n\noverstated the value of certain projects, by showing inaccurate percentages of\n\ncompletion on some projects, and failing to show that some projects were over-\n\nbudget.\u201d Suppl. App\u2019x at 16. Plaintiffs\u2019 new claims in the TAC \u2013 i.e., that\n\nrepresentations in the Registration Statement regarding Abengoa\u2019s use of the\n\npercentage-of-completion method were false or misleading \u2013 arise out of the same\n\nconduct alleged in the FAC.\n\n Defendants respond with the novel argument that a Securities Act claim\n\nalleging a new misstatement can never relate back. But that argument is\n\nunsupported by our caselaw. Defendants latch onto our statement in Slayton that\n\n\u201c[w]here the amended complaint does not allege a new claim but renders prior\n\nallegations more definite and precise, relation back occurs.\u201d 460 F.3d at 228. But\n\nwe have never interpreted this language to mean that an amended complaint can\n\nnever relate back simply because it asserts a new claim. In Slayton itself, we\n\nconcluded that new claims related back precisely because \u2013 as here \u2013 they \u201car[o]se\n\n\n\n 21\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page22 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 23 of 44\n\n\n\nout of the same set of operative facts.\u201d Id. at 229. Moreover, we have made clear\n\nthat \u201c[t]he purpose of Rule 15 is to provide maximum opportunity for each claim\n\nto be decided on its merits rather than on procedural technicalities.\u201d Id. at 228\n\n(internal quotation marks omitted).\n\n For all these reasons, we conclude that the TAC was timely filed, and the\n\ndistrict court erred in dismissing the Securities Act claims on statute-of-limitations\n\ngrounds.\n\n 2. Failure to State a Section 11 Claim\n\n The district court also held, in the alternative, that even if the section 11\n\nclaims were timely filed, Plaintiffs still failed to state a claim under the Securities\n\nAct. The district court recognized, correctly, that section 11 plaintiffs must allege,\n\namong other things, that \u201cthe registration statement contained an untrue\n\nstatement of a material fact or omitted to state a material fact required to be stated\n\ntherein or necessary to make the statements therein not misleading.\u201d Morgan\n\nStanley, 592 F.3d at 358\u201359 (internal quotation marks omitted). It then went on to\n\nconclude that (1) some of the allegedly false statements in the Registration\n\nStatement were inactionable puffery, (2) Plaintiffs\u2019 allegations of falsity were based\n\non confidential witness statements that were insufficiently particular and on\n\n\n\n 22\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page23 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 24 of 44\n\n\n\nfilings in various Spanish criminal proceedings that the district court declined to\n\naccept as true; (3) the statements in the Registration Statement were not misleading\n\nbecause Abengoa included various disclaimers; and (4) Plaintiffs failed to\n\nadequately allege the financial impact of Abengoa\u2019s accounting fraud. We\n\naddress each of these conclusions in turn.\n\n As noted above, the Registration Statement asserted that Abengoa\n\n\u201cenforce[d] strict financial discipline\u201d through a \u201crobust project management and\n\ncontrol system.\u201d J. App\u2019x at 942 (emphases omitted) (internal quotation marks\n\nomitted). We have previously explained that \u201c[v]ague positive statements\n\nregarding a corporate entity\u2019s risk[-]management strategy, asset quality, and\n\nbusiness practices are too general to cause a reasonable investor to rely upon them\n\nand therefore are precisely the type of puffery that this and other circuits have\n\nconsistently held to be inactionable.\u201d In re Synchrony Fin. Sec. Litig., 988 F.3d 157,\n\n170 (2d Cir. 2021) (internal quotation marks omitted); see also Singh v. Cigna Corp.,\n\n918 F.3d 57, 63 (2d Cir. 2019) (\u201c[G]eneral statements about reputation, integrity,\n\nand compliance with ethical norms are inactionable puffery.\u201d (internal quotation\n\nmarks omitted)). We agree with the district court that Abengoa\u2019s statements\n\nregarding its \u201cstrict financial discipline\u201d and \u201crobust\u201d systems are \u201c[v]ague\n\n\n\n 23\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page24 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 25 of 44\n\n\n\npositive statements\u201d and thus \u201ctoo general\u201d for a reasonable investor to rely upon\n\nthem. Synchrony, 988 F.3d at 170 (internal quotation marks omitted).\n\n We also agree with the district court that Abengoa\u2019s representations\n\nregarding its use of the percentage-of-completion method are different. The\n\nRegistration Statement provided specific details about how this method would be\n\nemployed such that a reasonable investor would be justified in relying on them.\n\nSee, e.g., J. App\u2019x at 942 (\u201c[T]he percentage of completion is determined at the date\n\nof every consolidated statement of financial position based on the actual costs\n\nincurred as a percentage of total estimated costs for the entire contract.\u201d (emphasis\n\nomitted) (internal quotation marks omitted)); id. at 943 (\u201cCosts incurred in the\n\nperiod which relate to future project activities are not included when determining\n\nthe percentage of completion.\u201d (emphasis omitted) (internal quotation marks\n\nomitted)). Accordingly, Abengoa\u2019s statements regarding the percentage-of-\n\ncompletion method are clearly more than non-actionable puffery.\n\n Nevertheless, the district court concluded that Plaintiffs did not adequately\n\nplead the falsity of those representations, in part because the court disregarded the\n\nallegations made by confidential witnesses. We have held that \u201cthere is no\n\nrequirement that [confidential sources] be named, provided they are described in\n\n\n\n 24\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page25 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 26 of 44\n\n\n\nthe complaint with sufficient particularity to support the probability that a person\n\nin the position occupied by the source would possess the information alleged.\u201d\n\nNovak v. Kasaks, 216 F.3d 300, 314 (2d Cir. 2000). We conclude that each of the\n\nconfidential witnesses here readily met that standard. The TAC specifically\n\nalleged that FE1 was the director of human resources at Abeinsa from August 2010\n\nto March 2013 who repeatedly heard from employees, including through exit\n\ninterviews, about accounting fraud at the company; that FE2 was \u201ca former\n\nAbengoa employee who had broad oversight for accounting and financial\n\nreporting at several of Abengoa\u2019s U.S. subsidiaries,\u201d J. App\u2019x at 900; that FE3 was\n\n\u201ca Senior Staff Accountant at Abengoa\u2019s corporate office in Chesterfield, Missouri\n\nfrom June 2013 through July 2014,\u201d id.; 1 that FE4 worked for Abengoa from 1989\n\nuntil 2016, including as the \u201c\u2018Chief of Critical Projects Follow-up\u2019 for Inabensa\n\nbetween 2013 and 2014\u201d and in the controller department from 2015 until his\n\nretirement in March 2016, id.; that FE5 was a communications engineer for\n\nInabensa from 2007 until 2017, which included an assignment to the controller\n\ndepartment where he oversaw project budgeting from April 2015 until 2017; that\n\n\n\n\n1 We recognize that the district court did \u201cnot discount the testimony of FE3\u201d because that\nwitness\u2019s \u201callegations were sufficiently specific.\u201d Francisco v. Abengoa, S.A., 624 F. Supp. 3d 365,\n394 n.15 (S.D.N.Y. 2022).\n\n 25\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page26 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 27 of 44\n\n\n\nFE6 worked for one of Abengoa\u2019s subcontractors, was responsible for negotiating\n\ncontract terms with Abengoa, and was a key liaison between the subcontractor\n\nand Abengoa; and that FE7 \u201cworked within Inabensa\u2019s Controller Department\n\nfrom at least 2013 through 2015 and was responsible for overseeing Inabensa\u2019s\n\nfinancial accounting and reporting,\u201d id. at 902. Because each of these confidential\n\nwitnesses was described \u201cwith sufficient particularity to support the probability .\n\n. . [they] would possess the information alleged,\u201d Novak, 216 F.3d at 314, we\n\nconclude that the district court erred by disregarding their allegations.\n\n The district court also \u201cdecline[d] to assume the truth of the allegations in\n\nthe Spanish proceedings.\u201d Francisco v. Abengoa, S.A., 624 F. Supp. 3d 365, 397\n\n(S.D.N.Y. 2022) (internal quotation marks omitted). Defendants argue that\n\nPlaintiffs may not plead facts based on reports and allegations from the Spanish\n\ncriminal proceedings. Defendants primarily rely on Lipsky v. Commonwealth\n\nUnited Corp., in which we held that \u201cneither a complaint nor references to a\n\ncomplaint which results in a consent judgment may be properly cited in the\n\npleadings.\u201d 551 F.2d 887, 893 (2d Cir. 1976). But we explicitly limited our\n\nholding in Lipsky to the facts of that case because the consent judgment was merely\n\n\u201cthe result of private bargaining\u201d and did not reflect \u201can actual adjudication of\n\n\n\n 26\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page27 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 28 of 44\n\n\n\nany of the issues.\u201d Id. at 893\u201394. Outside of this context, we certainly did not\n\nforeclose plaintiffs from relying on facts and allegations incorporated in another\n\nproceeding.\n\n We subsequently had the opportunity to elaborate upon our holding in\n\nLipsky in the context of a securities-fraud complaint that relied on allegations in an\n\nSEC order. While we recognized that \u201ca complaint that merely recites others\u2019\n\nallegations may . . . be insufficient,\u201d we explained that the plaintiffs \u201calso allege[d]\n\nnon-conclusory facts and . . . these additional factual pleadings [we]re sufficient to\n\nrender unproblematic any implied reliance on the SEC findings.\u201d Loreley Fin.\n\n(Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 180 (2d Cir. 2015). We\n\nfurther noted that Plaintiffs\u2019 \u201callegations \u2013 albeit clearly overlapping with the SEC\n\norder \u2013 [were] made directly by Plaintiffs, . . . were signed by Plaintiffs\u2019 counsel\n\nsubject to the requirements of [Federal Rule of Civil Procedure] 11,\u201d and \u201c[t]aken\n\ntogether\u201d were \u201cadequate to survive a motion to dismiss.\u201d Id. Applying our\n\nholdings in Lipsky and later Loreley, district courts within this Circuit have\n\nregularly permitted plaintiffs to incorporate allegations made in other complaints\n\nor proceedings. See, e.g., In re Mylan N.V. Sec. Litig., 379 F. Supp. 3d 198, 214\n\n(S.D.N.Y. 2019) (\u201c[T]he weight of authority holds that plaintiffs may base factual\n\n\n\n 27\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page28 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 29 of 44\n\n\n\nallegations on complaints from other proceedings because neither Circuit\n\nprecedent nor logic supports . . . an absolute rule against doing so.\u201d (internal\n\nquotation marks omitted)); In re Bear Stearns Mortg. Pass-Through Certificates Litig.,\n\n851 F. Supp. 2d 746, 768 n.24 (S.D.N.Y. 2012) (\u201cIt makes little sense to say that\n\ninformation from . . . a study \u2013 which the [complaint] could unquestionably rely\n\non if it were mentioned in a news clipping or public testimony \u2013 is immaterial\n\nsimply because it is conveyed in an unadjudicated complaint.\u201d); Sec. & Exch.\n\nComm\u2019n v. Lee, 720 F. Supp. 2d 305, 340 (S.D.N.Y. 2010) (\u201cThere is no absolute rule\n\nbarring a private plaintiff from relying on government pleadings and\n\nproceedings[.]\u201d).\n\n For the avoidance of all doubt, we hold that a complaint may rely on factual\n\nallegations or reports incorporated in complaints from other proceedings, subject,\n\nof course, to the limitations of Federal Rule of Civil Procedure 11. In other words,\n\nthe attorney signing the complaint must still be able to \u201ccertif[y] that to the best of\n\n[the attorney\u2019s] knowledge, information, and belief, formed after an inquiry\n\nreasonable under the circumstances[,] . . . the factual contentions have evidentiary\n\nsupport or, if specifically so identified, will likely have evidentiary support after a\n\nreasonable opportunity for further investigation or discovery.\u201d Fed. R. Civ. P.\n\n\n\n 28\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page29 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 30 of 44\n\n\n\n11(b). While this is inherently a case-dependent inquiry that will turn on the\n\nnature of the allegations contained in the other proceeding, we note that the\n\nallegations relied on by Plaintiffs in the TAC here were detailed, independently\n\ncorroborated, and the product of an independent investigation. See, e.g., Strougo\n\nv. Barclays PLC, 105 F. Supp. 3d 330, 343 (S.D.N.Y. 2015) (permitting plaintiffs \u201cto\n\nborrow allegations from the [New York Attorney General\u2019s (the \u2018NYAG\u2019)]\n\ncomplaint\u201d because \u201c[t]he facts [were] derived from a credible complaint based on\n\nfacts obtained after an investigation\u201d and \u201ccounsel for plaintiffs have indicated\n\nthat they have reached out to attorneys at the NYAG to verify the allegations in\n\nthe [c]omplaint\u201d); Bear Stearns, 851 F. Supp. 2d at 768 n.24 (\u201cNot all complaints are\n\ncreated equal \u2013 while some barely satisfy the pleading requirement, others are\n\nreplete with detailed factual information of obvious relevance to the case at\n\nhand.\u201d). These features distinguish the TAC from our prior precedents in which\n\nwe rejected pleadings that merely relied on conclusory allegations asserted in\n\nother proceedings. See Loreley, 797 F.3d at 180.\n\n For example, the Spanish National Court ruling did not merely consist of\n\nconclusory assertions but rather was based on an auditing firm\u2019s expert report,\n\nICAC\u2019s resolution of its investigation, and a forensic report from two financial-\n\n\n\n 29\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page30 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 31 of 44\n\n\n\nconsulting firms, each of which \u201cthe [complaint] could unquestionably rely on if\n\nit were mentioned in a news clipping or public testimony.\u201d Bear Stearns, 851 F.\n\nSupp. 2d at 768 n.24. Similarly, the statements made by FE4, FE5, and FE7 in the\n\nSeville criminal proceeding were not merely conclusory allegations but rather\n\nconsisted of detailed observations regarding the accounting-fraud scheme at\n\nAbengoa. Moreover, the allegations of all three confidential witnesses were\n\nindependently corroborated by the allegations of other confidential witnesses, the\n\naforementioned reports, and the KPMG investigation. And while it is true that\n\nplaintiffs ultimately may not be able to prove those allegations at a later stage of\n\nthe proceedings, it is not for the district court to presume as much on a motion to\n\ndismiss. Accordingly, we conclude that the district court erred in disregarding\n\nthe allegations from the Spanish criminal proceedings at this stage.\n\n Upon consideration of those allegations, we are persuaded that Plaintiffs\n\nhave plausibly alleged that Abengoa\u2019s representations in the Registration\n\nStatement regarding its use of the percentage-of-completion method were false.\n\nAs described above, Plaintiffs alleged that Abengoa engaged in three primary\n\nforms of accounting fraud. First, the company fraudulently inflated profit\n\nmargins by not accounting for the entire cost of the project, thereby allowing\n\n\n\n 30\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page31 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 32 of 44\n\n\n\nAbengoa to \u201crecognize revenue prematurely throughout the life of a project.\u201d\n\nJ. App\u2019x at 906. In at least one instance \u2013 according to FE7 \u2013 the profit margin was\n\n\u201chyper-inflated,\u201d which allowed Inabensa to recognize \u201cthe total estimated profit\n\nfor the entire project when, in reality, the project had hardly even started.\u201d Id. at\n\n907 (internal quotation marks omitted); see also id. at 911 (alleging that FE4\n\n\u201cconfirmed that in 2013 and 2014, Inabensa routinely recognized expenses\n\nprematurely in new projects in order to record inflated project revenues\u201d). This\n\npractice of inflating profit margins was supported by the findings of KPMG\u2019s\n\ninternal audit and by the resolution from ICAC \u2013 Spain\u2019s top financial accounting\n\nregulator \u2013 which found an \u201cabsolute lack of justification\u201d for the profit margins\n\nthat Abengoa reported. Id. at 941 (internal quotation marks omitted).\n\n Second, Abengoa \u201cfalsified costs to accelerate the recognition of revenue on\n\ncertain projects.\u201d Id. at 907. FE3 reported \u201cmanually modifying various\n\naccounting entries,\u201d including \u201cadjusting cost provisions at the direction of senior\n\nmanagement,\u201d in order to \u201cmaintain or create an appearance of profitability on\n\ncertain projects.\u201d Id. at 910. Likewise, FE4 recounted that in several instances,\n\ncost provisions \u201cwere entered immediately\u201d despite the purchase orders not\n\nhaving been issued, or the supplier even identified, for those projects. Id. at 912;\n\n\n\n 31\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page32 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 33 of 44\n\n\n\nsee also id. at 910\u201311 (recounting FE4\u2019s allegations that projects \u201ccontained\n\ninaccurate cost provisions information,\u201d which led to \u201cinaccurate income data\u201d).\n\nFE5 similarly detailed how he \u201cwas instructed to manipulate costs\u201d in order to\n\nmaintain a consistent profit margin throughout the duration of the AVE Mecca\n\nMedina project. Id. at 919. And FE6 described how project managers at\n\nAbengoa asked one of its subcontractors \u201cfor letters confirming the purchase of\n\nmaterials and supplies . . . even though those materials and supplies were not yet\n\nor ever needed,\u201d thus enabling Abengoa to prematurely recognize revenue. Id.\n\nat 914.\n\n Third, Abengoa engaged in a practice of triangulation whereby costs from\n\ncurrent projects were assigned to new projects in order to hide undeclared losses\n\non the former, increase the percentage-of-completion on the new projects, and\n\nrecognize higher revenues for the company. For example, FE5 discovered that\n\nunrelated expenses had been charged to Abengoa\u2019s AVE Mecca Medina project,\n\ntotaling over \u20ac22 million. The KPMG audit also found that Inabensa Turkey\n\nengaged in this practice of invoice triangulation, which enabled Inabensa to inflate\n\nits earnings to \u201cdouble what Abengoa had initially forecasted.\u201d Id. at 916. The\n\naudit further uncovered that this triangulation practice was directed by high-level\n\n\n\n 32\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page33 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 34 of 44\n\n\n\nAbengoa executives, including its former Executive Chairman, Benjumea. In\n\nlight of all these allegations, Plaintiffs adequately pleaded the falsity of Abengoa\u2019s\n\nrepresentations that it followed the percentage-of-completion method.\n\n The district court alternatively concluded that, notwithstanding the factual\n\nallegations contained in the TAC, the Registration Statement\u2019s representations\n\nconcerning the percentage-of-completion method were not misleading by virtue\n\nof the \u201ccautionary language\u201d contained therein. Francisco, 624 F. Supp. 3d at 397.\n\nAgain, we disagree. We have explained that, under the \u201cbespeaks caution\n\ndoctrine,\u201d \u201calleged misrepresentations in a stock offering are immaterial as a\n\nmatter of law if it cannot be said that any reasonable investor could consider them\n\nimportant in light of adequate cautionary language set out in the same offering.\u201d\n\nRombach v. Chang, 355 F.3d 164, 173 (2d Cir. 2004) (alteration accepted and internal\n\nquotation marks omitted). When a registration statement contains cautionary\n\nlanguage, we look to \u201cthe allegedly fraudulent materials in their entirety to\n\ndetermine whether a reasonable investor would have been misled.\u201d Id. (internal\n\nquotation marks omitted).\n\n The Registration Statement here included cautionary language explaining\n\nthat the percentage-of-completion method relied on \u201cthe use of estimates.\u201d\n\n\n\n 33\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page34 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 35 of 44\n\n\n\nJ. App\u2019x at 942 (internal quotation marks omitted). But it strains credulity to\n\nsuggest that such a tepid warning about the use of estimates was enough to put\n\ninvestors on notice that Abengoa was deliberately manipulating the percentage of\n\ncompletion to inflate its revenues. Thus, even with the disclaimer, a reasonable\n\ninvestor would have been misled by Abengoa\u2019s statements. See Rombach, 355 F.3d\n\nat 173 (\u201cThe doctrine of bespeaks caution provides no protection to someone who\n\nwarns his hiking companion to walk slowly because there might be a ditch ahead\n\nwhen he knows with near certainty that the Grand Canyon lies one foot away.\u201d\n\n(internal quotation marks omitted)).\n\n The district court also held that the TAC failed to state a claim because it did\n\nnot adequately plead \u201cthe impact of the alleged triangulation scheme on the\n\nfinancial statements as a whole,\u201d therefore calling into question the materiality of\n\nAbengoa\u2019s alleged misrepresentations. Francisco, 624 F. Supp. 3d at 397. But\n\naccepting the allegations in the complaint as true and drawing all reasonable\n\ninferences in favor of Plaintiffs \u2013 as we must \u2013 we reach a different conclusion.\n\nPlaintiffs alleged, based on the statements of FE1, FE4, FE5, and FE7, that the\n\ntriangulation practice was \u201cwidespread and systemic within Abengoa, and not\n\njust limited to the two [specific] projects mentioned.\u201d J. App\u2019x at 921\u201322; see id. at\n\n\n\n 34\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page35 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 36 of 44\n\n\n\n911\u201314. The KPMG report likewise concluded that the triangulation practice was\n\ndirected by Abengoa\u2019s senior management, further supporting the inference that\n\nthe practice was widespread throughout the company. Additionally, Plaintiffs\n\nalleged \u2013 based on FE5\u2019s testimony \u2013 that the triangulation practice \u201cprecipitated\n\nAbengoa\u2019s collapse and led it to bankruptcy.\u201d Id. at 913. Taking these\n\nallegations as true, we conclude that Plaintiffs adequately alleged the impact of\n\nthe triangulation scheme on the company as a whole. We further note that the\n\nmateriality of an alleged misrepresentation \u201cwill rarely be dispositive in a motion\n\nto dismiss\u201d because \u201c[a] complaint may not properly be dismissed on the ground\n\nthat the alleged misstatements or omissions are not material unless they are so\n\nobviously unimportant to a reasonable investor that reasonable minds could not\n\ndiffer on the question of their importance.\u201d Altimeo Asset Mgmt. v. Qihoo 360 Tech.\n\nCo., 19 F.4th 145, 151 (2d Cir. 2021) (alterations accepted and internal quotation\n\nmarks omitted). That high bar has not been met here. 2\n\n\n\n2 Defendants also contend that Plaintiffs were required to plead scienter for their section 11\nclaims. But Defendants did not raise this argument before the district court in their motions to\ndismiss, and it \u201cis a well-established general rule that an appellate court will not consider an issue\nraised for the first time on appeal.\u201d In re Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 132 (2d\nCir. 2008) (internal quotation marks omitted). \u201c[W]e will generally not exercise our discretion\nwhere the forfeited argument was available to the parties below and they proffer no reason for\ntheir failure to raise the arguments below.\u201d Siemens Energy, Inc. v. Petr\u00f3leos de Venez., S.A., 82\nF.4th 144, 160 (2d Cir. 2023) (alterations accepted and internal quotation marks omitted).\n\n\n 35\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page36 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 37 of 44\n\n\n\n For all the foregoing reasons, we conclude that Plaintiffs have stated a\n\nsection 11 claim and reverse the judgment of the district court in this respect.\n\n 3. Failure to State a Section 15 Claim Against Sanchez Ortega\n\n Plaintiffs also asserted a claim against Sanchez Ortega under section 15 of\n\nthe Securities Act, which \u201ccreates liability for individuals or entities that control\n\nany person liable under section 11.\u201d Morgan Stanley, 592 F.3d at 358 (alteration\n\naccepted and internal quotation marks omitted). The district court dismissed\n\nPlaintiffs\u2019 section 15 claim because \u201cthe success of a claim under section 15 relies,\n\nin part, on a plaintiff\u2019s ability to demonstrate primary liability under section[] 11,\u201d\n\nid., and the court had found that Plaintiffs failed to state a section 11 claim.\n\nBecause we reverse the district court\u2019s section 11 holding, we vacate the section 15\n\ndismissal and remand for further proceedings consistent with this Opinion.\n\nB. Exchange Act Claims\n\n In addition to the above claims under the Securities Act, Plaintiffs asserted\n\nclaims against Abengoa and Sanchez Ortega under section 10(b) of the Exchange\n\nAct and SEC Rule 10b-5 and against Sanchez Ortega under section 20(a) of the\n\nExchange Act. Section 10(b) prohibits \u201cus[ing] or employ[ing], in connection\n\n\n\nBecause Defendants could have raised this argument below and have not explained their failure\nto do so, we will not consider it for the first time on appeal.\n\n 36\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page37 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 38 of 44\n\n\n\nwith the purchase or sale of any security[,] . . . any manipulative or deceptive\n\ndevice or contrivance.\u201d 15 U.S.C. \u00a7 78j(b). Rule 10b-5 makes it illegal to \u201cmake\n\nany untrue statement of a material fact or to omit to state a material fact . . . in\n\nconnection with the purchase or sale of any security.\u201d 17 C.F.R. \u00a7 240.10b-5.\n\nAnd section 20(a) creates a cause of action against any person \u201cwho, directly or\n\nindirectly, controls any person liable\u201d under the Exchange Act and associated\n\nregulations. 15 U.S.C. \u00a7 78t(a).\n\n 1. Failure to State a Claim Against Abengoa\n\n The district court dismissed Plaintiffs\u2019 Exchange Act claims against\n\nAbengoa on the ground that Plaintiffs had failed to adequately allege the existence\n\nof an underlying accounting fraud scheme. But as we concluded above, Plaintiffs\n\nadequately alleged such a scheme, so this rationale no longer holds. The district\n\ncourt also determined, in the alternative, that Plaintiffs failed to adequately plead\n\nscienter, which is an element of an Exchange Act claim. But this analysis was\n\npremised, in large part, on the district court\u2019s decision to disregard allegations\n\nfrom the confidential witnesses and Spanish criminal proceedings, which, as\n\ndiscussed above, was error.\n\n\n\n\n 37\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page38 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 39 of 44\n\n\n\n Those materials are replete with allegations that high-level Abengoa\n\nexecutives sought to intentionally misrepresent the company\u2019s financial position\n\nto obscure the company\u2019s losses and to maximize their own bonuses. For\n\nexample, FE1 recounted that when Abeinsa\u2019s internal auditor challenged financial\n\nreports that inflated the value of certain projects, Abeinsa\u2019s Chief Financial Officer\n\ninstructed that auditor to \u201cshut . . . up and just sign\u201d the reports. J. App\u2019x at 920\n\n(internal quotation marks omitted). Likewise, the KPMG report revealed that\n\nAbengoa\u2019s executive chairman \u2013 Benjumea \u2013 along with other Abengoa executives,\n\nincluding the Director of Inabensa\u2019s Administration Department and Abengoa\u2019s\n\nGeneral Secretary, orchestrated a fraudulent scheme to hide financial losses and\n\ninflate earnings by triangulating invoices between projects. In light of the district\n\ncourt\u2019s failure to consider these and other allegations, we vacate the dismissal of\n\nthe Exchange Act claims against Abengoa and remand for further proceedings\n\nconsistent with this Opinion.\n\n 2. Denial of Leave to Amend Exchange Act Claims Against Sanchez Ortega\n\n The district court previously denied Plaintiffs leave to amend their\n\nExchange Act claims against Sanchez Ortega because such amendments would be\n\nfutile in alleging his scienter. \u201cWe review a district court\u2019s denial of leave to\n\n\n\n 38\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page39 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 40 of 44\n\n\n\namend for abuse of discretion, unless the denial was based on an interpretation of\n\nlaw, such as futility, in which case we review the legal conclusion de novo.\u201d\n\nPyskaty v. Wide World of Cars, LLC, 856 F.3d 216, 224 (2d Cir. 2017) (internal\n\nquotation marks omitted). We have explained that an amendment is futile if it\n\n\u201cwould fail to cure prior deficiencies or to state a claim under Rule 12(b)(6).\u201d Id.\n\nat 225 (internal quotation marks omitted). The district court concluded that the\n\nproposed amendments to Plaintiffs\u2019 complaint would be futile because they still\n\ndid not adequately allege Sanchez Ortega\u2019s scienter. Under the Private Securities\n\nLitigation Reform Act, a complaint asserting Exchange Act claims must \u201cstate with\n\nparticularity facts giving rise to a strong inference that the defendant acted with\n\nthe required state of mind.\u201d 15 U.S.C. \u00a7 78u-4(b)(2)(A) (emphasis added).\n\n Plaintiffs argue that the timing of Sanchez Ortega\u2019s retirement is sufficient\n\nto support such a strong inference of scienter. We disagree. Even though \u201c[w]e\n\nhave suggested that employees\u2019 \u2018suspicious\u2019 resignations may be suggestive of\n\nscienter,\u201d \u201cwe have done so only in the context of other compelling circumstantial\n\nallegations supporting scienter.\u201d KBC Asset Mgmt. NV v. MetLife, Inc., No. 21-291,\n\n2022 WL 480213, at *3 (2d Cir. Feb. 17, 2022) (quoting In re Hain Celestial Grp., Inc.\n\nSec. Litig., 20 F.4th 131, 137 (2d Cir. 2021)); see also, e.g., Schiro v. Cemex, S.A.B. de\n\n\n\n 39\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page40 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 41 of 44\n\n\n\nC.V., 396 F. Supp. 3d 283, 303 (S.D.N.Y. 2019) (\u201c[A] resignation can establish\n\nscienter only if the plaintiff alleges independent evidence corroborating that the\n\nemployee who resigned held a culpable state of mind. Standing alone, however,\n\nan employee\u2019s resignation does not raise a strong inference of scienter.\u201d (citation\n\nomitted)). Here, the TAC is bereft of such compelling circumstantial allegations.\n\nThe mere fact that Sanchez Ortega resigned around the same time that Abengoa\n\nneeded to borrow from its majority shareholder and approximately six months\n\nbefore the company filed for creditor protection is insufficient to support a strong\n\ninference of scienter. In their reply brief, Plaintiffs make much of the fact that\n\nSanchez Ortega subsequently took a position at a demanding investment-\n\nmanagement firm despite claiming that he was retiring to lead a quieter life. But\n\nthese allegations appear nowhere in the TAC, and \u201cthe law is clear that a party\n\nmay not amend pleadings through a brief.\u201d Gamma Traders \u2013 I LLC v. Merrill\n\nLynch Commodities, Inc., 41 F.4th 71, 80 (2d Cir. 2022) (internal quotation marks\n\nomitted). Accordingly, we conclude that the district court did not err in denying\n\nPlaintiffs leave to file the portion of the TAC asserting Exchange Act claims against\n\nSanchez Ortega.\n\n\n\n\n 40\n\f Case 22-2438, Document 185-1, 10/06/2025, 3647595, Page41 of 41\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 42 of 44\n\n\n\n V. CONCLUSION\n\n For the foregoing reasons, we AFFIM in part, REVERSE in part, and\n\nVACATE in part the judgment of the district court.\n\n\n\n\n 41\n\f Case 22-2438, Document 185-2, 10/06/2025, 3647595, Page1 of 1\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 43 of 44\n\n\n\n United States Court of Appeals for the Second Circuit\n Thurgood Marshall U.S. Courthouse\n 40 Foley Square\n New York, NY 10007\n\nDEBRA ANN LIVINGSTON CATHERINE O'HAGAN WOLFE\nCHIEF JUDGE CLERK OF COURT\n\nDate: October 06, 2025 DC Docket #: 15-cv-6279\nDocket #: 22-2438cv DC Court: SDNY (NEW YORK\nShort Title: Francisco v. Abengoa, S.A. CITY)\n DC Judge: Ramos\n\n\n\n BILL OF COSTS INSTRUCTIONS\n\n\n\nThe requirements for filing a bill of costs are set forth in FRAP 39. A form for filing a bill of\ncosts is on the Court's website.\n\nThe bill of costs must:\n* be filed within 14 days after the entry of judgment;\n* be verified;\n* be served on all adversaries;\n* not include charges for postage, delivery, service, overtime and the filers edits;\n* identify the number of copies which comprise the printer's unit;\n* include the printer's bills, which must state the minimum charge per printer's unit for a page, a\ncover, foot lines by the line, and an index and table of cases by the page;\n* state only the number of necessary copies inserted in enclosed form;\n* state actual costs at rates not higher than those generally charged for printing services in New\nYork, New York; excessive charges are subject to reduction;\n* be filed via CM/ECF or if counsel is exempted with the original and two copies.\n\f Case 22-2438, Document 185-3, 10/06/2025, 3647595, Page1 of 1\n Case 8:24-cv-02900-DKC Document 97-1 Filed 10/17/25 Page 44 of 44\n\n\n\n United States Court of Appeals for the Second Circuit\n Thurgood Marshall U.S. Courthouse\n 40 Foley Square\n New York, NY 10007\n\nDEBRA ANN LIVINGSTON CATHERINE O'HAGAN WOLFE\nCHIEF JUDGE CLERK OF COURT\n\nDate: October 06, 2025 DC Docket #: 15-cv-6279\nDocket #: 22-2438cv DC Court: SDNY (NEW YORK\nShort Title: Francisco v. Abengoa, S.A. CITY)\n DC Judge: Ramos\n\n\n\n VERIFIED ITEMIZED BILL OF COSTS\n\n\n\nCounsel for\n_________________________________________________________________________\n\nrespectfully submits, pursuant to FRAP 39 (c) the within bill of costs and requests the Clerk to\nprepare an itemized statement of costs taxed against the\n________________________________________________________________\n\nand in favor of\n_________________________________________________________________________\n\nfor insertion in the mandate.\n\nDocketing Fee _____________________\n\nCosts of printing appendix (necessary copies ______________ ) _____________________\n\nCosts of printing brief (necessary copies ______________ ____) _____________________\n\nCosts of printing reply brief (necessary copies ______________ ) _____________________\n\n\n\n(VERIFICATION HERE)\n\n ________________________\n Signature\n\f","ocr_status":1,"date_upload":"2026-05-19T22:32:34.286515-07:00","document_number":"97","attachment_number":1,"pacer_doc_id":"093015243722","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit A. Sherman v. Abengoa S.A., slip op.","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.325928-08:00","date_modified":"2026-05-18T23:59:55.874503-07:00","date_filed":"2025-10-17","time_filed":null,"entry_number":97,"recap_sequence_number":"2025-10-17.001","pacer_sequence_number":281,"description":"NOTICE by Louis Leveque, Iqbal al Hamid re 91 Response in Opposition to Motion, 90 Response in Opposition to Motion, 92 Response in Opposition to Motion, Supplemental Authority (Attachments: # 1 Exhibit A. Sherman v. Abengoa S.A., slip op.)(Porritt, Nicholas) (Entered: 10/17/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475308/","id":447475308,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228758/","id":462228758,"tags":[],"absolute_url":"/docket/69233925/96/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.295445-08:00","date_modified":"2026-05-18T23:59:55.842315-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"96","attachment_number":null,"pacer_doc_id":"093015239763","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.221573-08:00","date_modified":"2026-05-18T23:59:55.826557-07:00","date_filed":"2025-10-16","time_filed":null,"entry_number":96,"recap_sequence_number":"2025-10-16.001","pacer_sequence_number":278,"description":"NOTICE of Appearance by Katherine Elizabeth Pappas on behalf of Harish Chidambaran (Pappas, Katherine) (Entered: 10/16/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475307/","id":447475307,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228757/","id":462228757,"tags":[],"absolute_url":"/docket/69233925/95/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.162670-08:00","date_modified":"2026-05-22T08:06:01.309068-07:00","sha1":"6f190fb0b96b99f223b665dba61b19570a53fc14","page_count":3,"file_size":32187,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.95.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.95.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 95 Filed 10/02/25 Page 1 of 3\n\n\n\n IN THE UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n (Southern Division)\n\n DANNY WALKER,\n Individually and on Behalf of All Others\n Similarly Situated,\n\n Plaintiff, Civil Action No. 8:24-cv-02900-DKC\n v.\n\n ILEARNINGENGINES, INC., et al.\n Defendants.\n\n\n\n JOINING DEFENDANTS\u2019\n DEFENDANTS' JOINDER IN\n DEFENDANT MARCUM LLP\u2019S\n LLP'S OPPOSITION TO PLAINTIFFS\u2019\n PLAINTIFFS'\n MOTION TO LIFT THE PSLRA DISCOVERY STAY\n\n Defendants Sayyed Farhan Naqvi (\"Naqvi\"),\n (\u201cNaqvi\u201d), Puthugramam (\"Harish\")\n (\u201cHarish\u201d) Chidambaran\n\n(\u201cChidambaran\u201d), Thomas Olivier (\"Olivier\"),\n(\"Chidambaran\"), (\u201cOlivier\u201d), Matthew Barger (\"Barger\"),\n (\u201cBarger\u201d), Ian Davis (\"Davis\"),\n (\u201cDavis\u201d),\n\n (\u201cMehlman\u201d), and Michael Moe (\"Moe\")\nBruce Mehlman (\"Mehlman\"), (\u201cMoe\u201d) (together, Naqvi, Chidambaran, Olivier,\n\nBarger, Davis, Mehlman, and Moe are the \"Joining\n \u201cJoining Defendants\"),\n Defendants\u201d), by and through their respective\n\nundersigned counsel, join in the Opposition to Plaintiffs'\n Plaintiffs\u2019 Motion to Lift the PSLRA Discovery\n\nStay (\"Opposition\")\n (\u201cOpposition\u201d) (ECF No. 94) filed by Defendant Marcum LLP (\"Marcum\n (\u201cMarcum LLP\")\n LLP\u201d) on October\n\n2, 2025.\n\n For the reasons set forth in the Opposition, Joining Defendants join in and fully adopt the\n\narguments advanced by Marcum LLP in the Opposition.\n\n WHEREFORE, Joining Defendants respectfully request that the Court enter an Order\n\n Plaintiffs\u2019 Motion to Partially Lift the Discovery Stay and Permit Limited Discovery\nDENYING Plaintiffs'\n\ndated September 18, 2025 (ECF No. 93) filed by lead plaintiffs Louis Leveque and Iqbal Al Hamid.\n\f Case 8:24-cv-02900-DKC Document 95 Filed 10/02/25 Page 2 of 3\n\n\n\nDate: October 2, 2025 Respectfully submitted,\n\n\nMINTZ, LEVIN, COHN, FERRIS, COLE SCHOTZ P.C.\nGLOVSKY and POPEO, P.C.\n\n/s/\n/5/ Castell Abner, III . Philip A. Selden\nCastell Abner, III Federal Bar No. 28596\nFederal Bar No. 22328 Alicia L. Shelton\n555 12th\n th Street, NW Federal Bar No. 11538\n th 1201 Wills Street, Suite 320\n11th Floor\nWashington, DC 20004 Baltimore, Maryland 21231\n(202) 434-7300 (410) 528-2987 (phone)\nCAbner@Mintz.com (410) 528-9407\n pselden@coleschotz.com\nJohn F. Sylvia (pro hac vice) ashelton@coleschotz.com\nOne Financial Center\nBoston, MA 02111 KOZYAK TROPIN THROCKMORTON\n(617) 542-6000\nJFSylvia@Mintz.com\n /s/ Jorge L. Piedra (signed by Castell Abner,\n Is!\n for Defendant Sayyed Farhan\nAttorneys for III with permission from Jorge L. Piedra)\nNaqvi\n Jorge L. Piedra (Pro Hac Vice)\n Rasheed K. Nader (Pro Hac Vice)\n Alexa G. Chinchilla (Pro Hac Vice)\n 2525 Ponce de Leon Blvd., Floor 9\nMILLER & CHEVALIER CHARTERED Coral Gables, Florida 33134\n (305) 372-1800 (phone)\n jpiedra@kttlaw.com\n/s/ Laura G. Ferguson (signed by Castell\nIs! rnader@kttlaw.com\nAbner, III with permission from Laura G. achinchilla@kttlaw.com\nFerguson)\nLaura G. Ferguson for Defendant Thomas Olivier\n Attorneysfor\nFederal Bar No. 20828\nBradley Markano (pro hac vice)\n900 16th St., NW\nWashington, DC 20006\nP: (202) 626-5567\nF: (202) 626-5801\nlferguson@milchev.com\nbmarkano@milchev.com\n\n for Defendant Harish\nAttorneysfor\nChidambaran\n\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 95 Filed 10/02/25 Page 3 of 3\n\n\n\nPAUL HASTINGS LLP\n\n\nLawrence E. Slusky\nFederal Bar No. 21745\nBradley J. Bondi\nFederal Bar No. 16071\nRonald K. Anguas, Jr. (pro hac vice)\n2050 M Street N.W.\nWashington, D.C. 20036\nTel: 202-551-1700\nFax: 202-551-1705\nEmail: lawrenceslusky@paulhastings.com\nEmail: bradbondi@paulhastings.com\nEmail: ronaldanguas@paulhastings.com\n\n/s/ D. Scott Carlton (signed by Castell\nIs!\nAbner, III with permission from D. Scott\nCarlton)\nD. Scott Carlton (pro hac vice)\n515 South Flower Street, 25th Floor\nLos Angeles, CA 90071\nTel: 213-683-6000\nFax: 213-627-0705\nEmail: scottcarlton@paulhastings.com\n\n for Defendants Matthew\nAttorneysfor Matthew Barger,\n Mehlman, and Michael\nIan Davis, Bruce Mehlman, Michael\nMoe\nMoe\n\n\n\n\n 3\n\f","ocr_status":2,"date_upload":"2026-05-19T22:32:26.167936-07:00","document_number":"95","attachment_number":null,"pacer_doc_id":"093015207802","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.128961-08:00","date_modified":"2026-05-18T23:59:55.784509-07:00","date_filed":"2025-10-02","time_filed":null,"entry_number":95,"recap_sequence_number":"2025-10-02.002","pacer_sequence_number":275,"description":"RESPONSE in Opposition re 93 MOTION for Discovery to Partially Lift the Discovery Stay - Joining Defendants' Joinder in Defendant Marcum LLP's Opposition at ECF No. 94 - filed by Sayyed Farhan Naqvi.(Abner, Castell) (Entered: 10/02/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475306/","id":447475306,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228756/","id":462228756,"tags":[],"absolute_url":"/docket/69233925/94/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.097843-08:00","date_modified":"2026-05-22T08:57:05.654477-07:00","sha1":"0fc9acf3949b5998ca839fa630d2a6f86ea68393","page_count":22,"file_size":322014,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.94.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.94.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 1 of 22\n\n\n\n IN THE UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n\n\nDANNY WALKER, Individually and on Civil Action No. 8:24-cv-02900-DKC\nBehalf of All Others Similarly Situated,\n Hon. Deborah K. Chasanow\n Plaintiff,\n\n v.\n\nILEARNINGENGINES, INC., et al.,\n\n Defendants.\n\n\n DEFENDANT MARCUM LLP\u2019S OPPOSITION TO PLAINTIFFS\u2019\n MOTION TO LIFT THE PSLRA DISCOVERY STAY\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 2 of 22\n\n\n\n TABLE OF CONTENTS\n\n Page\n\nTable of Authorities ................................................................................................................. ii\n\nBACKGROUND..................................................................................................................... 2\n\n A. Plaintiffs\u2019 Failure to Plead Traceability.................................................................... 2\n\n B. Plaintiffs\u2019 Recent Motion ....................................................................................... 3\n\nARGUMENT .......................................................................................................................... 4\n\nI. GOVERNING LAW .................................................................................................... 4\n\nII. THE AUTOMATIC STAY OF DISCOVERY SHOULD NOT BE LIFTED .................... 6\n\n A. Plaintiffs Have Not Met Their Burden of Showing That Discovery\n Is \u201cNecessary\u201d to Prevent \u201cUndue Prejudice\u201d .......................................................... 7\n\n 1. Plaintiffs Do Not Claim That Discovery Is Necessary to Preserve\n Evidence........................................................................................................... 7\n\n 2. Plaintiffs\u2019 Failure to State a Claim Does Not Constitute\n \u201cUndue Prejudice\u201d ............................................................................................ 7\n\n B. Plaintiffs Also Have Not Met Their Burden of Showing That\n Discovery Is Particularized ....................................................................................11\n\n C. Plaintiffs\u2019 Proposed Discovery Is Not Curative and is Therefore\n Not \u201cNecessary\u201d................................................................................................... 13\n\nCONCLUSION ..................................................................................................................... 15\n\n\n\n\n i\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 3 of 22\n\n\n\n TABLE OF AUTHORITIES\n\n Page\n\nCASES\n\nBarnes v. Osofsky,\n 373 F.2d 269 (2d Cir. 1967) ............................................................................................. 14\n\nCornielsen v. Infinium Cap. Mgmt., LLC,\n 916 F.3d 589 (7th Cir. 2019) .............................................................................................. 8\n\nCremeen v. Schaefer,\n 2005 WL 4703651 (D. Kan. Dec. 7, 2005).......................................................................... 8\n\nCupat v. Palantir Techs., Inc.,\n 2025 WL 1141534 (D. Colo. Apr. 4, 2025).................................................................passim\n\nFanucchi v. Enviva Inc.,\n 2024 WL 3302564 (D. Md. July 3, 2024)............................................................................ 2\n\nFisher v. Kanas,\n 2006 WL 2239038 (E.D.N.Y. Aug. 4, 2006)................................................................. 5, 11\n\nGardner v. Major Auto. Cos.,\n 2012 WL 1230135 (E.D.N.Y. Apr. 12, 2012)...................................................................... 8\n\nHillman v. Maretta,\n 569 U.S. 483 (2013)........................................................................................................... 6\n\nIn re Ariad Pharms., Inc. Sec. Litig.,\n 842 F.3d 744 (1st Cir. 2016)............................................................................................... 3\n\nIn re Carnegie Int\u2019l Corp. Sec. Litig.,\n 107 F. Supp. 2d 676 (D. Md. 2000) .............................................................................. 5, 11\n\nIn re Century Aluminum Co. Sec. Litig.,\n 729 F.3d 1104 (9th Cir. 2013) .......................................................................... 3, 13, 14, 15\n\nIn re CFS Related Sec. Fraud Litig.,\n 179 F. Supp. 2d 1260 (N.D. Okla. 2001)......................................................................... 7, 9\n\nIn re Cree, Inc. Sec. Litig.,\n 220 F.R.D. 443 (M.D.N.C. 2004) ................................................................................... 5, 6\n\n ii\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 4 of 22\n\n\n\nIn re Fannie Mae Sec. Litig.,\n 362 F. Supp. 2d 37 (D.D.C. 2005) ...................................................................................... 6\n\nIn re Fluor Corp. Sec. Litig.,\n 1999 WL 817206 (C.D. Cal. Jan. 15, 1999) ........................................................................ 7\n\nIn re Honest Co. Sec. Litig.,\n 2023 WL 3190506 (C.D. Cal. May 1, 2023) ..................................................................... 14\n\nIn re Initial Pub. Offering Sec. Litig.,\n 236 F. Supp. 2d 286 (S.D.N.Y. 2002) ................................................................................. 5\n\nIn re Odyssey Healthcare Inc. Sec. Litig.,\n 2005 WL 1539229 (N.D. Tex. June 10, 2005)..................................................................... 9\n\nIn re Royal Ahold N.V. Sec. & Erisa Litig.,\n 220 F.R.D. 246 (D. Md. 2004).................................................................................. 7, 9, 12\n\nIn re Spectranetics Corp. Sec. Litig.,\n 2009 WL 3346611 (D. Colo. Oct. 14, 2009) ................................................................... 5, 8\n\nIn re Thornburg Mortg., Inc. Sec. Litig.,\n 2010 WL 2977620 (D.N.M. July 1, 2010)........................................................................... 9\n\nIn re Williams Sec. Litig.,\n 2003 WL 22013464 (N.D. Okla. May 22, 2003) ................................................................. 9\n\nIn re WorldCom, Inc. Sec. Litig.,\n 234 F. Supp. 2d 301 (S.D.N.Y. 2002) ............................................................................... 12\n\nKrim v. pcOrder.com, Inc.,\n 402 F.3d 489 (5th Cir. 2005) .................................................................................. 3, 14, 15\n\nMedhekar v. U.S. Dist. Ct. for the N. Dist. of California,\n 99 F.3d 325 (9th Cir. 1996) .............................................................................................. 11\n\nMiller v. French,\n 530 U.S. 327 (2000)........................................................................................................... 4\n\nMishkin v. Ageloff,\n 220 B.R. 784 (Bankr. S.D.N.Y. 1998)............................................................................... 13\n\nMori v. Saito,\n 802 F. Supp. 2d 520 (S.D.N.Y. 2011) ............................................................................... 11\n\n iii\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 5 of 22\n\n\n\nPetrie v. Elec. Game Card, Inc.,\n 761 F.3d 959 (9th Cir. 2014) .............................................................................................. 8\n\nSarantakis v. Gruttaduaria,\n 2002 WL 1803750 (N.D. Ill. Aug. 5, 2002)......................................................................... 7\n\nSG Cowen Sec. Corp. v. U.S. Dist. Ct. for N. Dist. of CA,\n 189 F.3d 909 (9th Cir. 1999) .............................................................................................. 8\n\nSlack Techs., LLC v. Pirani,\n 598 U.S. 759 (2023)............................................................................................... 2, 13, 15\n\nTellabs, Inc. v. Makor Issues & Rts., Ltd.,\n 551 U.S. 308 (2007)........................................................................................................... 4\n\nThomas v. Metropolitan Life Insurance Co.\n 540 F. Supp. 2d 1212 (W.D. Okla. 2008).......................................................................... 10\n\nU.S. Home Corp. v. Settlers Crossing, LLC,\n 2012 WL 3536691 (D. Md. Aug. 14, 2012) ........................................................................ 7\n\nVacold LLC v. Cerami,\n 2001 WL 167704 (S.D.N.Y. Feb. 16, 2001)............................................................ 6, 10, 11\n\nWaldman v. Wachovia Corp.,\n 2009 WL 86763 (S.D.N.Y. Jan. 12, 2009) .................................................................. 12, 13\n\nSTATUTES\n\n15 U.S.C. \u00a7 77z-1(b)(1) ...................................................................................................passim\n\nOTHER AUTHORITIES\n\nS. Rep. No. 104-98 (1995) ................................................................................................... 5, 8\n\n\n\n\n iv\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 6 of 22\n\n\n\n In a tacit acknowledgment that the Amended Complaint fails to plausibly allege\n\ntraceability, an essential element of their Section 11 claim, lead plaintiffs Louis Leveque and Iqbal\n\nAl Hamid (collectively, \u201cPlaintiffs\u201d) make an unusual ask. They seek leave to circumvent the\n\nautomatic stay of discovery imposed by the Private Securities Litigation Reform Act of 1995 (the\n\n\u201cPSLRA\u201d) and to issue an indefinite number of third-party subpoenas. See Motion to Partially\n\nLift the Discovery Stay and Permit Limited Discovery (Dkt. 93-1, the \u201cMotion\u201d). For at least three\n\nreasons, Plaintiffs\u2019 request is fatally and incurably flawed. Indeed, no other court has permitted\n\nthe discovery Plaintiffs seek at this stage of a Section 11 securities case. The Motion should be\n\ndenied.\n\n Plaintiffs seek relief that is inconsistent with governing law. To prevent the very sort of\n\nfishing expedition on which Plaintiffs now seek to cast their lure, Congress enacted a stop on all\n\ndiscovery in securities lawsuits while motions to dismiss are pending. Plaintiffs can demonstrate\n\nno adequate justification for evading that prohibition in this case. Their requests are also far from\n\nparticularized\u2014Plaintiffs themselves concede that they have no idea from whom they ultimately\n\nwill seek discovery, let alone how many rounds of subpoenas they will issue to unearth the\n\ninformation they hope to find. Moreover, even if this Court were to grant Plaintiffs\u2019 request, and\n\neven if Plaintiffs were to secure the hoped-for information, their discovery is unnecessary and\n\nultimately irrelevant: Plaintiffs are asking the wrong questions, and they will get the wrong\n\nanswers. Worse still, none of the discovery Plaintiffs seek is actually sufficient to cure a critical\n\npleading defect, because Plaintiffs have not alleged that the shares they purchased are traceable to\n\nthe allegedly misleading registration statements. Absent a cure, the suit cannot proceed. See Cupat\n\nv. Palantir Techs., Inc., 2025 WL 1141534, at *18 n.21 (D. Colo. Apr. 4, 2025) (considering and\n\n\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 7 of 22\n\n\n\nrejecting near-identical request to lift PSLRA discovery stay to seek documents concerning\n\ntraceability).\n\n Plaintiffs\u2019 feeble attempt to salvage their Section 11 claim should be rejected.\n\n BACKGROUND\n\n The background for the broader dispute is set forth at length in Marcum\u2019s Memorandum in\n\nSupport of its Motion to Dismiss (Dkt. 80-1, the \u201cMTD,\u201d at 4\u20137). In the interest of judicial\n\neconomy, only those facts essential to resolution of this Motion are repeated here.\n\n A. Plaintiffs\u2019 Failure to Plead Traceability\n\n \u201cA plaintiff bringing a Section 11 claim must \u2018plead and prove that he purchased shares\n\ntraceable to the allegedly defective registration statement.\u2019\u201d Fanucchi v. Enviva Inc., 2024 WL\n\n3302564, at *18 (D. Md. July 3, 2024) (Chasanow, J.) (quoting Slack Techs., LLC v. Pirani, 598\n\nU.S. 759, 770 (2023)). Rather than pleading it, Plaintiffs offered two alternative (and insufficient)\n\ntheories of traceability.\n\n Under the first theory, Plaintiffs\u2014who admit to purchasing their shares on the open market,\n\nnot in the offerings (see Dkt. 41 (Amended Complaint, or \u201cAm. Compl.\u201d) \u00b6\u00b6 423\u201324)\u2014try to\n\nallege traceability based on probability. Plaintiffs assert that the majority of shares issued prior to\n\nthe relevant offering documents were subject to lock-up restrictions and that trading volume\n\nincreased significantly in connection with each of the allegedly misleading offering documents.\n\nId. \u00b6\u00b6 419\u201320. As a result, they claim that \u201cthere is a high probability that the shares Plaintiffs\n\npurchased after these dates were traceable to the Offering Documents.\u201d Id. \u00b6 422.\n\n In the alternative, Plaintiffs advance a second theory, promising that \u201cduring the discovery\n\nphase, Plaintiffs[] will obtain the documents to evidence that [the] shares they purchased are in\n\nfact traceable to the Form S-8 Registration Statement and the Form S-1 Registration Statement.\u201d\n\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 8 of 22\n\n\n\nId. \u00b6 425. Plaintiffs argue that they may be able to \u201creconstruct the chain of title for each\n\niLearningEngines share they purchased,\u201d and that that chain will lead back to the relevant\n\nregistration statements. Id. \u00b6\u00b6 435\u201336.\n\n Marcum moved to dismiss Plaintiffs\u2019 Section 11 claim because, among the Amended\n\nComplaint\u2019s failings, Plaintiffs have not sufficiently pled traceability. See MTD 20\u201324. All\n\nindividual defendants made the same argument. See Dkt. 82-1 at 9\u201313, Dkt. 83-1 at 27\u201330, Dkt.\n\n84-1 at 21\u201327, and Dkt. 85-1 at 8\u201312. Stated succinctly, Plaintiffs\u2019 probability allegations are\n\ninsufficient to proceed, as every court of appeals to have addressed the question has held, see, e.g.,\n\nKrim v. pcOrder.com, Inc., 402 F.3d 489, 495 (5th Cir. 2005), In re Ariad Pharms., Inc. Sec. Litig.,\n\n842 F.3d 744, 755\u201356 (1st Cir. 2016), In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104,\n\n1106\u201309 (9th Cir. 2013), and Plaintiffs cannot rely on \u201ca plea to let the case proceed to discovery\n\nso that the plaintiff may locate the documents that may establish standing\u201d to satisfy a statutory\n\npleading requirement, Cupat, 2025 WL 1141534, at *16 (rejecting a materially identical discovery\n\naimed at curing deficient Section 11 traceability allegations).\n\n B. Plaintiffs\u2019 Recent Motion\n\n It appears that Plaintiffs recognize the merit of the Defendants\u2019 arguments on traceability.\n\nWithout explicitly conceding that their allegations are deficient, Plaintiffs brought the instant\n\nMotion seeking leave from the statutory stay of all discovery under the PSLRA. Plaintiffs seek to\n\nconduct the discovery outlined in their Amended Complaint now, while Defendants\u2019 Motions to\n\nDismiss are pending. Compare Am. Compl. \u00b6\u00b6 425\u201336 with Mot. at 8\u20139. To that end, they seek\n\nto issue subpoenas to, at least, Continental Stock Transfer & Trust Company (\u201cContinental\u201d) and\n\nthe Depository Trust Company (\u201cDTC\u201d), and, \u201cif necessary,\u201d AAI Solutions, Inc. and \u201ccertain\n\n[unidentified] brokers.\u201d Mot. at 4. From Continental, Plaintiffs would seek, among other things,\n\n\n\n 3\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 9 of 22\n\n\n\ntransfer journals and underlying registration records. Id. at 8. From the DTC, Plaintiffs would\n\nseek \u201cdirect deposit transactions into the DTC participant\u2019s account \u2026, securities deposits,\n\nwithdrawals, and transfer transactions on its ledgers.\u201d Id. at 5. Plaintiffs suggest that, together,\n\nthis sweeping discovery \u201cmay be sufficient to establish tracing of Plaintiffs\u2019 iLearningEngines\n\nshares.\u201d Id. (emphasis added). But, anticipating the likelihood that those will fail to bear out\n\nPlaintiffs\u2019 hopes, they also request permission to seek \u201cadditional documents from certain broker-\n\ndealers and/or AAI Solutions, Inc. to complete the tracing analysis.\u201d Id. The PSLRA discovery\n\nstay is designed to prevent this sort of fishing expedition.\n\n Because they failed to plead facts showing traceability in the Amended Complaint,\n\nPlaintiffs now seek exceptional relief and ask this Court to lift the automatic stay\u2014even though it\n\nis operating precisely as designed. Plaintiffs argue that their Motion is necessary to prevent undue\n\nprejudice and that it seeks limited, particularized, and minimally burdensome discovery (all while\n\neffectively admitting that, even with the benefit of the requested relief, they cannot be certain the\n\ndiscovery will give them they information they hope to find, see id. at 4\u20135; Am. Compl. \u00b6\u00b6 430\u2013\n\n33). Marcum now files this opposition to Plaintiffs\u2019 motion to demonstrate the fatal flaws in their\n\nrequest.\n\n ARGUMENT\n\nI. GOVERNING LAW\n\n The PSLRA was enacted \u201c[a]s a check against abusive litigation by private parties.\u201d\n\nTellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 313 (2007). As one element of that \u201ccheck,\u201d\n\nCongress included a \u201cmandatory\u201d and comprehensive stay of all discovery during the pendency\n\nof any motion to dismiss. Miller v. French, 530 U.S. 327, 350 (2000). Among other things,\n\nCongress imposed the PSLRA discovery stay in part to prevent plaintiffs from filing complaints\n\n\n\n 4\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 10 of 22\n\n\n\n\u201cin order to conduct discovery in the hopes of finding a sustainable claim.\u201d S. Rep. No. 104-98,\n\nat 14 (1995); see also In re Carnegie Int\u2019l Corp. Sec. Litig., 107 F. Supp. 2d 676, 682\u201383 (D. Md.\n\n2000) (\u201cThe purpose of the [PSLRA] was to restrict abuses in securities class-action litigation,\n\nincluding: (1) \u2026 filing lawsuits against issuers of securities in response to any significant change\n\nin stock price \u2026 (2) the targeting of deep pocket defendants; [and] (3) the abuse of the discovery\n\nprocess to coerce settlement.\u201d), In re Spectranetics Corp. Sec. Litig., 2009 WL 3346611, at *2 (D.\n\nColo. Oct. 14, 2009) (\u201cThe purpose of the discovery stay is to allow the court to determine the\n\nlegal sufficiency of a complaint alleging securities fraud before corporate defendants are forced to\n\nengage in costly discovery, which in turn may unfairly coerce early settlement.\u201d), In re Initial Pub.\n\nOffering Sec. Litig., 236 F. Supp. 2d 286, 287 (S.D.N.Y. 2002) (noting that the PSLRA discovery\n\nstay \u201creflects the balance that Congress chose to strike between the rights of defendants and\n\nplaintiffs in securities actions by allowing a defendant to test the adequacy of the complaint\u201d before\n\ndiscovery begins).\n\n In every federal securities case, the PSLRA automatically provides that \u201call discovery and\n\nother proceedings shall be stayed during the pendency of any motion to dismiss, unless the court\n\nfinds, upon the motion of any party, that particularized discovery is necessary to preserve evidence\n\nor to prevent undue prejudice to that party.\u201d 15 U.S.C. \u00a7 77z-1(b)(1). The statutory text contains\n\nno exception for discovery as to third parties. Instead, as courts throughout the nation have\n\nrecognized, \u201cthe statute\u2019s protective stay provision applies to all discovery, including that of third\n\nparties.\u201d In re Carnegie, 107 F. Supp. 2d at 680\u201381 (emphasis in original); In re Cree, Inc. Sec.\n\nLitig., 220 F.R.D. 443, 446 (M.D.N.C. 2004) (\u201call discovery is stayed against parties and non-\n\nparties alike until the court has addressed the sufficiency of the complaint\u201d); Fisher v. Kanas, 2006\n\n\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 11 of 22\n\n\n\nWL 2239038, at *2 (E.D.N.Y. Aug. 4, 2006) (\u201cTo the extent that this statute prohibits discovery of\n\nparties, it bars discovery of non-parties as well.\u201d).\n\n Congress has explicitly enumerated two, and only two, exceptions to the general stay\n\nprovision: the preservation of evidence and the prevention of undue prejudice. See 15 U.S.C.\n\n\u00a7 77z-1(b)(1). See also Hillman v. Maretta, 569 U.S. 483, 496 (2013) (quotation omitted)\n\n\u201c[W]here Congress explicitly enumerates certain exceptions to a general prohibition, additional\n\nexceptions are not to be implied.\u201d). No matter which of the two exceptions from which a movant\n\nseeks to draw, the requested discovery must also be both \u201cparticularized\u201d and \u201cnecessary.\u201d See 15\n\nU.S.C. \u00a7 77z-1(b)(1). See also, e.g., In re Cree, 220 F.R.D. at 447 (a movant \u201cmust demonstrate\n\nthat the requested discovery is particularized and necessary \u2026\u201d).\n\n The burden on a party who seeks reprieve from the PSLRA\u2019s automatic stay in any manner\n\nhas been described as a \u201cheavy one,\u201d In re Fannie Mae Sec. Litig., 362 F. Supp. 2d 37, 38 (D.D.C.\n\n2005), that requires a showing of \u201cexceptional circumstances,\u201d Vacold LLC v. Cerami, 2001 WL\n\n167704, at *6 (S.D.N.Y. Feb. 16, 2001). In fact, the only court to address a similar request on the\n\nquestion of traceability has rejected it. Cupat, 2025 WL 1141534, at *18 n.21. As described further\n\nbelow, Plaintiffs have come nowhere close to bearing that burden.\n\nII. THE AUTOMATIC STAY OF DISCOVERY SHOULD NOT BE LIFTED\n\n At every step of the requisite statutory analysis, Plaintiffs\u2019 request to evade the PSLRA\n\ndiscovery stay falls short. First, they fail to demonstrate the applicability of an enumerated\n\nexception to the PSLRA discovery stay. Second, they fail to explain how their desired discovery\n\nis \u201cparticularized.\u201d And third, they fail to show that their requests are \u201cnecessary.\u201d The Motion\n\nshould be denied.\n\n\n\n\n 6\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 12 of 22\n\n\n\n A. Plaintiffs Have Not Met Their Burden of Showing That Discovery Is \u201cNecessary\u201d\n to Prevent \u201cUndue Prejudice.\u201d\n\n The PSLRA discovery stay is subject to only two enumerated exceptions: where discovery\n\nis \u201cnecessary to preserve evidence or to prevent undue prejudice.\u201d 15 U.S.C. \u00a7 77z-1(b)(1).\n\nNeither fits here.\n\n 1. Plaintiffs Do Not Claim That Discovery Is Necessary to Preserve Evidence.\n\n Plaintiffs make no assertion that discovery is necessary to preserve evidence. 1 This is\n\nunsurprising, as this is not a situation where there are \u201creasonable concern[s] that documents may\n\nbe lost,\u201d such as where the target of the discovery was \u201cundertaking a wide-ranging corporate\n\nreorganization,\u201d including by \u201cdivest[ing] itself of key subsidiaries [with] plans to divest itself of\n\nmore.\u201d See, e.g., In re Royal Ahold N.V. Sec. & Erisa Litig., 220 F.R.D. 246, 251 (D. Md. 2004).\n\nCourts have held that \u201c[a] party alleging that discovery is \u2018necessary to preserve evidence\u2019 must\n\npresent more than mere \u2018generalizations of fading memories and allegations of possible loss or\n\ndestruction.\u2019\u201d Sarantakis v. Gruttaduaria, 2002 WL 1803750, at *2 (N.D. Ill. Aug. 5, 2002)\n\n(quoting In re Fluor Corp. Sec. Litig., 1999 WL 817206, at *3 (C.D. Cal. Jan. 15, 1999)). A movant\n\nmust instead \u201cmake a specific showing that \u2018the loss of evidence is imminent as opposed to merely\n\nspeculative.\u2019\u201d Sarantakis, 2002 WL 1803750, at *2 (quoting In re CFS Related Sec. Fraud Litig.,\n\n179 F. Supp. 2d 1260, 1265 (N.D. Okla. 2001)). Plaintiffs make no attempt to meet this burden.\n\n 2. Plaintiffs\u2019 Failure to State a Claim Does Not Constitute \u201cUndue Prejudice.\u201d\n\n Instead, Plaintiffs rest their Motion on a claim that they will be unduly prejudiced absent\n\nlicense to seek the hoped-for discovery at this time. See Mot. at 9. But the so-called \u201cprejudice\u201d\n\nthey wish to prevent is dismissal, because they have failed to meet their pleading burden. This is\n\n\n\n Plaintiffs therefore forfeit that argument. See, e.g., U.S. Home Corp. v. Settlers Crossing, LLC, 2012 WL\n 1\n\n3536691, at *4 n.9 (D. Md. Aug. 14, 2012)).\n\n 7\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 13 of 22\n\n\n\nprecisely the type of discovery\u2014where Plaintiffs can only know whether they have a claim with\n\nthe benefit of discovery\u2014the PSLRA\u2019s stay was designed to prevent. Under the PSLRA, it is\n\naxiomatic that a securities plaintiff may not engage in discovery unless and until a complaint\n\nsurvives a motion to dismiss. See 15 U.S.C. \u00a7 77z-1(b)(1) (\u201cIn any private action arising under\n\nthis subchapter, all discovery and other proceedings shall be stayed during the pendency of any\n\nmotion to dismiss\u201d). This provision \u201cclearly contemplates that \u2018discovery should be permitted in\n\nsecurities class actions only after the court has sustained the legal sufficiency of the complaint.\u2019\u201d\n\nSG Cowen Sec. Corp. v. U.S. Dist. Ct. for N. Dist. of CA, 189 F.3d 909, 912\u201313 (9th Cir. 1999)\n\n(quoting S. Rep. No. 104-98, at 14 (1995)); see also Gardner v. Major Auto. Cos., 2012 WL\n\n1230135, at *3\u20134 (E.D.N.Y. Apr. 12, 2012) (the PSLRA makes a \u201cstrong presumption that no\n\ndiscovery should take place until a court has affirmatively decided that a complaint does state a\n\nclaim\u201d).\n\n Accordingly, \u201cas a matter of law, failure to muster facts sufficient to meet the . . . pleading\n\nrequirements cannot constitute the requisite \u2018undue prejudice\u2019 to the plaintiff justifying a lift of the\n\ndiscovery stay.\u201d SG Cowen, 189 F.3d at 912\u201313. Indeed, \u201cthe PSLRA seeks to prevent,\u201d among\n\nother things, \u201cusing discovery to plead a sufficient case.\u201d In re Spectranetics, 2009 WL 3346611,\n\nat *9 (emphasis added). Courts around the country agree. See, e.g., Petrie v. Elec. Game Card,\n\nInc., 761 F.3d 959, 966 (9th Cir. 2014) (reaffirming SG Cowen\u2019s holding as described above);\n\nCremeen v. Schaefer, 2005 WL 4703651, at *2 (D. Kan. Dec. 7, 2005) (\u201c[A] plaintiff may not\n\nengage in any discovery for the purpose of discovering additional evidence or facts\u2014even if such\n\nevidence would allow a plaintiff to satisfy the Act\u2019s pleading requirements.\u201d); Cornielsen v.\n\nInfinium Cap. Mgmt., LLC, 916 F.3d 589, 601 (7th Cir. 2019) (The PSLRA discovery stay\n\n\u201cprevents a plaintiff from bringing an action without first possessing the information necessary to\n\n\n\n 8\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 14 of 22\n\n\n\nsatisfy the heightened pleading requirements of the PSLRA and using discovery to obtain that\n\ninformation and resuscitate a complaint that would otherwise be dismissed.\u201d). 2\n\n Plaintiffs\u2019 cases are not to the contrary and their reliance on them is misplaced. As\n\ndiscussed supra at pg. 7, In re Royal Ahold primarily concerned the preservation of evidence, not\n\nundue prejudice. See In re Royal Ahold, 220 F.R.D. at 251 (\u201c[T]he plaintiffs\u2019 showing of necessity\n\nto preserve evidence appears substantial, at least as to discovery from Royal Ahold.\u201d). And the\n\n\u201cundue prejudice\u201d that court there considered was not a pleading issue, but an issue of equity vis-\n\n\u00e0-vis other parties whose claims were not subject to the PSLRA discovery stay. See id. at 251\n\n(\u201c[T]he ERISA plaintiffs included in this very litigation are prepared to proceed with discovery,\n\nand there is no indication that Congress intended to extend the discovery stay to them.\u201d). So too\n\nwith In re Williams Sec. Litig., 2003 WL 22013464 (N.D. Okla. May 22, 2003), where the court\n\npermitted discovery into a discrete set of documents where the plaintiffs \u201crepresented that the\n\ninformation contained in the proposed discovery [would] not be used to defeat the motion to\n\ndismiss or to attempt to amend the complaint.\u201d Id. at *2. That is the opposite of what Plaintiffs\n\npropose here, where discovery is being sought expressly so that Plaintiffs may \u201cseek leave to\n\namend the Complaint to plead the evidence obtained in discovery that proves Plaintiffs\u2019 purchases\n\nof iLearningEngines shares are traceable to the Offering Documents.\u201d Mot. at 6.\n\n Plaintiffs also cite a non-Section 11, non-traceability-related case out of the Western\n\nDistrict of Oklahoma to argue the existence of undue prejudice absent leave to seek discovery\n\nbecause, without it, \u201cthe federal claims are subject to dismissal for lack of facts alleged in support\n\n\n 2\n See also, e.g., In re Thornburg Mortg., Inc. Sec. Litig., 2010 WL 2977620, at *9 (D.N.M. July 1, 2010)\n(\u201c[T]rying to acquire more facts for the purpose of having a better litigation position\u201d does not constitute \u201cundue\nprejudice.\u201d); In re CFS Related Sec. Fraud Litig., 179 F. Supp. 2d 1260, 1265 (N.D. Okla. 2001) (denying discovery\nfor \u201cfail[ure] to articulate any prejudice which is not inherent in the fact that the PSLRA imposes a stay in this case\u201d);\nIn re Odyssey Healthcare Inc. Sec. Litig., 2005 WL 1539229, at *2 (N.D. Tex. June 10, 2005) (denying discovery\nmeant \u201cto add factual detail to their complaint prior to this Court\u2019s resolution of the pending motion to dismiss\u201d).\n\n 9\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 15 of 22\n\n\n\nof standing.\u201d Mot. at 10 (quoting Thomas v. Metropolitan Life Insurance Co. 540 F. Supp. 2d\n\n1212, 1222 (W.D. Okla. 2008)). But the \u201cstanding\u201d discussed therein was Article III standing, not\n\na merits question of statutory standing. See id. at 1218. What\u2019s more, the quotation lacks critical\n\ncontext. The complaint in Thomas \u201cpresent[ed] a complex matrix of claims: there are two different\n\ntypes of federal claims, different types of MetLife proprietary products are in issue with respect to\n\neach set of federal claims; and the types of MetLife proprietary products purchased by the plaintiffs\n\nvaries.\u201d Id. at 1222. Plaintiffs have alleged no such circumstances here. And interpreted with\n\nPlaintiffs\u2019 gloss, Thomas would be dramatically out of keeping with the vast majority of decisions\n\ninterpreting the phrase \u201cundue prejudice\u201d in the PSLRA. See supra at pg. 8, 9 n.2.\n\n Plaintiffs\u2019 idiosyncratic interpretation of \u201cundue prejudice\u201d is placed into yet starker\n\ncontrast by Vacold LLC v. Cerami. As with Plaintiffs\u2019 other cited authorities, the Vacold court was\n\nnot concerned with traceability or statutory standing, but rather the \u201cnature and timing\u201d of a non-\n\nparty\u2019s investment. See Vacold, 2001 WL 167704, at *7 (permitting discovery on \u201climited issue\u201d).\n\nLike Plaintiffs\u2019 other cases, Vacold was not a Section 11 case, had nothing to do with traceability,\n\nand was not concerned in any way with statutory standing. In fact, Vacold was not even a class\n\naction, but an action involving corporate plaintiffs suing individuals over an allegedly fraudulent\n\ndeal. See id. at *3.\n\n Plaintiffs contend that courts have \u201crepeatedly\u201d held that \u201cundue prejudice exists \u2018where\n\ndefendants might be shielded from liability in the absence of the requested discovery.\u2019\u201d Mot. at\n\n10 (quoting Vacold, 2001 WL 167704, at *6). But traceability is a statutory bar to recovery, not a\n\nfactual one. Plaintiffs also misunderstand the proposition for which Vacold and the cases it cites\n\non this issue stand: that discovery may be warranted into a question of fact that \u201cmay \u2026 shield\n\n[defendants] from eventual liability for any material violations of the securities laws.\u201d Vacold,\n\n\n\n 10\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 16 of 22\n\n\n\n2001 WL 167704, at *6 (quotation omitted, emphasis added). Here, in contrast, the discovery\n\nsought does not concern whether defendants may be ultimately shielded from any liability, but\n\nwhether these specific plaintiffs can maintain their claims. Moreover, the key facts at issue in the\n\nVacold case were already alleged before any discovery was sought. Not so here. Compare id. at\n\n*7 (\u201cThis request does not implicate a concern that plaintiffs are seeking discovery \u2026 to support\n\na claim not alleged in the Complaint.\u201d) with Mot. at 6 (\u201cIn the event that the Court grants this\n\nmotion, Plaintiffs will seek leave to amend the Complaint to plead the evidence obtained in\n\ndiscovery\u201d).\n\n Neither the text of the PSLRA nor the caselaw permit a reading of \u201cundue prejudice\u201d as\n\nbroad as Plaintiffs propose. \u201cCongress clearly intended that complaints in these securities actions\n\nshould stand or fall based on the actual knowledge of the plaintiffs rather than information\n\nproduced \u2026 after the action has been filed.\u201d Medhekar v. U.S. Dist. Ct. for the N. Dist. of\n\nCalifornia, 99 F.3d 325, 328 (9th Cir. 1996). To read the statutory stay to permit such discovery\n\nin the name of preventing \u201cundue prejudice\u201d would be to create a different kind of undue prejudice\n\nin direct conflict with the statutory text and scheme\u2014and all in contravention of an \u201cunmistakable\u201d\n\ncongressional purpose: that \u201cdiscovery should be permitted in securities class actions only after\n\nthe court has sustained the legal sufficiency of the Complaint.\u201d In re Carnegie, 107 F. Supp. 2d at\n\n683 (quoting S. Rep. No. 104\u201398 at 14 (1995)).\n\n B. Plaintiffs Also Have Not Met Their Burden of Showing that Discovery Is\n Particularized.\n\n Plaintiffs\u2019 Motion fails for a second, independent reason: the discovery sought is not\n\n\u201cparticularized.\u201d 15 U.S.C. \u00a7 77z-1(b)(1). A request is \u201cparticularized\u201d when \u201cit is directed at\n\nspecific persons\u2019 and \u2018identifies specific types of evidence.\u2019\u201d Mori v. Saito, 802 F. Supp. 2d 520,\n\n523\u201324 (S.D.N.Y. 2011) (quoting Kanas, 2006 WL 2239038, at *2); see also In re Royal Ahold,\n\n\n 11\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 17 of 22\n\n\n\n220 F.R.D. at 250 (quoting In re WorldCom, Inc. Sec. Litig., 234 F. Supp. 2d 301, 306 (S.D.N.Y.\n\n2002)) (\u201cparticularized\u201d discovery requires a \u201cclearly defined universe of documents\u201d). As an\n\nimplicit concession of this shortcoming, Plaintiffs acknowledge that they cannot presently identify\n\nwhich, or how many, broker-dealers they ultimately would subpoena. See Mot. at 9. Plaintiffs\u2019\n\nrequest is the antithesis of a \u201cclearly defined universe of documents.\u201d In re Royal Ahold, 220\n\nF.R.D. at 250.\n\n \u201cA string of requests, even a string of individually particularized requests\u2014is not\n\nsufficiently particularized\u201d to lift the PSLRA discovery stay. Waldman v. Wachovia Corp., 2009\n\nWL 86763, at *1 (S.D.N.Y. Jan. 12, 2009). To the contrary, \u201c[a]llowing seriatim requests would\n\nundermine the purpose of the PSLRA discovery stay\u2014to reduce the burden of discovery \u2026 and\n\nprevent so-called fishing expeditions.\u201d Id. Despite Plaintiffs\u2019 assurances, their proposed discovery\n\nwould be a complex endeavor of unknown, evolving scope. By their own terms, Plaintiffs\u2019\n\nproposal starts with requests to the DTC and Continental, but they have no confidence as to\n\nwhether those efforts will lead to production of the information they need. See Mot. at 8\u20139. If\u2014\n\nand more likely, when\u2014they do not, Plaintiffs will then subpoena \u201ca limited [i.e., unknown]\n\nnumber of [unnamed, i.e., unknown] broker-dealers and, if necessary, AAI Solutions, Inc.\u201d Id. at\n\n9. Further, many of those unidentified broker-dealers were likely acting on behalf of investment\n\nadvisers, who also would then need to be subpoenaed to secure documents evidencing the identity\n\nof their selling clients. And even assuming Plaintiffs were able to trace their shares back through\n\nthis web, the sellers from whom these hypothetical broker-dealers purchased shares are likely to\n\nhave themselves purchased shares on the secondary market. The winding would continue with the\n\nissuance of yet more subpoenas. It is impossible to know how many rounds of discovery (all in\n\ncontravention of the PSLRA\u2019s automatic stay of discovery) Plaintiffs might ultimately need to\n\n\n\n 12\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 18 of 22\n\n\n\ndetermine whether they are entitled to pursue a Section 11 claim. These \u201cseriatim requests\u201d are\n\nnot particularized, they are speculative. See, e.g., Waldman, 2009 WL 86763, at *1 (discovery to\n\n\u201cidentify other materials that would be subject to further requests\u201d is not \u201csufficiently\n\nparticularized\u201d); Mishkin v. Ageloff, 220 B.R. 784, 793 & n.6 (Bankr. S.D.N.Y. 1998) (rejecting\n\n\u201cwait-and-see approach to the particularized discovery requirement,\u201d and holding that plaintiff\n\nmust \u201cspecify [the requested] discovery up-front\u201d and not \u201cas the case progresses\u201d). Because\n\nPlaintiffs seek iterative, market-wide tracing discovery, and because they intend to use it to amend\n\ntheir Amended Complaint, Plaintiffs\u2019 Motion should be denied.\n\n C. Plaintiffs\u2019 Proposed Discovery Is Not Curative and Is Therefore Not \u201cNecessary.\u201d\n\n For yet a third, independent reason, Plaintiffs\u2019 Motion should be denied as futile. Futile\n\nacts are, by definition, not \u201cnecessary\u201d to \u201cprevent\u201d any type of prejudice. 15 U.S.C. \u00a7 77z-1(b)(1).\n\nPlaintiffs contend that their proposed discovery \u201cwill enable them to plead evidence establishing\n\nthat their iLearningEngines shares purchases are traceable to the Offering Documents.\u201d Mot. at 6.\n\nPlaintiffs are wrong, and the Motion should be denied.\n\n Section 11 plaintiffs must \u201cplead and prove\u201d purchases of shares \u201ctraceable to the allegedly\n\ndefective registration statement.\u201d Slack Techs., 598 U.S. at 770. As Section 11 liability \u201cruns with\n\nregistered shares alone,\u201d id. at 769, the law requires \u201cstrict chain-of-title tracing\u201d to registered\n\nshares rather than \u201cconstructive,\u201d probabilistic, or accounting-presumptive tracing, Cupat, 2025\n\nWL 1141534, at *18 n.21. Where, as here, the Plaintiffs purchased shares in the aftermarket rather\n\nthan directly in or during the offering, courts have widely recognized that compliance with this\n\nstrict tracing requirement \u201cis \u2018often impossible,\u2019 because \u2018most trading is done through brokers\n\nwho neither know nor care whether they are getting newly registered or old shares,\u2019 and \u2018many\n\nbrokerage houses do not identify specific shares with particular accounts but instead treat the\n\naccount as having an undivided interest in the house\u2019s position.\u2019\u201d In re Century Aluminum, 729\n\n 13\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 19 of 22\n\n\n\nF.3d at 1107 (quoting Barnes v. Osofsky, 373 F.2d 269, 271\u201372 (2d Cir. 1967)). Under \u201cpresent\n\nmarket realities,\u201d shares are often held in or flow through \u201cfungibl[e]\u201d holdings \u201cin street name,\u201d\n\nwhich makes them \u201cvirtually impossible\u201d to trace. Krim, 402 F.3d at 498; see also, e.g., In re\n\nHonest Co. Sec. Litig., 2023 WL 3190506, at *4 (C.D. Cal. May 1, 2023) (\u201c[O]nce shares [have\n\nbeen] commingled \u2026 it is effectively impossible to determine the origin of any individual stock.\u201d).\n\n It is perhaps unsurprising, therefore, that only one court has so much as considered a similar\n\nrequest to lift the PSLRA discovery stay in order to seek discovery necessary to shore up\n\ninsufficiently-pled traceability in a Section 11 case. 3 That court squarely rejected the plaintiffs\u2019\n\nrequest, where materially identical discovery was sought. Compare Cupat, 2025 WL 1141534, at\n\n*18 n.21 (seeking leave to issue discovery targeting, inter alia, records \u201cconsisting of Palantir\u2019s\n\ntransfer agent\u2019s transfer journal, Participant Daily Activity Statements held by the Depository\n\nTrust Company (DTC) \u2026 transaction records maintained by broker dealers, and registration status\n\nrecords from Palantir to trace Plaintiffs\u2019 purchases.\u201d) with Mot. at 8 (proposing to target \u201crelevant\n\ndocuments such as the \u2018Participant Daily Activity Statements\u2019 \u2026 from iLearningEngines\u2019 and\n\nArrowroot\u2019s transfer agent, Continental, relevant documents such as the transfer journals and\n\nunderlying records regarding the share registrations\u201d). The Cupat court properly held that such\n\nrequests would have \u201cthe Court \u2026 replace one set of assumptions (probability based inferences)\n\nwith another (accounting presumptions)\u201d\u2014all in contravention of Slack\u2019s \u201cstrict chain-of-title\n\ntracing\u201d requirement. Cupat, 2025 WL 1141534, at *18 n.21. In other words, because the\n\ndiscovery, even if obtained, would not enable Plaintiffs to plead actual Slack-compliant tracing, it\n\n\n\n\n 3\n Counsel for Marcum has identified no other case, and Plaintiffs cite none either (as they surely would have\nif any contrary case existed).\n\n 14\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 20 of 22\n\n\n\nis not and cannot be \u201cnecessary\u201d to prevent prejudice. 15 U.S.C. \u00a7 77z-1(b)(1); Cupat, 2025 WL\n\n1141534, at *18 n.21.\n\n This is not to say that there is no way to plead or prove a Section 11 claim. To the contrary,\n\na plaintiff who \u201cpurchased directly in [an] offering\u201d or who purchased shares at a time where shares\n\nwere only available pursuant to \u201cone offering at the time of purchase\u201d may plead traceability. See\n\nKrim, 402 F.3d at 498. 4 But Plaintiffs here, each of whose stock ownership is at best multiple\n\ndegrees removed from the allegedly misleading registration documents, have not shown\n\nthemselves capable of pleading or proving that they are among the class of people to whom\n\nCongress has seen fit to grant a Section 11 cause of action\u2014those plaintiffs who \u201cpurchased shares\n\ntraceable to the allegedly defective registration statement.\u201d Slack, 598 U.S. at 770.\n\n CONCLUSION\n\n Plaintiffs\u2019 request is inconsistent with the PSLRA; Plaintiffs do not face any undue\n\nprejudice; and the discovery they seek is not particularized and is futile in any event. The Motion\n\nshould therefore be denied.\n\n\n\n\n 4\n Both the Century Aluminum court and the Supreme Court have acknowledged that traceability is a high bar\nwhich many plaintiffs will fail to clear, but both recognized that it is one Congress imposed and can alone reconsider.\nSee In re Century Aluminum, 729 F.3d at 1107 (quotation omitted) (\u201cThough difficult to meet \u2026, this tracing\nrequirement is the condition Congress has imposed for granting access to the relaxed liability requirements \u00a7 11\naffords.\u201d), Slack, 598 U.S. at 769 (\u201cAdopting a broader reading of [Section 11] would, [plaintiff] says, \u2026 better\naccomplish the purpose of the 1933 Act. We cannot endorse this line of reasoning.\u201d).\n\n 15\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 21 of 22\n\n\n\nDated: October 2, 2025 Respectfully submitted,\n /s/ Shirlethia V. Franklin\n Shirlethia V. Franklin\n D. Md. Bar No. 28662\n JONES DAY\n 51 Louisiana Avenue, N.W.\n Washington, D.C. 20001\n T: 202.879.3892\n E: sfranklin@jonesday.com\n\n Adrienne Ferraro Mueller\n Jacob J. Thackston\n Admitted Pro Hac Vice\n JONES DAY\n 901 Lakeside Ave.\n Cleveland, OH 44114\n T: 216.586.3939\n E: afmueller@jonesday.com\n jthackston@jonesday.com\n\n Samir Kaushik\n Admitted Pro Hac Vice\n JONES DAY\n 2727 North Harwood Street, Suite 500\n Dallas, Texas 75201-1515\n T: 214.220.3939\n E: skaushik@jonesday.com\n\n Attorneys for Defendant Marcum LLP\n\n\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 94 Filed 10/02/25 Page 22 of 22\n\n\n\n CERTIFICATE OF SERVICE\n\n I hereby certify that on October 2, 2025, I electronically filed the foregoing Opposition to\n\nPlaintiffs\u2019 Motion to Lift the PSLRA Discovery Stay by using the CM/ECF system which will send\n\na notice of electronic filing to all counsel or parties of record.\n\n\n\n /s/ Shirlethia V. Franklin\n Shirlethia V. Franklin\n\n\n\n\n 1\n\f","ocr_status":2,"date_upload":"2026-05-19T22:33:10.525986-07:00","document_number":"94","attachment_number":null,"pacer_doc_id":"093015207671","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/479807130/","id":479807130,"tags":[],"absolute_url":"/docket/69233925/94/1/walker-v-chidambaran/","date_created":"2026-05-19T22:32:33.740569-07:00","date_modified":"2026-05-22T08:56:10.328886-07:00","sha1":"9f5e21b9fa6eed373b704c668676149df0547d8e","page_count":1,"file_size":123406,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.94.1.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.94.1.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 94-1 Filed 10/02/25 Page 1 of 1\n\n\n\n IN THE UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n\n\n DANNY WALKER, Individually and on Civil Action No. 8:24-cv-02900-DKC\n Behalf of All Others Similarly Situated,\n Hon. Deborah K. Chasanow\n Plaintiff,\n\n v.\n\n ILEARNINGENGINES, INC., et al.,\n\n Defendants.\n\n\n [PROPOSED] ORDER DENYING PLAINTIFFS\u2019\n MOTION TO LIFT THE PSLRA DISCOVERY STAY\n\n Having considered Plaintiffs\u2019 Motion to Partially Lift the Discovery Stay and Permit\n\nLimited Discovery (the \u201cMotion\u201d), the Memorandum of Law in Support of Plaintiffs\u2019 Motion, the\n\nopposition thereto, and the reply in support of the Motion, IT IS HEREBY ORDERED that the\n\nMotion is DENIED.\n\n\n\n IT IS SO ORDERED.\n\n\n\nDated:\n\nSigned: _________________________\n\n Honorable Deborah K. Chasanow\n United States District Judge\n\n\n\n\n 1\n\f","ocr_status":2,"date_upload":"2026-05-19T22:32:49.548297-07:00","document_number":"94","attachment_number":1,"pacer_doc_id":"093015207672","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Text of Proposed Order","acms_document_guid":""}],"date_created":"2025-12-17T07:51:11.068963-08:00","date_modified":"2026-05-18T23:59:55.749277-07:00","date_filed":"2025-10-02","time_filed":null,"entry_number":94,"recap_sequence_number":"2025-10-02.001","pacer_sequence_number":272,"description":"RESPONSE re 93 MOTION for Discovery to Partially Lift the Discovery Stay filed by Marcum LLP. (Attachments: # 1 Text of Proposed Order)(Franklin, Shirlethia) (Entered: 10/02/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475305/","id":447475305,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228755/","id":462228755,"tags":[],"absolute_url":"/docket/69233925/93/walker-v-chidambaran/","date_created":"2025-12-17T07:51:11.038123-08:00","date_modified":"2026-05-22T08:54:42.273373-07:00","sha1":"5547e4467629068685ce90e3046da20fde0c1d04","page_count":3,"file_size":24780,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.93.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.93.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 93 Filed 09/19/25 Page 1 of 3\n\n\n\n UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n (Southern Division)\n\n\n DANNY WALKER, Individually and on )\n Behalf of All Others Similarly Situated, )\n )\n Plaintiff, )\n )\n v. ) Civil Action No. DKC 24-2900\n )\n HARISH CHIDAMBARAN, et al., )\n )\n Defendants. )\n )\n )\n )\n ______________________________________ )\n\n\nNOTICE OF MOTION AND MOTION OF LEAD PLAINTIFF LOUIS LEVEQUE AND\nPLAINTIFF IQBAL AL HAMID TO PARTIALLY LIFT THE DISCOVERY STAY AND\n PERMIT LIMITED DISCOVERY\n\n Lead Plaintiff Louis Leveque and Plaintiff Iqbal Al Hamid (\u201cPlaintiffs\u201d) move this Court\n\npursuant to 15 U.S.C. \u00a778u-4(b)(3)(B) to seek leave from the Private Securities Litigation Reform\n\nAct of 1995\u2019s (\u201cPSLRA\u201d) mandatory stay of discovery to conduct limited discovery. For the\n\nreasons more fully stated in the accompanying memorandum of law, Plaintiffs\u2019 motion should be\n\ngranted.\n\n On September 17, 2025, Plaintiffs\u2019 counsel conferred via video teleconference with\n\ncounsel for Defendants Puthugramam \u201cHarish\u201d Chidambaran, Sayyed Farhan Naqvi, Matthew\n\nBarger, Ian Davis, Bruce Mehlman, Michael Moe, Thomas Olivier, and Marcum LLP\n\n(collectively, \u201cDefendants\u201d). During this meet and confer, Defendants\u2019 counsel informed\n\nPlaintiffs\u2019 counsel that Defendants do not agree to the relief requested herein\n\n\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 93 Filed 09/19/25 Page 2 of 3\n\n\n\n Wherefore, Plaintiffs respectfully request that the Court grant this motion, partially lift the\n\nPSLRA discovery stay, permit Plaintiffs to undertake the discovery detailed in the accompanying\n\nmemorandum of law, and grant any other relief that the Court deems appropriate.\n\n\n\n Dated: September 18, 2025 Respectfully submitted,\n\n LEVI & KORSINSKY, LLP\n\n / s / Nicholas I. Porritt\n Nicholas I. Porritt\n Alexander A. Krot III (attorney admission\n application forthcoming)\n 1101 Vermont Ave, NW Suite 800\n Washington, DC 20005\n Tel: (202)-524-4290\n Fax: (212) 363-7171\n Email: nporritt@zlk.com\n Email: akrot@zlk.com\n\n Counsel for Lead Plaintiff Louis Leveque,\n Plaintiff Iqbal Al Hamid, and Lead\n Counsel for the Class\n\n\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 93 Filed 09/19/25 Page 3 of 3\n\n\n\n CERTIFICATE OF SERVICE\n\n I hereby certify that on September 18, 2025, I electronically filed the foregoing Notice Of\n\nMotion And Motion Of Lead Plaintiff Louis Leveque And Plaintiff Iqbal Al Hamid To Partially\n\nLift The Discovery Stay And Permit Limited Discovery by using the CM/ECF system which will\n\nsend a notice of electronic filing to all counsel or parties of record.\n\n\n\n /s/ Nicholas I. Porritt\n Nicholas I. Porritt\n\n\n\n\n 3\n\f","ocr_status":2,"date_upload":"2026-05-19T22:32:39.824192-07:00","document_number":"93","attachment_number":null,"pacer_doc_id":"093015171217","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/479807131/","id":479807131,"tags":[],"absolute_url":"/docket/69233925/93/1/walker-v-chidambaran/","date_created":"2026-05-19T22:32:43.408445-07:00","date_modified":"2026-05-22T08:54:39.020689-07:00","sha1":"3c7dd65f6f7920d3e345679d8366402a73c3efaf","page_count":15,"file_size":76198,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.93.1.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.93.1.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":"2026-05-19T22:32:59.257802-07:00","document_number":"93","attachment_number":1,"pacer_doc_id":"093015171218","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Memorandum in Support","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/479807132/","id":479807132,"tags":[],"absolute_url":"/docket/69233925/93/2/walker-v-chidambaran/","date_created":"2026-05-19T22:32:43.423491-07:00","date_modified":"2026-05-22T08:54:41.152948-07:00","sha1":"17db0b7d0d685d7a3ba95bd7b182c98a7173f774","page_count":1,"file_size":20570,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.93.2.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.93.2.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":"2026-05-19T22:33:08.133679-07:00","document_number":"93","attachment_number":2,"pacer_doc_id":"093015171219","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Text of Proposed Order","acms_document_guid":""}],"date_created":"2025-12-17T07:51:10.963119-08:00","date_modified":"2026-05-18T23:59:55.717707-07:00","date_filed":"2025-09-19","time_filed":null,"entry_number":93,"recap_sequence_number":"2025-09-19.001","pacer_sequence_number":270,"description":"MOTION for Discovery to Partially Lift the Discovery Stay by Louis Leveque, Iqbal al Hamid (Attachments: # 1 Memorandum in Support, # 2 Text of Proposed Order)(Porritt, Nicholas) (Entered: 09/19/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475304/","id":447475304,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228754/","id":462228754,"tags":[],"absolute_url":"/docket/69233925/92/walker-v-chidambaran/","date_created":"2025-12-17T07:51:10.893207-08:00","date_modified":"2026-05-22T08:38:36.150323-07:00","sha1":"4eed58356e0caff98fd756a82d82a70b061acea3","page_count":37,"file_size":695137,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.92.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.92.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 1 of 37\n\n\n\n UNITED STATES DISTRICT COURT\n DISTRICT OF MARYLAND\n\nDANNY WALKER, Individually and on Behalf\nof All Others Similarly Situated,\n\n Plaintiff,\n Case No.: 8:24-cv-02900-DKC\nv.\n Hon. Deborah K. Chasanow\nHARISH CHIDAMBARAN, et al.,\n\n Defendants.\n\n\n CONSOLIDATED MEMORANDUM OF LAW\n IN OPPOSITION TO DEFENDANTS CHIDAMBARAN\u2019S\n AND NAQVI\u2019S MOTIONS TO DISMISS THE AMENDED COMPLAINT\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 2 of 37\n\n\n\n TABLE OF CONTENTS\n\nTABLE OF CONTENTS ................................................................................................................ ii\nTABLE OF AUTHORITIES .......................................................................................................... iv\nPRELIMINARY STATEMENT...................................................................................................... 1\nBACKGROUND AND FACTUAL ALLEGATIONS .................................................................... 2\n a. iLearningEngines\u2019 Origins .............................................................................................. 2\n b. iLearningEngines Merges with Arrowroot to become a Public Company ..................... 2\n c. iLearningEngines Business ............................................................................................. 3\n d. The Hindenburg Report Reveals the Undisclosed Related Party Transactions and\n Fraudulent Revenue and Expenses .......................................................................................... 7\n e. Hindenburg Report Aftermath \u2013 Market and iLearningEngines Response .................... 8\n f. iLearningEngines Declares Bankruptcy ......................................................................... 9\n g. Post-Class Period Events ................................................................................................ 9\nLEGAL STANDARD ....................................................................................................................11\nARGUMENT .................................................................................................................................11\n I. iLearningEngines\u2019 financial statements do not fairly present the financial conditions and\n results of operations of iLearningEngines and thus do not faithfully represent what they\n purport to represent. .................................................................................................................. 11\n a. Defendants\u2019 Statements in iLearningEngines\u2019 Financial Statements were False and\n Misleading because They Failed to disclosed the Related Party Transactions with Experion\n and Misrepresented iLearningEngines\u2019 Revenue and Expenses ........................................... 11\n b. Falsity of iLearningEngines\u2019 Revenue and Expenses Adequately Pleaded (Naqvi) .... 14\n i. Defendant Naqvi\u2019s Attempt to Misdirect the Court by Emphasizing the Language\n \u201clargely fake\u201d Fails Because the Amended Complaint Alleges with Particularity Events\n Corroborating the Hindenburg Report .............................................................................. 14\n ii. Defendants attempt to hide the falsity of their financial reporting behind\n iLearningEngines\u2019 bankruptcy, liquidation, and lack of restatement. ............................... 16\n c. Round-Tripping (Chidambaran) ................................................................................... 17\n d. Related Party Misstatements (Chidambaran)................................................................ 18\n II. The Amended Complaint Pleads a Strong Inference of Scienter ..................................... 19\n a. The Amended Complaint Alleges Facts Supporting a Strong Culpable Inference for\n Defendants Naqvi and Chidambaran ..................................................................................... 20\n i. Defendants Chidambaran\u2019s and Naqvi\u2019s background and roles belie their arguments\n that the GAAP related party test requires expertise. ......................................................... 20\n\n ii\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 3 of 37\n\n\n\n ii. The roles, responsibilities, and background of Defendants Chidambaran and Naqvi\n weigh heavily on the side of knowledge of related party transactions and therefore\n support a strong inference of culpability. .......................................................................... 21\n iii. The timing and circumstances of Defendants Naqvi and Chidambaran\u2019s departures\n supports a strong culpable inference. ................................................................................ 22\n iv. Despite Defendant Chidambaran\u2019s claims to the contrary, maximizing\n iLearningEngines\u2019 valuation can serve as a qualifying motive in the scienter analysis. .. 22\n III. The Amended Complaint Adequately Pleads Loss Causation. ........................................ 23\nCONCLUSION ............................................................................................................................. 30\n\n\n\n\n iii\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 4 of 37\n\n\n\n TABLE OF AUTHORITIES\nCases Page(s)\nAshcroft v. Iqbal, 556 U.S. 662 (2009) 11\nBell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) 11\nIn re BofI Holding, Inc. Sec. Litig., 977 F.3d 781 (9th Cir. 2020) passim\nCarlucci v. Han, 907 F. Supp. 2d 709 (E.D. Va. 2012) 25\nIn re Constellation Energy Grp., Inc., 738 F. Supp. 2d 614 (D. Md. 2010) 11\nDefeo v. IonQ, Inc., 134 F.4th 153 (4th Cir. 2025) passim\nEpstein v. World Acceptance Corp., 203 F. Supp. 3d 655 (D.S.C. 2016) 30\nEspy v. J2 Global, Inc., 99 F.4th 527 (9th Cir. 2024) 29\nKatyle v. Penn Nat. Gaming, Inc., 637 F.3d 462 (4th Cir. 2011) 24\nKBC Asset Mgmt. NV v. DXC Tech. Co., 19 F.4th 601 (4th Cir. 2021). 20\nKiken v. Lumber Liquidators Holdings, Inc., 155 F. Supp. 3d 593 (E.D. Va. 2015) 16\nKlein v. Altria Grp., Inc., 525 F. Supp. 3d 638 (E.D. Va. 2021) 25\nLeacock v. IonQ, Inc., No. CV DLB-22-1306, 2024 WL 3360647 (D. Md. July 10,\n 24, 28\n2024)\nIn re Lihua Int'l, Inc. Sec. Litig., No. 14-CV-5037 (RA), 2016 WL 1312104 (S.D.N.Y.\nMar. 31, 2016) 16\nMarsh Grp. v. Prime Retail, Inc. 46 Fed App\u2019x 140 (4th Cir. 2002) 11\nMatrix Capital Mgmt. Fund, LP v. BearingPoint, Inc., 576 F.3d 172 (4th Cir. 2009) 20\nMiller v. Asensio & Co., 364 F.3d 223 (4th Cir. 2004) 23\nIn re Nektar Therapeutics Sec. Litig., 34 F.4th 828 (9th Cir. 2022) 29\nPanther Partners Inc. v. Ikanos Commc'ns, Inc., 681 F.3d 114 (2d Cir. 2012) 30\nPub. Emps. Ret. Sys. of Mississippi, Puerto Rico Tchrs. Ret. Sys. v. Amedisys, Inc.,\n 29\n769 F.3d 313 (5th Cir. 2014)\nSinger v. Reali, 883 F.3d 425 (4th Cir. 2018) 19, 23\nTeachers\u2019 Ret. Sys. of Louisiana v. Hunter, 477 F.3d 162 (4th Cir. 2007) 14, 17\nTellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) 20\nIn re Urb. Outfitters, Inc. Sec. Litig., 103 F. Supp. 3d 635, 655\u201356 (E.D. Pa. 2015) 24\nWag More Dogs, LLC v. Cozart, 680 F.3d 359 (4th Cir. 2012) 11\nZak v. Chelsea Therapeutics Int\u2019l, Ltd., 780 F.3d 597 (4th Cir. 2015) 20\n\nStatutes\n\n15 U.S.C. \u00a7 77k (\u00a7 11 of the Securities Act) passim\n15 U.S.C. \u00a7 77l(a)(2) (\u00a7 12(a)(2) of the Securities Act) 30\n15 U.S.C. \u00a7 78j(b) (Section 10(b) of the Exchange Act) 23\n\n\n\n\n iv\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 5 of 37\n\n\n\nRules\n\nFed. R. Civ. P. 9(b) 11\nRule 10b-5 23\n\nOther Authorities\n\nFASB Accounting Standards Codification (ASC) 105-10-05-01 12\nFASB Accounting Standards Codification (ASC) 606-10-05-04 13\nFASB Accounting Standards Codification (ASC) 606-10-25-1 12, 13\n 18, 19,\nFASB Accounting Standards Codification (ASC) 850-10-20\n 21\nFASB Accounting Standards Codification (ASC) 850-10-20(e) 18, 21\nFASB Accounting Standards Codification (ASC) 850-10-20(f)\u2013(g) 18\nPrivate Securities Litigation Reform Act of 1995 (PSLRA), Pub. L. No. 104-67, 109\n 11\nStat. 737 (1995)\nRegulation S-X, 17 C.F.R. \u00a7 210.4-01(a)(1) 12\n\n\n\n\n v\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 6 of 37\n\n\n\n PRELIMINARY STATEMENT\n Defendants\u2019 Motions to Dismiss attempt to portray this case as resting solely on a short-\n\nseller\u2019s suspicions. That framing is wrong. The Amended Complaint alleges, and subsequent\n\nevents confirm, far more. iLearningEngines, Inc. was simply a company that should never have\n\ngone public. It lacked any meaningful operations of its own and appeared to have existed solely to\n\ncycle revenue and expenses from its insiders\u2019 off-shore business: Experion Technologies. The\n\nAmended Complaint sets forth in painstaking detail the multiple ways that iLearningEngines\n\nimproperly recorded over 90% of its revenues in its financial statements published during the Class\n\nPeriod. This revenue was purportedly \u201cearned\u201d through transactions with an undisclosed related\n\nparty that had no economic substance and provided no benefit to iLearningEngines. When exposed\n\nby an independent research firm, Hindenburg Research, iLearningEngines swiftly collapsed: its\n\nown Board-appointed Special Committee declared its financial statements unreliable, its auditor\n\nretracted its audit opinions and then resigned, and iLearningEngines itself admitted in bankruptcy\n\nfilings that its key counterparty, Experion, was a related party and insider. The Special Committee\n\nalso required the removal of the CEO, Harish Cidambaran and CFO, Sayyed Naqvi and has\n\nreferred potential violations of law to the Department of Justice, prompting parallel DOJ and SEC\n\ninvestigations. ILearningEngines stock, which once traded as high as $10.87 per share, is now\n\nworthless. These undisputed facts\u2014ignored in Defendants\u2019 motions\u2014demonstrate falsity,\n\nscienter, and loss causation. Defendants\u2019 motions to dismiss should be denied.\n\n\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 7 of 37\n\n\n\n BACKGROUND AND FACTUAL ALLEGATIONS\n a. iLearningEngines\u2019 Origins\n iLearningEngines, Inc. (\u201ciLearningEngines\u201d) was founded in 2010 by Defendant\n\nPuthugramam \u201cHarish\u201d Chidambaran as iHealthEngines and was initially marketed as a \u201crewards-\n\nbased patient education\u201d platform. (AC \u00b6\u00b6 54 \u2013 57). While iLearningEngines claims to be an \u201cearly\n\npioneer in enterprise AI\u201d, it was not until 2020 that the company began portraying itself as AI\n\nPowered Learning Platform\u201d despite owning no patents to substantiate such claims beyond a 2012\n\nfiling for a rewards system unrelated to artificial intelligence (AC \u00b6\u00b6 60\u201361).\n\n b. iLearningEngines Merges with Arrowroot to become a Public Company\n iLearningEngines was a private company until April 16, 2024, when it became a wholly\n\nowned subsidiary of Arrowroot Acquisitions, Inc. (\u201cArrowroot\u201d), a public special purpose\n\nacquisition company (\u201cSPAC\u201d), through a reverse de-SPAC merger. (AC \u00b6 67). On January 25,\n\n2023, Arrowroot\u2019s board set a proposed valuation of $1.28 billion for iLE. (AC \u00b6 73). On April\n\n27, 2023, the parties executed the merger agreement and related support agreements. Arrowroot\n\nfiled a Form S-4 registration statement in September 2023, which was amended three times, with\n\nthe final amendment filed on January 5, 2024. (AC \u00b6 78). The merger ultimately closed on April\n\n17, 2024. (AC \u00b6 79). As a result, iLearningEngines received about $52.7 million in gross proceeds.\n\n(AC \u00b6 80). With the deal complete, Arrowroot formally changed its name to iLearningEngines,\n\nInc. (AC \u00b6 81).\n\n Although the transaction ascribed to iLearningEngines a valuation exceeding $1.2 billion,\n\nbased primarily on reported revenues for 2022, at the time of the merger, iLearningEngines was in\n\na precarious financial state: it reported only $800,000 in cash, $22 million in debt, and an\n\naccumulated deficit of $47.1 million (AC \u00b6\u00b6 6,67). Conspicuously absent from both Naqvi and\n\n\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 8 of 37\n\n\n\nChidambaran\u2019s arguments is any mention of iLearningEngines\u2019 financial weakness at the time of\n\nthe transaction.\n\n c. iLearningEngines Business\n In SEC filings following the public offering, iLearningEngines described itself as a value-\n\nadded enterprise AI company offering \u201cAI-powered learning automation\u201d and related software-as-\n\na-service (\u201cSaaS\u201d) solutions. (AC \u00b6 62). iLearningEngines stated it generates revenue \u201cprimarily\n\nthrough user licenses\u201d and reported that in 2023 its services generated $421 million of revenue,\n\nrepresenting 36% growth over the prior year, with 69% gross margins. (Id.). The company also\n\nasserted that its proprietary AI platform serves more than 1,000 enterprise end customers with over\n\n4.7 million licensed users across 12+ industry verticals such as education, healthcare, insurance,\n\nmanufacturing, cybersecurity, and energy and utilities (AC \u00b6 62).\n\n On June 3, 2024, iLearningEngines filed a Form S-1 seeking to register up to 22,624,975\n\nshares of its common stock issuable upon exercise of iLearningEngines warrants, up to\n\n100,774,669 shares of iLearningEngines common by the \u201cSelling Securityholders\u201d, and 8,250,000\n\nwarrants (the \u201cForm S-1 Registration Statement\u201d). (AC \u00b6440). The Form S-1 Registration\n\nStatement was signed by each of the Individual Defendants. (AC \u00b6\u00b6 144, 250). The Form S-1\n\nRegistration Statement was amended two times with the second amended version filed with the\n\nSEC on July 22, 2024 before it was declared effective on August 9, 2024. (AC \u00b6\u00b610, 147, 492).\n\n On June 21, 2024, after market close, iLearningEngines filed a Form S-8 registration\n\nstatement to register up to 16,208,318 shares of iLearningEngines common stock issued or issuable\n\npursuant to various incentive and employee stock plans (the \u201cForm S-8 Registration Statement\u201d).\n\n(AC \u00b6\u00b6 137, 139). The Form S-8 Registration Statement was signed by Defendants Chidambaran,\n\nNaqvi, Arackal, Olivier, Barger, Davis, Mehlman, and Moe. \u00b6138. The Form S-8 Registration\n\nStatement was automatically effective upon its filing with the SEC. \u00b6\u00b6139, 142.\n\n 3\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 9 of 37\n\n\n\n The Form S-1 Registration Statement and the Form S-8 Registration Statement provided\n\ninvestors with its financial statements for the years 2021, 2022, and 2023 as well as the first two\n\nquarters of 2024. The financial statements purported to report iLearningEngines\u2019 revenues,\n\nexpenses, and disclosed any \u201cRelated Party\u201d and \u201cRelated Party Transactions\u201d. The annual\n\nfinancial statements for 2021, 2022, and 2023 were also accompanied by an audit report provided\n\nby iLearningEngines public accounting firm: Marcum LLP which certified that the financial\n\nstatements were properly stated in accordance with generally accepted along with audited financial\n\nstatements for the years 2021-2023 and the first two quarters of 2024. (AC \u00b6\u00b6 9\u201311). The\n\nincorporated financial statements, iLearningEngines reported revenue of $217.9 million, $309.2\n\nmillion, and $420.6 million, for fiscal years 2021, 2022 and 2023, respectively. (AC \u00b6 66).\n\n After going public, iLearningEngines\u2019 filings with the SEC represented that it earned\n\nrevenue \u201cprimarily through user licenses[,]\u201d and contended that its \u201cproprietary AI platform\u201d\n\nserved \u201cmore than 1,000 enterprise end customers with over 4.7 million licensed users[,]\u201d\n\nreporting that in 2023, its services generated \u201c$421 million of revenue, representing 36% growth\n\nover the prior year, with 69% gross margins.\u201d (AC \u00b6 62). Defendants Chidambaran, Arackal, and\n\nNaqvi led iLearningEngines as CEO and founder, Chief Business Officer, and CFO and Treasurer,\n\nrespectively. (AC \u00b6 66). As of May 2024, iLearningEngines reported that it had 101 full-time\n\nemployees and 428 contract employees worldwide. Id.\n\n Most of iLearningEngines\u2019 revenue and sales are generated through its partner\n\nrelationships. (AC \u00b6 82). In financial statements filed with the SEC in 2023, iLearningEngines\n\nstated that it has partner relationships with value-added resellers (\u201cVARs\u201d), including entities\n\niLearningEngines and Chidambaran later disclosed in their response to the Hindenburg Report:\n\nExult Global, Techvantage, Vedhik Schools, and Experion. (AC \u00b6\u00b6 291; 515).\n\n\n\n 4\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 10 of 37\n\n\n\n Apart from the disclosed VARs, one company \u2013 unnamed and not identified as a related\n\nparty or affiliated entity \u2013 accounted for the majority of iLearningEngines\u2019 revenue. (AC \u00b6 88). In\n\nits 2023 financial statements, iLearningEngines called this firm the \u201cTechnology Partner.\u201d (AC \u00b6\u00b6\n\n82, 291). In iLearningEngines\u2019 Management\u2019s Discussion and Analysis for the fiscal year ended\n\nDecember 31, 2023 (\u201c2023 MD&A\u201d) and the Form S-1 Registration Statement, iLearningEngines\n\ndescribed its dealings with the Technology Partner a contractual agreement with the Technology\n\nPartner \u201cthrough which the Technology Partner purchases and integrates our platform into the\n\nTechnology Partner\u2019s own software solution provided to one of the Technology Partner\u2019s\n\ncustomers.\u201d (AC \u00b6 90). iLearningEngines further disclosed that it outsourced all of its\n\nimplementation services services to the Technology Partner. Id. In this arrangement, the\n\nTechnology Partner provided a wide variety of services for which it receives fees from\n\niLearningEngines, including research and development, sales and marketing, and implementation\n\nand support services, and that it also purchases, integrates, and resells the platform to end\n\ncustomers. (AC \u00b6 91). In the Form S-1, iLearningEngines stated that because the Technology\n\nPartner was both a customer in some arrangements and a vendor in others, iLearningEngines\n\nevaluated the fees it paid the Technology Partner for services. (AC \u00b692). It concluded the services\n\nwere distinct, the consideration was equivalent to an arms-length transaction, and therefore costs\n\npaid to the Technology Partner were not netted against revenues earned from it. Id.\n\n The importance of the Technology Partner to iLearningEngines\u2019 business was underscored\n\nby the fact that the term \u201cTechnology Partner\u201d appeared 129 times in the Form S-1 and 103 times\n\nin the Form S-4. Financial statements showed that the Technology Partner collected nearly all\n\nrevenue for iLearningEngines while offsetting over 90% of what it owed through costs it incurred.\n\n(AC \u00b6 93). For example, the unaudited financial statements for the quarter ended March 31, 2024\n\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 11 of 37\n\n\n\nincorporated in the Form S-1 disclosed that 90.9% of iLearningEngines\u2019 reported revenue was\n\ncollected by the Technology Partner and over 94.62% of its costs of revenue were invoiced by the\n\nTechnology Partner to iLE. (AC \u00b6 94). In a November 6, 2023 letter response to SEC comments\n\nregarding Form S-4, iLearningEngines asserted that it was not dependent on any single channel\n\npartner or related contract and that no single agreement was material. (AC \u00b6 95). Nevertheless, the\n\nCompany\u2019s own filings showed overwhelming dependence on the Technology Partner.\n\n Notably, iLearningEngines did not disclose that the Technology Partner was a \u201crelated\n\nparty\u201d and, as such, did not record any of its transactions with it as \u201crelated party transactions.\u201d\n\n(AC \u00b6 12). In fact, in response to comments by the SEC concerning the Form S-4 issued as part of\n\nthe merger, Arrowroot (now iLearningEngines) stated that \u201cthe Technology Partner is not a related\n\nparty and they do not hold any financial interest in iLearningEngines.\u201d (AC \u00b6\u00b6 12, 403).\n\n As alleged in the Complaint, under the applicable accounting standards, recognition of\n\nrevenue by iLearningEngines from transactions run through the Technology Partner was improper\n\nbecause it was a related party. (AC \u00b6\u00b6 111-133). The Technology Partner, later revealed to be\n\nExperion technologies, shared offices, management, directors and financial interests with\n\niLearningEngines. (AC \u00b6\u00b6 111-133; 298-300; 226-40). The transactions between the two were\n\nimproperly recorded because they do not meet GAAP\u2019s definitions of proper revenues and\n\nexpenses and because they had no commercial substance. (AC \u00b6\u00b6 305-307). Specifically, because\n\nmost of iLearningEngines\u2019 revenue and expenses were subject to netting-off provisions and flowed\n\nthrough the Technology Partner, the Technology Partner facilitated the falsification of\n\niLearningEngines\u2019 financials and revenue. (\u00b6 AC 162). iLearningEngines\u2019 financial statements\n\nshowed that it earned $420.6 million in revenue in 2023, 92.6% of the total revenue amount, or\n\n$389.4 million, was \u201cCollections by the Technology Partner.\u201d (AC \u00b6 164). In 2023, of the $389.4\n\n\n\n 6\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 12 of 37\n\n\n\nmillion in revenue collected for iLearningEngines by the Technology Partner, iLearningEngines\n\nwould receive only $1.2 million after the Technology Partner netted the $388.2 million payable\n\nfor \u201c[c]osts of services by [the] Technology Partner[.]\u201d (AC \u00b6 165). None of this revenue was real\n\nor properly recorded in accordance with GAAP and iLearningEngines\u2019 own accounting policies.\n\n d. The Hindenburg Report Reveals the Undisclosed Related Party Transactions and\n Fraudulent Revenue and Expenses\n On August 29, 2024, before the market opened, an independent, well-respected investment\n\nresearch firm known for its short positions in companies, Hindenburg Research, published a report\n\ndetailing its investigation into iLearningEngines titled \u201cAn Artificial Intelligence SPAC With\n\nArtificial Partners And Artificial Revenue\u201d (previously defined as the \u201cHindenburg Report\u201d). (AC\n\n\u00b6 159).\n\n Hindenburg Research supported the conclusions reached in the Hindenburg Report with\n\nevidence uncovered in its investigation, and provides citations, along with links to its sources,\n\nincluding SEC filings, Indian corporate records, international court filings, other documents, and\n\narchived captures of the Technology Partner\u2019s and iLearningEngines\u2019 websites. (AC \u00b6 160).\n\n Based on its research, the Hindenburg Report concluded that iLearningEngines had\n\nundisclosed related party transactions with the \u201cTechnology Partner\u201d and that \u201cthe vast majority\u201d\n\nof iLearningEngines\u2019 revenue was fake. (AC \u00b6 160). Hindenburg disclosed for the first time that\n\nthe \u201cTechnology Partner\u201d was called Experion technologies with multiple relationships between\n\nit and iLearningEngines, including common employees, offices, and management. (AC \u00b6 160-76).\n\n Hindenburg Research concluded most of iLearningEngines\u2019 revenue is fake, enabled by an\n\nExperion \u201cnetting off\u201d arrangement that inflates gross figures while reporting only a small net in\n\nan opaque jurisdiction, and the circular structure facilitates the inflation of revenue and cost while\n\nnetting out a minimal difference. (AC \u00b6 177). Following publication of the Hindenburg Report on\n\n\n 7\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 13 of 37\n\n\n\nAugust 29, 2024, shares fell 53.3% in a day\u2014from $3.19 to $1.49\u2014on unusually heavy volume\n\n(AC \u00b6 179).\n\n e. Hindenburg Report Aftermath \u2013 Market and iLearningEngines Response\n On September 5, 2024, iLearningEngines issued a press release announcing that the\n\niLearningEngines Board of Directors formed a special committee of the board (the \u201cSpecial\n\nCommittee\u201d), to investigate the Hindenburg Report\u2019s allegations. (AC \u00b6 186). The September 5,\n\n2024 press release quoted Defendant Chidambaran, who represented that iLearningEngines was\n\n\u201cproud of the AI platform that we\u2019ve built[,] [t]he company I founded has real products, contracts,\n\nand revenue,\u201d and reiterated his previous statements accusing the Hindenburg Report of being\n\nmisleading. (AC \u00b6 187).\n\n On November 18, 2024, iLearningEngines issued a issued a Form 8-K disclosing that: (i)\n\nbased on the Special Committee\u2019s investigation into the Hindenburg Report\u2019s allegations, the\n\nAudit Committee had concluded that essentially all of iLearningEngines\u2019 financial statements\n\nsince 2020 should \u201cno longer be relied upon\u201d; (ii) Marcum had withdrawn its prior opinions; (iii)\n\nthat iLearningEngines received a subpoena from the SEC on October 17, 2024; and (iv) that\n\nDefendant Naqvi was placed on administrative leave from his position as CFO on November 12,\n\n2024. (AC \u00b6 196-97). Further, the November 18, 2024 Form 8-K disclosed that Marcum informed\n\nthe Audit Committee that its reports, dated April 22, 2024 and September 1, 2023 should no longer\n\nbe relied upon. (AC \u00b6 199).\n\n The market reacted decisively to these disclosures; the price of iLearningEngines decreased\n\nby $0.405 per share from its previous closing price of $1.50 per share on Friday, November 15,\n\n2024, to close at $1.095 per share on November 18, 2024, on an abnormally large volume of over\n\n5.965 million shares. (AC \u00b6 202). In a sole trading session, iLearningEngines\u2019 stock price fell 27%.\n\nId.\n\n 8\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 14 of 37\n\n\n\n On December 10, 2024, iLearningEngines issued a press release disclosing that based on\n\nthe Special Committee\u2019s recommendation, Defendants Chidambaran, Naqvi and Arackal on\n\nadministrative leave. This disclosure caused the price of iLearningEngines stock to decrease by\n\n$0.17 per share from its previous closing price of $1.20 per share on Monday, December 9, 2024,\n\nto close at $1.03 per share on December 10, 2024, on large volume of over 1.015 million shares.\n\n(AC \u00b6 207). In a sole trading session, iLearningEngines\u2019 share price fell 14.17%. Id.\n\n f. iLearningEngines Declares Bankruptcy\n On December 23, 2024, iLearningEngines issued a press release announcing that on\n\nDecember 20, 2024, it had voluntarily initiated Chapter 11 bankruptcy proceedings in the United\n\nStates Bankruptcy Court for the District of Delaware. (AC \u00b6 208). The market responded quickly\n\nand decisively. In response to this disclosure, the price of iLearningEngines stock decreased by\n\n$0.695 per share from its previous closing price of $0.885 per share on Friday, December 20, 2024\n\nto close at $0.19 per share on December 23, 2024, on exceptionally large volume of over 29.7\n\nmillion shares. (AC \u00b6 209). In a sole trading session, iLearningEngines\u2019 share price fell 78.5%. Id.\n\n g. Post-Class Period Events\n On December 27, 2024, iLearningEngines filed a Form 8-K announcing that Defendants\n\nChidambaran, Naqvi, and Arackal had resigned from their positions of employment and any other\n\noffices of employment held at iLearningEngines, effective immediately. (AC \u00b6 214). The\n\nDecember 27, 2024 Form 8-K also disclosed that the Special Committee had reported \u201cpotential\n\nviolations of law to the Department of Justice[,]\u201dand that the Special Committee was cooperating\n\nwith the SEC\u2019s and DOJ\u2019s investigations of iLE. (AC \u00b6 215).\n\n On February 19, 2025, iLearningEngines filed a Form 8-K that disclosed that on February\n\n13, 2025, Marcum had resigned as iLearningEngines independent registered public accounting\n\nfirm, and that Marcum had advised that its audit of the consolidated financial statements for the\n\n\n 9\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 15 of 37\n\n\n\nyear ended December 31, 2023 revealed material weaknesses in iLearningEngines\u2019 internal control\n\nover corporate governance, statutory compliance, and information technology controls (AC \u00b6 217).\n\nThe February 19, 2025 Form 8-K also disclosed that Marcum had informed iLearningEngines that\n\nits reports, dated April 22, 2024 and September 1, 2023, on the Company\u2019s previously issued\n\nconsolidated financial statements could no longer be relied upon. (AC \u00b6 218).\n\n On March 28, 2025, AAI Solutions, Inc., a company for which Defendant Thomas Olivier\n\nserves as President, entered into an agreement with the iLearningEngines trustee to acquire the\n\nassets of iLearningEngines for $1,500,000 (AC \u00b6 222). As part of the bankruptcy process,\n\niLearningEngines\u2019 former interim CEO and CFO, Gerety, submitted filings on behalf of each of\n\nthe iLearningEngines entities disclosing their payments within one year of the filing of bankruptcy\n\npetitions to \u201cinsiders\u201d as defined by the Bankruptcy Code (AC \u00b6 224). The filings were signed by\n\nGerety. The list identified Experion MEA Corporation in Dubai, UAE, as both an \u201cinsider\u201d and as\n\na \u201cRelated Party\u201d that received payments totaling $87.425 million from iLearningEngines (AC \u00b6\n\n227). The filings reveal that of the $87.425 million transferred to Experion MEA Corporation by\n\niLearningEngines within one year of iLearningEngines\u2019 commencing its voluntary bankruptcy\n\nproceedings, $83.6 million was transferred via wire transfers following the IPO and that the pace\n\nof the payments accelerated in close proximity to the publication of the Hindenburg Report on\n\nAugust 29, 2024, with $63.2 million transferred between August 20, 2024, and November 8, 2024,\n\nof which $55.7 million was transferred after the publication of the Hindenburg Report (AC \u00b6 230).\n\nThese payments do not match the \u201cNet cash transfers between Company and Technology Partner\u201d\n\ndisclosed in the notes to the financial statements for 2023, in the 1Q2024 Financial Statements, or\n\nthe 2Q2024 Form 10-Q, respectively, and are in addition to the funds Experion kept due to netting\n\nof charges for costs of services purportedly provided by the Technology Partner. (AC \u00b6 231-232).\n\n\n\n 10\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 16 of 37\n\n\n\n LEGAL STANDARD\n To survive a motion to dismiss, \u201ca complaint must contain sufficient factual matter,\n\naccepted as true, to \u2018state a claim to relief that is plausible on its face.\u2019\u201d Ashcroft v. Iqbal, 556 U.S.\n\n662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); Wag More Dogs,\n\nLLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012). Securities fraud allegations must be pleaded with\n\nparticularity to comply with Fed. R. Civ. P. 9(b) and the Private Securities Litigation Reform Act\n\nof 1995 (\u201cPSLRA\u201d). In evaluating a complaint\u2019s allegations, all \u201creasonable factual inferences\u201d\n\nmust be drawn in the plaintiff's favor and all well-pled allegations must be accepted as true. \u201cIt is\n\nwell settled that \u201ca complaint should not be dismissed for failure to state a claim unless it appears\n\nbeyond doubt that the plaintiff can prove no set of facts in support of [the plaintiff\u2019s] claim which\n\nwould entitle [the plaintiff] to relief.\u201d Marsh Grp. v. Prime Retail, Inc., 46 Fed. App\u2019x. 140, 144\n\n(4th Cir. 2002). \u201c[T]he purpose of Rule 12(b)(6) is to test the sufficiency of a complaint and not\n\nto resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.\u201d\n\nIn re Constellation Energy Grp., Inc., 738 F. Supp. 2d 614, 623 (D. Md. 2010).\n\n ARGUMENT\n I. iLearningEngines\u2019 financial statements do not fairly present the financial conditions\n and results of operations of iLearningEngines and thus do not faithfully represent\n what they purport to represent.\n\n\n a. Defendants\u2019 Statements in iLearningEngines\u2019 Financial Statements were False and\n Misleading because They Failed to disclosed the Related Party Transactions with\n Experion and Misrepresented iLearningEngines\u2019 Revenue and Expenses\n During the Class Period, iLearningEngines made materially false and misleading\n\nstatements regarding virtually all reported revenue and costs \u2013 which flowed through an\n\nundisclosed related-party \u201cTechnology Partner\u201d, later revealed to be Experion. iLearningEngines\n\nfailed to make required GAAP and related-party disclosures in its S-8 and S-1/prospectus and in\n\nrepeated public statements. Despite Experion being a related party under GAAP, iLearningEngines\n 11\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 17 of 37\n\n\n\nrepeatedly omitted to disclose to the market the fact that there was significant overlap between\n\nExperion and iLearningEngines management, ownership, and executives. Once these\n\nmisrepresentations were revealed to the market, the resultant auditor withdrawal, executive\n\nsuspensions, government investigations, and bankruptcy confirmed the materially false and\n\nmisleading nature of iLearningEngines\u2019 statements and omissions.\n\n The relationship between iLearningEngines and Experion allowed iLearningEngines to\n\nrecord fake expenses and revenues without the need to cycle through cash. iLearningEngines\u2019\n\nrecording of transactions between it and Experion constitutes a GAAP violation because the\n\nreported amounts do not meet the definitions of revenues and expenses, and financial statements\n\nthat do not comport with GAAP are presumed to be misleading.\n\n Generally Accepted Accounting Principles (\u201cGAAP\u201d) comprise the conventions, rules, and\n\nprocedures U.S. companies use to prepare financial statements. AC \u00b6 254. The SEC has statutory\n\nauthority to issue GAAP to public companies and has delegated that authority to the Financial\n\nAuthority Standards Board (\u201cFASB\u201d). (AC \u00b6 255). For SEC registrants, the SEC Rules and the\n\nFASB Accounting Standards Codification (\u201cASC\u201d) are sources of authoritative GAAP. ASC 105-\n\n10-05-01. Financial statements not prepared in compliance with GAAP and filed with the SEC are\n\npresumed to be misleading and inaccurate in spite of other disclosures. Regulation S-X (17 C.F.R.\n\n\u00a7 210.4-01(a)(1)).\n\n The Complaint sets forth at length the relevant GAAP provisions and explains why the\n\nrevenues recognized by iLearningEngines were improper. (AC \u00b6\u00b6 264-313). Fundamentally,\n\niLearningEngines recognition of revenue violated ASC 606-10-25-1 because its arrangements with\n\nExperion lacked \u201ccommercial substance (that is, the risk, timing, or amount of the entity's future\n\ncash flows is expected to change as a result of the contract).\u201d Further issues were that (a) the\n\n\n\n 12\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 18 of 37\n\n\n\ntransaction price is nil or non-existent because any revenues recognized are the result of the round-\n\ntripping transactions and no consideration is expected to be received, (b) no goods or services are\n\ntransferred to a customer, (c) the seller does not have any performance obligations because there\n\nis no actual transfer of goods or services to a customer, or (d) no allocation of transaction price to\n\nperformance obligations could be made due to the non-existence of either element. ASC 606-10-\n\n05-04 and ASC 606-10-25-1. This improperly recognized revenue amounted to 94% of total\n\nrevenue in 2021, 96.3% in 2022, and 92.6% in 2023. (AC \u00b6 303). In total, iLearningEngines\n\nclaimed nearly $900 million in revenue over three years from Experion. Id. None of it was properly\n\nrecognized under GAAP. (AC \u00b6 307).\n\n This violation was made more egregious by masking the identity of the Technology\n\nPartner. Although iLearningEngines disclosed that it had a long-term relationship with a\n\nTechnology Partner, it did not disclose that the Technology Partner was a related party.\n\niLearningEngines did not formally disclose this until after it had filed for bankruptcy.\n\niLearningEngines\u2019 disclosures stating that it \u201cdetermined the services it received from the\n\nTechnology Partner were distinct and the consideration paid to the Technology Partner was\n\nequivalent to an arms-length transaction\u201d are false because iLearningEngines and Experion were\n\nrelated parties, and GAAP prohibits representing transactions between them as \u201carms-length.\u201d (AC\n\n\u00b6 309.) This failure to disclose was itself a violation of GAAP rendering iLearningEngines\u2019\n\nfinancial statements misleading independent of the improper recognition of revenue.\n\n The payments made to Experian MEA Corporation between December 22, 2023 and\n\nNovember 8, 2024, disclosed by iLearningEngines as part of the bankruptcy process were large\n\nround amounts \u2013 an attribute of a financial transaction without economic substance. AC \u00b6 310.\n\nThe reason provided for each payment is marked as \u201cOutgoing wire transfer\u201d instead of a\n\n\n\n 13\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 19 of 37\n\n\n\nlegitimate business purpose. Id. Thus, these payments do not appear to be made for distinct goods\n\nor services, lacking a legitimate business purpose, and therefore should have been recorded as\n\neither a reduction of revenue earned by iLearningEngines from Experion or an expense. Therefore,\n\niLearningEngines\u2019 revenue and net revenue is overstated by the amount of these payments, over\n\n$87.4 million. AC \u00b6 311. Thus, the revenue reported in iLearningEngines\u2019 financial statements for\n\n2023, the first quarter 2024, and the second quarter 2024 were misstated by at least $2.0 million,\n\n$1.75 million, and $12.225 million, respectively. AC \u00b6 311.\n\n Additionally, the non-Experion iLearningEngines transactions appear not to have cost of\n\nsales, despite showing sizeable revenues. In summary, due to the lack of related party transactions\n\nand the suspicious characteristics of the reported amounts, iLearningEngines\u2019 financial statements\n\nfor the relevant periods do not provide financial information about the reporting entity that is useful\n\nto financial statement users and do not faithfully represent iLearningEngines\u2019 results of operations\n\nand financial condition. AC \u00b6 312.\n\n b. Falsity of iLearningEngines\u2019 Revenue and Expenses Adequately Pleaded (Naqvi)\n i. Defendant Naqvi\u2019s Attempt to Misdirect the Court by Emphasizing\n the Language \u201clargely fake\u201d Fails Because the Amended Complaint\n Alleges with Particularity Events Corroborating the Hindenburg\n Report\n In the Fourth Circuit, Rule 9(b) requires securities fraud pleadings to state \u201cthe time, place,\n\nand contents of the false representations, as well as the identity of the person making the\n\nmisrepresentation and what he obtained thereby.\u201d Teachers\u2019 Retirement System of Louisiana v.\n\nHunter, 477 F.3d 162 (4th Cir. 2007) (internal citations omitted). Here, Defendant Naqvi\u2019s\n\ncontention that the amended complaint does not plead with requisite particularity why the\n\nmisrepresentations were false when made (Naqvi MTD at 9) is directly contradicted by the facts\n\nalleged in the amended complaint showing the identity of the speaker, the contents of the\n\n\n 14\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 20 of 37\n\n\n\nmisrepresentation, and what was obtained. Specifically, the amended complaint contains factual\n\nallegations showing that the contents of iLearningEngines\u2019 financial statements reported revenues\n\nand expenses from transactions with an undisclosed related party and lacking commercial\n\nsubstance (AC \u00b6 310), violating GAAP (AC \u00b6\u00b6 332, 337, 346, 357 386), iLearningEngines failed\n\nto report related party transactions in its disclosures, and from this failure to report accurately its\n\nfinancial condition gained the ability inflate its revenue and expenses without any exchange of\n\ncash or other real consideration. AC \u00b6 177.\n\n Defendant Naqvi\u2019s Motion to Dismiss misleadingly casts the Amended Complaint\u2019s\n\nallegations regarding iLearningEngines\u2019 revenue and expenses as overly reliant on a short-seller\u2019s\n\nreport, and lacking specificity, but this is misleading. Naqvi\u2019s argument reduces the amended\n\ncomplaint\u2019s falsity arguments to the phrase \u201clargely fake\u201d while ignoring that the Amended\n\nComplaint goes beyond merely repackaging the Hindenburg Report\u2019s claims; it specifically pleads\n\nthat iLearningEngines\u2019 revenue and expenses were misstated because they do not comply with\n\nGAAP. The Amended Complaint contains over eighty paragraphs of detailed allegations\n\nexplaining why the revenue was improperly recognized. (AC \u00b6111-33, 254-313). The bankruptcy\n\ndisclosures further revealed the scope of iLearningEngines\u2019 transactions with Experion; fifty wire\n\ntransfers transferring $87.425 million (AC \u00b6 532), as well as revealing the extent of the related\n\nparty relationships between Experion and iLearningEngines and iLearningEngines\u2019 admission of\n\nrelated party relationships. AC \u00b6\u00b6 297-302.\n\n Naqvi also fails to address iLearningEngines\u2019 admission of the falsity of its financial\n\nstatements through its on November 18, 2024, announcement that its financial statements from\n\n2020 through the second quarter 2024 should no longer be relied upon \u2013 a revelation that occurred\n\nas a result of iLearningEngines\u2019 own investigation of the Hindenburg Report\u2019s allegations. AC \u00b6\n\n\n\n 15\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 21 of 37\n\n\n\n17. The amended complaint\u2019s allegations that iLearningEngines made repeated misstatements in\n\nits financial statements and then later admitted those allegations is sufficient to show falsity. See\n\nKiken v. Lumber Liquidators Holdings, Inc., 155 F. Supp. 3d 593, 604\u201305 (E.D. Va. 2015) (finding\n\nthat allegations that defendants repeatedly assuring investors of continued margin growth and later\n\nadmitting that these assurances were not in compliance with statutory law is enough to show\n\nfalsity); see also In re Lihua Int'l, Inc. Sec. Litig., No. 14-CV-5037 (RA), 2016 WL 1312104, at\n\n*11 (S.D.N.Y. Mar. 31, 2016) (\u201cBecause Lihua itself acknowledges that the financial information\n\nin its 2013 First Quarter 10-Q is unreliable, Plaintiffs have adequately pled its falsity.\u201d)\n\n ii. Defendants attempt to hide the falsity of their financial reporting\n behind iLearningEngines\u2019 bankruptcy, liquidation, and lack of\n restatement.\n Naqvi points to the fact that iLearningEngines has not restated its financial statements to\n\nmisleadingly suggest that the amended complaint\u2019s allegations that iLearningEngines\u2019 financial\n\nstatements are false are merely conclusory. Naqvi MTD, at 10. It is only because of its bankruptcy\n\nand subsequent liquidation that iLearningEngines was not required to restate its financial\n\nstatements. This should not be used as shield for its fraud. iLearningEngines\u2019 November 18, 2024\n\nannouncement confirmed the falsity of its reported revenue and expenses, and it must not be\n\npermitted to contend that because there was no restatement, that the amended complaint fails to\n\nallege \u201cthe size of the supposed distortion of iLearningEngines\u2019 finances.\u201d Naqvi Mem., at 10. The\n\nbankruptcy disclosures confirm that particular claim made by Naqvi is misleading; the size of the\n\n\u201cdistortion\u201d, at least with respect to the 50 payments to Experion MEA without economic\n\nsubstance revealed after the Hindenburg Report, is specifically alleged in \u00b6 532 of the amended\n\ncomplaint, and the amended complaint adequately details why revenue and expenses flowing\n\nthrough a related party and netted from amounts owed the related party does not comply with\n\nGAAP for reporting revenue and is therefore materially misleading. Further corroboration of the\n 16\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 22 of 37\n\n\n\nfalsity of iLearningEngines\u2019 reported finances comes from the actions of iLearningEngines\n\nfollowing the publication of the Hindenburg Report, including the formation of the Special\n\nCommittee, its withdrawal of iLearningEngines\u2019 financial statements, the self-referral to the SEC\n\nand the DOJ. There is no doubt that iLearningEngines\u2019 financial statements are false, and the lack\n\nof a restatement indicates only that iLearningEngines was not required to restate its finances, not\n\nthat the financial statements it made were true.\n\n In contending that the amended complaint offers only \u201cformulas and conclusions\u201d (Naqvi\n\nMTD, at 9), Naqvi is not only contradicted by the facts alleged, but also applies an impermissible\n\nstandard to the amended complaint\u2019s contentions. See Kiken, 155 F. Supp. 3d at 601, \u201c[it] is not\n\nnecessary for Plaintiff to prove absolute, incontrovertible falsity at the motion to dismiss stage.\u201d\n\n(internal citation omitted).\n\n c. Round-Tripping (Chidambaran)\n Chidambaran\u2019s focus on round-tripping is an attempt to distract from the core of the\n\namended complaint\u2019s allegations: that iLearningEngines\u2019 arrangement with Experion allowed\n\niLearningEngines to grossly inflate revenues while transferring cash and cash equivalents to\n\nExperion. The transactions between Experion and iLearningEngines lacked economic substance,\n\nregardless whether the round-trip constituted a 100% offset of revenue. The round-tripping\n\narrangement discussed in Hunter, 477 F.3d at 178 is a \u201ctypical\u201d round-tripping arrangement, as\n\nconfirmed by Defendants\u2019 but does not represent the only way to round-trip, as confirmed by\n\nChidambaran attempts to escape on a technicality, while ignoring the accounting and economic\n\nsubstance components of a round-tripping arrangement. This is not merely a short seller report\n\ncase. Here iLearningEngines not only issued non-reliance on its financial statements, but it also\n\nlaunched a special committee and self-reported potential violations of law to the DOJ with the\n\nDOJ and SEC both launching investigations. See e.g. \u00b6\u00b6 196-200. Chidambaran completely\n\n 17\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 23 of 37\n\n\n\ndisregards the withdrawl of the financial statements, the resignation of auditors, the special\n\ninvestigation\u2019s focus on him, and his departure under highly suspicious circumstances in the midst\n\nof the Special Committee\u2019s investigation. These independent factual allegations not only support\n\nscienter, but the falsity of his statements.\n\n d. Related Party Misstatements (Chidambaran)\n Chidambaran cherry-picks from within ASC 850-10-20(f) and (g), to misleadingly argue\n\nthat iLearningEngines officers and family members with overlapping ownership and control at\n\nExperion do not possess the requisite \u201clevel of influence and control required by ASC 850.\u201d\n\nChidambaran MTD at 10. This argument is attempts to misdirect the Court and is clearly\n\ncontradicted by ASC 850-10-20(e), which defines as a related party \u201c[m]anagement of the entity\n\nand members of their immediate families[,]\u201d and the facts asserted in the Amended Complaint.\n\nASC 850-10-20. \u201cManagement\u201d is defined as \u201c[p]ersons who are responsible for achieving the\n\nobjectives of the entity and who have the authority to establish policies and make decisions by\n\nwhich objectives are to be pursued[,] [m]anagement normally includes members of the board of\n\ndirectors, the chief executive officer, chief operating officer, vice presidents in charge of principal\n\nbusiness functions (such as sales, administration, or finance), and other persons who perform\n\nsimilar policy making functions.\u201d\n\n iLearningEngines\u2019 President and Chief Business Officer, Defendant Arackal, was\n\nExperion India\u2019s director from November 2017 through April 2022 while also serving as a\n\nmanaging director of Experion MEA through at least 2019, and while at Experion India and\n\nExperion MEA, was appointed as a director of iLearningEngines India Private Limited. AC \u00b6 299.\n\nJojo Philip, the brother of iLearningEngines\u2019 Head of Channel Partnerships (AC \u00b6 300), owns 35%\n\nof Experion India, and 45% of Experion MEA, and is presently the Chief Operating Officer of\n\nSynergy Technologies AI, a \u201cgold partner\u201d of iLE. AC \u00b6\u00b6 131-133. Ratish Nair is\n\n 18\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 24 of 37\n\n\n\niLearningEngines\u2019 AVP of Sales & Business Development, and in 2023, and was director of\n\nExperion India and shareholder. AC \u00b6\u00b6 119-120. Tom Thomas, iLearningEngines\u2019 Senior Project\n\nManager and iLearningEngines\u2019 Director of Service Delivery is also an Experion India director\n\nand shareholder. AC \u00b6\u00b6 119 \u2013 122. Apart from the definition of management including \u201cmembers\n\nof the board of directors\u201d and the \u201cchief operating officer\u201d, the roles of Defendant Chidambaran,\n\nDefendant Arackal, Ratish Nair, and Jojo Philip make them \u201c[o]ther parties that can significantly\n\ninfluence the management or operating policies of the transacting parties or that have an ownership\n\ninterest in one of the transacting parties and can significantly influence the management or\n\noperating policies\u201d of Experion India, Experion MEA, and Synergy Technologies AI, and \u201ccan\n\nsignificantly influence\u201d iLE.\n\n Chidambaran attempts to confuse the court in arguing that the related party allegations have\n\nnot plead with requisite specificity the authority \u201cactually exerted by the identified\n\niLearningEngines officers and family members[.]\u201d Chidambaran MTD at 11. However, as\n\noutlined above, to meet the definition of a related party under ASC 850-10-20, no actual control\n\nis required. ASC 850-10-20. Merely being a director is to make a person \u201c[m]anagement of the\n\nentity\u201d and thus a related party under ASC 850-10-20(e), and only the ability to control or\n\nsignificantly influence management or operational policies is required under ASC 850-10-20 (f)\n\nand (g). Further, iLearningEngines subsequently admitted that Experion was a related party.\n\n II. The Amended Complaint Pleads a Strong Inference of Scienter\n In stark contravention to Defendants\u2019 argument that the amended complaint does not\n\nsufficiently allege facts supporting a strong inference of scienter, the amended complaint alleges\n\na holistic set of facts creating an overwhelmingly cogent and compelling inference of scienter.\n\n To adequately allege scienter, a plaintiff must show \u201cthat the defendant acted with \u2018a\n\nmental state embracing intent to deceive, manipulate, or defraud.\u2019\u201d Singer v. Reali, 883 F.3d 425\n\n 19\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 25 of 37\n\n\n\n(4th Cir. 2018) (internal citations omitted). A complaint may defeat a motion to dismiss by alleging\n\nreckless conduct. Id. (citing Matrix Capital Mgmt. Fund, LP v. BearingPoint, Inc., 576 F.3d 172,\n\n181 (4th Cir. 2009)). Reckless conduct sufficient to plead a strong inference of scienter must be so\n\nunreasonable as to present a danger of misleading a plaintiff to the extent that the danger was either\n\nknown by the defendant, or so obvious the defendant must have been aware of it. Id. (citing Zak v.\n\nChelsea Therapeutics Int\u2019l, Ltd., 780 F.3d 597, 606 (4th Cir. 2015)).\n\n a. The Amended Complaint Alleges Facts Supporting a Strong Culpable Inference for\n Defendants Naqvi and Chidambaran\n In analyzing scienter, courts must analyze all pleaded facts collectively and compare\n\ncompeting inferences to determine if a strong inference of scienter has been pleaded. Tellabs, Inc.\n\nv. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007). Core-operations allegations are relevant to a\n\ncourt\u2019s holistic analysis of scienter, but bare allegations of scienter, without more, are not enough\n\nto support a strong inference of scienter. KBC Asset Mgmt. NV v. DXC Tech. Co., 19 F.4th 601,\n\n614\u201315 (4th Cir. 2021). Here, the amended complaint is replete with factual allegations\n\ndemonstrating Defendants\u2019 knowledge or reckless disregard of the risk of misleading plaintiffs, of\n\nthe misleading nature of iLearningEngines\u2019 financial reporting and failure to disclose related party\n\ntransactions and transactions without economic substance.\n\n The significance of the Experion-iLearningEngines relationship, comprising over 90% of\n\nrevenues and costs of sales (AC \u00b6 521), weighs heavily on the side of culpability, as nearly all of\n\niLearningEngines\u2019 reported revenues and expenses flowed through Experion, rendering it a critical\n\npart of iLearningEngines\u2019 business.\n\n i. Defendants Chidambaran\u2019s and Naqvi\u2019s background and roles belie\n their arguments that the GAAP related party test requires expertise.\n Defendants attempt to deflect the great weight of facts demonstrating, at a minimum,\n\nDefendants\u2019 knowledge or recklessness by contending that the GAAP related party test is\n\n 20\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 26 of 37\n\n\n\nsomehow complex enough that only accounting professionals could have determined whether\n\nExperion was a related party, or that failing to disclose Experion transactions was simple error.\n\nChidambaran MTD, at 18; Naqvi MTD, at 20. Not so. The GAAP test is simple, and ASC 850-10-\n\n20(e), defining a related party as \u201c[m]anagement of the entity and members of their immediate\n\nfamilies\u201d requires no complicated analysis and leaves no room for subjective judgment. AC \u00b6 282.\n\nSeveral high-level iLearningEngines executives meet this test. AC \u00b6 298. Moreover, Defendant\n\nChidambaran\u2019s address was listed as the American headquarters for Experion. Id. Defendant\n\nNaqvi, as the CFO of iLE, also worked at Ernst & Young as a \u201cTransaction Advisor[.]\u201d AC \u00b6 32.\n\nTo claim that a CFO with a background at well-known accounting firm and the CEO, who is listed\n\nas the contact and shares an address with the Experion entity made a simple error in judgement in\n\nfailing to disclose related party transactions beggars belief.\n\n ii. The roles, responsibilities, and background of Defendants\n Chidambaran and Naqvi weigh heavily on the side of knowledge of\n related party transactions and therefore support a strong inference\n of culpability.\n Chidambaran does not address the undisclosed wire transfers to Experion. While\n\nDefendant Naqvi attempts to argue that the large, undisclosed wire transfers to Experion revealed\n\nby the bankruptcy disclosures do not weigh on the side of culpability (Naqvi MTD, at 21), because\n\nExperion was a \u201ccounterparty\u201d rather than a related party, other factual allegations surrounding\n\nthese transfers support a cogent and compelling inference of culpability. First, it is highly\n\nimplausible a CEO and CFO unaware of 50 transactions totaling $87.425 million to an entity at\n\nwhich several iLearningEngines executives served as directors, executives, or shareholders. AC \u00b6\n\n532. It is even more implausible that a CEO and CFO would be unaware of the lack of economic\n\nsubstance for such transactions, and why those transactions occurred and in round amounts without\n\nIt is also highly improbable that a CFO would be unaware of these undisclosed transactions failing\n\n\n 21\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 27 of 37\n\n\n\nto match disclosed net cash transfers between iLearningEngines and Experion\u201d. AC \u00b6 331. Finally,\n\nneither Defendant Naqvi nor Defendant Chidambaran address the allegation that the \u201cpace of the\n\npayments accelerated in close proximity to the publication of the Hindenburg Report on August\n\n29, 2024, with $63.2 million transferred between August 20, 2024, and November 8, 2024, of\n\nwhich $55.7 million was transferred after the publication of the Hindenburg Report. AC \u00b6 230.\n\nThis fact weighs strongly in favor of culpability, as it appears that Defendants Naqvi and\n\nChidambaran rushed to move money out of iLearningEngines and into Experion in anticipation of\n\nregulatory and investor scrutiny.\n\n iii. The timing and circumstances of Defendants Naqvi and\n Chidambaran\u2019s departures supports a strong culpable inference.\n While Naqvi and Chidambaran contend that the resignations of Defendants Naqvi and\n\nChidambaran are \u201cuninformative\u201d (Naqvi MTD, at 20), and \u201cnot helpful\u201d (Chidambaran MTD, at\n\n22) to the scienter analysis, the particular context and timing of both defendants\u2019 departure lends\n\nweight to the culpable inference. Both defendants were placed on leave pending the conclusion of\n\nthe Special Committee\u2019s investigation to the allegations of the Hindenburg Report. AC \u00b6 527. Both\n\ndefendants resigned on December 23, 2024, while the investigation was still ongoing (AC \u00b6 528);\n\nthe Special Committee announced it was self-reporting potential violations of law to the DOJ on\n\nDecember 27, 2024. AC \u00b6 215. The timing of the departures lends further weight to the inference\n\nthat Defendants Naqvi and Chidambaran resigned in lieu of termination for cause. AC \u00b6 530.\n\n iv. Despite Defendant Chidambaran\u2019s claims to the contrary, maximizing\n iLearningEngines\u2019 valuation can serve as a qualifying motive in the\n scienter analysis.\n While only Chidambaran argues that there is no motive to defraud, for an \u201cAI company\u201d\n\nwithout any real AI products and seeking to go public, there is a clear incentive to maximize the\n\ncompany\u2019s perceived value prior to a public offering. One obvious way to maximize valuation\n\n\n 22\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 28 of 37\n\n\n\nwithout any products is to manipulate revenue and expenses to create the illusion that mirage that\n\nthe company\u2019s product has buyers, and running nearly all revenue and costs of revenue through a\n\nrelated party with a netting arrangement allowed iLearningEngines to input whatever revenue and\n\nexpenses it wanted without any need for cash. The fact that when liquidated, iLearningEngines\n\nwas sold for $1.5 million, in April 2025 after having been valued at over $1.2 billion prior to its\n\nde-SPAC in April 2024 shows that, for a year, iLearningEngines\u2019 valuation fraud was successful.\n\n(AC \u00b6 22). While Chidambaran attempts to defend against scienter by questioning why\n\niLearningEngines would disclose its relationship with Experion in its public filings but not disclose\n\nthat Experion was a related party, it seems readily apparent that if iLearningEngines disclosed that\n\nover 90% of its revenue and cost of revenue were running through a related party, investors would\n\nalmost certainly value the company very differently.\n\nIII. The Amended Complaint Adequately Pleads Loss Causation.\n To plead a claim under Section 10(b) and Rule 10b-5, a plaintiff must plead \u201ca sufficiently\n\ndirect relationship between the plaintiff's economic loss and the defendant's fraudulent conduct.\u201d\n\nMiller v. Asensio & Co., 364 F.3d 223, 232 (4th Cir.2004). The Fourth Circuit has recognized this\n\nmay be adequately pleaded through \u201ccorrective disclosures\u201d, \u201cmaterialization of the risk\u201d, or an\n\n\u201camalgam\u201d of these two. Defeo v. IonQ, Inc., 134 F.4th 153, 162 (4th Cir. 2025)(quoting Singer\n\nv. Reali, 883 F.3d 425, 445-47 (4th Cir. 2018))(citations omitted).\u201cThe ultimate loss causation\n\ninquiry under either the corrective disclosure theory or the materialization of a concealed risk\n\ntheory is the same: whether a \u2018misstatement or omission concealed something from the market\n\nthat, when disclosed, negatively affected the value of the security.\u2019\u201d Singer, 883 F.3d at 446\n\n(quoting In re Vivendi, S.A. Sec. Litig., 838 F.3d 223, 261-62 (2d Cir. 2016)).\n\n The disclosure of the alleged fraud need not be the sole reason for the depreciation of the\n\nstock price; rather, plaintiff must allege facts that indicate the misrepresentation inflated the stock\n\n 23\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 29 of 37\n\n\n\nprice, and the truth had a proximate and negative impact on the value of stock. Id. at 447. Although\n\na corrective disclosure must be related to the same subject as the misrepresentation, there is no\n\nrequirement that the disclosure exactly mirror the earlier misrepresentation. Katyle v. Penn Nat.\n\nGaming, Inc., 637 F.3d 462, 472 (4th Cir. 2011). The information newly disclosed \u201cmust reveal to\n\nthe market in some sense the fraudulent nature of\u201d the alleged misrepresentation or omission, and\n\n\u201cmust at least relate back to the misrepresentation [or omission] and not to some other negative\n\ninformation about the company.\u201d Id. Moreover, the \u201cexposure of the alleged fraud need not occur\n\nin a single, all-encompassing corrective disclosure\u201d; instead, the truth can be revealed through a\n\nseries of partial corrective disclosures. with the \u201centire series of partial disclosures [prompting] the\n\nstock price deflation.\u201d Id.; see also Singer, 883 F.3d at 445\u201346 Further, the market may learn the\n\ntruth regarding the misrepresentation from \u201cwhistleblowers, analysts questioning financial results,\n\nresignation of CFOs or auditors, announcements by the company of changes in accounting\n\ntreatment going forward, newspapers and journals,\u201d and other informers who are otherwise not\n\nrepresentatives of the company or the company itself. In re Urb. Outfitters, Inc. Sec. Litig., 103 F.\n\nSupp. 3d 635, 655\u201356 (E.D. Pa. 2015).\n\n \u201cBecause loss causation is fact-dependent, the specificity sufficient to plead loss causation\n\nwill vary depending on the facts and circumstances of each case.\u201d Katyle, 637 F.3d at 472. Relevant\n\nfactors include the source of the new information entering the market, its credibility, its\n\nrelationship to the alleged misrepresentation or omission, any reaction of the company\u2019s stock\n\nprice to the news, and the temporal proximity of that reaction to the new information. See Singer,\n\n883 F.3d at 447 (stock price drop immediately following analyst report sufficient to plead loss\n\ncausation); Leacock v. IonQ, Inc., No. CV DLB-22-1306, 2024 WL 3360647, at *11\u201313 (D. Md.\n\nJuly 10, 2024), aff'd sub nom. Defeo v. IonQ, Inc., 134 F.4th 153 (4th Cir. 2025) (assessing source\n\n\n\n 24\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 30 of 37\n\n\n\nand credibility of news); see also In re BofI Holding, Inc. Sec. Litig., 977 F.3d 781, 792 (9th Cir.\n\n2020)(motive of source is \u201cjust one factor among many that market participants would have\n\nweighed in deciding how much credence his claims deserved.\u201d). Due to the fact-intensive nature\n\nof the inquiry, loss causation is usually reserved to the trier of fact. Carlucci v. Han, 907 F. Supp.\n\n2d 709, 724 (E.D. Va. 2012). \u201cSo long as the plaintiff alleges facts to support a theory that is not\n\nfacially implausible, the court's skepticism is best reserved for later stages of the proceedings\n\nwhere the plaintiff's case can be rejected on evidentiary grounds.\u201d Klein v. Altria Grp., Inc., 525\n\nF. Supp. 3d 638, 669 (E.D. Va. 2021) (citations omitted).\n\n The Amended Complaint\u2019s allegations of loss causation are more than sufficient under this\n\nstandard. Plaintiffs allege that the stock price of iLearningEngines\u2019 common stock was artificially\n\nand fraudulently inflated throughout the Class Period, from April 20, 2024 to December 20, 2024.\n\n\u00b6 554. The artificial inflation first began to come out of the stock price on August 29, 2024, when\n\nthe stock price declined by $1.70 per share, a 53.3% from its former closing price, on a single day\n\non abnormally large volume of over 12.568 million shares. \u00b6 179. This stock price decline\n\nimmediately followed the publication of an investigative report from Hindenburg Research. \u00b6 159.\n\nThis report was based on Hindenburg\u2019s painstaking investigation using domestic and foreign\n\ncorporate records, including India and the United Arab Emirates, Indian court records, patent\n\nrecords, archived internet webpages going back ten years, social media postings, and a report from\n\n\u201ccorporate intelligence firm Diligencia\u201d. See \u00b6 160; see also Chidambaran Mem. Ex. 1. It is\n\nextensively sourced with thirty footnotes. Id. None of the sources are anonymous. Id. Hindenburg\n\nrepresented that \u201cto the best of Hindenburg\u2019s ability and belief, all information contained herein is\n\naccurate and reliable.\u201d Id. at 23.\n\n\n\n\n 25\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 31 of 37\n\n\n\n The new information disclosed by Hindenburg that had not previously been disclosed by\n\niLearningEngines was that the vast majority of its revenue came from related party transactions\n\nand the revenue was largely if not entirely improperly recognized under relevant accounting\n\npolicies. Hindenburg used the terms \u201cfake\u201d and \u201cfalse\u201d. In particular, Hindenburg identified the\n\nanonymous Technology Partner referred to in iLearningEngines\u2019 SEC filings and offering\n\ndocuments as Experion Technologies and then set forth in detail the extensive and longstanding\n\nrelationship between Experion and iLearningEngines, based on its international research.\n\n On August 29, 2024, several reputable news sources, such as Bloomberg, Reuters, and\n\nFortune attributed iLearningEngines\u2019 stock price decline to the market reaction to the Hindenburg\n\nReport. \u00b6\u00b6 180-82. 185. On September 5, 2024, iLearningEngines announced that it had formed a\n\nSpecial Committee to investigate allegations raised by the Hindenburg Report. \u00b6 186. As the\n\nSpecial Committee investigation continued, iLearningEngines made disclosures confirming\n\nmaterial aspects of the Hindenburg Report. First, on November 18, 2024, iLearningEngines\n\nannounced that, as a result of the Special Committee\u2019s investigation of the Hindenburg Report\u2019s\n\nallegations, it was withdrawing its prior published financial statements and Marcum was\n\nwithdrawing its previously published audit reports. \u00b6\u00b6 196-200. iLearningEngines also announced\n\nDefendant Naqvi had been replaced as iLearningEngines\u2019 CFO. \u00b6201. iLearningEngines\u2019 stock\n\nprice immediately declined on this news by a further 27%, to $1.095 per share on heavy volume\n\nof 5.965 million shares. \u00b6 202.\n\n The end for iLearningEngines then came rapidly. On December 10, 2024, just three weeks\n\nlater, iLearningEngines, based on the recommendations of the Special Committee, placed\n\nnumerous senior executives, including Chidambaran and Naqvi on administrative leave. \u00b6 206. In\n\nresponse, iLearningEngines\u2019 stock price dropped another 14%. \u00b6 207. Finally, on December 23,\n\n\n\n 26\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 32 of 37\n\n\n\n2024, iLearningEngines announced it had filed for bankruptcy. \u00b6 208. Before its delisting by\n\nNasdaq, iLearningEngines\u2019 stock price had declined further to $0.19 per share. \u00b6209. On December\n\n27, 2024, Chidambaran and Naqvi resigned from iLearningEngines and it disclosed that it had\n\n\u201cself-reported potential violations of law to the Department of Justice.\u201d \u00b6\u00b6 214-5.\n\n The demolition of iLearningEngines as a public company, the mass forced resignations of\n\nmanagement, and the self-report of violations of the law all stemmed from the Hindenburg Report\n\nand the Special Committee\u2019s investigation into its allegations. The stock price declines and related\n\ninvestor losses resulted from Defendants\u2019 fraudulent misrepresentations during the Class Period\n\nand their subsequent exposure by the Hindenburg Report and related Special Committee\n\ninvestigation.\n\n Chidambaran and Naqvi, however, argue that the Amended Complaint fails to adequately\n\nplead loss causation. Both principally base their argument on the fact that Hindenburg Research\n\nwere short iLearningEngines\u2019 stock when it published its report and that much of the information\n\nused by Hindenburg in drafting the report came from public sources. See Chidambaran Mem. 24-\n\n27; Naqvi Mem. 27-30. Both advocate for a bright-line rule precluding any information derived\n\nfrom short-seller reports or public information, relying on Defeo, 134 F.4th 153. Defeo, however,\n\nexpressly refused to impose such a bright-line prohibition. \u201cWe, like the Ninth Circuit, do not\n\nimpose a categorical ban on using short-seller reports to plead loss causation.\u201d 134 F.4th at 163.\n\n\u201cIn appropriate circumstances, a short-seller\u2019s report\u2019s financial motivation may not disqualify it\n\nfrom use in litigation as alleging that it exposed a company\u2019s fraud to the market.\u201d Id. at 163-64;\n\nsee also BofI, 977 F.3d at 792 (\u201cErhart's motivations for coming forward may not have been\n\nentirely pure, as he lodged his allegations in a lawsuit seeking money from BofI.\u201d). \u201cWhat matters\n\nis whether the plaintiffs allege enough additional facts to turn the otherwise implausible claim that\n\n\n\n 27\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 33 of 37\n\n\n\nthis sort of short-seller report exposed the truth to investors into a claim plausible enough to survive\n\na motion to dismiss.\u201d Leacock, 2024 WL 3360647, at *11.\n\n The Amended Complaint contains exactly the additional facts that establish the\n\nHindenburg Report has sufficient indicia of reliability that it is appropriate to treat it as a corrective\n\ndisclosure of Defendants\u2019 fraud. The sources are not anonymous but are named in the Hindenburg\n\nReport and include corporate and court records from India and the United Arab Emirates as well\n\nas archived web pages. Id., at *13 (report based on Chinese court records had indicia of reliability).\n\nThe immediate and severe stock price reaction to the Hindenburg Report indicates that the market\n\ntreated its investigation \u201cas sufficiently credible to be acted upon as truth, and the inflation in the\n\nstock price attributable to the defendant's misstatements is dissipated as a result\u201d. Id., at *11\n\n(quoting BofI, 977 F.3d at 792). Indeed, \u201cA price drop of that magnitude would not be expected in\n\nresponse to whistleblower allegations perceived as unworthy of belief, and the drop is not readily\n\nattributable to non-fraud-related factors that might have moved BofI's stock price that day.\u201d BofI,\n\n977 F.3d at 792.\n\n Finally, the fact that the new information disclosed by the Hindenberg Report was\n\nsubsequently corroborated by iLearningEngines and its Special Committee further bolsters the\n\nreliability and credibility of the Hindenberg Report. The accounting irregularities identified by\n\nHindenburg are confirmed by the subsequent withdrawal of iLearningEngines\u2019 financial\n\nstatements, the removal of its CFO, and the self-report of law violations to the Department of\n\nJustice. Furthermore, in its bankruptcy filings, iLearningEngines\u2019 new CFO has confirmed the\n\nmain finding of Hindenburg\u2019s investigation, that Experion was a related party. \u00b6\u00b6 224-40.\n\n Chidambaran and Naqvi\u2019s arguments based on public information fare no better. Courts\n\nadopt a flexible approach to this evaluation. Analysis based on public information can form a\n\n\n\n 28\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 34 of 37\n\n\n\ncorrective disclosure if it is plausible that the information was not already incorporated into a\n\ncompany\u2019s stock price. Factors such as the complexity of the data and its relationship to the alleged\n\nmisstatements and \u201cthe great effort needed to locate and analyze it\u201d can plausibly establish that the\n\nanalysis conveyed new information to the market. BofI, 977 F.3d at 795. \u201cIf the report \u2018required\n\nextensive and tedious research involving the analysis of far-flung bits and pieces of data,\u2019 then\n\n\u2018[t]he time and effort it took to compiLearningEngines this information make it plausible that the\n\nposts provided new information to the market, even though all of the underlying data was publicly\n\navailable.\u2019\u201d In re Nektar Therapeutics Sec. Litig., 34 F.4th 828, 839 (9th Cir. 2022)(quoting BofI,\n\n977 F.3d at 797); see also Pub. Emps. Ret. Sys. of Mississippi, Puerto Rico Tchrs. Ret. Sys. v.\n\nAmedisys, Inc., 769 F.3d 313, 323 (5th Cir. 2014)(\u201cit is plausible that complex economic data\n\nunderstandable only through expert analysis may not be readily digestible by the marketplace.\u201d).\n\n This is exactly what Hindenburg has done here in preparing its Report, compiled far-flung\n\npieces of data and put them together for the market to understand their meaning for\n\niLearningEngines. Furthermore, not all the data relied on Hindenburg is public as it also includes\n\ninformation obtained from \u201ccorporate intelligence firm Diligencia\u201d. The disclosure of the results\n\nof Hindenburg;s work immediately resulted in a 50% drop in iLearningEngines\u2019 stock price. The\n\nallegations here are thus very different from the allegations presented in Espy v. J2 Global, Inc.,\n\n99 F.4th 527 (9th Cir. 2024), where the short-seller report required \u201cno expertise or specialized\n\nskills beyond what a typical market participant would possess to uncover and disseminate\u201d its\n\ninformation and there was no significant stock market reaction. Id. at 542.\n\n Chadimabaran and Naqvi argue that the subsequent disclosures between the Hindenburg\n\nReport and iLearningEngines\u2019 bankruptcy filing are also insufficient to establish loss causation\n\nbecause they do not attribute any of the disclosed events to allegations of fraud made in the\n\n\n\n 29\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 35 of 37\n\n\n\nHindenburg Report. Chadimabaran Mem. at 27, Naqvi Mem. at 30. The withdrawal of financial\n\nstatements, resignations of management, and ultimate bankruptcy are all attributed to the Special\n\nCommittee which is directly related to the allegations in the Hindenburg Report. See Epstein v.\n\nWorld Acceptance Corp., 203 F. Supp. 3d 655, 675 (D.S.C. 2016)(\u201ccourts have held resignation\n\nannouncements can be corrective disclosures where they are viewed collectively with other\n\ndisclosures.\u201d) Thus, there is sufficient proximity between the continued stock price declines\n\nsuffered by iLearningsEngines\u2019 investors in November and December 2024 and the alleged fraud\n\nin the offering documents and throughout the Class Period. 1\n\n Accordingly, Plaintiffs have adequately alleged that Defendants\u2019 fraudulent\n\nmisrepresentations and omissions caused their losses. 2\n\n CONCLUSION\n For the reasons stated above, Plaintiffs respectfully request that the motions to dismiss be\n\ndenied in their entirety. Alternatively, Plaintiffs respectfully request leave to amend their\n\ncomplaint to cure any pleading defects.\n\n\n\n\n1\n The fact that these corrective disclosures occurred after the initial complaint was filed in this action is irrelevant.\nThe current Class Period runs through December 20, 2024 and Plaintiffs do not allege that the Hindenburg Report\nwas a complete corrective disclosure. See Singer, 883 F.3d at 446 (\u201cthe truth may have \u201cgradually emerged through\na series of partial disclosures,\u201d with the \u201centire series of partial disclosures [prompting] the stock price deflation.\u201d)\n2\n Naqvi also argues that Plaintiffs\u2019 \u00a7 11 claims should be dismissed for failure to plead loss causation. Naqvi Mem.\nat 27, n.6. No authority is cited for this legal argument which is contrary to settled law. See Panther Partners Inc. v.\nIkanos Commc'ns, Inc., 681 F.3d 114, 120 (2d Cir. 2012) (\u201c Neither scienter, reliance, nor loss causation is an\nelement of \u00a7 11 or \u00a7 12(a)(2) claims.\u201d).\n\n 30\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 36 of 37\n\n\n\nDated: September 18, 2025 Respectfully submitted,\n\n\n LEVI & KORSINSKY, LLP\n\n\n / s / Nicholas I. Porritt\n Nicholas I. Porritt (Bar No. 17078)\n Alexander A. Krot III (attorney admission\n application forthcoming).\n 1101 Vermont Ave, NW Suite 800\n Washington, DC 20005\n Tel: (202)-524-4290\n Fax: (212) 363-7171\n Email: nporritt@zlk.com\n Email: akrot@zlk.com\n\n Counsel for Lead Plaintiff Louis Leveque,\n Plaintiff Iqbal Al Hamid, and Lead\n Counsel for the Class\n\n\n\n\n 31\n\f Case 8:24-cv-02900-DKC Document 92 Filed 09/18/25 Page 37 of 37\n\n\n\n CERTIFICATE OF SERVICE\n\nI hereby certify that on September 18, 2025, I electronically filed the foregoing Plaintiffs\u2019\nMemorandum Of Law In Opposition To Defendants Chidambaran and Naqvi\u2019s Motions To\nDismiss The Amended Class Action Complaint by using the CM/ECF system which will send a\nnotice of electronic filing to all counsel or parties of record.\n\n\n\n /s/ Nicholas Porritt\n Nicholas I. Porritt\n\n\n\n\n 32\n\f","ocr_status":2,"date_upload":"2026-05-19T22:33:06.728392-07:00","document_number":"92","attachment_number":null,"pacer_doc_id":"093015171214","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:10.865268-08:00","date_modified":"2026-05-18T23:59:55.687387-07:00","date_filed":"2025-09-18","time_filed":null,"entry_number":92,"recap_sequence_number":"2025-09-18.003","pacer_sequence_number":266,"description":"RESPONSE in Opposition re 84 MOTION to Dismiss for Failure to State a Claim Plaintiff's Amended Class Action Complaint, 83 MOTION to Dismiss Amended Class Action Complaint filed by Louis Leveque, Iqbal al Hamid.(Porritt, Nicholas) (Entered: 09/18/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475303/","id":447475303,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228753/","id":462228753,"tags":[],"absolute_url":"/docket/69233925/91/walker-v-chidambaran/","date_created":"2025-12-17T07:51:10.832954-08:00","date_modified":"2026-05-22T08:56:32.280674-07:00","sha1":"6bd360483bba70eef226b086ab8ceea6a31e5d71","page_count":38,"file_size":209894,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.91.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.91.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 1 of 38\n\n\n\n UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n (Southern Division)\n\n\nDANNY WALKER, Individually and on Behalf of)\nAll Others Similarly Situated, )\n )\n Plaintiff, )\n ) Civil Action No. DKC 24-2900\n v. )\n )\nHARISH CHIDAMBARAN, et al., )\n )\n Defendants. )\n )\n )\n )\n )\n )\n )\n\n\n PLAINTIFFS\u2019 MEMORANDUM OF LAW\n IN OPPOSITION TO DEFENDANT MARCUM LLP\u2019S\n MOTION TO DISMISS THE AMENDED CLASS ACTION COMPLAINT\n\fCase 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 2 of 38\n\n\n\n TABLE OF CONTENTS\n\n\n\n\nINTRODUCTION............................................................................................................. 1\n\nSTATEMENT OF FACTS ............................................................................................... 5\n\nARGUMENT ..................................................................................................................... 6\n\nI. THE SECURITIES ACT IS DESIGNED BY CONGRESS TO PROTECT\n\n INVESTORS THROUGH THE DISCLOSURE OF MATERIAL FINANCIAL\n\n INFORMATION ENFORCED BY A STRICT LIABILITY REGIME. ...................... 6\n\n A. The Securities Act was enacted to require issuers of securities to disclose accurate\n\n financial information to the public. ........................................................................ 6\n\n B. The Securities Act replaced common law requirement of scienter with strict\n\n liability. ................................................................................................................... 7\n\nII. MARCUM IS LIABLE PURSUANT TO \u00a7 11 OF THE ACT FOR\n\n MISSTATEMENTS CONTAINED IN ILEARNINGENGINES\u2019 FINANCIAL\n\n STATEMENTS THAT IT CERTIFIED. .................................................................... 11\n\n A. Every Accountant Who Certifies Financial Statements Incorporated Into a\n\n Registration Statement is Prima Facie Liable For Misrepresentations and\n\n Omissions They Contain. ...................................................................................... 11\n\n B. Omnicare Does Not Immunize Auditors From Liability For Misrepresentations in\n\n Certified Financial Statements. ............................................................................ 14\n\n\n i\n\fCase 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 3 of 38\n\n\n\n\n C. Marcum\u2019s Liability Under \u00a7 11(a)(4) is Not Limited to Its Audit Opinion Itself. 21\n\n D. \u00a7 11(a)(4) Does Not Create a Guarantee of Every Line in the Registration\n\n Statement. .............................................................................................................. 24\n\n E. Plaintiffs Plausibly Allege Section 11 Standing.................................................... 25\n\nCONCLUSION ............................................................................................................... 28\n\n\n\n\n ii\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 4 of 38\n\n\n\n TABLE OF AUTHORITIES\n\n Cases Pages\n\nAdams v. Standard Knitting Mills, Inc., 24\n\n 623 F.2d 422 (6th Cir. 1980)\n\nAdvoc. Health Care Network v. Stapleton, 22\n\n 581 U.S. 468 (2017)\n\nAnderson v. Hancock, 22\n\n 820 F.3d 670 (4th Cir. 2016)\n\nBaker, Watts & Co. v. Miles & Stockbridge, 9\n\n 876 F.2d 1101 (4th Cir. 1989)\n\nBarbour v. Garland, 26\n\n 105 F.4th 579 (4th Cir. 2024)\n\nBoise Cascade Corp. v. U.S. E.P.A., 22\n\n 942 F.2d 1427 (9th Cir. 1991)\n\nIn re Century Aluminum Co. Secs. Litig., 26\n\n 729 F.3d 1104 (9th Cir. 2013)\n\nIn re Charles Schwab Corp. Secs. Litig., 23\n\n 257 F.R.D. 534 (N.D. Cal. 2009)\n\nIn re Coinbase Glob., Inc. Sec. Litig., 27\n\n No. 2:22-CV-04915 (BRM) (LDW), 2024 WL 4053009 (D.N.J.\n Sept. 5, 2024)\n\nIn re Countrywide Fin. Corp. Sec. Litig., 14\n\n 588 F. Supp. 2d 1132 (C.D. Cal. 2008)\n\n iii\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 5 of 38\n\n\n\n\nDeephaven Private Placement Trading, Ltd. v. Grant Thornton & Co., 14\n\n 454 F.3d 1168 (10th Cir. 2006)\n\nDerry v. Peek, 9\n\n (1889) 14 App Cas 337\n\nErnst & Ernst v. Hochfelder, 6\n\n 425 U.S. 185 (1976)\n\nEscott v. BarChris Const. Corp., 4\n\n 283 F. Supp. 643 (S.D.N.Y. 1968)\n\nIn re EveryWare Global, Inc. Secs. Litig., 27\n\n 175 F. Supp. 3d 837 (S.D. Ohio 2016)\n\nFait v. Regions Fin. Corp., 19\n\n 655 F.3d 105 (2d Cir. 2011)\n\nFam. of Care Real Est. Holding Co. v. Chapman Prop., LLC, 25\n\n No. CV DKC 23-0574, 2023 WL 4134427 (D. Md. June 22, 2023)\n\nFanucchi v. Enviva Inc., 26\n\n No. CV DKC 22-2844, 2024 WL 3302564 (D. Md. July 3, 2024)\n\nGustafson v. Alloyd Co., 11\n\n 513 U.S. 561 (1995)\n\nHerman & MacLean v. Huddleston, Passim\n\n 459 U.S. 375 (1983)\n\n\n\n\n iv\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 6 of 38\n\n\n\n\nHunt v. Bloom Energy Corp., 16, 18\n\n No. 19-CV-02935-HSG, 2021 WL 4461171 (N.D. Cal. Sept. 29,\n\n 2021)\n\nIBEW Loc. No. 58 Annuity Fund v. EveryWare Glob., Inc., 27\n\n 849 F.3d 325 (6th Cir. 2017)\n\nJohnson v. CBD Energy Ltd., 17, 18\n\n No. CV H-15-1668, 2016 WL 3654657 (S.D. Tex. July 6, 2016)\n\nKrim v. pcOrder.com, Inc., 26\n\n 402 F.3d 489 (5th Cir. 2005)\n\nLee v. Ernst & Young, LLP, 4, 13\n\n 294 F.3d 969 (8th Cir. 2002)\n\nIn re Lehman Bros. Sec. & ERISA Litig., 4, 12, 13\n\n 131 F. Supp. 3d 241 (S.D.N.Y. 2015)\n\nMalone v. Microdyne Corp., 15\n\n 26 F.3d 471 (4th Cir. 1994)\n\nMonroe v. Hughes, 23\n\n 31 F.3d 772 (9th Cir. 1994)\n\nIn re McKesson HBOC, Inc. Sec. Litig., 24\n\n 126 F. Supp. 2d 1248 (N.D. Cal. 2000)\n\nOmnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, Passim\n\n 575 U.S. 175 (2015)\n\n\n\n\n v\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 7 of 38\n\n\n\n\nIn re OSG Sec. Litig., 19\n\n 971 F. Supp. 2d 387 (S.D.N.Y. 2013)\n\nIn re: Petrobras Securities Litigation, 20\n\n No. 14-CV-9662 (JSR), 2016 WL 1533553 (S.D.N.Y. Feb. 19,\n\n 2016)\n\nPinter v. Dahl, 20\n\n 486 U.S. 622 (1988)\n\nPirani v. Slack Techs., Inc., 25\n\n 127 F.4th 1183 (9th Cir. 2025)\n\nQuerub v. Hong Kong, 22, 23\n\n 649 F. App\u2019x 55 (2d Cir. 2016)\n\nRosenberg v. Hano, 9\n\n 121 F.2d 818 (3d Cir. 1941)\n\nS. E. C. v. Seaboard Corp., 12\n\n 677 F.2d 1301 (9th Cir. 1982)\n\nSlater v. A.G. Edwards & Sons, Inc., 27\n\n 719 F.3d 1190 (10th Cir. 2013)\n\nSpecial Situations Fund III QP, L.P. v. Marrone Bio Innovations, Inc., 12, 13\n\n 243 F. Supp. 3d 1109 (E.D. Cal. 2017)\n\nSummers v. Earth Island Institution, 26\n\n 555 U.S. 488 (2009)\n\n\n\n\n vi\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 8 of 38\n\n\n\n\nIn re SunEdison, Inc. Sec. Litig., 23\n\n 300 F. Supp. 3d 444 (S.D.N.Y. 2018)\n\nIn re Suprema Specialties, Inc. Secs. Litig., 25\n\n 438 F.3d 256 (3d Cir. 2006)\n\nIn re Thornburg Mortg., Inc. Sec. Litig., 26\n\n 683 F. Supp. 2d 1236 (D.N.M. 2010)\n\nIn re Ubiquiti Networks, Inc. Sec. Litig., 27\n\n 33 F. Supp. 3d 1107 (N.D. Cal. 2014)\n\nUnited States v. Arthur Young & Co., 10\n\n 465 U.S. 805 (1984)\n\nWilliams v. Taylor, 22\n\n 529 U.S. 362 (2000)\n\nIn re Worlds of Wonder Sec. Litig., 4, 13, 15\n\n 35 F.3d 1407 (9th Cir. 1994)\n\nYates v. Mun. Mortg. & Equity, LLC, 3 ,8\n\n 744 F.3d 874 (4th Cir. 2014)\n\n\nSTATUTES\n\n\n15 U.S.C. \u00a7\u00a7 77a et seq. 1, 6\n\n15 U.S.C. \u00a7 77g(a) 6\n\n15 U.S.C. \u00a7 77k(a) 7\n\n15 U.S.C. \u00a7 77k(a)(4) Passim\n\n\n\n vii\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 9 of 38\n\n\n\n\n15 U.S.C. \u00a7 77k(b)(3) 3, 17, 24\n\n15 U.S.C. \u00a7 77aa(25)-(26) 7, 12\n\n15 U.S.C. \u00a7 78r(a) 14\n\n\nREGULATIONS\n\n\n17 C.F.R. \u00a7 210.1-02(f) 7, 12\n\n17 C.F.R. \u00a7 210.5-03(b) 7\n\n17 C.F.R. \u00a7 229.10(b)(2) 7\n\n17 C.F.R. Pt. 210 20\n\n\nOTHER AUTHORITIES\n\nH.R.Rep. No. 85, 73d Cong., 1st Sess. (1933) 8\n\nSenate Report No. 47, 73d Cong., 1st Sess. (1933) 7\n\nShulman, Civil Liability and the Securities Act, 43 Yale L.J. 235-38 10\n(1933)\n\n\n\n\n viii\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 10 of 38\n\n\n\n INTRODUCTION\n\n The Securities Act of 1933, 15 U.S.C. \u00a7\u00a7 77a et seq., was enacted by Congress in the wake\n\nof the Great Depression and Wall Street Crash to protect investors from fraud and dishonest\n\ndealings in the offering of new securities to the public. It created new disclosure requirements for\n\nissuers backed up by a strict liability regime for misrepresentations and omissions. It expanded the\n\nliability for misrepresentation and omissions beyond that imposed under common law for\n\nnegligent misrepresentation and deceit and also imposed liability on critical gatekeepers of\n\nsecurities offerings: the directors of the issuer, underwriters of the offering, and, importantly, the\n\npublic accountants who were required under the Act to certify financial information contained in\n\noffering documents. The purpose of the new disclosure requirements and strict liability regime\n\nwas to improve the information available to value new offerings and to prevent and deter\n\nfraudulent offerings from being undertaken at all.\n\n ILearningEngines was exactly the sort of fraudulent offering that the Securities Act was\n\nintended to deter and prevent. It should never have gone public. Its revenues were almost entirely\n\nfictitious and the result of round trip transactions with an undisclosed related party in which\n\niLearningEngines executives and directors had economic interest and control. When this\n\ninformation was brought to public attention by Hindenburg Research on August 29, 2024, just five\n\nmonths after ILearningEngines had gone public, the entire house of cards quickly collapsed. An\n\ninvestigation by the United States Securities & Exchange Commission was commenced. An\n\ninternal investigation by iLearningEngines\u2019 Board of Directors led to the departures of senior\n\nmanagement, including Defendants Chidambaran, Naqvi, and Arackal. ILearningEngines\u2019 prior\n\nfinancial statements that had been included in its offering documents were withdrawn as\n\nunreliable. Finally, on December 20, 2024, iLearningEngines filed for bankruptcy and self-\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 11 of 38\n\n\n\n\nreported potential violations of federal law to the United States Department of Justice.\n\nILearningEngines\u2019 lifetime as a public company had lasted just eight months. In April 2025, its\n\nentire assets were sold for just $1.5 million, a 99.999% decrease from the value iLearningEngines\n\nhad placed on itself during the public offering process.\n\n In certifying iLearningEngines\u2019 misleading financial statements included in its offering\n\ndocuments, Marcum LLP failed in its role as a gatekeeper against fraudulent offerings. Without\n\nMarcum\u2019s certification, iLearningEngines would never have been able to go public and Plaintiffs\n\nand other members of the Class would never have suffered millions of dollars of losses. Congress\n\nexplicitly placed liability for those losses on accountants such as Marcum, subject to Marcum\n\nproving it acted with reasonable care. The detailed allegations in the Amended Complaint\n\nregarding iLearningEngines\u2019 fake revenue and undisclosed related party transactions are more than\n\nsufficient to meet Plaintiffs\u2019 minimal pleading burden to allege a claim pursuant to \u00a7 11(a)(4) of\n\nthe Act. See Herman & MacLean v. Huddleston, 459 U.S. 375, 382 (1983)(Securities Act places\n\n\u201cminimal burden\u201d on the plaintiff).\n\n Marcum does not dispute that iLearningEngines\u2019 financial statements that it certified and\n\nthat were included in its offering documents to induce investors to purchase iLearningEngines\n\nstock contained massive misrepresentations so that almost all the claimed revenue was entirely\n\nfake. Marcum, however, seeks to avoid the straightforward application of \u00a7 11(a)(4) to its conduct\n\nthrough four arguments, which should each be rejected. Marcum\u2019s main argument is that Plaintiffs\n\nhave failed to plead that its audit opinion itself contained any misrepresentation or omission.\n\nMemorandum of Law in Support of Defendant Marcum LLP\u2019s Motion to Dismiss the Amended\n\nClass Action Complaint for Violations of the Federal Securities Laws, at 9-14. This argument is\n\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 12 of 38\n\n\n\n\ncompletely beside the point and irrelevant. Plaintiffs do not base liability under \u00a7 11(a)(4) on any\n\nmisrepresentation or omission contained within Marcum\u2019s opinion itself; Marcum\u2019s liability\n\nresults from misrepresentations and omissions contained in the portions of iLearningEngines\u2019\n\nregistration statements, i. e., its financial statements, that Marcum certified. This follows the\n\nexpress language of \u00a7 11(a)(4) providing that purchasers of a registered security has a claim against\n\n\u201cevery accountant . . . who has with his consent been named as having prepared or certified any\n\npart of the registration statement . . . with respect to the statement in such registration statement,\n\nreport, or valuation, which purports to have been prepared or certified by him.\u201d 15 U.S.C. \u00a7\n\n77k(a)(4) (emphasis added). Liability results from the fact of certification, not from any additional\n\nmisrepresentation in the certification itself.\n\n Marcum next argues that because its certification takes the form of an opinion, its liability\n\nfor any certified misrepresentation or omission by iLearningEngines must be assessed through the\n\nframework proposed by Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund,\n\n575 U.S. 175 (2015), so that a plaintiff must plead facts showing an auditor did not \u201csincerely\n\nbelieve his opinion.\u201d Marcum Mem. at 12. In addition to being contrary to the express language\n\nof the Act, this also effectively injects a scienter requirement into a claim under \u00a7 11(a)(4), contrary\n\nto decades of precedent in this Circuit and elsewhere. See, e. g., Yates v. Mun. Mortg. & Equity,\n\nLLC, 744 F.3d 874, 894 (4th Cir. 2014)(scienter is not an element of a violation of \u00a7 11(a)). It also\n\ncompletely makes redundant the due diligence defense created by Congress in the Act. 15 U.S.C.\n\n\u00a7 77k(b)(3). The idea that this radical overhaul of \u00a7 11(a) liability is required by Omnicare is\n\nabsurd. Omnicare concerned statements of \u201cpure opinion\u201d and did not address any aspect of\n\nfinancial statements or audit opinions. The suggestion that it would silently re-write the statute to\n\n\n\n 3\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 13 of 38\n\n\n\n\nadd a scienter requirement to an accountant\u2019s liability and moot an affirmative defense expressly\n\nprovided by the statute is both extreme and unsupported by any statement in Omnicare itself.\n\n Marcum\u2019s next argument is that even if its audit opinion functions as a certification under\n\n\u00a7 11(a)(4), nonetheless its liability is limited solely to statements in the audit opinion itself.\n\nMarcum Mem at 16-20. This completely ignores the unambiguous language of \u00a7 11(a)(4) itself\n\nwhich creates liability for an accountant for misrepresentations and omissions in both portions that\n\nit prepared (i. e., its audit opinion) and portions it certified (i. e., the issuer\u2019s financial statements).\n\nMarcum\u2019s claim that this is a novel argument and \u201cno federal circuit court has ever extended\n\nauditor liability under Section 11 beyond the auditor\u2019s opinion\u201d, Marcum Mem. at 19, is blatantly\n\nfalse. See Lee v. Ernst & Young, LLP, 294 F.3d 969, 978 (8th Cir. 2002)(auditors subject to \u00a7 11\n\nclaim based on misrepresentations in audited financial statements); In re Worlds of Wonder Sec.\n\nLitig., 35 F.3d 1407, 1421 (9th Cir. 1994)(auditor alone was potentially liable for\n\nmisrepresentations of revenue contained in issuer\u2019s financial statements); see also In re Lehman\n\nBros. Sec. & ERISA Litig., 131 F. Supp. 3d 241, 260 n108 (S.D.N.Y. 2015) (a clean audit opinion\n\nregarding the financial statements in a registration statement served to \u201ccertify\u201d those financial\n\nstatements, and subjected the auditor to Section 11 liability for the false statements made by\n\nLehman in the financial statements); Escott v. BarChris Const. Corp., 283 F. Supp. 643, 698\n\n(S.D.N.Y. 1968)(auditors liable for misrepresentations in audited financial statements). Marcum\u2019s\n\nremaining cases shielding auditors from liability are all distinguishable.\n\n Finally, Marcum argues that Plaintiffs have failed to sufficiently allege that they purchased\n\nshares registered under the allegedly misleading registration statements. For reasons provided in\n\n[Individual Directors\u2019 opposition], the Amended Complaint alleged sufficient facts, at the pleading\n\n\n\n 4\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 14 of 38\n\n\n\n\nstage, to plausibly allege that they purchased shares traceable to the registration statements at issue.\n\n STATEMENT OF FACTS\n\n The facts relevant to Marcum\u2019s motion may be simply and concisely stated.1\n\nILearningEngines filed an S-8 Registration Statement and S-1 Registration Statement that\n\nregistered shares of its common stock. Amended Complaint (ECF No. 41) at \u00b6\u00b6 241-52. The S-8\n\nRegistration Statement was effective on filing with the SEC on June 21, 2024, Id. at \u00b6\u00b6 241-42,\n\nand the S-1 Registration Statement was declared effective by the SEC on August 9, 2024. Id. at \u00b6\n\n250. Both the S-8 and S-1 Registration Statements incorporated historical financial statements of\n\niLearningEngines for the years ended December 31, 2023, 2022, and 2021. Id. at \u00b6\u00b6 316, 323-29,\n\n377-83. The iLearningsEngines 2021-23 financial statements contained in both the S-8 and S-1\n\nRegistration Statements were accompanied, by consent and as mandated by SEC Rule, by an audit\n\nopinion from Marcum. Id. at \u00b6\u00b6 245-46, 253.\n\n Plaintiffs purchased iLearningEngines common stock registered by the S-8 and S-1\n\nRegistration Statements. Id. at \u00b6\u00b6 29-30. As later disclosed by iLearningsEngines, and not disputed\n\nby Marcum in its motion to dismiss, the financial statements included in the S-8 and S-1 financial\n\nstatements contained material misstatements, particularly of its revenue and expenses. Id. at \u00b6\u00b6\n\n330-32, 384-86. Specifically, on November 18, 2024, iLearningEngines announced that, as a result\n\nof an investigation by its audit committee, its audited financial statements for 2023, 2022, and\n\n2021 should no longer be relied on and Marcum communicated that its audit opinions should also\n\nno longer be relied on. Id. at \u00b6 197. At the same time, iLearningEngines announced that Defendant\n\n\n\n\n1\n Plaintiffs refer to their [Opposition to CEO Motion] for a more extensive discussion of the facts\nas alleged in their Amended Complaint.\n\n 5\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 15 of 38\n\n\n\n\nNaqvi, its former Chief Financial Officer, was placed on administrative leave. Id. at \u00b6 196. On\n\nDecember 20, 2024, iLearningEngines filed for bankruptcy, id. at \u00b6208, and on December 27,\n\n2024, it announced that it had \u201cself-reported potential violations of law to the Department of\n\nJustice.\u201d Id. at \u00b6 215. ILearningEngines common stock is now worthless. Id. at \u00b6 220.\n\n ARGUMENT\n\n I. THE SECURITIES ACT IS DESIGNED BY CONGRESS TO PROTECT\n INVESTORS THROUGH THE DISCLOSURE OF MATERIAL\n FINANCIAL INFORMATION ENFORCED BY A STRICT LIABILITY\n REGIME.\n\n A. The Securities Act was enacted to require issuers of securities to disclose accurate\n financial information to the public.\n\n The Securities Act was passed by Congress shortly after the inauguration of President\n\nFranklin D. Roosevelt as part of the rush of legislation referred to as the Hundred Days that\n\nattempted to address the nation\u2019s economic crisis. The Act was the first in a series of legislation\n\nas part of Congress\u2019s regulation of securities transactions prompted by the aftermath of the Wall\n\nStreet crash in 1929 and the economic depression that followed. \u201cThe Securities Act of 1933, 15\n\nU.S.C. \u00a7 77a et seq., was designed to provide investors with full disclosure of material information\n\nconcerning public offerings of securities in commerce, to protect investors against fraud and,\n\nthrough the imposition of specified civil liabilities, to promote ethical standards of honesty and\n\nfair dealing.\u201d Ernst & Ernst v. Hochfelder, 425 U.S. 185, 195 (1976). Two aspects of the Act were\n\nessential to Congress\u2019s purpose to protect investors: increasing disclosure requirements for newly\n\npublic companies and promoting compliance with the new disclosure requirements by expanding\n\nliability beyond the remedies available at common law.\n\n Accordingly, a registration statement for a new security is required to disclose historical\n\nfinancial information of the issuer. See 15 U.S.C. \u00a7\u00a7 77g(a), 77aa(25) and (26) (requiring an\n\n 6\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 16 of 38\n\n\n\n\nissuer\u2019s registration statement to include the information set forth on Schedule A which includes\n\na balance sheet and profit and loss statement). Further, Congress required that both the balance\n\nsheet and profit and loss statement included in the registration statement be \u201ccertified by an\n\nindependent public or certified accountant.\u201d Id.\n\n As directed by Congress, the SEC has promulgated rules establishing the form and contents\n\nof the balance sheet and profit and loss statement required to be included in a registration\n\nstatement. Regulation S-X requires the disclosure of gross revenues, net income or loss, and\n\nearnings per share data. 17 C.F.R. \u00a7 210.5-03(b); see also Item 10 of Regulation S-K, 17 C.F.R.\n\n\u00a7229.10(b)(2) (revenues, net income (loss) and earnings (loss) per share are \u201cthree financial items\n\ngenerally considered to be of primary importance to investors\u2026\u201d). Regulation S-X further notes\n\nthat: \u201cThe term certified, when used in regard to financial statements, means examined and\n\nreported upon with an opinion expressed by an independent public or certified public accountant.\u201d\n\n17 C.F.R. \u00a7 210.1-02(f).\n\n B. The Securities Act replaced common law requirement of scienter with strict\n liability.\n\n Allied to the expanded disclosure requirements on issuers was a strict liability scheme.\n\nConsciously departing from the existing common law liability regime, Congress created strict\n\nliability for the issuer as well as creating liability to investors for the issuer\u2019s directors,\n\nunderwriters, and auditors even in the absence of fraud. See \u00a7 77k(a). The \u201cessence of the relief to\n\nthe public\u201d is whether \u201cthe signers on behalf of the corporation be exempt from liability if it cannot\n\nbe shown that they knew of the false or erroneous character of the representations made\u2026. [I]t is\n\nessential to accomplish the objects of the act to make the directors executing the registration\n\nstatement liable for the consequences of untrue statements rather than to throw the loss on the\n\n\n 7\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 17 of 38\n\n\n\n\nbuyer.\u201d Sen. Rep. No. 47, 73d Cong., 1st Sess., 4-5 (1933). As the House Report noted:\n\n The Committee emphasizes that these liabilities attach only when there has been an\n untrue statement of material fact or an omission to state a material fact in the\n registration statement or the prospectus\u2014the basic information by which the public\n is solicited. All who sell securities with such a flaw, who cannot prove that they did\n not know\u2014or who in the exercise of due care could not have known\u2014of such\n misstatement or omission, are liable under sections 11 and 12. For those whose\n moral responsibility to the public is particularly heavy, there is a correspondingly\n heavier legal liability\u2014the persons signing the registration statement, the\n underwriters, the directors of the issuer, the accountants, engineers, appraisers, and\n other professionals preparing and giving authority to the prospectus\u2014all these are\n liable to the buyer ... if they cannot prove [the use of due care]. This throws upon\n originators of securities a duty of competence as well as innocence....\n\nH.R.Rep. No. 85, 73d Cong., 1st Sess., 5 (1933). It was understood that this may result in innocent\n\nparties being liable to investors. \u201cIf one of two presumably innocent persons must bear a loss, it is\n\nfamiliar legal principle that he should bear it who has the opportunity to learn the truth and has\n\nallowed untruths to be published and relied upon. Moreover he should suffer the loss who occupies\n\na position of trust in the issuing corporation toward the stockholders, rather than the buyer of stock\n\nwho must rely upon what he is told.\u201d Sen. Rep. 47-73, 5.\n\n \u201cThe section was designed to assure compliance with the disclosure provisions of the Act\n\nby imposing a stringent standard of liability on the parties who play a direct role in a registered\n\noffering.\u201d Herman & MacLean v. Huddleston 459 U.S. 375, 381-82 (1983) ; see also Yates v. Mun.\n\nMortg. & Equity, LLC, 744 F.3d 874, 894 (4th Cir. 2014)(basic purpose\u201d of the Securities Act is\n\nto provide greater protection to purchasers of registered securities.). Common law remedies for\n\nnegligence or deceit in the context of securities transactions had been limited and widely seen as\n\ninsufficient. 2 The strict liability regime enacted in the Securities Act was a deliberate and welcome\n\n\n\n\n2\n See generally Harry Shulman, \u201cCivil Liability and the Securities Act\u201d, 43 Yale L.J. 227 (1933).\n\n 8\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 18 of 38\n\n\n\n\nexpansion of liability beyond the limitations of the common law. 3 \u201cThe purpose of the civil\n\nliability provisions of the first Act was to broaden the law of deceit. In that branch of the law of\n\ntorts there had raged one of those controversies that delight lawyers and disgust laymen. It had its\n\ninception in the famous case of Derry v. Peek, and stemmed from a 19th Century English Court's\n\nconservative reluctance to believe ill of the tycoons of its day.\u201d Rosenberg v. Hano, 121 F.2d 818,\n\n819 (3d Cir. 1941); see also Baker, Watts & Co. v. Miles & Stockbridge, 876 F.2d 1101, 1105 (4th\n\nCir. 1989)(Negligence in the preparation of a securities prospectus was made actionable under the\n\nAct \u201cin order to promote careful adherence to the requirements of the statute\u201d).\n\n Explicitly included in this severe liability scheme were the auditors for the issuer. \u00a7\n\n11(a)(4) of the Act provides that any person acquiring a security pursuant to a registration\n\nstatement that contains \u201can untrue statement of a material fact or omitted to state a material fact\n\nrequired to be stated therein or necessary to make the statements therein not misleading\u201d has a\n\nclaim against \u201cevery accountant . . . who has with his consent been named as having prepared or\n\ncertified any part of the registration statement . . . with respect to the statement in such registration\n\nstatement, report, or valuation, which purports to have been prepared or certified by him.\u201d 15\n\nU.S.C. \u00a7 77k(a)(4). Combined with the requirement in Schedule A of the Act for every issuer to\n\ninclude in its registration statement a balance sheet and statement of income and loss certified by\n\n\n\n\n3\n Liability under the express private right of action contained in \u00a7 11 of the Securities Act thus\ndiffers from liability under \u00a7 10(b) of the Securities Exchange Act, 15 U.S.C. \u00a7 78j(b), and SEC\nRule 10b(5), 17 C.F.R. \u00a7 240.10b(5) which arises from a judicially implied cause of action,\nexplicitly based on common law concepts of fraud. See Dura Pharms., Inc. v. Broudo, 544 U.S.\n336, 343 (2005)(\u201cJudicially implied private securities fraud actions resemble in many (but not all)\nrespects common-law deceit and misrepresentation actions.\u201d); Herman & MacLean, 459 U.S. at\n380-84 (noting differences between express private cause of action in \u00a7 11 of the Securities Act\nand implied cause of action based on \u00a7 10(b) of the Securities Exchange Act).\n\n 9\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 19 of 38\n\n\n\n\nan accountant, this explicitly makes the certifying accountant liable for every misstatement\n\ncontained in the balance sheet or income statement. A purchaser may recover against the\n\naccountant without having to submit any proof of fraud, negligence, reliance, or loss causation.\n\nHerman & MacLean, 459 U.S. 375 at 82 (under \u00a7 11, accountant bears burden of proving due\n\ndiligence). Instead, the auditor must prove whether it \u201cafter reasonable investigation, had\n\nreasonable ground to believe and did believe that the [issuer financial statements] were true and\n\nthat no material fact had been omitted from the registration statement which should have been\n\nincluded in order to make the [issuer financial statements] not misleading.\u201d BarChris, 283 F. Supp.\n\nat 698.\n\n This liability regime for auditors reflects the importance of commercial financial\n\nstatements and an auditor\u2019s certifying opinion. As the Court stated in United States v. Arthur Young\n\n& Co.: \u201cCorporate financial statements are one of the primary sources of information available to\n\nguide the decisions of the investing public.\u201d 465 U.S. 805, 810 (1984). The Court continued: \u201cThe\n\nSEC requires the filing of audited financial statements in order to obviate the fear of loss from\n\nreliance on inaccurate information, thereby encouraging public investment in the nation's\n\nindustries. It is therefore not enough that financial statements be accurate; the public must also\n\nperceive them as being accurate.\u201d Id., at 819, n.15.\n\n The expansion of liability to auditors in the Securities Act was undertaken in the context\n\nthe common law generally did not recognize liability for statements of opinion but only with regard\n\nto statements of fact. See Shulman, Civil Liability and the Securities Act, 43 Yale L.J. at 235-38.\n\nNevertheless, and cognizant of the importance of judgement and estimates in the creation of\n\ncorporate financial statements, Congress explicitly created strict liability for misstatements made\n\n\n\n 10\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 20 of 38\n\n\n\n\nin financial statements contained in registration statements that were mandated to be provided to\n\npotential investors. As Justice Scalia noted in Omnicare, such liability presumes an expertise on\n\nbehalf of management and experts such as public accountants and \u201cIt is reasonable enough to adopt\n\nsuch a presumption for those matters that are required to be set forth in a registration statement.\n\nThose are matters on which the management of a corporation are experts.\u201d 575 U.S. at 199-200\n\n(per Scalia J. concurring). This presumption of expertise naturally extends to items required to be\n\nincluded in a registration statement such as the items in Schedule A like the issuer\u2019s financial\n\nstatements. As Justice Scalia observes, such information would never be expressed as an opinion.\n\nId. at 200.\n\n II. MARCUM IS LIABLE PURSUANT TO \u00a7 11 OF THE ACT FOR\n MISSTATEMENTS CONTAINED IN ILEARNINGENGINES\u2019 FINANCIAL\n STATEMENTS THAT IT CERTIFIED.\n\n A. Every Accountant Who Certifies Financial Statements Incorporated Into a\n Registration Statement is Prima Facie Liable For Misrepresentations and\n Omissions They Contain.\n\n Under \u00a7 11(a)(4) of the Securities Act, any person acquiring a security pursuant to a\n\nRegistration Statement that contains \u201can untrue statement of a material fact or omitted to state a\n\nmaterial fact required to be stated therein or necessary to make the statements therein not\n\nmisleading\u201d has a claim against \u201cevery accountant . . . who has with his consent been named as\n\nhaving prepared or certified any part of the registration statement . . . with respect to the\n\nstatement in such registration statement, report, or valuation, which purports to have been prepared\n\nor certified by him.\u201d 15 U.S.C. \u00a7 77k(a)(4)(emphasis added). The reach of this provision was\n\npurposeful and reflects the Congressional determination in enacting this law that that accountants\n\nand auditors certifying financial statements are among \u201cthose whose moral responsibility to the\n\npublic is particularly heavy\u201d in a public offering of securities. Gustafson v. Alloyd Co., 513 U.S.\n\n 11\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 21 of 38\n\n\n\n\n561, 581 (1995)\n\n As Marcum does not contest that iLearningEngine\u2019s financial statements included in its\n\nregistration statements contained material misstatements, Plaintiffs have a claim under \u00a7 11(a)(4)\n\nof the Securities Act, 15 U.S.C. \u00a7 77k(a)(4), against the accountant who certified those financial\n\nstatements: Marcum. Contrary to Marcum\u2019s arguments, this does not \u201cmisunderstand the nature of\n\nan auditor certification.\u201d Marcum Mem. at 18. Rather, Marcum misunderstands the legal effect of\n\nits certification of iLearningEngine\u2019s financial statements under the Act. A registration statement\n\nis required by statute to include financial statements (both a balance sheet and an income\n\nstatement) that have been \u201ccertified by an independent public or certified accountant\u201d, 15 U.S.C.\n\n\u00a7 77aa(25)-(26), and the SEC defines \u201ccertified, when used in regard to financial statements, means\n\nexamined and reported upon with an opinion expressed by an independent public or certified\n\npublic accountant.\u201d 17 C.F.R. \u00a7 210.1-02(f).\n\n Courts interpreting the plain language of \u00a7 11(a)(4) hold that an auditor opinion serves to\n\n\u201ccertify\u201d an issuer\u2019s financial statements for the purpose of the Securities Act. S. E. C. v. Seaboard\n\nCorp., 677 F.2d 1301, 1305 (9th Cir. 1982)(auditor \u201ccertified\u201d financial statements by providing\n\naudit opinion); Special Situations Fund III QP, L.P. v. Marrone Bio Innovations, Inc., 243 F. Supp.\n\n3d 1109, 1117 (E.D. Cal. 2017)(\u201cIt is difficult to imagine what Congress might have meant by an\n\naccountant's certification if not an audit affirming the accuracy of the documents in question.\u201d); In\n\nre Lehman Bros. Sec. & ERISA Litig., 131 F. Supp. 3d 241, 260 n108 (S.D.N.Y. 2015) (a clean\n\naudit opinion regarding the financial statements in a registration statement served to \u201ccertify\u201d those\n\nfinancial statements, and subjected the auditor to Section 11 liability for the false statements made\n\nby Lehman in the financial statements).\n\n\n\n 12\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 22 of 38\n\n\n\n\n Thus, even if their audit opinion itself contains no affirmative false statements, accountants\n\nare liable under \u00a7 11(a)(4) for errors in \u201cany part of the registration statement\u201d that they \u201cprepared\n\nor certified.\u201d 15 U.S.C. \u00a7 77k(a)(4). This is not a novel theory but has been well-established ever\n\nsince the passage of the Act. Notably, in Worlds of Wonder, the auditor was the only defendant 4\n\npotentially liable for the errors contained in the issuer\u2019s financial statements, including alleged\n\nerrors in revenue recognition where the technical accounting issues were \u201cenormously complex\u201d.\n\n35 F.3d 1407 at 1421; see also Lee v. Ernst & Young, LLP, 294 F.3d 969, 978 (8th Cir.\n\n2002)(auditors subject to \u00a7 11 claim based on misrepresentations contained in audited financial\n\nstatements).\n\n Recent decisions are consistent with Lee and Worlds of Wonder. In Special Situations Fund\n\nIII QP, L.P. v. Marrone Bio Innovations, Inc., 243 F. Supp. 3d 1109, (E.D. Cal. 2017), plaintiffs\n\nalleged that Marrone Bio improperly recognized revenue on sales to distributors with \u201cinventory\n\nprotection\u201d rights. 243 F. Supp. 3d at 1115. This resulted in material misstatements in Marrone\n\nBio\u2019s audited financial statements that were included in a registration statement. Id. The court\n\nfound that plaintiffs alleged a claim against the auditors pursuant to \u00a7 11 for the material\n\nmisstatements in Marrone Bio\u2019s financial statements that they audited. Id. at 1115-18; see also In\n\nre Lehman Bros. Sec. & ERISA Litig., 131 F. Supp. 3d 241, 259\u201360 (S.D.N.Y. 2015)(\u201cAccountants\n\nmay be found liable under Section 11 for portions of registration statements that they audited.\u201d);\n\nIn re OSG Sec. Litig., 971 F. Supp. 2d 387, 400, n.87 (S.D.N.Y. 2013) (collecting cases and finding\n\nthat \u201c[c]ourts in this district have consistently found that accountants bear Section 11 liability for\n\n\n\n\n4\n The issuer, Worlds of Wonder, Inc., had filed for bankruptcy.\n\n\n 13\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 23 of 38\n\n\n\n\nthe portions of a Registration Statement that they audited.\u201d). In re Countrywide Fin. Corp. Sec.\n\nLitig., 588 F. Supp. 2d 1132, 1174 (C.D. Cal. 2008)(\u201cAccounting-related statements [incorporated\n\ninto a registration statement] are attributable to their auditor, Countrywide, those who signed the\n\nstatement, and the underwriters\u201d).\n\n Marcum places great reliance on Deephaven Private Placement Trading, Ltd. v. Grant\n\nThornton & Co., 454 F.3d 1168 (10th Cir. 2006). In Deephaven, however, there was no claim\n\nalleged against the auditors under \u00a7 11(a)(4) of the Act; the claim instead was under \u00a7 18(a) of the\n\nSecurities Exchange Act, 15 U.S.C. \u00a7 78r(a). \u00a7 18(a) of the Securities Exchange Act does not\n\nexpressly make accountants liable for any portion of an SEC filing that they certified, it simply\n\ncreates liability for \u201cany person\u201d who makes a statement that is false and misleading. The Court in\n\nDeephaven simply held that under the terms of an audit opinion itself, as well as professional\n\naccounting standards, auditors do not certify or guarantee the accuracy of audited financial\n\nstatements. Id. at 1174. The Court noted, however, that \u00a7 11(a)(4) of the Act did create liability\n\nfor auditors for misrepresentations in financial statements that they certify and contrasted this\n\nprovision with \u00a7 18(a) of the Securities Exchange Act which \u201cdoes not, however, impose liability\n\non auditors (or accountants) in a parallel manner; rather, it extends liability to those who make or\n\ncause to be made materially false or misleading statements.\u201d Id. at 1174, n.6.\n\n Because Marcum certified them in the S-8 and S-1 Registration Statement, it is prima facie\n\nliable under \u00a7 11 for the admitted material false statements in iLearningEngine\u2019s 2021-23 financial\n\nstatements. It may only avoid liability by proving its affirmative due diligence defense.\n\n B. Omnicare Does Not Immunize Auditors From Liability For Misrepresentations in\n Certified Financial Statements.\n\n Marcum argues that as its certification was expressed as an opinion, then it can only be liable\n\n\n 14\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 24 of 38\n\n\n\n\nif Plaintiffs can prove that \u201cit did not honestly believe the opinion it expressed in the Marcum\n\nOpinion.\u201d Marcum Mem. at 12. 5 This radical limitation on auditors\u2019 liability pursuant to \u00a7 11(a)(4)\n\nis purportedly required by the Supreme Court\u2019s decision in Omnicare, 575 U.S. 175. Omnicare,\n\nhowever, concerned explicit and pure statements of opinion quite unlike the statements at issue in\n\nthis case. The Omnicare Court was concerned that excluding pure statements of opinion from\n\nliability under \u00a7 11 of the Act would \u201cpunch a hole in the statute\u201d and give issuers \u201ccarte blanche\u201d\n\nto make misleading statements \u201cfree from worry about \u00a7 11\u201d. 575 U.S. at 193. Thus, the Court\n\nintended to expand liability under \u00a7 11 by making some pure statements of opinion actionable,\n\nspecifically when the opinion was not honestly held or had no reasonable basis. Perversely, Marcum\n\nis now relying on this precedent to eliminate liability under \u00a7 11 for statements which were\n\npreviously regarded as obviously actionable statements of fact attributable to the auditor. See Worlds\n\nof Wonder, 35 F.3d at 1418 (auditors liable where \u201ca company that \u2018substantially overstate[s] its\n\nrevenues by reporting consignment transactions as sales ... mak[es] false or misleading statements\n\nof material fact.\u2019\u201d) (quoting Malone v. Microdyne Corp., 26 F.3d 471, 478 (4th Cir.1994)).\n\n Indeed, Justice Scalia in his concurring opinion in Omnicare, contrasted information\n\nrequired to be included in a registration statement, such as financial statements certified by an\n\n\n\n\n5\n Marcum argues that auditor opinions are only actionable under \u00a7 11 \u201cin two narrow\ncircumstances: (1) if they are not actually believed (i. e. subjective falsity), \u2026 or (2) if the\nstatement omits material facts and those omitted facts conflict with what a reasonable investor\nwould take from the statement itself.\u201d Marcum Mem. at 10. Marcum cites Employees' Retirement\nSystem of the City of Baton Rouge & Parish of East Baton Rouge v. MacroGenics, Inc., 61 F.4th\n369 (4th Cir. 2023), and Paradise Wire & Cable Defined Benefit Pension Plan v. Weil, 918 F.3d\n312 (4th Cir. 2019). Yet plaintiffs in MacroGenics did not allege any claim against an auditor\nbased on its audit opinion, 61 F.4th at 391, and plaintiffs in Weil also did not allege any claim\nagainst an auditor or even any claim under \u00a7 11 of the Act. 918 F.3d at 317. Thus, neither case\nsupports the proposition put forward by Marcum in its Memorandum.\n\n 15\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 25 of 38\n\n\n\n\nauditor, with the \u201cpure\u201d statements of opinion at issue in that case. Liability for statements under \u00a7\n\n11 presumes an expertise on behalf of management and experts making the statement and \u201cIt is\n\nreasonable enough to adopt such a presumption for those matters that are required to be set forth in\n\na registration statement. Those are matters on which the management of a corporation are experts.\u201d\n\n575 U.S. at 199-200 (per Scalia J. concurring). This presumption of expertise naturally extends to\n\nitems required to be included in a registration statement such as the issuer\u2019s financial statements.\n\nAs Justice Scalia observes, such information would never be expressed as an opinion. Id. at 200.\n\n There is a greater problem with expansively applying Omnicare to financial statements\n\nrequired to be included in a registration statement. Meeting the Omnicare standard for pleading and\n\nproving a misleading statement of opinion requires pleading and proving facts about how the\n\nspeaker has formed that opinion. 575 U.S. at 188. \u201cThus, if a registration statement omits material\n\nfacts about the issuer's inquiry into or knowledge concerning a statement of opinion, and if those\n\nfacts conflict with what a reasonable investor would take from the statement itself, then \u00a7 11's\n\nomissions clause creates liability.\u201d Id. at 189. In other words, \u201ca statement of opinion is not\n\nmisleading just because external facts show the opinion to be incorrect, so long as the opinion is\n\nhonestly believed.\u201d Hunt v. Bloom Energy Corp., No. 19-CV-02935-HSG, 2021 WL 4461171, at\n\n*4 (N.D. Cal. Sept. 29, 2021).\n\n This explicitly and impermissibly imposes a scienter requirement on plaintiffs in violation\n\nof the statutory strict liability scheme under the Act enacted by Congress. Certainly, in the context\n\nof corporate balance sheets and income statements that are not couched in language suggesting\n\nuncertainty or introduced with hedging statements of belief, all that is required to establish liability\n\nunder \u00a7 11 is to plead and prove external facts showing the statement to be incorrect. The honest\n\n\n\n 16\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 26 of 38\n\n\n\n\nbelief of the speaker as to the truth of its statement is expressly not a defense to liability. \u201cIf a\n\nplaintiff purchased a security issued pursuant to a registration statement, he need only show a\n\nmaterial misstatement or omission to establish his prima facie case.\u201d Herman & MacLean, 459 U.S.\n\nat 382. The fact that the speaker\u2019s belief in the truth of its statement may be honest is also irrelevant.\n\n\u201cIf one of two presumably innocent persons must bear a loss, it is familiar legal principle that he\n\nshould bear it who has the opportunity to learn the truth and has allowed untruths to be published\n\nand relied upon. Moreover he should suffer the loss who occupies a position of trust in the issuing\n\ncorporation toward the stockholders, rather than the buyer of stock who must rely upon what he is\n\ntold.\u201d Sen. Rep. 73-47.\n\n The expansive application of Omnicare to auditor liability for certifying financial statements\n\ncontaining misrepresentations also negates any role for the due diligence defense expressly provided\n\nin \u00a7 11(b)(3) of the Securities Act. 15 U.S.C. \u00a7 77k(b)(3). Under the standard advocated by Marcum,\n\nit would be a practical impossibility for any plaintiff to establish prima facie liability of an auditor\n\nwithout proving a least negligence, if not fraud. Under Marcum\u2019s standard, to prove falsity a\n\nplaintiff would have to plead and prove that either the auditor did not have a basis for its audit\n\nopinion (negligence) or did not believe its audit opinion was true when it was published (fraud).\n\nThere would therefore be no need or ability for a defendant auditor to establish a due diligence\n\ndefense as fraud or negligence would be part of plaintiff\u2019s burden. This is completely contrary to\n\nthe explicit language and scheme contained in the Act.\n\n Marcum relies on the reasoning from Johnson v. CBD Energy Ltd., No. CV H-15-1668,\n\n2016 WL 3654657 (S.D. Tex. July 6, 2016). In Johnson, the District Court dismissed claims against\n\nan auditor holding that statements in its audit opinion were statements of opinion, not fact, and\n\n\n\n 17\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 27 of 38\n\n\n\n\ntherefore assessed under the Omnicare standard. 2016 WL 3654657, at *11. This holding is not\n\nrelevant to this action which concern misrepresentations in the certified financial statements\n\nthemselves. The Johnson Court also appears to have found that Omnicare affects an auditor\u2019s\n\nliability under \u00a7 11(a)(4) of the Act from certifying financial statements. Applying Omnicare, the\n\nJohnson Court held that an auditor cannot be liable for certifying misleading financial statements\n\nunless a plaintiff can prove that its audit opinion was also false under Omnicare. 2016 WL 3654657,\n\nat *12 (Plaintiffs failed to state \u00a7 11 claim against auditor because they failed to allege auditor \u201cdid\n\nnot subjectively believe any of the opinions it provided in its report\u201d). Similar arguments were\n\naccepted by the District Court in Hunt, expressly relying on Johnson. 2021 WL 4461171, at *15\n\n(\u201cThe Court finds the reasoning in Johnson persuasive and adopts it here.\u201d). 6\n\n Such a rule is contrary to the express language contained in \u00a7 11 itself, the entire scheme of\n\nstrict liability enacted by Congress, as well as Supreme Court precedent. As discussed above, it\n\neffectively incorporates into \u00a7 11 a scienter requirement for claims against auditors in direct\n\ncontradiction to the legislative language and design. The consequences of such a rule were discussed\n\nby the District Court in Marrone, where the defendant auditor advanced similar arguments. The\n\nMarrone Court first noted \u201cSection 11 imposes special liability on those involved in a registration\n\n\n\n\n6\n More importantly, the District Court in Hunt found that the financial statements certified by the\nauditor in that case did not contain any misrepresentations or omissions, thus negating any liability\nfor the auditor who certified those financial statements under \u00a7 11(a)(4). See Hunt, 2021 WL\n4461171, at *4-*8. A similar determination was made by the District Court in In re Velti PLC\nSecurities Litigation, No. 13-CV-03889-WHO, 2015 WL 5736589 (N.D. Cal. Oct. 1, 2015), where\nclaims against the auditor were dismissed where the District Court found that plaintiff failed to\nplead that the certified financial statements contained any misstatement regarding bad debt\nreserves. Id., at *23 (\u201cWhile the threshold for pleading the falsity of Velti's bad debt reserves is\nundoubtedly lower under Rule 8(a) than under Rule 9(b), the allegations in the SACC still fall\nshort.\u201d)\n\n 18\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 28 of 38\n\n\n\n\nstatement, and Omnicare did nothing to upset prior caselaw holding auditors liable for erroneous\n\nfinancial statements in registration statements.\u201d Marrone, 243 F. Supp. 3d at 1116. The District\n\nCourt then held that the opinions at issue in Omnicare \u201care qualitatively different from an auditor's\n\nprofessional opinion about the soundness of a company's financial statements. Thus, no amount of\n\ncouching an audit report as an opinion obviates the certification effect of those reports when made\n\npart of a registration statement.\u201d Id.\n\n Similar arguments were made by the auditor defendant in In re OSG Securities Litigation.\n\nThere the auditors argued that although they consented to the inclusion of their auditor opinions in\n\nthe registration statement, they did not \u201ccertify\u201d the truth of the financial statements audited and\n\nthus cannot be held liable for the information contained therein. 971 F. Supp. 2d at 398. They thus\n\nmoved to dismiss on the grounds that plaintiffs did not allege that they subjectively disbelieved their\n\naudit opinions. Id. The District Court in that case rejected this argument outright, stating \u201cHowever,\n\nit would render Section 11 meaningless to find that an accountant's liability turns on this semantic\n\nchoice. Auditors may not shield themselves from liability under Section 11 merely by using the\n\nword \u2018opinion\u2019 as a disclaimer.\u201d Id. at 399 The District Court further held that \u201cthe Auditor\n\nDefendants' broad reading of Fait [v. Regions Fin. Corp., 655 F.3d 105 (2d Cir. 2011)] would\n\nundercut the statutory language establishing strict liability for accountants based on the materials\n\nthey have certified. It is difficult to imagine what Congress might have meant by an accountant's\n\ncertification if not an audit affirming the accuracy of the documents in question.\u201d Id. at 399-400.\n\nThe same reasoning applies with equal force to Marcum\u2019s argument here.\n\n Marcum also argues against treating iLearningEngines\u2019 financial statements as \u201cembedded\n\nfacts\u201d contained with its audit opinion which may then be a basis for liability under an analysis\n\n\n\n 19\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 29 of 38\n\n\n\n\npursuant to Omnicare. Marcum Mem. at 10, n.2. Such a theory is unnecessary in light of the\n\nexplicit language of \u00a7 11(a)(4) of the Act that establishes liability for an auditor for any material\n\nmisrepresentation or omission contained in certified financial statements. In the event the Court\n\ndoes analyze Marcum\u2019s liability for misrepresentations and omissions in iLearningEngines\u2019\n\nfinancial statements through an Omnicare lens, then it is proper to treat the financial statements as\n\nfactual statements embedded in Marcum\u2019s audit opinion.\n\n Judge Rakoff considered this issue in In re: Petrobras Securities Litigation, No. 14-CV-\n\n9662 (JSR), 2016 WL 1533553 (S.D.N.Y. Feb. 19, 2016). Judge Rakoff noted that the auditor\u2019s\n\nopinion \u201crested on the underlying facts contained in the financial statements\u201d and were \u201cbased on\n\n\u2018examining, on a test basis, evidence supporting the amounts and disclosures in the financial\n\nstatements.\u2019\u201d Id., at *3. \u201cOne measure of how embedded these underlying facts were within PwC's\n\nopinions is the de minimis value investors would place on PwC's opinions were the facts excluded.\n\n\u2026 PwC's audit opinions would be of no use to anyone if they announced, without any basis in the\n\ncontent of the financial statements or other evidence, that a company's presentation of its financial\n\nhealth was sound.\u201d Id., at *4. The fact that preparation of the financial statements involved the use\n\nof estimates and judgement did not change Judge Rakoff\u2019s conclusion that the auditor was liable\n\nfor any misrepresentations they contained:\n\n But a fact-based estimate is different from a subjective opinion. Issuers like\n Petrobras are required to submit financial statements under the Securities Act, and\n the Act does not call for an issuer to submit its opinion of what it thinks an asset\n might be worth. See 17 C.F.R. Pt. 210. Instead, it requires issuers to make factual\n statements about their financial health and imposes strict liability with respect to\n errors and omissions in such statements to \u201cpromot[e] \u2018full and fair disclosure\u2019 of\n material information.\u201d Omnicare, Inc., 135 S.Ct. at 1331 (quoting Pinter v. Dahl,\n 486 U.S. 622, 646 (1988)). The supposition that financial statements are\n nonactionable opinions flies in the face of the statutory language of \u00a7 11, which\n imposes liability expressly on auditors for portions of registration statements that\n\n\n 20\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 30 of 38\n\n\n\n\n they certify, see 15 U.S.C. \u00a7 77k(a)(4), and long-standing precedent applying the\n same. See In re Lehman Bro. Sec. and ERISA Litig., 2015 WL 5514692 at *11, *11\n n.108 (S.D.N.Y. Sept. 18, 2015) (collecting cases). Accordingly, the financial\n statements embedded within PwC's audit opinions are actionable under \u00a7 11 as\n facts.\n\nId.\n\n Marcum has conceded that Plaintiffs sufficiently pleaded that iLearningEngine\u2019s 2021-23\n\nfinancial statements included in its registration statements contained material misstatements and\n\nomissions. Marcum certified those financial statements. Pursuant to \u00a7 11(a)(4) of the Securities Act,\n\nPlaintiffs have pleaded a claim against Marcum based on those material misstatements and\n\nomissions. Nothing in Omnicare should be read to alter that conclusion and there is nothing in\n\nOmnicare to suggest that the Court intended such a radical overhaul of the liability scheme enacted\n\nby Congress in the Act, even if such an overhaul could be judicially effected. See Omnicare, 575\n\nU.S. at 193 (\u201cCongress gets to make policy, not the courts.\u201d)\n\n C. Marcum\u2019s Liability Under \u00a7 11(a)(4) is Not Limited to Its Audit Opinion Itself.\n\n Marcum finally argues that as \u00a7 11(a)(4) only imposes liability on an accountant for the\n\nportions of a registration statement that it actually prepares or certifies, this is \u201ctypically\u201d limited to\n\nthe audit opinion itself and \u201cnot for every statement in the issuer\u2019s financial statements or\n\nregistration statement.\u201d Marcum Mem. at 18. First, Plaintiffs do not allege that Marcum is liable for\n\nany misrepresentation contained anywhere in iLearningEngines\u2019 Registration Statements. They\n\nonly seek to hold Marcum liable for misrepresentations and omissions contained in the financial\n\nstatements that Marcum certified.\n\n Second, limiting an auditor\u2019s liability to just statements contained within the actual audit\n\nopinion is a nonsensical reading of \u00a7 11(a)(4). \u00a7 11(a)(4) states that an accountant is liable for\n\n\n\n 21\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 31 of 38\n\n\n\n\nmisrepresentations contained in any portion of the registration statement that it certified. So, the\n\nrelevant question under \u00a7 11(a)(4) is: \u201cwhat portions are certified by an accountant\u2019s audit\n\nopinion?\u201d The obvious answer to this question is: \u201cthe financial statements of the issuer.\u201d Indeed,\n\nany other answer makes no sense. Marcum\u2019s proposed answer, \u201cthe audit opinion, or certification,\n\nprovided by the accountant\u201d leads to the following reading of \u00a7 11(a)(4): investors have a claim\n\nagainst \u201cevery accountant . . . with respect to the [certification] . . . which purports to have been .\n\n. . certified by him.\u201d This circular reading is nonsensical.\n\n In fact, Marcum\u2019s proposed reading of the statute renders the words \u201cor certified\u201d entirely\n\nsuperfluous. \u00a7 11(a)(4) creates liability for an accountant for statements that \u201chave been prepared\n\nor certified by him\u201d. The audit opinion is undeniably a document prepared by the accountant. Thus,\n\nunder Marcum\u2019s interpretation where liability is limited to the audit opinion, there are no\n\nactionable statements against an accountant that were not \u201cprepared by him\u201d. Thus, an accountant\n\ndoes not \u201ccertify\u201d any statement that is not already potentially actionable under \u00a7 11(a)(4). This is\n\nnot an appropriate interpretation of a statute, especially where there is another interpretation that\n\ngives meaning to each word in \u00a7 11(a)(4). Advoc. Health Care Network v. Stapleton, 581 U.S. 468,\n\n478(2017)(\u201cOur practice, however, is to \u2018give effect, if possible, to every clause and word of a\n\nstatute.\u2019\u201d)(quoting Williams v. Taylor, 529 U.S. 362, 404 (2000)); Anderson v. Hancock, 820 F.3d\n\n670, 674 (4th Cir. 2016)(\u201cWe interpret [statutory provisions] \u2018as a whole, giving effect to each\n\nword and making every effort not to interpret a provision in a manner that renders other provisions\n\n... inconsistent, meaningless or superfluous.\u2019\u201d)(quoting Boise Cascade Corp. v. U.S. E.P.A., 942\n\nF.2d 1427, 1432 (9th Cir. 1991)).\n\n Marcum\u2019s cases are inapposite and unpersuasive. Marcum refers to Querub v. Hong Kong,\n\n\n\n 22\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 32 of 38\n\n\n\n\n649 F. App\u2019x 55 (2d Cir. 2016), an unreported summary order that lacks any precedential value,\n\neven in its own Second Circuit. The summary order in Querub addresses claims based on alleged\n\nmisrepresentations contained in the auditor\u2019s audit opinions themselves rather than any\n\nmisstatement contained in the issuer\u2019s financial statements. Id. at 58. It is thus irrelevant to the\n\nissue currently before the Court. This was also the case in Monroe v. Hughes, another case cited\n\nby Marcum, which dismissed \u00a7 11 claims against an auditor again based on alleged\n\nmisrepresentations or omissions from the audit opinion itself. 31 F.3d 772, 774 (9th Cir.\n\n1994)(\u201cThe principal issues in this case are whether Deloitte should have stated in its 1988 audit\n\nreport that it had found deficiencies in internal controls, and whether its failure to do so was a\n\nmaterial omission actionable under \u00a7 11.\u201d) 7\n\n Marcum also relies on In re SunEdison, Inc. Sec. Litig., 300 F. Supp. 3d 444 (S.D.N.Y.\n\n2018), and In re Charles Schwab Corp. Securities Litigation, 257 F.R.D. 534 (N.D. Cal. 2009). In\n\nSunEdison, plaintiff alleged \u201cthat KPMG violated section 11 of the Securities Act when it asserted\n\nthat it complied with the Generally Accepting Auditing Standards (\u201cGAAS\u201d) of the Public\n\nCompany Accounting Oversight Board (\u201cPCAOB\u201d) in its review of the Company's internal\n\ncontrols over financial reporting.\u201d 300 F. Supp. 3d at 498. It did not concern an auditor\u2019s liability\n\nfor misrepresentations contained within certified financial statements. In Charles Schwab, the\n\nalleged misrepresentations were also purportedly contained within the auditor\u2019s opinion itself,\n\nunlike the case here, and the Court still recognized that the plaintiff states a claim for accounting\n\n\n\n\n7\n United States v. Weiner, 578 F.2d 757 (9th Cir. 1978), is even less relevant as it concerns a jury\ninstruction given at a criminal trial of several accountants for violations of various provisions of\nthe Act and the Securities Exchange Act of 1934, 15 U.S.C. \u00a7\u00a7 78a, et seq., but not \u00a7 11 of the Act\nthat is at issue here.\n\n 23\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 33 of 38\n\n\n\n\nfraud \u201cif it adequately pleads a material violation of GAAP in the statements PwC certified.\u201d Id.\n\nat 558.\n\n D. \u00a7 11(a)(4) Does Not Create a Guarantee of Every Line in the Registration\n Statement.\n\n Under the plain meaning of \u00a7 11(a)(4), an accountant such as Marcum is prima facie liable\n\nto investors for any misstatements contained in its audit opinion itself (a statement prepared by the\n\naccountant) or contained in the financial statements of the issuer that are the subject of the audit\n\nopinion (a statement certified by the accountant). While accountants are strictly liable under \u00a7\n\n11(a)(4) to investors, in the sense that investors have no burden to plead or prove negligence, or\n\nfraud or any other form of scienter, accountants can avoid any liability for misstatements in an\n\nissuer\u2019s financial statements by proving they acted with reasonable care. \u00a7 11(b)(3) of the Act. 15\n\nU.S.C. \u00a7 77k(b)(3). Thus it is untrue that Plaintiffs seek to create \u201ca guarantee of the accuracy of\n\nevery line item in the financial statements.\u201d Marcum Mem. at 19. Instead, Plaintiffs demand that\n\naccountants face liability if they fail to exercise reasonable care in their audits of the financial\n\nstatements of public companies as mandated by Congress. While Marcum would make the express\n\ndue diligence defense enacted by Congress redundant, Plaintiffs\u2019 proposed common sense\n\ninterpretation of \u00a7\u00a7 11(a)(4) and 11(b)(3) retains the due diligence defense that provides protection\n\nfor accountants against claims based on minor and non-negligent mistakes. See In\n\nre McKesson HBOC, Inc. Sec. Litig., 126 F. Supp. 2d 1248, 1264 (N.D. Cal. 2000)(\u201cMoreover,\n\nthe Adams court\u2019s concerns about holding outside auditors liable for minor mistakes seems\n\nmisplaced, because even under a negligence standard plaintiffs only prevail if they prove that the\n\nmisstatements were material and that the defendants deviated from an appropriate standard of\n\ncare.)(referring to Adams v. Standard Knitting Mills, Inc., 623 F.2d 422 (6th Cir. 1980)).\n\n\n 24\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 34 of 38\n\n\n\n\n E. Plaintiffs Plausibly Allege Section 11 Standing.\n\n Section 11 requires a plaintiff to plausibly plead traceability, not accomplish proof at the\n\npleading stage. Fam. of Care Real Est. Holding Co. v. Chapman Prop., LLC, No. CV DKC 23-\n\n0574, 2023 WL 4134427, at *4 (D. Md. June 22, 2023) (Chasanow, J.) (plaintiff need not plead\n\nevidence); In re Suprema Specialties, Inc. Secs. Litig., 438 F.3d 256, 274 n.7 (3d Cir. 2006) (Third\n\nCircuit recognizing that the question of tracing in the secondary market is \u201ca factual one, to be\n\nresolved through discovery\u201d and although a Plaintiff \u201cmust allege\u201d their shares are traceable, they\n\n\u201cneed not prove their shares are traceable to a false or misleading registration statement at this\n\nearly stage of the litigation.\u201d). The Amended Complaint meets the correct legal standard by\n\nproviding sufficient facts to plausibly allege that Plaintiffs shares are traceable to offering\n\ndocuments. See, e.g., Pirani v. Slack Techs., Inc., 127 F.4th 1183, 1188 (9th Cir. 2025)\n\n(recognizing that the evaluation of allegations of traceability is evaluated under a plausibility\n\nstandard).\n\n Plaintiffs establish this plausibility by alleging facts that evidence the limited market for\n\niLearningEngines shares prior to the offering and that the shares registered by the offering\n\ndocuments covered over 87.1% of iLearningEngines outstanding shares which also represented\n\nover 100% of iLearningEngines\u2019 public float. See Amended Complaint at \u00b6\u00b6137, 139, 241, 247,\n\n420, 422, 439-40 (establishing number of shares registered by offering documents and outstanding\n\nshares); Declaration of Nicholas I. Porritt dated September 18, 2025, Exhibit A, at 45 (noting that\n\nshares registered under the Form S-1 Registration Statement accounted for 90.9% of\n\niLearningEngines public float). Furthermore, the Amended Complaint alleges that Plaintiffs\n\npurchased shares at the time the newly registered shares were being actively sold into the market\n\nby the selling stockholders. See id. at \u00b6\u00b629, 30, 148-155, 420-24 (Plaintiffs\u2019 certifications and facts\n\n 25\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 35 of 38\n\n\n\n\nsupporting continued sales of stock flowing into market). This is not the conclusory allegation of\n\ntracing that the Court was confronted with in Fanucchi v. Enviva Inc., No. CV DKC 22-2844,\n\n2024 WL 3302564 (D. Md. July 3, 2024). As a result, the Amended Complaint\u2019s allegations raise\n\nthe right to relief above the speculative level, nudging the claims \u201cacross the line from conceivable\n\nto plausible,\u201d which is all that is required. Barbour v. Garland, 105 F.4th 579, 589 (4th Cir. 2024).\n\n Defendants\u2019 reliance on cases In re Century Aluminum Company Securities Litigation, 729\n\nF.3d 1104 (9th Cir. 2013) and Krim v. pcOrder.com, Inc., 402 F.3d 489 (5th Cir. 2005) is misplaced\n\nbecause they are factually distinguishable. In those cases, the number of shares registered in the\n\nofferings were comparatively small to the millions of pre-existing shares in the market, creating a\n\nmore plausible explanation for the source of plaintiffs\u2019 shares. Moreover, unlike in Krim, where\n\nthe plaintiff\u2019s expert conceded tracing could not be proven (Krim, 402 F.3d at 492), Plaintiffs here\n\nhave alleged that their shares are traceable and that they will prove it through evidence from\n\ndiscovery. Amended Complaint at \u00b6\u00b629-30,423-36, 447.\n\n Marcum argues that Plaintiffs\u2019 plausibility allegations based on the sheer number and\n\nproportion of shares registered by the offering documents in the market to other tradeable shares\n\nruns afoul of Summers v. Earth Island Institution, 555 U.S. 488, 499 (2009). This is not so.\n\nSummers dealt with statistical probability for constitutional standing under Article III when\n\ncomplaint alleges no harm to plaintiff\u2019s members, which Marcum does not argue is lacking here.\n\nId. Plaintiffs allege they were personally harmed as well as members of the class by the misleading\n\nstatements in the offering documents, including in the incorporated financial statements. Amended\n\nComplaint a \u00b6\u00b6437-446. This is an issue of statutory not constitutional standing. In re Thornburg\n\nMortg., Inc. Sec. Litig., 683 F. Supp. 2d 1236, 1255 (D.N.M. 2010), on reconsideration in part,\n\n\n\n 26\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 36 of 38\n\n\n\n\n824 F. Supp. 2d 1214 (D.N.M. 2011), and aff'd sub nom. Slater v. A.G. Edwards & Sons, Inc., 719\n\nF.3d 1190 (10th Cir. 2013), and aff'd sub nom. Slater v. A.G. Edwards & Sons, Inc., 719 F.3d 1190\n\n(10th Cir. 2013) (finding that although \u201cPlaintiffs may lack statutory standing under Sections 11\n\nand 12(a)(2) against certain Defendants . . .they do not lack standing under Article III such that the\n\nCourt would lack subject-matter jurisdiction over these claims.\u201d).\n\n Moreover, the Amended Complaint does not argue that Plaintiffs will prove their Section\n\n11 standing through statistical principles, quite the opposite. Amended Complaint at \u00b6\u00b6425-36\n\n(alleging Plaintiffs will prove tracing with benefits of discovery through analysis of the chain of\n\ntitle). The overwhelming proportion of newly registered shares is not presented as statistical proof\n\nbut as a non-conclusory fact that evidences the plausibility of the traceability of Plaintiffs shares.\n\nAs courts have found in a similar factual situations, where a complaint alleges that \u201call or very\n\nnearly all the shares of stock available publically at the time were traceable to the registration\n\nstatement,\u201d standing is adequately alleged. In re Ubiquiti Networks, Inc. Sec. Litig., 33 F. Supp.\n\n3d 1107, 1119 (N.D. Cal. 2014). Plaintiffs have done such here. See In re EveryWare Global, Inc.\n\nSecs. Litig., 175 F. Supp. 3d 837 (S.D. Ohio 2016), aff\u2019d sub nom. IBEW Loc. No. 58 Annuity Fund\n\nv. EveryWare Glob., Inc., 849 F.3d 325 (6th Cir. 2017) (Section 11 standing plausibly alleged\n\nwhen newly registered shares equaled 86% of pre-existing public float); In re Coinbase Glob., Inc.\n\nSec. Litig., No. 2:22-CV-04915 (BRM) (LDW), 2024 WL 4053009, at *19 (D.N.J. Sept. 5, 2024),\n\nreconsideration denied, No. 2:22-CV-04915 (BRM) (LDW), 2025 WL 1040633 (D.N.J. Apr. 8,\n\n\n\n\n 27\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 37 of 38\n\n\n\n\n2025) (Section 11 standing adequately alleged when plaintiff alleged that 74% of the shares\n\nentering the market were pursuant to the registration statement). 8\n\n CONCLUSION\n\n For the reasons set forth herein, Plaintiffs respectfully request that the Court deny\n\nMarcum\u2019s motion to dismiss the Amended Complaint in its entirety.\n\n\n\n Dated: September 18, 2025 Respectfully submitted,\n\n LEVI & KORSINSKY, LLP\n\n / s / Nicholas I. Porritt\n Nicholas I. Porritt\n Alexander A. Krot III (attorney admission\n application forthcoming).\n 1101 Vermont Ave, NW Suite 800\n Washington, DC 20005\n Tel: (202)-524-4290\n Fax: (212) 363-7171\n Email: nporritt@zlk.com\n Email: akrot@zlk.com\n\n Counsel for Lead Plaintiff Louis Leveque,\n Plaintiff Iqbal Al Hamid, and Lead\n Counsel for the Class\n\n\n\n\n8\n Plaintiffs incorporate by reference their arguments set forth in Plaintiffs\u2019 Memorandum of Law in Opposition to\nIndependent Defendants\u2019 Motions to Dismiss the Amended Class Action Complaint. ECF No. 90.\n\n 28\n\f Case 8:24-cv-02900-DKC Document 91 Filed 09/18/25 Page 38 of 38\n\n\n\n\n CERTIFICATE OF SERVICE\n\n I hereby certify that on September 18, 2025, I electronically filed the foregoing Plaintiffs\u2019\n\nMemorandum Of Law In Opposition To Defendant Marcum LLP\u2019s Motion To Dismiss The\n\nAmended Class Action Complaint by using the CM/ECF system which will send a notice of\n\nelectronic filing to all counsel or parties of record.\n\n\n\n /s/ Nicholas I. Porritt\n Nicholas I. Porritt\n\n\n\n\n 29\n\f","ocr_status":2,"date_upload":"2026-05-19T22:33:12.816382-07:00","document_number":"91","attachment_number":null,"pacer_doc_id":"093015171211","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:10.780300-08:00","date_modified":"2026-05-18T23:59:55.656518-07:00","date_filed":"2025-09-18","time_filed":null,"entry_number":91,"recap_sequence_number":"2025-09-18.002","pacer_sequence_number":263,"description":"RESPONSE in Opposition re 80 MOTION to Dismiss for Failure to State a Claim filed by Louis Leveque, Iqbal al Hamid.(Porritt, Nicholas) (Entered: 09/18/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475302/","id":447475302,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228752/","id":462228752,"tags":[],"absolute_url":"/docket/69233925/90/walker-v-chidambaran/","date_created":"2025-12-17T07:51:10.741536-08:00","date_modified":"2026-05-22T08:17:35.754175-07:00","sha1":"283ac62964488e15f2a37f7a3b0269fa0ced493d","page_count":33,"file_size":183418,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.90.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.90.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 1 of 33\n\n\n\n UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n (Southern Division)\n\n\nDANNY WALKER, Individually and on Behalf )\nof All Others Similarly Situated, )\n )\n Plaintiff, )\n ) Civil Action No. DKC 24-2900\n v. )\n )\nHARISH CHIDAMBARAN, et al., )\n )\n Defendants. )\n )\n )\n )\n )\n )\n )\n\n\n PLAINTIFFS\u2019 MEMORANDUM OF LAW\n IN OPPOSITION TO INDEPENDENT DEFENDANTS\u2019\n MOTIONS TO DISMISS THE AMENDED CLASS ACTION COMPLAINT\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 2 of 33\n\n\n\n TABLE OF CONTENTS\n\n\nI. INTRODUCTION. ............................................................................................................. 1\n\nII. STATEMENT OF FACTS. ................................................................................................ 2\n\nIII. STANDARDS OF LAW. ................................................................................................... 9\n\nIV. ARGUMENT. ..................................................................................................................... 9\n\n A. The Complaint Adequately Alleges Plaintiffs\u2019 Standing for the Securities Act\n\n Claims ..................................................................................................................... 9\n\n B. The Complaint Adequately Alleges Violations of Section 15 of the Securities Act.\n\n ............................................................................................................................... 22\n\n C. Defendants Barger, Davis, Melham, Moe, and Olivier are Control Persons ........ 22\n\nV. CONCLUSION. ................................................................................................................ 25\n\n\n\n\n i\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 3 of 33\n\n\n\n TABLE OF AUTHORITIES\n\n\n\nCases\n\nIn re Alstom SA Securities Litigation,\n\n 406 F.Supp.2d 433 (S.D.N.Y. 2005) ......................................................................................... 24\n\nIn re Ariad Pharms., Inc. Sec. Litig.,\n\n 842 F.3d 744 (1st Cir. 2016) ..................................................................................................... 21\n\nAshcroft v. Iqbal,\n\n 556 U.S. 662 (2009) .................................................................................................................. 11\n\nBarbour v. Garland,\n\n 105 F.4th 579 (4th Cir. 2024).................................................................................................... 14\n\nBell Atl. Corp. v. Twombly,\n\n 550 U.S. 544 (2007) .............................................................................................................. 9, 11\n\nBlack v. Martek Biosciences Corp.,\n\n No. CV MJG-05-1224, 2006 WL 8435572 (D. Md. June 14, 2006) ........................................ 23\n\nButtram v. City of Bessemer,\n\n 2:17-CV-0846-VEH, 2018 U.S. Dist. LEXIS 7326 (N.D. Ala. Jan. 17, 2018) ........................ 12\n\nIn re Century Alum. Co. Secs. Litig,\n\n 729 F.3d 1104 (9th Cir. 2013) ................................................................................................... 20\n\nIn re Charles Schwab Corp. Securities Litigation,\n\n 257 F.R.D. 534 (N.D. Cal. 2009) .............................................................................................. 24\n\nCiarciello v. Bioventus, Inc.,\n\n 1:23-CV-32, 2023 WL 7300081 (D. Md. Nov. 6, 2023) .......................................................... 17\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 4 of 33\n\n\n\nIn re Coinbase Glob., Inc. Sec. Litig.,\n\n No. 2:22-CV-04915 (BRM) (LDW), 2024 WL 4053009 (D.N.J. Sept. 5, 2024),\n\n reconsideration denied, No. 2:22-CV-04915 (BRM) (LDW), 2025 WL 1040633 (D.N.J. Apr.\n\n 8, 2025)...................................................................................................................................... 15\n\nIn re Constellation Energy Grp., Inc. Sec. Litig.,\n\n 738 F. Supp. 2d 614 (D. Md. 2010) .......................................................................................... 24\n\nCupat v. Palantir Techs., Inc.,\n\n No. 1:22-CV-02805-GPG-SBP, 2025 WL 1141534 (D. Colo. Apr. 4, 2025) .................... 17, 18\n\nDavidco Investors, LLC v. Anchor Glass Container Corp.,\n\n Case No. 8:04-cv-2561-T-24 EAJ, 2006 U.S. Dist. LEXIS 11527 (M.D. Fla. Mar. 6, 2006) .. 21\n\nDoherty v. Pivotal Software, Inc.,\n\n No. 3:19-CV-03589-CRB, 2019 WL 5864581 (N.D. Cal. Nov. 8, 2019) ................................ 21\n\nIn re Evergreen Ultra Short Opportunities Fund Sec. Litig.,\n\n 705 F. Supp. 2d 86 (D. Mass. 2010) ......................................................................................... 24\n\nIn re EveryWare Glob., Inc. Sec. Litig.,\n\n 175 F. Supp. 3d 837 (S.D. Ohio 2016), aff\u2019d sub nom. IBEW Loc. No. 58 Annuity Fund v.\n\n EveryWare Glob., Inc., 849 F.3d 325 (6th Cir. 2017)................................................... 14, 15, 18\n\nFam. of Care Real Est. Holding Co. v. Chapman Prop., LLC,\n\n No. CV DKC 23-0574, 2023 WL 4134427 (D. Md. June 22, 2023) (Chasanow, J.) ............... 11\n\nFanucchi v. Enviva, Inc.,\n\n No. CV DKC 22-2844, 2024 WL 3302564 (D. Md. July 3, 2024) (Chasanow, J.) ............ 15, 16\n\nIn re Fleetboston Fin. Corp. Secs. Litig.,\n\n 253 F.R.D. 315 (D.N.J. 2008) ................................................................................................... 21\n\n\n\n ii\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 5 of 33\n\n\n\nIn re Global Crossing, Ltd. Sec. Litig.,\n\n 313 F.Supp.2d 189 (S.D.N.Y. 2003) ......................................................................................... 16\n\nGrand Lodge of Pa. v. Peters,\n\n 550 F. Supp. 2d 1363 (M.D. Fla. 2008) .................................................................................... 21\n\nHughes v. Lasalle Bank, N.A.,\n\n 02 Civ. 6384 (MBM) (HBP), 2004 U.S. Dist. LEXIS 3403 (S.D.N.Y. Mar. 4, 2004) ............ 12\n\nJohn v. Whole Foods Mkt. Grp., Inc.,\n\n 858 F.3d 732 (2d Cir. 2017) ...................................................................................................... 18\n\nJohnson v. CBD Energy Ltd.,\n\n No. CV H-15-1668, 2016 WL 3654657 (S.D. Tex. July 6, 2016) ............................................ 21\n\nKrim v. pcOrder.com, Inc.,\n\n 402 F.3d 489 (5th Cir. 2005) ................................................................................... 15, 19, 20, 21\n\nMacKnight v. Leonard Morse Hosp.,\n\n 828 F.2d 48 (1st Cir. 1987) ....................................................................................................... 12\n\nIn re Metropolitan Securities Litigation,\n\n 532 F.Supp.2d 1260 (E.D.Wash. 2007) .................................................................................... 24\n\nIn re Mirant Corp. Sec. Litig.,\n\n No. 1:02-CV-1467-RWS, 2008 WL 11334395 (N.D. Ga. Aug. 5, 2008) ................................ 21\n\nIn re Mun. Mortg. & Equity, LLC, Sec. & Derivative Litig., 876 F. Supp. 2d 616 (D. Md. 2012),\n\n aff\u2019d sub nom. Yates v. Mun. Mortg. & Equity, LLC, 744 F.3d 874 (4th Cir. 2014) ...... 9, 19, 22\n\nNB ex rel. Peacock v. District of Columbia,\n\n 682 F.3d 77 (D.C. Cir. 2012) .................................................................................................... 12\n\n\n\n\n iii\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 6 of 33\n\n\n\nNorthumberland Cnty. Ret. Sys. v. Kenworthy,\n\n No. CIV-11-520-D, 2013 WL 5230000 (W.D. Okla. Sept. 16, 2013) ...................................... 16\n\nPerry v. Duoyuan Printing, Inc.,\n\n No. 10 CIV. 7235 GBD, 2013 WL 4505199 (S.D.N.Y. Aug. 22, 2013) .................................. 16\n\nPirani v. Slack Techs., Inc.,\n\n 127 F.4th 1183 (9th Cir. 2025)........................................................................................ 2, 10, 18\n\nPirani v. Slack Techs., Inc.,\n\n 13 F.4th 940, 951 (9th Cir. 2021), vacated and remanded sub nom. Slack Techs., LLC v.\n\n Pirani, 598 U.S. 759 (2023 ....................................................................................................... 10\n\nIn re Royal Ahold N.V. Sec. & ERISA Litig.,\n\n 351 F. Supp. 2d 334 (D. Md. 2004) .......................................................................................... 22\n\nSabby Volatility Warrant Master Fund Ltd. v. Safety Shot, Inc.,\n\n 24 Civ. 920 (NRB), 2025 U.S. Dist. LEXIS 48437 (S.D.N.Y. Mar. 17, 2025) ........................ 12\n\nSD3, LLC v. Black & Decker (U.S.) Inc.,\n\n 801 F.3d 412 (4th Cir. 2015), as amended on reh\u2019g in part (Oct. 29, 2015) ............................ 11\n\nShapiro v. UJB Fin. Corp.,\n\n 964 F.2d 272 (3d Cir. 1992), as amended (May 27, 1992) ....................................................... 12\n\nSlack Techs., LLC v. Pirani,\n\n 598 U.S. 759 (2023) ................................................................................................................ 2, 9\n\nIn re Sourcefire, Inc. Sec. Litig.,\n\n No. CIV. JFM 07-1210, 2008 WL 1827484 (D. Md. Apr. 23, 2008) ....................................... 24\n\nIn re Suprema Specs., Inc. Sec. Litig.,\n\n 438 F.3d 256 (3d Cir. 2006) ................................................................................................ 11, 12\n\n\n\n iv\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 7 of 33\n\n\n\nStarr v. Baca,\n\n 652 F.3d 1202 (9th Cir. 2011) .................................................................................................. 14\n\nTransEnterix Investor Group v. TransEnterix, Inc.,\n\n 272 F. Supp. 3d 740 (E.D.N.C. 2017) ....................................................................................... 21\n\nIn re Ubiquiti Networks, Inc. Sec. Litig.,\n\n 33 F. Supp. 3d 1107 (N.D. Cal. 2014), aff'd in part, rev\u2019d in part and remanded, 669 F. App'x\n\n 878 (9th Cir. 2016) .................................................................................................................... 14\n\nIn re Wachovia Equity Sec. Litig.,\n\n 753 F.Supp.2d 326 (S.D.N.Y. 2011) ......................................................................................... 16\n\nYates v. Mun. Mortg. & Equity, LLC,\n\n 744 F.3d 874 (4th Cir. 2014) ........................................................................................... 9, 18, 19\n\nIn re 2U, Inc. Sec. Class Action,\n\n No. CV TDC-19-3455, 2021 WL 3418841 (D. Md. Aug. 5, 2021) ......................................... 19\n\nStatutes\n\n15 U.S.C. \u00a7 77k(a) .......................................................................................................................... 9\n\n15 U.S.C. \u00a777f(a) .......................................................................................................................... 23\n\n\n\n\n v\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 8 of 33\n\n\n\n I. INTRODUCTION.\n\n The Amended Complaint plausibly alleges that Plaintiffs have standing to pursue their\n\nSecurities Act claims against the Defendants because they allege that they purchased their shares\n\npursuant and/or traceable to the Offering Documents together with additional, non-conclusory\n\nfacts showing that it is plausible they will be able to prove they can trace their shares to a\n\nmisleading Registration Statement. Most importantly, Plaintiffs\u2019 allegations and\n\niLearningEngines\u2019 own filings show that, following the effectiveness of the false Form S-8 and\n\nForm S-1 Registration Statements, over 100% of iLearningEngines public float was registered by\n\nthe Offering Documents, and Plaintiffs have set forth a clear methodology to definitively prove\n\nthrough evidence that their iLearningEngines shares trace to the Offering Documents by\n\nreconstructing the chain of title for their iLearningEngines stock purchases from evidence obtained\n\nwith the benefit of discovery.\n\n Defendants Barger, Davis, Mehlman, and Moe (collectively, the \u201cIndependent Directors\u201d),\n\nseek to escape liability for the false and misleading statements 1 in the Offering Documents 2\n\narguing that Plaintiffs have failed to adequately allege standing to pursue the Securities Act Claims\n\nunder Rule 8(a) of the Federal Rules of Civil Procedure because the Complaint fails to allege the\n\nchain-of-title for Plaintiffs\u2019 purchases of iLearningEngines shares to prove that the shares are\n\ntraceable to the Offering Documents. In their respective motions to dismiss the Complaint,\n\nDefendants Chidambaran, Naqvi, Olivier, and Marcum mirror such arguments. 3\n\n\n1\n The Independent Directors joined and incorporated by reference the arguments made in Section I.A. of Defendant\nHarish Chidambaran\u2019s Motion to Dismiss, ECF No. 83-1 at 9-16, and Section I.B. of Defendant Farhan Naqvi\u2019s\nMotion to Dismiss, ECF No. 84-1 at 9-14, regarding the deficiency of certain alleged misrepresentations. Ind. Defs.\nBr. at 2 n.1. Plaintiffs hereby incorporate their arguments in opposition to these arguments made in their opposition\nto Defendants Chidambaran\u2019s and Naqvi\u2019s motions to dismiss.\n2\n All capitalized terms shall have the meaning ascribed to them in the Amended Class Action Complaint For Violations\nOf The Federal Securities Laws (the \u201cComplaint\u201d, ECF No. 41) unless defined otherwise herein.\n3\n Given the substantial overlap of Defendants arguments on tracing, Plaintiffs will generally refer to that the argument\nwas raised by the \u201cDefendants\u201d although only one or more of the Defendants may raise the specific argument.\n\n 1\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 9 of 33\n\n\n\n Defendants rely on the Supreme Court\u2019s decision Slack Techs., LLC v. Pirani, 598 U.S.\n\n759 (2023) (\u201cSlack\u201d), and subsequent cases, for the premise that \u201cSection 11 requires a plaintiff to\n\nplead and prove that he purchased shares traceable to the allegedly defective registration\n\nstatement.\u201d Id. at 770. Defendants and courts, however, have conflated this with requiring that a\n\nplaintiff must allege evidence in their complaint that establishes the chain-of-title from their stock\n\npurchases in the aftermarket following a company\u2019s secondary offering to the registration\n\nstatement to \u201cprove\u201d their standing instead of plausibly alleging facts that suggest that plaintiff\u2019s\n\nshare purchases are traceable and that plaintiff will be able to prove such. This, however, is not the\n\nlaw.\n\n Here, the Court simply needs to determine whether Plaintiffs\u2019 allegations \u201cmake the\n\nconclusion of traceability a plausible one under the pleading standards articulated by the Supreme\n\nCourt in Ashcroft v. Iqbal, [556 U.S. 662, 678 (2009)].\u201d Pirani v. Slack Techs., Inc., 127 F.4th\n\n1183 (9th Cir. 2025) (\u201cPirani II\u201d) (the Ninth Circuit applying the Supreme Court\u2019s opinion in\n\nSlack on remand). In the Complaint, Plaintiffs have adequately alleged under Rule 8(a) that their\n\nshare purchases are traceable to the Offering Documents, the facts that support the plausibility that\n\ntheir shares are traceable, and that Plaintiffs can \u201cprove\u201d by a chain-of-title that their shares are\n\ntraceable once they are permitted to obtain the records establishing such through discovery.\n\nPlaintiffs have met their burden at the pleading stage. Defendants\u2019 motions to dismiss the\n\nComplaint\u2019s Securities Act claims for standing should be denied.\n\n II. STATEMENT OF FACTS.\n\n iLearningEngines, was a privately held company, until it went public on April 16, 2024,\n\nthrough a reverse merger with Arrowroot Acquisitions, Inc. (\u201cArrowroot\u201d), a special purpose\n\nacquisition company (\u201cSPAC\u201d). \u00b63. Arrowroot was incorporated in 2020 as a SPAC to acquire a\n\n\n\n 2\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 10 of 33\n\n\n\ncompany in the enterprise software industry. \u00b667. After its IPO in March 2021, which raised $287.5\n\nmillion, Arrowroot spent the next two years searching for a suitable business to acquire. \u00b669. In\n\nOctober 2022, iLearningEngines Holdings and Arrowroot entered into a non-binding letter of\n\nintent and related non-disclosure agreement. \u00b671.\n\n In early 2023, during the Merger negotiations, Arrowroot Capital and iLearningEngines\n\nHoldings discussed a convertible note investment of up to $50 million to meet the immediate cash\n\nneeds of iLearningEngines Holdings upon the closing of the Merger. \u00b672. In January 2023,\n\nArrowroot's board of directors valued iLearningEngines Holdings at $1.28 billion and as part of\n\nthe Merger negotiations agreed to enter into a forward purchase agreement with respect to the\n\nproposed business combination so that a certain number of shares would be tradable at close to\n\nhelp support a trading environment for the company\u2019s stock post close of the merger. \u00b6\u00b673-74. On\n\nApril 27, 2023, the merger agreement was executed and an announcement was made that\n\niLearningEngines was merging into Arrowroot through its subsidiary, that the surviving company\n\nwould be renamed iLearningEngines, Inc., and that post-merger the new company would trade on\n\nthe NASDAQ market under the symbol \u201cAILE.\u201d \u00b6\u00b676-77.\n\n On September 5, 2023, Arrowroot filed a Form S-4 registration statement in connection\n\nwith the Merger with it being amended three times with the last amendment filed on January 5,\n\n2024 (collectively, the \u201cForm S-4\u201d). \u00b678. Per the Form S-4, there were 4,445,813 shares of\n\nArrowroot Class A Common Stock outstanding that were freely tradable without restriction or\n\nfurther registration under the Securities Act, except for shares held by one of Arrowroot affiliates\n\nwithin the meaning of Rule 144 under the Securities Act and all of the 7,187,500 shares of\n\nArrowroot Class B Common Stock being restricted securities under Rule 144. \u00b6418. Over 71.7%\n\nof iLearningEngines outstanding shares, or 96,764,327 shares, were owned by Defendant\n\n\n\n 3\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 11 of 33\n\n\n\nChidambaran and his wife and subject to lock-ups or otherwise restricted. \u00b6419. Arrowroot\n\nAcquisition also had an additional 7,005,793 shares that corresponded to 5.2% of the outstanding\n\nshares which were also subjected to lockup. Id. As such, as of April 25, 2024, over 76.9% of\n\niLearningEngines outstanding shares were not tradeable. Id.\n\n On April 17, 2024, iLearningEngines Holdings went public via a reverse merger with\n\nArrowroot. \u00b679. The merger came at a time when iLearningEngines Holdings was in a poor\n\nfinancial state, with only $800,000 in cash and $22 million in debt as of March 2024. \u00b667.\n\nAlthough, the merger's initial goal was to secure a minimum of $100 million in cash (\u00b677), due to\n\nmost of Arrowroot's stockholders redeeming their shares before the consummation of the merger,\n\nthe funds in Arrowroot\u2019s trust account declined significantly from $287.5 million to just $5.9\n\nmillion at the time the closing of the Merger was announced on April 17, 2024. \u00b679.\n\n Ultimately, iLearningEngines received approximately $52.7 million in gross proceeds\n\nfrom the trust account and convertible notes consisting of approximately comprising\n\napproximately $5.9 million from the Arrowroot trust account, approximately $17.4 million from\n\nthe 2023 Convertible Notes, and approximately $29.4 million from the 2024 Convertible Notes.\n\n\u00b680. Upon the closing of the Merger closed on April 16, 2024, with Arrowroot changing its name\n\nto \u201ciLearningEngines, Inc.\u201d and its ticker symbol being changed on the NASDAQ to \u201cAILE.\u201d\n\n\u00b6\u00b667, 80-81.\n\n As of May 14, 2024, iLearningEngines had 134,313,494 shares of common stock\n\noutstanding. \u00b646. Over 76.9% of iLearningEngines\u2019 outstanding shares were subject to lock-up\n\nprovisions and not available for public sale following the Merger. \u00b6419. These restrictions meant\n\nthat only a small fraction of the iLearningEngines stock were freely tradable before the new\n\nregistration statements became effective. \u00b6418.\n\n\n\n 4\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 12 of 33\n\n\n\n On June 3, 2024, iLearningEngines filed a Form S-1 seeking to register up to 22,624,975\n\nshares of its common stock issuable upon exercise of iLearningEngines warrants, up to\n\n100,774,669 shares of iLearningEngines common by the \u201cSelling Securityholders\u201d which included\n\ninvestors in Arrowroot; and included the 8,250,000 warrants issued in a private placement to the\n\nArrowroot Acquisition LLC, the sponsor of the SPAC. \u00b6440. The Form S-1 Registration Statement\n\nwas amended twice with the second amended version filed with the SEC on July 22, 2024. \u00b6\u00b610,\n\n249; see also Declaration of Nicholas I. Porritt dated September 18, 2025 (\u201cPorritt Decl.\u201d), Exhibit\n\nA (the Form S-1 Registration Statement dated July 22, 2024). The Form S-1 Registration\n\nStatement was signed by each of the Individual Defendants. \u00b6\u00b6144, 250. Marcum certified the\n\nconsolidated financial statements of iLearningEngines, Inc. contained or incorporated by\n\nreferenced into the Form S-1 Registration as of December 31, 2023 and 2022 and for the years\n\nended December 31, 2023, 2022, and 2021.\u00b6253. Attached to Form S-1 Registration Statement as\n\nExhibit 23.1 was Marcum\u2019s consent form stating \u201c[w]e consent to the inclusion in this Registration\n\nStatement of iLearningEngines, Inc. on Form S-1 of our report dated April 22, 2024, with respect\n\nto our audits of the consolidated financial statements of iLearningEngines, Inc. as of December\n\n31, 2023 and 2022 and for the years ended December 31, 2023, 2022, and 2021, which report\n\nappears in the Prospectus, which is part of this Registration Statement. We also consent to the\n\nreference to our Firm under the heading \u2018Experts\u2019 in such Prospectus.\u201d \u00b6\u00b6146, 253.\n\n On June 21, 2024, after market close, iLearningEngines filed the Form S-8 Registration\n\nStatement to register up to 16,208,318 shares of iLearningEngines common stock issued or\n\nissuable pursuant to the 2020 Equity Incentive Plan, iLearningEngines, Inc. 2024 Equity Incentive\n\nPlan, and iLearningEngines, Inc. 2024 Employee Stock Purchase Plan. \u00b6\u00b6137, 139. The Form S-8\n\nRegistration Statement was signed by Defendants Chidambaran, Naqvi, Arackal, Olivier, Barger,\n\n\n\n 5\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 13 of 33\n\n\n\nDavis, Mehlman, and Moe. \u00b6138. The Form S-8 Registration Statement was automatically\n\neffective upon its filing with the SEC. \u00b6\u00b6139, 142. Attached to Form S-8 Registration Statement\n\nas Exhibit 23.1 was Marcum\u2019s consent form stating \u201c[w]e consent to the incorporation by reference\n\nin this Registration Statement of iLearningEngines, Inc. on Form S-8 of our report dated April 22,\n\n2024, with respect to our audits of the consolidated financial statements of iLearningEngines, Inc.\n\nas of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022, and 2021\n\nappearing in the Form 8-K filed with the Securities and Exchange Commission on April 22, 2024.\u201d\n\n\u00b6\u00b641, 245-46, 253. With this consent, Marcum\u2019s report dated April 22, 2024, certified the\n\nfollowing financial statements incorporated by reference into the Form S-8 Registration Statement\n\nthe \u201cbalance sheets . . . as of December 31, 2023 and 2022, the related consolidated statements of\n\noperations, changes in shareholders\u2019 deficit and cash flows for each of the three years ended\n\nDecember 31, 2023, 2022 and 2021, and the related notes (collectively referred to as the \u201cfinancial\n\nstatements\u201d). \u00b6246.\n\n Although the Form S-1 Registration Statement was filed prior to the Form S-8 Registration\n\nStatement, it did not go effective until August 9, 2025 at 4 p.m., at which time the shares became\n\nregistered and freely tradeable. \u00b6\u00b6147, 492. On August 12, 2024, iLearningEngines filed the\n\nProspectus for the Form S-1 Registration Statement and continued to amend the prospectus for the\n\nForm S-1 Registration statements seven additional times between August 14, 2024 and December\n\n10, 2024, as the registered shares were being sold into the marketplace. \u00b6\u00b6148-155, 251, 492.\n\n On the filing of the Form S-8 Registration Statement and again after the effectiveness of\n\nthe Form S-1 Registration Statement, the market for iLearningEngines stock was fundamentally\n\naltered by the massive influx of newly registered shares. After the Form S-8 Registration Statement\n\nbecame effective, on June 21, 2024, iLearningEngines trading volume surged more than 14-fold,\n\n\n\n 6\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 14 of 33\n\n\n\njumping from 277,382 shares the prior day to 3,989,868 shares. \u00b6420. Similarly, on the first trading\n\nday after the Form S-1 Registration Statement became effective on August 9, 2024, trading volume\n\nexploded by nearly 11-fold, increasing from 266,969 shares to 2,946,992 shares, and continued to\n\nsurge to 3,861,955 shares on August 13, 2024. \u00b6421. This dramatic increase in trading volume,\n\noccurring in a market where most pre-existing shares were locked-up and limited market for\n\niLearningEngines shares, creates a strong and plausible inference that the shares being traded were\n\nthe newly registered shares from the Offering Documents. \u00b6\u00b6420-22.\n\n Of the 134,313,494 outstanding shares, 4 87.1%, or 116,982,987 of the shares were\n\nregistered by the Offering Documents. See \u00b6\u00b6137, 139, 241, 247, 439-40. Importantly, the \u201cResale\n\nSecurities\u201d registered by the Form S-1 Registration Statement, i.e., the 100,774,669 shares being\n\nsold by existing shareholders, alone represent approximately 90.9% of iLearningEngines public\n\nfloat of 110,863,222 shares. See Porritt Decl., Ex. A (Page 45 of the Form S-1 Registration\n\nStatement stating \u201c[t]he number of Resale Securities represents approximately 90.9% of our public\n\nfloat[.]\u201d). Importantly, the 90.9 percentage does not even account the 16,208,318 shares registered\n\nby the Form S-8 Registration Statement. \u00b6\u00b6420, 422, 439. Thus, after adding the 100,774,669\n\nResale Securities to the previously registered 16,208,318 shares registered by the Form S-8\n\nRegistration Statement, the number of iLearningEngines registered shares exceeds the public float.\n\n The Complaint alleges that Defendants violated Section 11 of the Securities Act by issuing\n\nthe materially false and/or misleading statements in the Offering Documents. \u00b6\u00b6241-450. The\n\nComplaint further asserts violations of Section 15 of the Securities Act against the Individual\n\nDefendants. \u00b6\u00b6451-457. Plaintiffs purchased iLearningEngines common stock that they allege to\n\nbe directly traceable to the Offering Documents. \u00b6\u00b629-30, 447.\n\n\n4\n This calculation excludes the 22,624,975 shares of iLearningEngines common stock that were being registered that\nare issuable upon the exercise of the warrants discussed in the Form S-1 Registration Statement.\n\n 7\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 15 of 33\n\n\n\n Lead Plaintiff Louis Leveque purchased common stock pursuant and/or traceable to the\n\nForm S-8 Registration Statement on July 25, 2024. \u00b629. The Leveque shares were purchased in\n\nthe market following the effective date of the Form S-8 Registration Statement as shares were\n\nbeing sold by iLearningEngines\u2019 employees. See \u00b6\u00b629, 420; ECF No. 3-3 (Lead Plaintiff\n\nLeveque\u2019s PSLRA certification listing his transaction in iLearningEngines share).\n\n Plaintiff Al Hamid purchased common stock from August 20 to August 30, 2024 pursuant\n\nand/or traceable to the Offering Documents, which include both the Form S-8 and the Form S-1\n\nRegistration Statements. \u00b630. Plaintiff Al Hamid initial purchases of iLearningEngines stock were\n\nwithin approximately a week of the filing of the Prospectus and additional purchases took place\n\nduring the time Prospectus Supplements Nos. 1-2 were entering the market as the shares registered\n\nby the Form S-1 Registration Statement were being sold into the market. See \u00b6\u00b630, 149-50;\n\nComplaint, Exhibit A (Plaintiff Al Hamid\u2019s certification).\n\n Plaintiffs have articulated a clear methodology to definitively prove through evidence that\n\ntheir iLearningEngines shares trace to the Offering Documents. \u00b6\u00b6417-36. When Plaintiffs are\n\npermitted discovery, Plaintiffs will obtain and analyze specific records, including \u201cParticipant\n\nDaily Activity Statements\u201d from the Depository Trust Company (\u201cDTC\u201d) and transfer journals\n\nfrom iLearningEngines\u2019 transfer agent, Continental Stock Transfer & Trust Company, and as\n\nnecessary additional documents from select brokerages or iLearningEngines\u2019 corporate records\n\nowned by AAI Solutions, Inc., to reconstruct the chain of title for the shares they purchased. \u00b6\u00b6422-\n\n36. These documents track share issuances and transfers between parties and will allow Plaintiffs\n\nto distinguish newly registered shares from the previously tradeable shares prior to effectiveness\n\nof the Form S-8 and to establish a chain of title for each share of iLearningEngines shares they\n\npurchased. See id. Therefore, Plaintiffs\u2019 ability to prove traceability is not based on mere\n\n\n\n 8\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 16 of 33\n\n\n\nprobability, but on a well-defined plan to use standard industry records to evidence title chain\n\nbetween their purchases and the Offering Documents. \u00b6\u00b629-30, 417-36.\n\nIII. STANDARDS OF LAW.\n\n Section 11 of the Securities Act of 1933 provides that \u201c[i]n case any part of the registration\n\nstatement ... contained an untrue statement ... any person acquiring such security ... may ... sue.\u201d\n\n15 U.S.C. \u00a7 77k(a). Section 11 claims are subject to a Rule 8(a) notice pleading standard. Yates v.\n\nMun. Mortg. & Equity, LLC, 744 F.3d 874, 899 (4th Cir. 2014) (\u201cWe review the plausibility of the\n\namended complaint's standing allegations de novo under the pleading requirements of Rule 8(a).\u201d).\n\nNotably, Rule 8(a) \u201cdoes not impose a probability requirement at the pleading stage; it simply\n\ncalls for enough fact to raise a reasonable expectation that discovery will reveal evidence\u201d to\n\nsupport the allegations. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007) (emphasis added).\n\nThus, plausibility does not mean proof as even if a plaintiff \u201cwill be unable to prove that he bought\n\ndirectly in the offering or that he can trace his shares to the offering . . . inasmuch as the allegations\n\npresent a plausible claim, they are adequate\u201d for pleading traceability for a Section 11 claim. In re\n\nMun. Mortg. & Equity, LLC, Sec. & Derivative Litig., 876 F. Supp. 2d 616, 658 (D. Md. 2012),\n\naff\u2019d sub nom. Yates v. Mun. Mortg. & Equity, LLC, 744 F.3d 874 (4th Cir. 2014).\n\nIV. ARGUMENT.\n\n A. The Complaint Adequately Alleges Plaintiffs\u2019 Standing for the Securities Act\n\n Claims\n\n Section \u201c11 requires a plaintiff to plead and prove that he purchased shares traceable to the\n\nallegedly defective registration statement.\u201d Slack, 598 U.S. at 770. Proof, however, need not be\n\naccomplished at the pleading stage. See id. at 765; Pirani v. Slack Techs., Inc., 13 F.4th 940, 951\n\n(9th Cir. 2021) (\u201cPirani I\u201d), vacated and remanded sub nom. Slack Techs., LLC v. Pirani, 598 U.S.\n\n\n\n 9\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 17 of 33\n\n\n\n759 (2023) (dissent by Judge Miller stating that because it was impossible for Plaintiffs to later\n\n\u201cprove\u201d that plaintiff\u2019s shares could be traced to the registration statement he would reverse and\n\ngrant motion to dismiss).\n\n Notably, in delivering the Ninth Circuit\u2019s opinion on remand in Pirani II, Judge Miller\n\ninterpreted the Supreme Court\u2019s opinion in Slack. Although the Ninth Circuit found the claims\n\nmust be dismissed because plaintiff waived any allegations of traceability based on his prior\n\nconcession that he could not trace his shares, Judge Miller discussed that if plaintiff had not made\n\nthis concession, and if plaintiff had only alleged his purchases were traceable, then the Ninth\n\nCircuit \u201cwould have to decide whether his allegation was sufficient to make the conclusion of\n\ntraceability a plausible one under the pleading standards articulated by the Supreme Court in\n\nAshcroft v. Iqbal, [556 U.S. 662, 678 (2009)]\u201d. Pirani II, 127 F.4th at 1188.\n\n Plaintiff argued that although he could not prove the registration status of particular shares\n\nthat \u201c[he] can plausibly allege that he purchased at least some registered shares\u201d through a\n\n\u201cstatistical inference\u201d based on \u201cthe number of shares he purchased and the fraction of shares on\n\nthe exchange that were registered.\u201d Id. at 1190. The Ninth Circuit took this at face value to be what\n\nwas represented by the plaintiff that \u201c[h]e cannot allege traceability.\u201d Id. Although the Ninth\n\nCircuit took issue with the proposed \u201cstatistical\u201d proof of tracing, it acknowledged that standing\n\ncan be proven if plaintiffs can \u201ctrace the chain of title for their shares back to the secondary\n\noffering.\u201d Id. This is what Plaintiffs allege in the Complaint can be done with their\n\niLearningEngines shares.\n\n Defendants concede that Plaintiffs can establish their standing by tracing the chain-of-title\n\nof the shares they purchased to the Offering Documents. See Olivier Br. at 10-11; Ind. Dir. Br. at\n\n\n\n\n 10\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 18 of 33\n\n\n\n12; Marcum Br. at 21; Chidambaran Br. at 28. 5 Defendants, however, argue that Plaintiffs must\n\n\u201cprove\u201d this chain of title in the Complaint with evidence at the pleading stage. See Chidambaran\n\nBr. at 28 (arguing must prove at the pleading stage); Olivier Br. at 9-10 (arguing plaintiffs \u201cmust\n\nshow\u201d and \u201caffirmatively trace the chain of title\u201d); Marcum Br. at 21 (arguing plaintiffs must plead\n\nproof); Naqvi Br. at 23-24; Ind. Dir. Br. at 12. This, is not the law. \u201c[A] plaintiff is not required to\n\nplead evidence or prove its case at the motion to dismiss stage. Alleging that a statement was made\n\nis enough, and the court must accept the allegation as true.\u201d Fam. of Care Real Est. Holding Co.\n\nv. Chapman Prop., LLC, No. CV DKC 23-0574, 2023 WL 4134427, at *4 (D. Md. June 22, 2023)\n\n(Chasanow, J.); see also, SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 431 (4th Cir.\n\n2015), as amended on reh\u2019g in part (Oct. 29, 2015) (discussing conclusory allegations versus\n\nparticularized allegations in the wake of Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and\n\nnoting in an antitrust case that \u201cdemanding more than the particularized allegations . . . would\n\ncompel a[] . . . plaintiff to plead evidence\u2014and we have already expressly refused to impose such\n\na requirement.\u201d). Rather, \u201c[t]o survive a motion to dismiss, a complaint must contain sufficient\n\nfactual matter, accepted as true, to \u2018state a claim to relief that is plausible on its face.\u2019\u201d Ashcroft v.\n\nIqbal, 556 U.S. 662, 678 (2009).\n\n In re Suprema Specialties, Inc. Securities. Litigation, 438 F.3d 256 (3d Cir. 2006) is\n\ninstructive as to why Section 11 standing is a pleading standard and not a \u201cproof\u201d standard. In\n\nSuprema, the Third Circuit recognized that \u201c[b]efore discovery takes place [ ] it is impossible for\n\n\n5\n Citations to Defendants\u2019 briefs in support of their motions to dismiss are cited as the following: Memorandum Of\nPoints And Authorities In Support Of Defendants Matthew Barger, Ian Davis, Bruce Mehlman, And Michael Moe\u2019s\nMotion To Dismiss The Amended Complaint, ECF No. 85-1 (\u201cInd. Dir. Br.\u201d); Memorandum Of Law In Support Of\nDefendant Harish Chidambaran\u2019s Motion To Dismiss Amended Class Action Complaint, ECF No. 83-1\n(\u201cChidambaran Br.\u201d); Defendant Sayyed Farhan Naqvi\u2019s Memorandum In Support Of His Motion To Dismiss The\nAmended Complaint, ECF No. 84-1 (\u201cNaqvi Br.\u201d); Memorandum Of Law In Support Of Defendant Thomas Olivier\u2019s\nMotion To Dismiss, ECF No. 82-1 (\u201cOlivier Br.\u201d); and Memorandum Of Law In Support Of Defendant Marcum\nLLP\u2019s Motion To Dismiss The Amended Class Action Complaint For Violations Of The Federal Securities Laws,\nECF No. 80-1 (\u201cMarcum Br.\u201d).\n\n 11\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 19 of 33\n\n\n\nplaintiffs to know whether their shares were newly issued or were purchased in the secondary\n\nmarket.\u201d Id. at 274 n.7 (3d Cir. 2006). The Third Circuit explained that tracing in the secondary\n\nmarket is \u201ca factual one, to be resolved through discovery, as to whether plaintiffs can demonstrate\n\nthat the shares they allegedly purchased are in fact traceable to the registration statement alleged\n\nto be false and misleading.\u201d Thus, the Third Circuit has recognized on at least two occasions that\n\n\u201cPlaintiffs need not prove their shares are traceable to a false or misleading registration statement\n\nat this early stage of the litigation, they must allege it.\u201d Suprema, 438 F.3d at 274 n.7; see also\n\nShapiro v. UJB Fin. Corp., 964 F.2d 272, 286 (3d Cir. 1992), as amended (May 27, 1992) (\u201cAt\n\nsome point, plaintiffs may be able to prove that their DRISP shares came from treasury stock.\n\nBecause we cannot say that plaintiffs can prove no set of facts that would entitle them to relief, the\n\n\u00a7 11 claim cannot be dismissed at this time\u201d). Thus, the Third Circuit in Suprema found such issues\n\nshould rightfully be resolved after discovery concluding that \u201cif, as appellees suggest, plaintiffs\n\nhave misrepresented the circumstances of their stock purchases and do not in fact have standing,\n\nappellees can raise that matter at the summary judgment stage after discovery.\u201d Suprema, 438 F.3d\n\nat 274 n.7. 6\n\n Therefore, plausibility does not mean certainty. NB ex rel. Peacock v. District of Columbia,\n\n682 F.3d 77, 85 (D.C. Cir. 2012) (finding standing adequately alleged even when \u201callegations do\n\n\n6\n Defendant Naqvi\u2019s arguments to the opposite are unavailing. Naqvi Br. at 26. Plaintiffs are \u201cnot discovering a right\u201d\nof or a cause of action as Plaintiffs have already alleged a detailed basis for the elements of their claims. What Plaintiffs\nallege in the Complaint is that they can prove standing. Defendant Naqvi\u2019s arguments are misplaced as evidenced by\nhis own authorities. See Hughes v. Lasalle Bank, N.A., 02 Civ. 6384 (MBM) (HBP), 2004 U.S. Dist. LEXIS 3403, at\n*4 (S.D.N.Y. Mar. 4, 2004) (\u201cA litigant may not use discovery to determine whether there is a cause of action . . . The\npurpose of discovery is to find out additional facts about a well-pleaded claim, not to find out whether such a claim\nexists.\u201d); MacKnight v. Leonard Morse Hosp., 828 F.2d 48, 52 (1st Cir. 1987) (discussing requested discovery as a\nfishing expedition as plaintiff did not \u201cdisclose some relevant facts and basis for them before the requested discovery\nwould be allowed\u201d); Sabby Volatility Warrant Master Fund Ltd. v. Safety Shot, Inc., 24 Civ. 920 (NRB), 2025 U.S.\nDist. LEXIS 48437, at *10 (S.D.N.Y. Mar. 17, 2025) (denying \u201cfishing expedition\u201d to establish defense where\ndefendant had no \u201cfactual support\u201d, despite discovery, but merely a \u201cgood reason to believe\u201d that plaintiff conspired\nto manipulate securities prices); Buttram v. City of Bessemer, 2:17-CV-0846-VEH, 2018 U.S. Dist. LEXIS 7326, at\n*10 (N.D. Ala. Jan. 17, 2018) (plaintiff not alleging facts as to an element of deprivation of rights cause of action).\n\n\n 12\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 20 of 33\n\n\n\nnot add up to absolute certainty\u201d because \u201cabsolute certainty is not required.\u201d). Here, Plaintiffs\n\nhave alleged that their iLearningEngines shares are traceable to the Offering Documents and that\n\nthey will construct a reliable chain of title with discovery that would allow them to prove that their\n\nshares are traceable to the Offering Documents. \u00b6\u00b629-30, 417-36. Plaintiffs establish the\n\nplausibility of their allegations by evidencing that the shares registered by the Offering Documents\n\nexceeded iLearningEngines public float and covered over 87.1% of its outstanding shares, there\n\nwas a small percentage and limited market for iLearningEngines shares that were trading prior to\n\nthe effectiveness of the Form S-8 Registration Statement, 7 and the method by which Plaintiffs will\n\nprove that that the chain of title for their iLearningEngines shares will trace to the Offering\n\nDocuments. See \u00b6\u00b6137, 139, 241, 247, 418, 417-36, 439-440; Porritt Decl., Ex. A, at 45 (stating\n\nResale Securities registered in Form S-1 Registration Statement represent 90.9% of public float).\n\nMoreover, Plaintiffs have alleged that Plaintiff Al Hamid\u2019s purchases were during the same time\n\nas the shares that were registered in the Form S-1 Registration Statement were being sold into the\n\nmarket (see \u00b6\u00b6149-50 (Prospectus Supplement Nos. 1 and 2 being issued as shares still being sold\n\nunder the Form S-1 Registration Statement); \u00b630; Exhibit A (Plaintiff Al Hamid\u2019s certification\n\nevidencing shares being purchased at the time the Prospectus supplements were being filed with\n\nthe SEC)) 8 and that Plaintiff Leveque shares were purchased at the time the shares registered by\n\nthe Form S-8 Registration Statement were being sold into the market. See \u00b6\u00b629, 420; ECF No. 36.\n\n\n\n7\n The Independent Directors argue that Plaintiffs \u201cignore\u2019 the other iLearningEngines shares from the SPAC Merger\nand argue that Plaintiffs have not asserted claims for the shares coming from the Form S-4. Ind. Def. Br. at 10-11.\nPlaintiffs acknowledged in the Complaint that there were certain shares registered and trading in the market but they\nappear to be the previously registered Arrowroot shares renamed as iLearningEngines shares following the Merger.\nSee ECF No.85-6 at 622 of 653, Annex K (\u201cClass A ordinary shares . . . of Arrowroot Acquisition Corp. a Delaware\ncorporation (Ticker: \u201cARRW\u201d), which shall have renamed following the Business Combination, iLearning Engines.\u201d).\n8\n Plaintiff Al Hamid had multiple purchases of iLearningEngines following the effective dates of the Form S-8\nRegistration Statement and Form S-1 Registration Statement. Plaintiff Al Hamid alleged that his purchases are\ntraceable to both registration statements. \u00b630. Defendants\u2019 argument that he did not refer to the \u201cparticular registration\nstatement\u201d is misguided. Ind. Dir. Br. at 12 n.8.\n\n 13\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 21 of 33\n\n\n\n Thus, the Complaint plausibly alleges that Plaintiffs\u2019 shares are traceable, that at the time\n\nof the Offering Documents the newly registered shares of iLearningEngines dwarfed the\n\npreviously registered shares and covered 87.1% of its total outstanding shares, and 100% of the\n\npublic float, and that Plaintiffs purchased the shares at the time the newly registered shares were\n\nbeing actively sold into the market by the selling shareholders who shares were registered by the\n\nOffering Documents. As is here, where the \u201ccomplaint contains factual allegations that raise a right\n\nto relief above the speculative level, thereby nudging the claims across the line from conceivable\n\nto plausible, dismissal is improper.\u201d Barbour v. Garland, 105 F.4th 579, 589 (4th Cir. 2024). 9\n\n\u201c[T]the bar plaintiffs must clear to plead their claim is set only as high as \u2018plausibility,\u2019 not, as\n\ndefendants would have it, certain knowledge . . . plaintiffs. theory of standing is straightforward,\n\neminently plausible, and, indeed, highly likely. Defendants\u2019 alternate explanation\u2014that plaintiffs\n\nchanced to purchase some of the . . . . unrestricted shares . . . is plausible, but not as plausible as\n\nplaintiffs\u2019 explanation.\u201d In re Ubiquiti Networks, Inc. Sec. Litig., 33 F. Supp. 3d 1107, 1119 (N.D.\n\nCal. 2014), aff'd in part, rev\u2019d in part and remanded, 669 F. App\u2019x 878 (9th Cir. 2016)\n\n(distinguishing facts from that of Century Aluminum (discussed below) and finding Section 11\n\nstanding adequately alleged as the complaint \u201callege[s] that all or very nearly all the shares of stock\n\navailable publically at the time were traceable to the registration statement\u201d).\n\n The Complaint\u2019s allegations are like those the court found adequately alleged Section 11\n\nstanding in In re EveryWare Global, Inc. Securities Litigation, 175 F. Supp. 3d 837 (S.D. Ohio\n\n2016), aff\u2019d sub nom. IBEW Loc. No. 58 Annuity Fund v. EveryWare Glob., Inc., 849 F.3d 325\n\n(6th Cir. 2017). In EveryWare Global, Plaintiffs alleged that they purchased shares when the shares\n\n\n9\n See also, Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (\u201cIf there are two alternative explanations, one advanced\nby defendant and the other advanced by plaintiff, both of which are plausible, plaintiff's complaint survives a motion\nto dismiss under Rule 12(b)(6). Plaintiff's complaint may be dismissed only when defendant's plausible alternative\nexplanation is so convincing that plaintiff's explanation is im plausible.\u201d).\n\n 14\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 22 of 33\n\n\n\nwere being sold into the market, that at the time of the offering \u201c1,7500,000 [sic] shares were sold\n\nin the Secondary Offering in comparison to the pre-existing public float of 2,023,000 shares\u201d, and\n\n\u201cthat in discovery they would seek to prove traceability through third-party subpoenas to the\n\nDepository Trust Company\u201d and other non-parties. Id. at 866. In rendering its decision, the court\n\nacknowledged that it \u201cagrees with the reasoning in Century Aluminum that Iqbal and Twombly\n\n\u2018moved us away from a system of pure notice pleading\u2019\u201d and as such \u201cpurely conclusory\n\nallegations\u201d are \u201cnot sufficient to survive a motion to dismiss on standing grounds[.]\u201d The court,\n\nhowever, found that plaintiffs\u2019 allegations were the \u201csufficient, non-conclusory allegations of\n\nstanding\u201d that establish that plaintiffs have standing for their Section 11 claims. Id. Thus, as in\n\nEveryWare Global, Plaintiffs have sufficiently alleged non-conclusory allegations of their Section\n\n11 standing. Id.; see also In re Coinbase Glob., Inc. Sec. Litig., No. 2:22-CV-04915 (BRM)\n\n(LDW), 2024 WL 4053009, at *19 (D.N.J. Sept. 5, 2024), reconsideration denied, No. 2:22-CV-\n\n04915 (BRM) (LDW), 2025 WL 1040633 (D.N.J. Apr. 8, 2025) (noting Krim but finding Section\n\n11 standing adequately alleged when plaintiff alleged that 74% of the shares entering the market\n\nwere pursuant to the registration statement and plaintiff purchased shares at the times the registered\n\nshares were being offered for sale into the market).\n\n Defendants, however, argue that the Complaint merely contains conclusory allegations like\n\nthe Court was confronted with in Fanucchi v. Enviva, Inc., No. CV DKC 22-2844, 2024 WL\n\n3302564 (D. Md. July 3, 2024) (Chasanow, J.). This is not so. In Fanucchi, Plaintiff did not even\n\nplainly allege that his purchases were pursuant or traceable to the secondary offering in a singular\n\nsentence. See Amended Class Action Complaint for Violations of the Federal Securities Laws, at\n\n\u00b6228, Fagen v. Enviva, 8:22-cv-02844 (D. Md. Apr. 3, 2024), ECF No. 34 (\u201cThis claim is asserted\n\nby Plaintiff against Defendants . . . and the Underwriter Defendants individually and on behalf of\n\n\n\n 15\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 23 of 33\n\n\n\nall other persons who acquired shares traceable to the Offering, in which the shares issued pursuant\n\nto the Offering Documents were sold\u201d); id. at \u00b644 (\u201cThe Underwriter Defendants owed Plaintiff\n\nand the other members of the Class who purchased Enviva common stock pursuant or traceable to\n\nthe Offering Documents the duty to make a reasonable and diligent investigation of the statements\n\ncontained in the Prospectus to ensure that such statements were true and that there was no omission\n\nto state a material fact required to be stated in order to make the statements contained therein not\n\nmisleading\u201d). In fact, in Fanucchi, the plaintiff made no attempts to allege any facts that could\n\nhave plausibly established that his shares were traceable to the offering.\n\n Moreover, plaintiff\u2019s sole argument in opposition was that these aforementioned\n\nallegations were sufficient. Memorandum Of Law In Opposition To The Underwriter Defendants\u2019\n\nMotion To Dismiss, at 10, Fagen v. Enviva, 8:22-cv-02844 (D. Md. July 3, 2024), ECF No. 67\n\n(\u201cPlaintiff has both alleged that he purchased traceable to the Offering during the Offering period\n\nand submitted a sworn PSLRA certification . . . to the effect that he understood his shares emanated\n\nfrom the Offering. \u00b644.\u201d). 10 Unlike here, the plaintiff in Fanucchi did not allege any other factual\n\nsupport such as how many shares were registered by the registration statement and the proportion\n\nof the registered shares available in the market prior to the secondary offering to the registered\n\n\n\n\n10\n Other courts have routinely found when a plaintiff alleges that their purchases are pursuant or traceable to the\nregistration statement that this is sufficient for alleging Section 11 standing. See, e.g., Perry v. Duoyuan Printing, Inc.,\nNo. 10 CIV. 7235 GBD, 2013 WL 4505199, at *9 (S.D.N.Y. Aug. 22, 2013) (\u201c[T]he pleading requirement is not\nelaborate. Plaintiffs have not been required to explain how their shares can be traced; general allegations that plaintiff\npurchased \u2018pursuant to\u2019 or traceable to [a] false registration statement have been held sufficient to state a claim.\u201d\n(quoting In re Global Crossing, Ltd. Sec. Litig., 313 F.Supp.2d 189, 208 (S.D.N.Y. 2003)); In re Wachovia Equity\nSec. Litig., 753 F.Supp.2d 326, 373 (S.D.N.Y. 2011) (\u201cThe pleading requirement for Section 11 standing is satisfied\nby general allegations that plaintiff purchased pursuant to or traceable to a false registration statement.\u201d (citation and\ninternal quotation marks omitted)); Northumberland Cnty. Ret. Sys. v. Kenworthy, No. CIV-11-520-D, 2013 WL\n5230000, at *6 (W.D. Okla. Sept. 16, 2013) (\u201cAlthough the movants contend that the Amended Complaint contains\nonly conclusory allegations that the purchases were pursuant to or traceable to the offering, the Court finds that the\nallegations are sufficient to place all defendants on notice of the basis of Lead Plaintiffs\u2019 claims. Whether Lead\nPlaintiffs can prove those allegations is a matter that involves consideration of the merits of the claims rather than the\nsufficiency of the pleadings and should not normally be considered at this stage of the litigation.\u201d).\n\n 16\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 24 of 33\n\n\n\nshares in the secondary offer. 11 The plaintiff also did not allege that he would prove his shares\n\nwould trace to the offering and the detailed methodology that would be undertaken that would\n\nestablish the chain-of-title tracing of his purchases.\n\n Defendants further argue that Plaintiffs\u2019 factual allegations supporting the plausibility of\n\nthat the iLearningEngines share they purchased are traceable to the Offering Documents are\n\ninsufficient in the absence of proving a chain of title. Specifically, Defendants argue than an out-\n\nof-circuit decision from the District of Colorado, Cupat v. Palantir Techs., Inc., No. 1:22-CV-\n\n02805-GPG-SBP, 2025 WL 1141534 (D. Colo. Apr. 4, 2025), establishes that statistics is not\n\nsupportive of plausibility. The facts of Palantir, however, are clearly distinguishable from here.\n\n In Palantir, plaintiff allege that Palantir Technologies Inc. went public via a direct listing\n\nthat was a \u201cunified liquidity event\u201d whereby 489,128,232 shares entered the market at the same\n\ntime with 257,135,415 shares registered through the registration statement at issue with the\n\nremaining 231,992,817 shares being freely tradeable and exempt from registration under the\n\nSecurities Act. Id. at *2, 15. In other words, 47.4% of the shares trading on the market were not\n\nregistered in the challenged offering. Id. In an attempt to overcome this, the Palantir plaintiff\n\nargued that probabilistically at least one of its shares traced to the offering by calculating\n\nstatistically that the chance it purchased one share in the offering was 99.9% by applying statistical\n\ncalculations to determine the statistical likelihood that at least one of the 1,280,700 shares\n\npurchases was from the 52.6% of registered shares that entered the market in the direct listing.\n\nSecond Amended Consolidated Class Action Complaint For Violations Of The Federal Securities\n\nLaws, \u00b6\u00b6237-242, Cupat v. Palantir Techs., Inc., 1:22-cv-02384-GPG-SBP (D. Colo. May 24,\n\n2024), ECF No. 92; see id. at \u00b6239 (\u201cA simple application of the 52.6% probability that any single\n\n\n11\n Defendants also rely on Ciarciello v. Bioventus, Inc., 1:23-CV-32, 2023 WL 7300081 (D. Md. Nov. 6, 2023).\nCiarciello, is distinguishable as plaintiff made only a bare bone assertion of traceability.\n\n 17\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 25 of 33\n\n\n\nshare purchased was a registered share establishes that the probability that CalPERS did not\n\npurchase a single registered share is infinitesimally small. In particular, the likelihood is equal to\n\n(1 \u2013 52.6%) 1,280,700, which is approximately 4 x 10-414,881\u201d). The Complaint, here, does not\n\nallege this \u201cstatistical\u201d tracing.\n\n Notably, Plaintiffs are not alleging that probabilistically all of the shares they purchased\n\nare traceable to the Offering Documents nor do they argue that they will prove their shares are\n\nstatistically traceable - i.e. without the need to prove a chain of title. Rather, Plaintiff Leveque has\n\nspecifically alleged that he purchased shares pursuant or traceable to the Form S-8 Registration\n\nStatement and Plaintiff Al Hamid has specifically alleged he purchased shares pursuant or\n\ntraceable to the Offering Documents. \u00b6\u00b629-30. Plaintiffs have alleged that they \u201cwill prove that the\n\nshares they purchased were traceable to the Offering Documents through a tracing analysis\u201d (\u00b6425)\n\nand detailed the process they would undertake to prove such \u00b6\u00b6426-36.\n\n Plaintiffs allege that the overwhelming number of shares in the market were registered\n\nshares from the Offering Documents as compared to other shares. This is a non-conclusory\n\nallegation that evidences the plausibility of the traceability of their shares, but Plaintiffs are not\n\nespousing the \u201cstatistical\u201d arguments raised by plaintiffs in Palantir or Pirani II. At the pleading\n\nstage, allegations that plausibly suggest that at least one of the shares they purchased is traceable\n\nto the Offering Document is sufficient. See John v. Whole Foods Mkt. Grp., Inc., 858 F.3d 732,\n\n737 (2d Cir. 2017) (finding that standing adequately alleged where foods were 89% of food\n\npackage weights were mislabeled, plaintiff regularly purchased those foods, and \u201cdrawing all\n\nreasonable inferences in his favor, it is plausible that [Plaintiff] overpaid for at least one product\u201d);\n\nIn re EveryWare Glob., 175 F. Supp. 3d at 866; In re Coinbase, 2024 WL 4053009, at *19. 12.\n\n\n12\n In Yates v. Municipal Mortgage & Equity, LLC, the Fourth Circuit found that for a Section 12(a)(2) claim, plaintiff\u2019s\nallegations that \u201cpursuant and/or traceable to\u201d language\u2014coupled with sufficient supporting facts\u2014can give rise to a\n\n 18\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 26 of 33\n\n\n\nNothing more is required at the pleading stage. See id.; see also In re Mun. Mortg. & Equity, 876\n\nF. Supp. 2d at 658 (finding Section 11 standing adequately alleged when plaintiff alleged\n\nadditional facts concerning timing of purchase and delivery supported plausibility of ability to\n\ntrace); In re 2U, Inc. Sec. Class Action, No. CV TDC-19-3455, 2021 WL 3418841, at *25 (D. Md.\n\nAug. 5, 2021) (finding conclusory allegation that plaintiff purchased in a secondary offering\n\nsufficient for standing and noting that \u201c[a]lternatively, plaintiffs may meet this requirement by\n\nalleging sufficient facts to show \u2018that their shares, although purchased in the aftermarket, can be\n\ntraced back to the\u2019 offering.\u201d).\n\n Defendants further rely upon other out-of-circuit cases for the premise that allegations of\n\nprobability of or the likelihood of purchasing a share is insufficient to allege Section 11 liability.\n\nEach of these cases is distinguishable. First, in Krim v. pcOrder.com, Inc., 402 F.3d 489 (5th Cir.\n\n2005), although there was high probability that the shares purchased by plaintiff were registered\n\nshares, plaintiff\u2019s expert \u201cacknowledged that there is no way to track individual shares within a\n\npool once it becomes contaminated with outside shares\u201d and therefore conceded that plaintiffs\n\ncould not later prove tracing. Id. at 492. As a result, the issue was whether a high probability of\n\npurchasing a traceable stock was sufficient to prove traceability with the Fifth Circuit stating that\n\n\u201cgeneral statistics say nothing about the shares that a specific person actually owns and have no\n\n\n\n\nplausible inference of standing in certain circumstances.\u201d 744 F.3d 874, 900 (4th Cir. 2014). This, decision however,\nwas limited to establishing whether a plaintiff had sufficiently alleged standing for a Section 12(a)(2) claim. See id.\n\nNotably, In re Municipal Mortgage & Equity, the district court found that the standards for pleading standing differed\nfor Section 11 and Section 12(a)(2). 876 F. Supp. 2d at 658-61. The district court found plaintiff had plausibly alleged\nstanding for his Section 11 claim concerning a secondary offering based on the date of his stock purchase. Id. at 659.\nThe district court, however, found these same allegations were insufficient to plead standing for his Section 12(a)(2)\nclaim because he failed to allege that he purchased directly from the issuer and had alleged that purchase price was\n\u201c$26.32\u201d when the secondary offering price was \u201c$26.51.\u201d Id. at 660. While the Fourth Circuit\u2019s Yates opinion post-\ndated the district court\u2019s opinion, it did displace district court\u2019s well-reasoned findings on Section 11 standing and\nmerely articulated the heightened showing for standing that applies to Section 12(a)(2) claims. As Plaintiffs do not\nassert Section 12(a)(2) claims, Yates does not apply.\n\n 19\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 27 of 33\n\n\n\nability to separate those shares upon which standing can be based from those for which standing\n\nis improper.\u201d Id. at 501. Notably, the Fifth Circuit did not foreclose what other ways may be used\n\nto prove tracing stating \u201c[w]e did not speculate on what other methods might be available to satisfy\n\nthe traceability requirement for aftermarket purchases.\u201d Here, Plaintiffs allege their shares are\n\ntraceable, that they can trace their shares to the Offering Documents, and that discovery will\n\nprovide the evidential documents to prove such.\n\n In re Century Aluminum Company Securities Litigation, 729 F.3d 1104 (9th Cir. 2013) is\n\nalso distinguishable. Notably, prior to the secondary offering by Century Aluminum, more than 49\n\nmillion shares were already trading in the market with the secondary offering registering half as\n\nmany shares, 24.5 million shares. Id. at 1106. The Ninth Circuit noted that as the plaintiffs\n\npurchased in the aftermarket they could \u201ctrace the chain of title for their shares back to the\n\nsecondary offering, starting with their own purchases and ending with someone who bought\n\ndirectly in the secondary offering\u201d to prove their standing. Id. at 1106-07. The Ninth Circuit,\n\nhowever, recognized at that time in 2013 that such tracing was difficult, if not impossible. Id. at\n\n1108. Despite factual enhancements such as proximity in purchase date and market reaction to\n\nshares entering the market, the Ninth Circuit found that plaintiffs allegations, although consistent\n\nwith standing, did not rise to the level of plausible because \u201cthey do not tend to exclude the\n\npossibility that their shares came from the pool of previously issued shares\u201d as the 49 million\n\nprevious registered shares were an \u201cobvious alternative explanation[.]\u201d Id. Again, here Plaintiffs\n\nhave not only alleged the factual enhancements but also have provide allegations that shares sold\n\nto Plaintiffs were the newly registered shares from the Offering Documents and not previously\n\nregistered shares in part, the Offering Documents cover over 100% of the public float and 87.1%\n\nof all outstanding shares.\n\n\n\n 20\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 28 of 33\n\n\n\n A related factual situation resulted in the First Circuit not finding standing plausibly alleged\n\nin In re Ariad Pharmaceuticals., Inc. Securities Litigation, 842 F.3d 744 (1st Cir. 2016). In Ariad,\n\nthe First Circuit found that plaintiffs have not plausibly alleged traceability to a secondary offering\n\nbecause the secondary offering registered only 15.3 million shares when there were already 166\n\nmillion shares outstanding. Id. at 756. Again, the factual underpinnings of this decision is opposite\n\nof the facts presented here.\n\n TransEnterix Investor Group v. TransEnterix, Inc., 272 F. Supp. 3d 740 (E.D.N.C. 2017)\n\nsimilarly suffers from the same issues. In evaluating whether plaintiffs have adequately alleged\n\nstanding, the court recognized that plausibility standard meant that \u201cPlaintiffs must plead facts\n\nsuggesting that the shares, although purchased in the aftermarket, can be traced back to the . . . at-\n\nthe-market offering.\u201d Id. at 761 (emphasis added). Applying the standards from Iqbal and\n\nTwombly, the court found that plaintiffs had not suggested this was plausible because over 100\n\nmillion TransEnterix shares were already trading in the market and \u201cafter the offering commenced,\n\nroughly 92% of the shares available for purchase by the public were not issued under\u201d the\n\nregistration statement. Id. Here, Plaintiffs have alleged facts supporting the exact opposite: the\n\nshares registered in the Offering Documents exceeded 100% of the public float. 13\n\n\n13\n Defendants additionally cite to a number of district courts in footnotes that contend that allegations of probability\nare insufficient for supporting Section 11 standing. These cases heavily rely upon Krim which Plaintiffs have already\ndistinguished and/or the authorities are distinguishable on other bases. See Grand Lodge of Pa. v. Peters, 550 F. Supp.\n2d 1363, 1374-76 (M.D. Fla. 2008) (citing to Krim but not discussing any statistical arguments by plaintiffs, but\nfinding that \u201cLead Plaintiffs have not set forth how they could show that Ratcliff's purchases of SPO stock were\ntraceable\" or what evidence they could use to establish tracing so such claims were conclusory\u201d); Davidco Investors,\nLLC v. Anchor Glass Container Corp., Case No. 8:04-cv-2561-T-24 EAJ, 2006 U.S. Dist. LEXIS 11527, at *70 (M.D.\nFla. Mar. 6, 2006) (merely citing Krim\u2019s holding as a standard of law but ruling plaintiff had no standing because\n\u201coffered no evidence\u201d shares were traceable to prospectus); Doherty v. Pivotal Software, Inc., No. 3:19-CV-03589-\nCRB, 2019 WL 5864581, at *9 (N.D. Cal. Nov. 8, 2019) (following Century Aluminum and finding, in part, no\nstanding because plaintiff did not cite any authority showing how a favorable percentage of offered shares was\nsupportive of plausibility); In re Mirant Corp. Sec. Litig., No. 1:02-CV-1467-RWS, 2008 WL 11334395, at *11 (N.D.\nGa. Aug. 5, 2008) (following Krim); Johnson v. CBD Energy Ltd., No. CV H-15-1668, 2016 WL 3654657, at *6 (S.D.\nTex. July 6, 2016) (following Krim); In re Fleetboston Fin. Corp. Secs. Litig., 253 F.R.D. 315 (D.N.J. 2008)\n(discussing Krim in the context of numerosity for class certification).\n\n\n 21\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 29 of 33\n\n\n\n Thus, as Plaintiffs have plausibly alleged the tracing of their iLearningEngines shares to\n\nthe Offering Documents, Defendants\u2019 motion to dismiss the Securities Act claims for lack of\n\nstanding should be denied. 14\n\n B. The Complaint Adequately Alleges Violations of Section 15 of the Securities\n\n Act.\n\n \u201cSection 15 of the Securities Act creates control-person liability only where Sections 11 or\n\n12 have been violated.\u201d In re Mun. Mortg. & Equity, 876 F. Supp. 2d at 663. As Plaintiffs have\n\nadequately alleged an underlying violation of Section 11, Plaintiffs claims for violations under\n\nSection 15 survive Defendants\u2019 motions to dismiss. See id. (denying dismissal of Section 15 claims\n\nwhen plaintiffs\u2019 Section 11 claims survived the motion to dismiss).\n\n C. Defendants Barger, Davis, Melham, Moe, and Olivier are Control Persons\n\n Neither \u201c[t]he PSLRA nor Rule 9(b)'s heightened pleading standards apply to control\n\nperson claims; rather it is sufficient to satisfy Rule 8.\u201d In re Royal Ahold N.V. Sec. & ERISA Litig.,\n\n351 F. Supp. 2d 334, 408 (D. Md. 2004). Thus, the Complaint must merely allege that Defendants\n\nBarger, Davis, Melham, and Moe had \u201cpossession, direct or indirect, of the power to direct or\n\ncause the direction of the management and policies of a person, whether through the ownership of\n\nvoting securities, by contract, or otherwise\u201d which, in turn, means that they \u201chad the power to\n\ncontrol the general affairs of the entity primarily liable at the time the entity violated the securities\n\nlaws ... [and] had the requisite power to directly or indirectly control or influence the specific\n\ncorporate policy which resulted in the primary liability.\u201d Black v. Martek Biosciences Corp., No.\n\n\n\n14\n In the event that this Court, however, finds such allegations insufficient, Plaintiffs respectfully request the Court\ngrant their motion for leave from the stay of discovery to conduct limited discovery of targeted non-parties to obtain\nthe necessary documentation to establish the chains of title of their iLearningEngines stock purchases to the Offering\nDocuments. If granted, Plaintiffs will respectfully seek leave to amend the Complaint to allege the evidence obtained\nduring discovery to address any issues the Court raises concerning Plaintiffs\u2019 standing to pursue the Securities Act\nclaims.\n\n 22\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 30 of 33\n\n\n\nCV MJG-05-1224, 2006 WL 8435572, at *7 (D. Md. June 14, 2006). For Section 15 claims, a\n\nplaintiff need not allege \u201cculpable participation.\u201d See id. at *6.\n\n Here, the Complaint alleges that the \u201cIndividual Defendants had the power to influence\n\nand control, and did influence and control, directly or indirectly, the decision-making of\n\niLearningEngines, including the content of its public statements and of the Offering Documents.\u201d\n\n\u00b6454. The Complaint further alleges that \u201c[t]he Individual Defendants were controlling persons of\n\niLearningEngines when the Offering Documents were filed and became effective due to their\n\nsenior executive positions therewith; their direct involvement i[n] iLearningEngines\u2019 day-to-day\n\noperations; and their participation in, and preparation of, the Offering Documents.\u201d 15 \u00b6453.\n\nNotably, the Complaint alleges that each of the Independent Directors signed the Offering\n\nDocuments authorizing the filing of the Form S-8 Registration Statement and Form S-1\n\nRegistration Statement. \u00b6\u00b6243, 250, 441, 444. The Form S-8 Registration Statement and Form S-\n\n1 Registration Statement each require signatures by a majority of the board in order to be filed. 15\n\nU.S.C. \u00a777f(a) (\u201cAny security may be registered with the Commission under the terms and\n\nconditions hereinafter provided, by filing a registration statement in triplicate, at least one of which\n\nshall be signed . . . the majority of its board of directors\u201d). As directors, the Independent Directors,\n\neach had the right to withhold their signatures if they disapproved of the statements included the\n\nForm S-8 Registration Statement and the Form S-1 Registration Statement. By each of the\n\nIndependent Directors signing these registration statement they exerted the ability to control the\n\ndissemination the Offering Documents that contained the materially false and/or misleading\n\nstatements therein.\n\n\n\n15\n Defendants attempt to deflect from this allegation for the allegations directed at the Individual Defendants that were\nalso executives. See e.g., Olivier Br. at 14. Notwithstanding, the rest of the allegation is applicable to Defendants\nBarger, Davis, Melham, Moe, and Olivier.\n\n 23\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 31 of 33\n\n\n\n Defendants rely on In re Constellation Energy Group., Inc. Securities Litigation, 738 F.\n\nSupp. 2d 614 (D. Md. 2010) for the premise that their positions as board members and signatories\n\nto the Offering Documents are insufficient to allege control. The Complaint\u2019s allegations of their\n\ncontrol, however, are sufficient to plead control liability. See In re Sourcefire, Inc. Sec. Litig., No.\n\nCIV. JFM 07-1210, 2008 WL 1827484, at *7 (D. Md. Apr. 23, 2008) (denying motion to dismiss\n\nSection 15 claims, in part, because \u201csummarizing the identity of the parties, plaintiff notes that\n\neach of the individual defendants was either a director or officer of Sourcefire and signed or\n\nauthorized the signing of the offering document\u201d stating that \u201c[s]uch facts are sufficient to carry\n\nthe control person claim past the motion to dismiss stage\u201d); In re Charles Schwab Corp. Securities\n\nLitigation, 257 F.R.D. 534, 555 (N.D. Cal. 2009) (\u201cWhere a board member is alleged to have\n\nsigned the registration statements at issue, ... courts have presumed that the director exercised\n\nactual authority and control, at least over the contents of and/or release of those statements\u201d); In\n\nre Alstom SA Securities Litigation, 406 F.Supp.2d 433, 487 (S.D.N.Y. 2005) (\u201c[C]ourts have held\n\nthat officer or director status alone does not constitute control.... In contrast, if that same officer or\n\ndirector has signed financial statements containing materially false or misleading statements,\n\ncourts have held that control as to the financial statements is sufficiently pled,\u201d (collecting cases));\n\nIn re Evergreen Ultra Short Opportunities Fund Sec. Litig., 705 F. Supp. 2d 86, 97 (D. Mass.\n\n2010) (finding control adequate alleged as complaint alleged their involvement and control over\n\nthe contents of the offering documents and noting that control allegations are \u201cusually a question\n\nof fact that cannot be resolved at the pleading stage.\u201d); In re Metropolitan Securities Litigation,\n\n532 F.Supp.2d 1260, 1296 (E.D. Wash. 2007) (\u201cWhile an individual\u2019s status as an officer or\n\ndirector of the issuing corporation is insufficient, standing alone, to demonstrate the exercise of\n\ncontrol, an officer or director who has signed an SEC filing does exercise control\u201d).\n\n\n\n 24\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 32 of 33\n\n\n\n V. CONCLUSION.\n\n For the reasons stated herein, the Court should deny Defendants motions to dismiss the\n\nSecurities Act Claims for lack of standing and liability under Section 15. If the Court grants\n\ndismissal of the Securities Act claims, Plaintiffs respectfully request that the Court grant Plaintiffs\u2019\n\nmotion for a partial lifting of the discovery stay to permit Plaintiffs to obtain the evidence to prove\n\nthat their iLearningEngines shares are traceable to the Offering Documents so that Plaintiffs may\n\nseek leave to amend the Complaint to correct any deficiencies that the Court identifies.\n\n\n\n Dated: September 18, 2025 Respectfully submitted,\n\n LEVI & KORSINSKY, LLP\n\n / s / Nicholas I. Porritt\n Nicholas I. Porritt (Bar No. 17078)\n Alexander A. Krot III (attorney admission\n application forthcoming).\n 1101 Vermont Ave, NW Suite 800\n Washington, DC 20005\n Tel: (202)-524-4290\n Fax: (212) 363-7171\n Email: nporritt@zlk.com\n Email: akrot@zlk.com\n\n Counsel for Lead Plaintiff Louis Leveque,\n Plaintiff Iqbal Al Hamid, and Lead\n Counsel for the Class\n\n\n\n\n 25\n\f Case 8:24-cv-02900-DKC Document 90 Filed 09/18/25 Page 33 of 33\n\n\n\n CERTIFICATE OF SERVICE\n\n I hereby certify that on September 18, 2025, I electronically filed the foregoing Plaintiffs\u2019\n\nMemorandum Of Law In Opposition To Independent Defendants\u2019 Motions To Dismiss The\n\nAmended Class Action Complaint by using the CM/ECF system which will send a notice of\n\nelectronic filing to all counsel or parties of record.\n\n\n\n /s/ Nicholas I. Porritt\n Nicholas I. Porritt\n\n\n\n\n 26\n\f","ocr_status":2,"date_upload":"2026-05-19T22:33:51.781504-07:00","document_number":"90","attachment_number":null,"pacer_doc_id":"093015171197","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/479807133/","id":479807133,"tags":[],"absolute_url":"/docket/69233925/90/1/walker-v-chidambaran/","date_created":"2026-05-19T22:33:16.070997-07:00","date_modified":"2026-05-22T08:38:35.253716-07:00","sha1":"e41df13eed6221c98406d287c9f9c9c6bf0db63c","page_count":3,"file_size":34246,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.90.1.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.90.1.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 90-1 Filed 09/18/25 Page 1 of 3\n\n\n\n UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n (Southern Division)\n\n\nDANNY WALKER, Individually and on Behalf )\nof All Others Similarly Situated, )\n )\n Plaintiff, )\n ) Civil Action No. DKC 24-2900\n v. )\n )\nHARISH CHIDAMBARAN, et al., )\n )\n Defendants. )\n )\n )\n )\n )\n )\n )\n\n\n DECLARATION OF NICHOLAS I. PORRITT IN SUPPORT OF PLAINTIFFS\u2019\nOPPOSITIONS TO DEFENDANTS\u2019 MOTIONS TO DISMISS THE AMENDED CLASS\n ACTION COMPLAINT\n\n\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 90-1 Filed 09/18/25 Page 2 of 3\n\n\n\n\nI, NICHOLAS I. PORRITT, hereby declare as follows pursuant to 28 U.S.C. \u00a7 1746:\n\n 1. I am a partner with the law firm Levi & Korsinsky, LLP counsel for Lead Plaintiff\n\nLouis Leveque and Plaintiff Iqbal Al Hamid (\u201cPlaintiffs\u201d) and Lead Counsel for the Class.\n\n 2. I submit this Declaration, together with the attached exhibit, in support of Plaintiffs\u2019\n\nbriefs in opposition to the motions to dismiss filed by Defendants Matthew Barger, Harish\n\nChidambaran, Ian Davis, Bruce Mehlman, Michael Moe, Sayyed Farhan Naqvi, Thomas Olivier,\n\nand Marcum LLP .\n\n 3. Attached hereto as Exhibit A is a true and correct copy of Amendment No. 2 to the\n\nForm S-1 Registration Statement dated July 22, 2024 filed by iLearningEngines, Inc. with the US\n\nSecurities and Exchange Commission on or about July 22, 2024. I caused this document to be\n\nretrieved from the SEC\u2019s EDGAR website on September 17, 2025.\n\n\n I declare under penalty of perjury that the foregoing is true and correct.\n\n\nDated: September 18, 2025\n /s/ Nicholas I. Porritt\n Nicholas I. Porritt\n\n\n\n\n 1\n\f Case 8:24-cv-02900-DKC Document 90-1 Filed 09/18/25 Page 3 of 3\n\n\n\n CERTIFICATE OF SERVICE\n\n I hereby certify that on September 18, 2025, I electronically filed the foregoing Declaration\n\nOf Nicholas I. Porritt In Support Of Plaintiffs\u2019 Oppositions To Defendants\u2019 Motions To Dismiss\n\nThe Amended Class Action Complaint by using the CM/ECF system which will send a notice of\n\nelectronic filing to all counsel or parties of record.\n\n\n\n /s/ Nicholas I. Porritt\n Nicholas I. Porritt\n\n\n\n\n 2\n\f","ocr_status":2,"date_upload":"2026-05-19T22:33:29.580252-07:00","document_number":"90","attachment_number":1,"pacer_doc_id":"093015171198","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Affidavit Declaration of Nicholas I. Porritt","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/479807134/","id":479807134,"tags":[],"absolute_url":"/docket/69233925/90/2/walker-v-chidambaran/","date_created":"2026-05-19T22:33:16.090173-07:00","date_modified":"2026-05-22T08:27:35.349966-07:00","sha1":"612779eec1567823f4ef54493ced15685f228684","page_count":408,"file_size":18496024,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.90.2.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.90.2.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 1 of 408\n\nEXHIBIT A\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 2 of 408\nAs filed with the U S Securities and Exchange Commission on July 22, 2024\nRegistration No_333 279908\n\nUNITED STATES\nSECURITIES AND EXCHANGE COMMISSION\nWashington, D C 20549\n\nAmendment No 2\nto\nFORMS 1\nREGISTRATION STATEMENT\nUNDER\nTHE SECURITIES ACT OF 1933\n\nTLEARNINGENGINES, INC\n(Exact name of registrant as specified in its charter)\n\nDelaware 7372 XX-XXXXXXX\n(State or other jurisdiction of (Primary Standard Industrial (.R.S. Employer\nincorporation or organization) Classification Code Number) Identification No.)\n\n6701 Democracy Blvd , Suite 300\nBethesda, Maryland 20817\n(650) 248 9874\n(Address, including zip code, and telephone number, including area code, of registrant\u2019s principal executive offices)\n\nHarish Chidambaran\nChief Executive Officer\n6701 Democracy Blvd , Suite 300\nBethesda, Maryland 20817\n(650) 248 9874\n(Name, address, including zip code, and telephone number, including area code, of agent for service)\n\nCopy to\nJosh Holleman\nEric Blanchard\nPaul Alexander\nCooley LLP\n1299 Pennsylvania Avenue NW, Suite 700\nWashington, D C 20004\n(202) 842 7800\nApproximate date of commencement of proposed sale to the public\nFrom time to time on or after this registration statement is declared effective\n\nIf any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under\nthe Securities Act of 1933, check the following box.\n\nIf this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check\nthe following box and list the Securities Act registration statement number of the earlier effective registration statement for the same\noffering O\n\nIf this Form is a post effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list\nthe Securities Act registration statement number of the earlier effective registration statement for the same offering. 0\n\nIf this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list\nthe Securities Act registration statement number of the earlier effective registration statement for the same offering O\n\nIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, smaller\nreporting company, or an emerging growth company See the definitions of \u201clarge accelerated filer,\u201d \u201caccelerated filer,\u201d \u201csmaller\n\n20 ce\n\fCase 8:24-cv-02900-DKC Document 90-2. Exiled 09/18/25 Page 3 of 408\n\nreporting company,\u201d and \u201cemerging growth company\u2019 change Act\n\nLarge accelerated filer oO Accelerated filer oO\n\nNon-accelerated filer Smaller reporting company\nEmerging growth company\n\nIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for\ncomplying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act O\n\nThe registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date\nuntil the registrant shall file a further amendment which specifically states that this registration statement shall thereafter\nbecome effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become\neffective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 4 of 408\n\nThe information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling security holders may\nsell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary\nprospectus is not an offer to sell these securities nor does it seek an offer to buy these securities in any jurisdiction where the offer or\nsale is not permitted.\n\nSubject to Completion, Dated July 22, 2024\nPRELIMINARY PROSPECTUS\n\n\u00a9 iLearnin\nt: Baines\u201d\n\nUp to 22,624,975 Shares of Common Stock Issuable Upon Exercise of Warrants\nUp to 100,774,669 Shares of Common Stock\nand\nUp to 8,250,000 Warrants to Purchase Common Stock\n\nThis prospectus relates to the issuance by us of an aggregate of up to 22,624,975 shares of our common stock, $0.0001 par value\nper share (the \u201cCommon Stock\u201d), issuable upon the exercise of warrants, which consists of (a) up to 8,250,000 shares of Common\nStock that are issuable upon the exercise of 8,250,000 warrants (the \u201cPrivate Placement Warrants\u2019) originally issued to Arrowroot\nAcquisition LLC, a Delaware limited liability company (the \u201cSponsor\u2019), in a private placement at a price of $1.00 per Private\nPlacement Warrant in connection with the initial public offering of Arrowroot Acquisition Corp. \u201cARRW\u2019\u201d) and (b) up to 14,374,975\nshares of Common Stock that are issuable upon the exercise of 14,374,975 warrants (the \u201cPublic Warrants\u201d and, together with the\nPrivate Placement Warrants, the \u201cWarrants\u201d) originally issued as part of the units offered in the ARRW initial public offering at a price\nof $10.00 per unit, with each unit consisting of one common stock and one-half of one Public Warrant by the holders thereof. We will\nreceive the proceeds from any exercise of any Warrants for cash.\n\nThis prospectus also relates to the offer and sale, from time to time, by the Selling Securityholders named in this prospectus or\ntheir permitted transferees (the \u201cSelling Securityholders\u201d) of (4) up to 100,774,669 shares of Common Stock (the \u201cResale Securities\u201d)\nconsisting of up to (a) 8,089,532 shares of Common Stock that were issued for a total price of $29,414,500 (equivalent to a per share\nprice of $3.64) upon the conversion of the convertible notes originally issued to investors in a private placement pursuant to the 2024\nConvertible Note Purchase Agreement (as defined below) (the \u201c2024 Convertible Note Shares\u201d) in satisfaction of the convertible\nnotes payable to such investors, (b) 6,787,500 shares of Common Stock (the \u201cFounder Shares\u201d) (160,000 of which were subsequently\ntransferred by the Sponsor to current and former directors of ARRW) originally issued at a price of approximately $0.004 per share ina\nprivate placement to the Sponsor prior to ARRW\u2019s initial public offering, (c) 82,091 shares of Common Stock (the \u201cMeteora Shares\u201d)\nissued at a fair value price of $10.00 per share to certain investors pursuant to a non-redemption agreement with certain investors as\nconsideration for the non-exercise of redemption rights by such investors in connection with the shareholder meetings preceding the\nBusiness Combination (as defined below), (d) 3,763,378 shares of Common Stock (the \u201cLender Shares\u201d) issued at a fair value price of\n$10.00 per share to Venture Lending & Leasing IX, Inc. (\u201cVenture Lending\u201d) and WTI Fund X, Inc. \u201cWTI Fund X\u201d and together\nwith Venture Lending, the \u201cLenders\u201d) pursuant to the Second Omnibus Amendment to Loan Documents with In2vate, L.L.C.,\niLearningEngines, Inc. (solely with respect to the issuance of shares of Common Stock) and the Lenders, as consideration, in part, for\nthe revision of amortization schedules under the WTI Loan Agreements (as defined below) prior to the Business Combination and, after\nthe Business Combination, the repayment in full of all outstanding obligations under (1) the Loan and Security Agreement, dated as of\nDecember 30, 2020, between iLearningEngines Inc. and Venture Lending & Leasing IX, Inc. (the \u201c2020 Loan Agreement\u201d), (2) the\nLoan and Security Agreement, dated as of October 21, 2021, between iLearningEngines Inc., and Venture Lending & Leasing IX, Inc.\nand WTI Fund X, Inc. (the \u201c2021 Loan Agreement\u2019), and (3) the Loan and Security Agreement, dated as of October 31, 2023,\nbetween iLearningEngines Inc., and WTI Fund X, Inc. (the \u201c2023 Loan Agreement\u201d and, together with the 2020 Loan Agreement and\nthe 2021 Loan Agreement, the \u201cWTI Loan Agreements\u201d), (c) 460,384 shares of Common Stock (\u201cWorking Capital Shares\u201d) issued\nto the Sponsor as consideration for the repayment of $4,510,000 (equivalent to a per share price of $9.80), which represented part of the\nthen-outstanding obligations under unsecured promissory notes issued to ARRW, (f) 78,730 shares of Common Stock (\u201cUnvested\nShares\u2019) issuable upon the vesting and settlement of restricted stock units that were initially granted at no cash cost by\niLearningEngines Inc. (\"Legacy iLearningEngines\u201d) and assumed by the Company and converted into restricted stock units with\nrespect to the Common Stock pursuant to the Merger Agreement, which were granted at no cost to the recipients thereof (the\n\u201cAssumed RSUs\u201d), (g) 8,250,000 shares of Common Stock (\u201cWarrant Shares\u201d) acquired by the Sponsor at a purchase price of\n$8,250,000 (equivalent to a per share price of $1.00) issuable upon exercise of the Private Placement Warrants at an exercise price of\n$11.50 per share of Common Stock, (h) 71,508,370 shares of Common Stock (including 4,727,199 shares issuable upon settlement of\n\f4-cy-02900-DKC Document 30- 2 Filed O9/18/A2 9 ob 3 e 5 of 408\n\nvested RSUs) RSET hares\u201d) issued to certain directors icers at a fair value price o share as merger\nconsideration for such shares originally issued by Legacy iLearningEngines to such directors and officers as consideration for\nemployment and services provided to Legacy iLearningEngines prior to the Business Combination, (i) 511,073 shares of Common\nStock (\"BTIG Shares\u201d) that were issued at a price of $5 87 per share pursuant to that amendment to the BTIG Engagement Letter (the\n\u201cBTIG Amendment\u2019), dated as of March 27, 2024, by and between ARRW and BTIG, LLC (\u201cBTIG\u201d), in connection with the\npayment of certain Business Combination transaction expenses, (j) 1,022,146 shares of Common Stock (\u201cCantor Shares\u201d) that were\nissued in lieu of payment of deferred underwriting commissions in an aggregate amount of $6,000,000 at a price of $5 87 per share,\npursuant to that certain fee modification agreement (the \u201cFee Modification Agreement\u2019), dated as of March 27, 2024, by and among\niLearningEngines Inc , ARRW, Cantor Fitzgerald & Co (\u2018Cantor\u2019), in connection with the Closing (as defined herein), and (k)\n221,465 shares of Common Stock (\u201cCooley Shares\u201d) that were issued at a price of $5 87 per share pursuant to that amendment to the\nLetter Agreement (the \u201cCooley Fee Agreement\u201d), dated as of March 27, 2024, by and among, iLearningEngines Inc , Cooley LLP\n(\u201cCooley\u201d) and ARRW, in connection with the payment of Business Combination transaction expenses; and (ii) up to 8,250,000 Private\nPlacement Warrants We will not receive any proceeds from the sale of shares of Common Stock or Warrants by the Selling\nSecurityholders pursuant to this prospectus\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 6 of 408\n\nCertain of the Selling Securityholders acquired securities at prices that are significantly less than the current trading price of our\nCommon Stock. The original holder of the Founder Shares paid approximately $0.004 per share for each share of Common Stock and\n$1.00 per private placement warrant for each private placement warrant being offered pursuant to this prospectus.\n\nThe Common Stock being offered for resale pursuant to this prospectus by the Selling Securityholders would represent\napproximately 61.7% of our outstanding Common Stock as of April 16, 2024 (after giving effect to the issuance of the shares issuable\nupon exercise of the Warrants, the acquisition of certain shares acquirable upon the settlement of assumed restricted stock units, and the\nissuance of the Resale Securities). Given the substantial number of shares of Common Stock being registered for potential resale by\nSelling Securityholders pursuant to this prospectus, the sale of shares by the Selling Securityholders of a large number of shares, or the\nperception in the market that the Selling Securityholders of a large number of shares intend to sell shares, could increase the volatility\nof the market price of our Common Stock or result in a significant decline in the public trading price of our Common Stock. Even if our\ntrading price is significantly below $10.00, the offering price for the units offered in the initial public offering of ARRW, the purchasers\nof which exchanged their ARRW shares for our Common Stock in the business combination described in this prospectus, the Selling\nSecurityholders may still have an incentive to sell our shares of our Common Stock because they purchased the shares at prices that are\nsignificantly lower than the purchase prices paid by our public investors or the current trading price of our Common Stock.\n\nDue to the significant number of redemptions of ARRW Class A common stock in connection with the Business Combination,\nthere was a significantly lower number of shares of ARRW Class A common stock that converted into shares of our Common Stock in\nconnection with the Business Combination. As a result, the shares of our Common Stock being registered for resale (a substantial\nportion of which may not be resold until the expiration of the applicable lock-up period) are anticipated to constitute a considerable\npercentage of our public float. The registration of these shares for resale creates the possibility of a significant increase in the supply of\nour Common Stock in the market. The increased supply, coupled with the potential disparity in purchase prices, may lead to heightened\nselling pressure, which could negatively affect the public trading price of our Common Stock.\n\nWhile the Selling Securityholders may, on average, experience a positive rate of return based on the current market price, public\nstockholders may not experience a similar rate of return on the Common Stock they purchased if there is such a decline in price and\ndue to differences in the purchase prices and the current market price. For example, based on the closing price of our Common Stock of\n$10.49 per share on July 18, 2024 (the \u201cJuly 18, 2024 Closing Price\u201d): (i) the holders of the 2024 Convertible Note Shares would\nexperience a potential profit of up to approximately $6.85 per share, or up to approximately $55.4 million in the aggregate; (ii) the\nholders of the Founder Shares would experience a potential profit of up to approximately $10.49 per share that they purchased prior to\nthe initial public offering of ARRW, or up to approximately $71.2 million in the aggregate (not giving effect to the issuance of\nCommon Stock issuable upon exercise of the Warrants held by them); (iti) the holders of the Meteora Shares would experience a\npotential profit of up to approximately $0.49 per share, or up to approximately $0.04 million in the aggregate; (iv) the holders of the\nLender Shares would experience a potential profit of up to approximately $0.49 per share, or up to approximately $1.8 million in the\naggregate; (v) the holders of the Working Capital Shares would experience a potential profit of up to approximately $0.69 per share, or\nup to approximately $0.3 million in the aggregate; (vi) the holders of the Unvested Shares would experience a potential profit of up to\napproximately $10.49 per share, or up to approximately $0.8 million in the aggregate; (vii) the holders of the Control Shares would\nexperience a potential profit of up to approximately $0.49 per share, or up to approximately $35.0 million in the aggregate; (viii) the\nholders of the BTIG Shares would experience a potential profit of up to approximately $4.62 per share, or up to approximately $2.4\nmillion in the aggregate; (ix) the holders of the Cantor Shares would experience a potential profit of up to approximately $4.62 per\nshare, or up to approximately $4.7 million in the aggregate; (x) the holders of the Cooley Shares would experience a potential profit of\nup to approximately $4.62 per share, or up to approximately $1.0 million in the aggregate; and (xi) the holders of the Warrant Shares\nwould experience a potential profit of up to approximately $9.49 per share, or up to approximately $78.3 million in the aggregate.\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 7 of 408\n\nThe Selling Securityholders may sell the securities being offered for resale through various methods, as described in the section\ntitled \u201cPlan of Distribution \u201d These sales may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the\nprevailing market price, at varying prices determined at the time of sale, or at negotiated prices In connection with any sales of\nsecurities offered hereunder, the Selling Securityholders and any underwriters, agents, brokers or dealers participating in such sales\nmay be deemed to be \u201cunderwriters\u201d within the meaning of the Securities Act of 1933, as amended\n\nWe will bear all costs, expenses and fees in connection with the registration of these securities, including with regard to\ncompliance with state securities or \u201cblue sky\u201d laws The Selling Securityholders will bear all commissions and discounts, if any,\nattributable to their sale of shares of Common Stock or Warrants See the section titled \u201cPlan of Distribution \u201d We will not receive any\nof the proceeds from such sales of the shares of Common Stock or Warrants, except with respect to amounts received by us upon\nexercise, if any, of the Warrants We believe the likelihood that holders of the Warrants will exercise their warrants, and therefore the\namount of cash proceeds that we would receive, is dependent upon the trading price of our Common Stock The exercise price of our\noutstanding Warrants is $11 50 per share, which exceeds the trading price of our Common Stock as of the date of this prospectus\n\nSo long as the trading price for our Common Stock is less than $11 50 per share, meaning the Warrants are \u201cout of the money\u201d, we\nbelieve holders of our Warrants will be unlikely to exercise their warrants In addition, to the extent the Warrants are exercised on a\n\u201ccashless basis,\u201d the amount of cash we would receive from the exercise of the Warrants will decrease The Private Placement Warrants\nmay be exercised for cash or on a \u201ccashless basis \u201d The Public Warrants may only be exercised for cash provided there is then an\neffective registration statement registering the shares of common stock issuable upon the exercise of such warrants If there is not a\nthen effective registration statement, then such warrants may be exercised on a \u201ccashless basis,\u201d pursuant to an available exemption\nfrom registration under the Securities Act of 1933, as amended\n\nThe Common Stock and Public Warrants are listed on the Nasdaq Global Market under the ticker symbols \u201cAILE\u201d and \u201cAILEW,\u201d\nrespectively On July 19, 2024, the last reported sales price of our Common Stock was $9 95 per share and the last reported sales price\nof our Warrants was $1 24 per warrant\n\nOur Chief Executive Officer and Chairman of our Board of Directors, Harish Chidambaran, and his wife, Preeta Chidambaran,\nbeneficially own 96,764,327 shares of our Common Stock, representing approximately 71 7% of the voting power of\niLearningEngines, Inc as of June 24, 2024 Under the rules of the Nasdaq Stock Market (\u201cNasdaq\u201d), a company of which more than\n50% of the voting power is held by an individual, a group or another company is a \u201ccontrolled company \u201d Accordingly, we are a\n\u201ccontrolled company\u201d within the meaning of Nasdaq rules and, as a result, qualify for exemptions from certain corporate governance\nrequirements Although we do not intend to rely on the controlled company exemptions under Nasdaq rules, we could elect to rely on\nthese exemptions in the future, and if so, you would not have the same protection afforded to stockholders of companies that are subject\nto all of the corporate governance requirements of Nasdaq See \u201cRisk Factors Risks Related the Ownership of Our Securities As\nlong as our principal stockholders hold a majority of the voting power of our capital stock, we may rely on certain exemptions from the\ncorporate governance requirements of Nasdaq available for \u201ccontrolled companies \u201d\n\nWe are an \u201cemerging growth company\u201d as defined under U S\u00a7 federal securities laws and, as such, have elected to comply with\nreduced public company reporting requirements This prospectus complies with the requirements that apply to an issuer that is an\nemerging growth company We are incorporated in Delaware\n\nInvesting in our securities involves a high degree of risk You should review carefully the risks and uncertainties described\nin the section titled \u201cRisk Factors\u201d beginning on page 7 of this prospectus, and under similar headings in any amendments or\n\nsupplements to this prospectus\n\nNeither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these\nsecurities, or passed upon the accuracy or adequacy of this prospectus Any representation to the contrary is a criminal offense\n\nProspectus dated , 2024\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 8 of 408\n\nTABLE OF CONTENTS\nPage\n\nABOUT THIS PROSPECTUS ii\nSPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ili\nFREQUENTLY USED TERMS Vv\nPROSPECTUS SUMMARY 1\nTHE OFFERING 4\nRISK FACTORS 7\nUSE OF PROCEEDS 55\nDETERMINATION OF OFFERING PRICE 36\nMARKET INFORMATION FOR SECURITIES AND DIVIDEND POLICY 37\nMANAGEMENT\u2019S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF\n\nOPERATIONS 38\nOUR BUSINESS 89\nMANAGEMENT 102\nEXECUTIVE COMPENSATION 110\nCERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 126\nPRINCIPAL SECURITYHOLDERS 131\nSELLING SECURITYHOLDERS 133\nDESCRIPTION OF OUR SECURITIES 137\nMATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES 146\nSECURITIES ACT RESTRICTIONS ON RESALE OF OUR SECURITIES 151\nPLAN OF DISTRIBUTION 152\nLEGAL MATTERS 155\nEXPERTS 155\nCHANGE IN REGISTRANT\u2019S CERTIFYING ACCOUNTANT 156\nWHERE YOU CAN FIND MORE INFORMATION 157\nUNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION 158\nSIGNATURES II-8\nPOWER OF ATTORNEY II-8\nINDEX TO FINANCIAL STATEMENTS F-1\nPART II - INFORMATION NOT REQUIRED IN PROSPECTUS Il-1\n\nYou should rely only on the information contained in this prospectus, any supplement to this prospectus or in any free writing\nprospectus, filed with the Securities and Exchange Commission (the \u201cSEC\u201d). Neither we, nor the Selling Securityholders have\nauthorized anyone to provide you with additional information or information different from that contained in this prospectus filed with\nthe SEC. We take no responsibility for and can provide no assurance as to the reliability of, any other information that others may give\nyou. The Selling Securityholders are offering to sell, and seeking offers to buy, our securities only in jurisdictions where offers and\nsales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the\ntime of delivery of this prospectus or any sale of our securities. Our business, financial condition, results of operations and prospects\nmay have changed since that date.\n\nFor investors outside of the United States: Neither we, nor the Selling Securityholders, have done anything that would permit this\noffering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the\nUnited States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and\nobserve any restrictions relating to, the offering of our securities and the distribution of this prospectus outside the United States.\n\nTo the extent there is a conflict between the information contained in this prospectus, on the one hand, and the information\ncontained in any document incorporated by reference filed with the SEC before the date of this prospectus, on the other hand, you\nshould rely on the information in this prospectus. If any statement in a document incorporated by reference is inconsistent with a\nstatement in another document incorporated by reference having a later date, the statement in the document having the later date\nmodifies or supersedes the earlier statement.\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 9 of 408\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 10 of 408\n\nABOUT THIS PROSPECTUS\n\nThis prospectus is part of a registration statement on Form S$ 1 that we filed with the SEC using the \u201cshelf\u201d registration process\nUnder this shelf registration process, the Selling Securityholders may, from time to time, sell the securities offered by them described in\nthis prospectus We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them\ndescribed in this prospectus This prospectus also relates to the issuance by us of the shares of Common Stock issuable upon the\nexercise of any Warrants We will not receive any proceeds from the sale of shares of Common Stock underlying the Warrants pursuant\nto this prospectus, except with respect to amounts received by us upon the exercise of the Warrants for cash\n\nNeither we nor the Selling Securityholders have authorized anyone to provide you with any information or to make any\nrepresentations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses\nprepared by or on behalf of us or to which we have referred you Neither we nor the Selling Securityholders take responsibility for and\ncan provide no assurance as to the reliability of, any other information that others may give you Neither we nor the Selling\nSecurityholders will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted\n\nWe may also provide a prospectus supplement or post effective amendment to the registration statement to add information to, or\nupdate or change information contained in, this prospectus You should read both this prospectus and any applicable prospectus\nsupplement or post effective amendment to the registration statement together with the additional information to which we refer you in\nthe section titled \u201cWhere You Can Find More Information \u201d\n\niLearningEngines, Inc (formerly known as Arrowroot Acquisition Corp (\u201c\u201cARRW\u2019), a Delaware corporation (\u201cNew\niLearningEngines\u201d or the \u201cCompany\u2019), previously entered into that certain Agreement and Plan of Merger and Reorganization, dated\nas of April 27, 2023 (as amended, the \u201cMerger Agreement\u201d), with ARAC Merger Sub, Inc , a Delaware corporation and wholly owned\nsubsidiary of Arrowroot Acquisition Corp (\u201cMerger Sub\u201d), and iLearningEngines Inc , a Delaware corporation (\u201cLegacy\niLearningEngines\u201d) On April 16, 2024, the Company consummated the merger transactions contemplated by the Merger Agreement\n(the \u201cBusiness Combination\u201d) whereby Merger Sub merged with and into Legacy iLearningEngines with the separate corporate\nexistence of Merger Sub ceasing and Legacy iLearningEngines surviving the merger as a wholly owned subsidiary of the Company In\ncomnection with the consummation of the Business Combination, ARRW changed its name from Arrowroot Acquisition Corp to\niLearningEngines, Inc and Legacy iLearningEngines changed its name from iLearningEngines Inc to iLearningEngines Holdings, Inc\n\nUnless the context indicates otherwise, references in this prospectus to the \u201cCompany,\u201d \u201ciLearningEngines,\u201d \u201cwe,\u201d \u201cus,\u201d \u201cour\u201d and\n\nsimilar terms refer to iLearningEngines, Inc (f/k/a Arrowroot Acquisition Corp ) and its consolidated subsidiaries (including Legacy\niLearningEngines) References to \u201cARRW\u201d refer to the predecessor company prior to the consummation of the Business Combination\n\nii\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 11 of 408\n\nSPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS\n\nSome of the statements contained in this prospectus constitute forward looking statements within the meaning of the federal\nsecurities laws Forward looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or\ntrends and similar expressions concerning matters that are not historical facts These forward looking statements include statements\nregarding our intentions, beliefs and current expectations and projections concerning, among other things our results of operations,\nfinancial condition, liquidity, prospects, growth, strategies and the markets in which we operate In some cases, you can identify these\nforward looking statements by the use of terminology such as \u201coutlook,\u201d \u201cbelieves,\u201d \u201cexpects,\u201d \u201cpotential,\u201d \u201ccontinues,\u201d \u201cmay,\u201d \u201cwill,\u201d\n\u201cshould,\u201d \u201ccould,\u201d \u201cseeks,\u201d \u201capproximately, * \u201cplans,\u201d \u201cestimates,\u201d \u201canticipates\u201d or the negative version of these\nwords or other comparable words or phrases\n\n29 66.\n\n29 66. 20 oes\n\npredicts,\u201d \u201cintends,\n\n20 ce\n\nThe forward looking statements contained in this prospectus reflect our current views about the Business Combination and future\nevents and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause\nits actual results to differ significantly from those expressed in any forward looking statement There are no guarantees that the\ntransactions and events described will happen as described (or that they will happen at all) As a result of a number of known and\nunknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by\nthese forward looking statements Some factors that could cause actual results to differ include\n\ne our ability to recognize the anticipated benefits of the Business Combination which may be affected by, among other things,\ncompetition and our ability to grow and manage growth profitably;\n\ne our ability to maintain the listing of our Common Stock and warrants on the Nasdaq Capital Market, and the potential liquidity\nand trading of such securities;\n\ne changes in applicable laws or regulations;\n\ne our ability to execute our business model;\n\ne our ability to attract and retain customers and expand customers\u2019 use of our products and services\n\ne our ability to raise capital;\n\ne the possibility that we may be adversely affected by other economic, business and/or competitive factors\n\n@ our success in retaining or recruiting, or changes required in, our officers, key employees or directors;\n\ne our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;\n\ne our business, operations and financial performance including\n\ne our history of operating losses and expectations of significant expenses and continuing losses for the foreseeable future;\n\ne our ability to execute our business strategy, including the growth potential of the markets for our products and our ability to\nserve those markets;\n\ne our ability to grow market share in our existing markets or any new markets we may enter;\ne our ability to develop and maintain our brand and reputation;\n\ne our ability to partner with other companies;\n\niil\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 12 of 408\n\n@ our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the nghts of\nothers;\n\ne our ability to manage our growth effectively;\ne the outcome of any legal proceedings that may be instituted against us; and\n\ne unfavorable conditions in our industry, the global economy or global supply chain, including financial and credit market\nfluctuations, international trade relations, pandemics, political turmoil, natural catastrophes, warfare, and terrorist attacks\n\nIn addition, statements that \u201ciLearningEngines believes,\u201d \u201cthe Company believes\u201d or \u201cwe believe\u201d and similar statements reflect\nour beliefs and opinions on the relevant subjects These statements are based upon information available to us as of the date of this\nprospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or\nincomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all\npotentially available relevant information These statements are inherently uncertain and investors are cautioned not to unduly rely\nupon these statements\n\nWhile forward looking statements reflect our good faith beliefs, they are not guarantees of future performance Except to the\nextent required by applicable law, we are under no obligation (and expressly disclaim any such obligation) to update or revise our\nforward looking statements whether as a result of new information, future events, or otherwise For a further discussion of these and\nother factors that could cause our future results, performance or transactions to differ significantly from those expressed in any\nforward looking statement, please see the section titled \u201cRisk Factors\u201d You should not place undue reliance on any forward looking\nstatements, which are based only on information currently available to us (or to third parties making the forward looking statements)\n\niv\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 13 of 408\n\nFREQUENTLY USED TERMS\n\n\u201cA&R Registration Rights Agreement\u201d means that certain Amended and Restated Registration Rights Agreement entered into at\nClosing by and among iLearningEngines, the members of Sponsor, certain former stockholders of Legacy iLearningEngines\n\n\u201cARRW\u201d or \u201cArrowroot\u201d means Arrowroot Acquisition Corp (which was renamed \u201ciLearningEngines, Inc\u201d in connection with\nthe consummation of the Business Combination)\n\n\u201cARRW IPO\u201d means ARRW\u2019s initial public offering, consummated on March 4, 2021\n\n\u201cARRW Units\u201d means equity securities of us, each consisting of one share of Class A Common Stock and one half of one\nredeemable Warrant\n\n\u201cBusiness Combination\u201d means the transactions contemplated by the Merger Agreement, including, among other things, the\nMerger\n\n\u201cClosing\u201d means the closing of the Business Combination\n\n\u201cClosing Date\u201d means April 16, 2024, the date on which the Closing occurred\n\u201cCommon Stock\u201d means the shares of our common stock, $0 0001 par value per share\n\u201cDGCL\u201d means the General Corporation Law of the State of Delaware\n\n\u201cFourth Promissory Note\u201d means the unsecured promissory note in the principal amount of $2,000,000 in favor of the Sponsor\nArrowroot issued on June 13, 2023\n\n\u201cIPO\u201d means Arrowroot\u2019s initial public offering of Arrowroot Units, consummated on March 4, 2021\n\n\u201cIPO Promissory Note\u201d means an unsecured promissory note the Sponsor issued to the Company on December 21, 2020,\npursuant to which the Company may borrow up to an aggregate principal amount of $300,000\n\n\u201cLegacy iLearningEngines\u201d means iLearningEngines Holdings, Inc , a Delaware corporation which, pursuant to the Business\nCombination, became a direct, wholly owned subsidiary of iLearningEngines, Inc , and, unless the context otherwise requires, its\n\nconsolidated subsidiaries\n\n\u201cMerger\u201d means the merger of Merger Sub, a direct, wholly owned subsidiary of ARRW, with and into Legacy iLearningEngines,\nwith Legacy iLearningEngines continuing as the surviving entity\n\n\u201cMerger Agreement\u201d means that certain Agreement and Plan of Merger and Reorganization, dated as of April 27, 2023, with\nMerger Sub and Legacy iLearningEngines\n\n\u201cMerger Sub\u201d means ARAC Merger Sub, Inc , a Delaware corporation and wholly owned subsidiary of ARRW\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 14 of 408\n\n\u201cPrivate Placement Warrants\u201d means the 8,250,000 warrants purchased by the Sponsor in connection with the ARRW IPO ina\nprivate placement transaction occurring simultaneously with the closing of the ARRW IPO\n\n\u201cPromissory Notes\u201d means, collectively, the IPO Promissory Note, First Promissory Note, Second Promissory Note, Third\nPromissory Note and Fourth Promissory Note\n\n\u201cPublic Warrants\u201d means the 14,374 975 warrants included as a component of the ARRW Units sold in the ARRW IPO, each of\nwhich is exercisable, at an exercise price of $11 50, for one share of Common Stock, in accordance with its terms\n\n\u201cSEC\u201d means the U S Securities and Exchange Commission\n\n\u201cSecond Promissory Note\u201d means an unsecured promissory note in the principal amount of $500,000 in favor of the Sponsor\nArrowroot issued on February 23, 2023\n\n\u201cSecurities Act\u201d means the U S Securities Act of 1933, as amended\n\u201cSponsor\u201d means Arrowroot Acquisition LLC, a Delaware limited liability company\n\u201cWarrants\u201d means the Private Placement Warrants and the Public Warrants\n\n\u201c2024 Convertible Note Purchase Agreement\u201d means the convertible note purchase agreement that Legacy iLearningEngines\nentered into with an investor (the \u201cMarch Investor\u201c) on March 21, 2024, pursuant to which, among other things, Legacy\niLearningEngines issued and sold a 2024 Convertible Note (as defined below) to the March Investor with an aggregate principal\namount of $700,000 On April 16, 2024, Legacy iLearningEngines entered into the 2024 Convertible Note Purchase Agreement with\ncertain investors (collectively, the \u201cApril Investors\u201d and, together with the March Investor, the \u201c2024 Convertible Note Investors\u2019),\npursuant to which, among other things, Legacy iLearningEngines issued and sold to the April Investors convertible notes due in\nOctober 2026 (\u201c2024 Convertible Notes\u201d) with an aggregate principal amount of $28,714 500 Each 2024 Convertible Note accrued\ninterest at a rate of (i) 15% per annum until the aggregate accrued interest thereunder equals 25% of the principal amount of such note,\nand (ii) 8% per annum thereafter Immediately prior to the consummation of the Business Combination, each 2024 Convertible Note\nautomatically converted into shares of Legacy iLearningEngines thereby entitling the holder thereof to receive, in connection with the\nconsummation of the Business Combination, a number of shares New iLearningEngines Common Stock (rounded down to the nearest\nwhole share) equal to (i) 2 75, multiplied by the outstanding principal under such Convertible Note, plus all accrued and unpaid interest\nthereon, divided by (ii) $10 00\n\nvi\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 15 of 408\n\nPROSPECTUS SUMMARY\n\nThis summary highlights information contained elsewhere in this prospectus and does not contain all of the information that\nyou should consider in making your investment decision. Before investing in our securities, vou should carefully read this entire\nprospectus, including our consolidated financial statements and the related notes thereto and the information set forth in the\nsections titled \u201cRisk Factors,\u201d \u201cBusiness\u201d and \u201cManagement's Discussion and Analysis of Financial Condition and Results of\nOperations\u201d and our consolidated financial statements and the notes thereto included elsewhere in this prospectus, before deciding\nto invest in our shares of common stock. For purposes of this section, unless otherwise indicated or the context otherwise requires,\nall references to \u201ciLearningEngines,\u201d \u201cthe Company,\u201d \u201cwe,\u201d \u201cour,\u201d \u201cours,\u201d \u201cus\u201d or similar terms refer to iLearningEngines, Inc.\nand its consolidated subsidiaries after the Closing.\n\nOverview\n\niLearningEngines is an out-of-the-box AI platform that empowers customers to \u201cproductize\u201d their institutional knowledge and\ngenerate and infuse insights in the flow-of-work to drive mission critical business outcomes. iLearningEngines\u2019 customers\n\u201cproductize\u201d their institutional knowledge by transforming it into actionable intellectual property that enhances outcomes for\nemployees, customers and other stakeholders. Since its commercial deployment in 2018, our platform has enabled enterprises to\nbuild intelligent \u201cKnowledge Clouds\u201d that incorporate large volumes of structured and unstructured information across disparate\ninternal and external systems, and automate organizational processes that leverage these Knowledge Clouds to improve\nperformance. Our Learning Automation offering addresses the corporate learning market and our Information Intelligence offering\naddresses the information management, analytics and automation markets. We combine our offerings with vertically focused\ncapabilities and data models to operationalize AI and automation to effectively and efficiently address critical challenges facing our\ncustomers. Our customers utilize our platform to analyze and address employee knowledge gaps, provide personalized cognitive\nassistants or chatbots, and make predictive decisions based on real-time insights.\n\nLegacy iLearningEngines was incorporated in 2010 as iHealthEngines Inc. and changed its name to iLearningEngines Inc. in\n2018. On April 16, 2024, we completed the Business Combination, and Legacy iLearningEngines changed its name to\niLearningEngines Holdings, Inc.\n\nImplications of Being an Emerging Growth Company and Smaller Reporting Company\n\nWe are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, as amended, and therefore\nwe intend to take advantage of certain exemptions from various public company reporting requirements, including not being\nrequired to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant\nto Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in this\nprospectus, our periodic reports and our proxy statements and exemptions from the requirements of holding a nonbinding advisory\nvote on executive compensation and any golden parachute payments not previously approved. We will remain an emerging growth\ncompany until the earliest of (1) the last day of the fiscal year in which the market value of our Common Stock that is held by non-\naffiliates equals or exceeds $700 million as of the end of that year\u2019s second fiscal quarter, (ii) the last day of the fiscal year in which\nwe have total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on\nwhich we have issued more than $1.00 billion in non-convertible debt in the prior three-year period or (iv) December 31, 2026.\n\nAdditionally, we are a \u201csmaller reporting company\u201d as defined in Item 10 (f) (1) of Regulation S-K, which allows us to take\nadvantage of certain exemptions from disclosure requirements including exemption from compliance with the auditor attestation\nrequirements of Section 404. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market\nvalue of the shares of our Common Stock held by non-affiliates exceeds $250 million as of the prior June 30, and (ii) our annual\nrevenue exceeded $100 million during such completed fiscal year or the market value of the shares of our Common Stock held by\nnon-affiliates exceeds $700 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations,\nit may also make comparison of our financial statements with other public companies difficult or impossible.\n\nImplications of Being a Controlled Company\n\nOur Chief Executive Officer and Chairman of the Board, Harish Chidambaran, and his wife, Preeta Chidambaran, beneficially\nown 96,764,327 shares of our Common Stock, representing approximately 71.7% of the voting power of iLearningEngines, Inc. as\nof June 24, 2024. Under Nasdaq rules, a company of which more than 50% of the voting power is held by an individual, a group or\nanother company is a \u201ccontrolled company.\u201d Accordingly, we are a \u201ccontrolled company\u201d within the meaning of Nasdaq rules and,\n\n\fe 8:24-Cv-02900-DKC Document 90-2 . Filed 09/18/25 Page 16 of 408\n\nas a result, ake for exemptions from certain corporate governance requirements Although we do nof intend to rely on the\ncontrolled company exemptions under Nasdaq rules, we could elect to rely on these exemptions in the future, and if so, you would\nnot have the same protection afforded to stockholders of companies that are subject to all of the corporate governance requirements\nof Nasdaq See \u201cRisk Factors Risks Related the Ownership of Our Securities As long as our principal stockholders hold a\nmajority of the voting power of our capital stock, we may rely on certain exemptions from the corporate governance requirements of\nNasdaq available for \u201ccontrolled companies \u201d\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 17 of 408\n\nSummary of Risk Factors\n\nBelow is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this\nsummary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties\nsummarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under the section titled\n\u201cRisk Factors\u201d in this prospectus. The below summary is qualified in its entirety by that more complete discussion of such risks and\nuncertainties. You should carefully consider the risks and uncertainties described under the section titled \u201cRisk Factors\u201d as part of\nyour evaluation of an investment in our securities:\n\nRisks Related to Our Business\n\nWe have a history of net losses and could continue to incur substantial net losses in the future.\n\nOur recent rapid growth may not be indicative of our future growth. our rapid growth also makes it difficult to evaluate our\nfuture prospects and may increase the risk that we will not be successful.\n\nWe may not be able to successfully manage its growth and, if we are not able to grow efficiently, we may not be able to\nreach or maintain profitability, and its business, financial condition, and results of operations could be harmed.\n\nBecause we derive substantially all of our revenue from its learning automation and information intelligence offerings,\nfailure of this platform to satisfy customer demands could adversely affect our business, results of operations, financial\ncondition, and growth prospects.\n\nIf we are unable to attract new customers, its business, financial condition, and results of operations will be adversely\naffected.\n\nA limited number of contracted customers represent a substantial portion of our revenue and ARR. If we fail to retain these\ncontracted customers, our revenue and ARR could decline significantly.\n\nWe rely on a channel partner for key business development, administrative, operational and other functions that are\nimportant to its business. The loss of this service provider could materially and adversely affect our business, results of\noperations and financial condition.\n\nThe markets in which we participate are competitive and, if we do not compete effectively, our business, financial\ncondition, and results of operations could be harmed.\n\nThe success of our platform relies on the ability of our Al-enabled ecosystem to create broad solutions across corporate\nfunctions, and a failure to do so would adversely affect our business, financial condition, and results of operations.\n\nIf we fail to retain and motivate members of our management team or other key employees or to integrate new team\nmembers, fail to execute management transitions, or fail to attract additional qualified personnel to support our operations,\nour business and future growth prospects could be harmed.\n\nMarket adoption of automated learning solutions is relatively new and may not grow as we expect, which may harm our\nbusiness and results of operations.\n\nWe rely on our channel partners to generate a substantial amount of our revenue, and if we fail to expand and manage our\ndistribution channels, our revenue could decline and our growth prospects could suffer.\n\nIf we are not able to introduce new features or services successfully and to make enhancements to our platform or products,\nour business and results of operations could be adversely affected.\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 18 of 408\n\ne We target enterprise customers, and sales to these customers involve risks that may not be present or that are present to a\nlesser extent with sales to smaller entities.\n\ne Real or perceived errors, failures, or bugs in our platform and products could adversely affect our business, results of\noperations, financial condition, and growth prospects.\n\ne Incorrect or improper implementation or use of our platform and products could result in customer dissatisfaction and harm\nour business, results of operations, financial condition, and growth prospects.\n\ne If we are unable to ensure that our platform integrates with a variety of software applications that are developed by others,\nincluding our integration partners, we may become less competitive and our results of operations may be harmed.\n\ne Our outstanding indebtedness could adversely affect our financial condition and our ability to operate our business and\npursue our business strategies and we may not be able to generate sufficient cash flows to meet our debt service\nobligations.\n\ne We rely on data sets from our customers. If we are not able to acquire or utilize such data sets, or regulations limit it from\ndoing so, our business, financial condition, and results of operations could be adversely affected.\n\ne Weare subject to stringent and changing obligations related to data privacy and security. Our actual or perceived failure to\ncomply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions\nof our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse\nbusiness consequences.\n\ne \u00a7 Any failure to obtain, maintain, protect, or enforce our intellectual property and proprietary rights could impair our ability\nto protect our proprietary technology and our brand.\n\n@ Our management has identified material weaknesses in our internal control over financial reporting and they may identify\nadditional material weaknesses in the future. If we fail to remediate the material weaknesses or if we otherwise fail to\nestablish and maintain effective control over financial reporting, it may adversely affect our ability to accurately and timely\nreport our financial results, and may adversely affect investor confidence and business operations.\n\ne The common stock being offered in this prospectus represents a substantial percentage of our outstanding common stock,\nand the sales of such shares, or the perception that these sales could occur, could cause the market price of our common\nstock to decline significantly.\n\nPlease see the section titled \u201cRisk Factors\u201d beginning on page 7 of this prospectus for a discussion of these and other factors\nyou should consider in evaluating our business.\n\nCorporate Information\n\nOur principal executive office is located at 6701 Democracy Blvd, Suite 300, Bethesda, Maryland 20817 and our telephone\nnumber is (650) 248-9874. Our corporate website address is www. ilearningengines.com. Information contained on or accessible\nthrough our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual\nreference only.\n\nWe and our subsidiaries own or have rights to trademarks, trade names and service marks that they use in connection with the\noperation of their business. Other trademarks, trade names and service marks appearing in this prospectus are the property of their\nrespective owners. Solely for convenience, in some cases, the trademarks, trade names and service marks referred to in this\nprospectus are listed without the applicable \u00ae, \u2122 and SM symbols.\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 19 of 408\n\nIssuance of Common Stock\n\nShares of Common Stock offered by\nus\n\nShares of Common Stock\noutstanding prior to the exercise\nof all Warrants\n\nShares of Common Stock\noutstanding assuming exercise of\nall Warrants\n\nExercise price of Warrants\n\nUse of proceeds\n\nResale of Common Stock and\nWarrants\n\nShares of Common Stock offered by\nthe Selling Securityholders\n\nTHE OFFERING\n\nUp to 22,624,975 shares of Common Stock, including shares of Common Stock issuable\nupon exercise of the Private Placement Warrants and Public Warrants, consisting of (i) up to\n8,250,000 shares of Common Stock that are issuable upon the exercise of up to 8,250,000\nPrivate Placement Warrants, and (ii) up to 14,374,975 shares of Common Stock that are\nissuable upon the exercise of up to 14,374,975 Public Warrants.\n\n134,970,114 shares (as of April 16, 2024).\n\n157,595,089 shares (based on total shares outstanding as of April 16, 2024).\n\n$11.50 per share, subject to adjustment as described herein.\n\nWe will receive up to an aggregate of approximately $260.2 million from the exercise of the\nWarrants, assuming the exercise in full of all of the Warrants for cash. We expect to use the\nnet proceeds from the exercise of the Warrants, if any, for general corporate purposes. Due\nto the uncertainty regarding the exercise of the Warrants, none of our projected liquidity\nrequirements discussed in this prospectus assume the receipt of any proceeds from the\nexercise of the Warrants. The exercise price of our Public Warrants and Private Placement\nWarrants is $11.50 per warrant, which exceeds the trading price of our Common Stock as of\nthe date of this prospectus. We believe the likelihood that warrant holders will exercise their\nwarrants, and therefore the amount of cash proceeds that we would receive, is dependent\nupon the trading price of our Common Stock. For so long as the trading price for our\nCommon Stock is less than $11.50 per share, meaning the Warrants are \u201cout of the money,\u201d\nwe believe holders of our Warrants will be unlikely to exercise their warrants. In addition, to\nthe extent that our Warrants are exercised on a \u201ccashless basis,\u201d the amount of cash we\nwould receive from the exercise of such Warrants will decrease. The Private Placement\nWarrants may be exercised for cash or on a \u201ccashless basis.\u201d The Public Warrants may only\nbe exercised for cash provided there is then an effective statement registering the shares of\ncommon stock issuable upon the exercise of such warrants. If there is not a then-effective\nregistration statement, then such warrants may be exercised on a \u201ccashless basis,\u201d pursuant\nto an available exemption from registration under the Securities Act. See the section titled\n\u201cUse of Proceeds.\u201d\n\nWe are registering the resale by the Selling Securityholders named in this prospectus, or\ntheir permitted transferees, an aggregate of 100,774,669 shares of Common Stock,\nconsisting of:\n\n@ 8,089,532 2024 Convertible Note Shares issued for a total purchase price of\n$29,414,500 (equivalent to a per share price of $3.64) in satisfaction of the convertible\nnotes payable to such investors;\n\ne@ 6,787,500 Founder Shares (160,000 of which were subsequently transferred by the\nSponsor to current and former directors of ARRW) originally issued at a price of\napproximately $0.004 per share in a private placement to the Sponsor prior to ARRW\u2019s\nIPO;\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 20 of 408\n\n@ 82,091 Meteora Shares issued at a fair value price of $10 00 per share to certain\ninvestors as consideration for the non exercise of redemption rights by such investors in\ncomnection with the shareholder meetings preceding the Business Combination;\n\n@ 3,763,378 Lender Shares issued at a fair value price of $10 00 per share as\nconsideration, in part, for the revision of amortization schedules under the WTI Loan\nAgreements prior to the Business Combination and, after the Business Combination, the\nrepayment in full of all outstanding obligations under the WTI Loan Agreements;\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 21 of 408\n\n@ 460,384 Working Capital Shares issued as consideration for the repayment of\n$4,510,000 (equivalent to a per share price of $9.80), which represented part of the\nthen-outstanding obligations under unsecured promissory notes issued to ARRW;\n\ne 78,730 shares of Common Stock issuable upon the vesting and settlement of restricted\nstock units that were initially granted at no cash cost to the recipients thereof by Legacy\niLearningEngines;\n\ne@ 71,508,370 Control Shares issued to certain directors and officers at a fair value price of\n$10.00 per share as merger consideration for such shares originally issued by Legacy\niLearningEngines to such directors and officers as consideration for employment and\nservices provided to Legacy iLearningEngines prior to the Business Combination;\n\ne 511,073 shares of Common Stock that were issued at a price of $5.87 per share pursuant\nto the BTIG Amendment in connection with the payment of certain Business\nCombination transaction expenses;\n\ne 1,022,146 shares of Common Stock that were issued in lieu of payment of deferred\nunderwriting commissions in an aggregate amount of $6,000,000 at a price of $5.87 per\nshare, pursuant to the Fee Modification Agreement, in connection with the Closing;\n\n@ 221,465 shares of Common Stock that were issued at a price of $5.87 per share pursuant\nto the Cooley Fee Agreement, in connection with the payment of Business Combination\ntransaction expenses; and\n\ne@ 8,250,000 shares of Common Stock acquired by the Sponsor at a purchase price of\n$8,250,000 (equivalent to a per share price of $1.00) issuable upon the exercise of the\nPrivate Placement Warrants at a price of $11.50 per share.\n\nGiven the substantial number of shares of Common Stock being registered for potential\nresale by Selling Securityholders pursuant to this prospectus, the sale of shares by the\nSelling Securityholders of a large number of shares, or the perception in the market that the\nSelling Securityholders of a large number of shares intend to sell shares, could increase the\nvolatility of the market price of our Common Stock or result in a significant decline in the\npublic trading price of our Common Stock. Even if our trading price is significantly below\n$10.00 per share, the offering price for the units offered in the initial public offering of\nARRW,, the purchasers of which exchanged their ARRW shares for our Common Stock in\nthe business combination described in this prospectus, the Selling Securityholders may still\nhave an incentive to sell our shares of our Common Stock because they purchased the shares\nat prices that are significantly lower than the purchase prices paid by our public investors or\nthe current trading price of our Common Stock. While certain of the Selling Securityholders\nmay experience a positive rate of return on their investment in our Common Stock as a\nresult, the public securityholders may not experience a similar rate of return on the securities\nthey purchased due to differences in their purchase prices and the trading price. For\nexample, based on the closing price of our Common Stock of $10.49 per share on July 18,\n2024 (the \u201cJuly 18, 2024 Closing Price\u201d): (i) the holders of the 2024 Convertible Note\nShares would experience a potential profit of up to approximately $6.85 per share, or up to\napproximately $55.4 million in the aggregate; (ii) the holders of the Founder Shares would\nexperience a potential profit of up to approximately $10.49 per share that they purchased\nprior to the initial public offering of ARRW, or up to approximately $71.2 million in the\naggregate (not giving effect to the issuance of Common Stock issuable upon exercise of the\nWarrants held by them); (iii) the holders of the Meteora Shares would experience a potential\nprofit of up to approximately $0.49 per share, or up to approximately $0.04 million in the\naggregate; (iv) the holders of the Lender Shares would experience a potential profit of up to\napproximately $0.49 per share, or up to approximately $1.8 million in the aggregate; (v) the\nholders of the Working Capital Shares would experience a potential profit of up to\n\n\fCase 8:24-cv-02900; DIC mate 55069 oot ewe or on St SIa\u00b0 $0 Aen ae a aie eeate: (vi) the\n\nholders of the Unvested Shares would experience a potential profit of up to approximately\n$10 49 per share, or up to approximately $0 8 million in the aggregate; (vii) the holders of\nthe Control Shares would experience a potential profit of up to approximately $0 49 per\nshare, or up to approximately $35 0 million in the aggregate; (viii) the holders of the BTIG\nShares would experience a potential profit of up to approximately $4 62 per share, or up to\napproximately $2 4 million in the aggregate; (ix) the holders of the Cantor Shares would\nexperience a potential profit of up to approximately $4 62 per share, or up to approximately\n$4 7 million in the aggregate; (x) the holders of the Cooley Shares would experience a\npotential profit of up to approximately $4 62 per share, or up to approximately $1 0 million\nin the aggregate; and (xi) the holders of the Warrant Shares would experience a potential\nprofit of up to approximately $9 49 per share, or up to approximately $78 3 million in the\n\naggregate\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 23 of 408\n\nWarrants offered by the Selling\nSecurity holders\nRedemption\n\nLock-up Provisions\n\nTerms of the offering\n\nUse of proceeds\n\nRisk factors\n\nNasdaq ticker symbols\n\nUp to 8,250,000 Private Placement Warrants.\n\nThe Public Warrants are redeemable in certain circumstances. See the section titled\n\u201cDescription of Our Securities \u2014 Warrants.\u201d\n\nCertain of our securityholders are subject to certain restrictions on transfer until the\ntermination of applicable lock-up periods contained in the Amended and Restated Bylaws of\nthe Company.\n\nThe Selling Securityholders will determine when and how they will dispose of the securities\nregistered for resale under this prospectus.\n\nWe will not receive any proceeds from the sale of shares of Common Stock or Warrants by\nthe Selling Securityholders, except with respect to amounts received by us due to the\n\nexercise of the Warrants.\n\nBefore investing in our securities, you should carefully read and consider the information set\nforth in the section titled \u201cRisk Factors\u201d beginning on page 7.\n\n\u201cAILE\u201d and \u201cAILEW\u201d\n\nFor additional information concerning the offering, see the section titled \u201cPlan of Distribution\u201d beginning on page 152.\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 24 of 408\n\nRISK FACTORS\n\nInvesting in our securities involves a high degree of risk Before you make a decision to buy our securities in addition to the risks\nand uncertainties discussed above under Special Note Regarding Forward Looking Statements you should carefully consider the\nrisks and uncertainties described below together with all of the other information contained in this prospectus including our financial\nstatements and related notes appearing at the end of this prospectus and in the section titled Management s Discussion and Analysis\nof Financial Condition and Results of Operations before deciding to invest in our securities If any of the events or developments\ndescribed below were to occur our business prospects operating results and financial condition could suffer materially the trading\nprice of our securities could decline and you could lose all or part of your investment The risks and uncertainties described below are\nnot the only ones we face Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial\nmay also adversely affect our business\n\nRisks Related to Our Business, Products, Operations, and Industry\nWe have a history of net losses and could continue to incur substantial net losses in the future\n\nWe have incurred net losses in certain years since our incorporation in 2010 We incurred a net loss of $25 9 million for the three\nmonths ended March 31, 2024 and of $4 4 million for the year ended December 31, 2023, and we recorded net income of $11 5 million\nand $2 5 million for the years ended December 31, 2022 and 2021, respectively Asa result, as of March 31, 2024, we had an\naccumulated deficit of $83 5 million We expect to continue to invest in the growth of our business, including by increasing our sales\nand marketing efforts, hiring additional personnel and introducing new products and technologies We have incurred and will continue\nto incur significant legal, accounting and other expenses related to operating as a public company In addition, we may encounter\nunforeseen or unpredictable factors, including unforeseen operating expenses, complications or delays, which may also result in\nincreased costs If our revenue declines or fails to grow at a rate sufficient to offset increases in our operating expenses, we will not be\nable to achieve profitability in future periods or, if we do become profitable, sustain profitability As a result, we may continue to\ngenerate net losses There can be no assurances that we will achieve profitability in the future or that we will be able to sustain\nprofitability if we do become profitable\n\nOur recent rapid growth may not be indicative of our future growth Our rapid growth also makes it difficult to evaluate our future\nprospects and may increase the risk that we will not be successful\n\nWe generated revenue of $420 6 million, $309 2 million and $217 9 million for fiscal years 2023, 2022 and 2021, respectively Our\nannual recurring revenue (\u201cARR\u201d) was $447 3 million, $313 7 million and $224 3 million at December 31, 2023, 2022 and 2021,\nrespectively You should not rely on our ARR, revenue or key operational and business metrics from any prior quarterly or annual fiscal\nperiod as an indication of our future performance Even if our revenue or key operational and business metrics continue to improve, our\nrevenue or key operational and business metrics may worsen in the future as a result of a variety of factors, including changes in the\ndemand for our products, the maturation of our business, or our failure to capitalize on growth opportunities Overall growth of our\nbusiness depends on a number of additional factors, including our ability to\n\n@ price our products effectively so that we are able to attract new customers and expand sales to our existing customers;\n\ne expand the functionality and use cases for the products we offer on our platform;\n\n@ maintain and grow our customer base;\n\n@ maintain and expand the rates at which contracted customers purchase and renew maintenance and support of our platform;\n\n@ provide our customers with support that meets their needs;\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 25 of 408\n\n@ continue to introduce and sell our products to new industries and markets;\n\ne continue to develop new products and new functionality for our platform and successfully further optimize our existing\nproducts and infrastructure;\n\ne successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or\nexpand our platform; and\n\n@ increase awareness of our brand on a global basis and successfully compete with other companies\n\nWe may not successfully accomplish any of these objectives, and as a result, it is difficult for us to forecast our future results of\noperations If the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, or if we are\nunable to maintain consistent ARR or key operational and business metrics improvement, our stock price could be volatile, and it may\nbe difficult to achieve and maintain profitability\n\nIn addition, we expect to continue to expend substantial financial and other resources on\n\ne@ our specialized data sets and technology infrastructure, including systems architecture, scalability, availability, performance,\nand security;\n\ne our sales and marketing organization to engage our existing and prospective customers, increase brand awareness, and drive\nadoption of our products;\n\ne product development, including investments in our product development team and the development of new products and new\nfunctionality for our platform as well as investments in further optimizing our existing products and infrastructure;\n\n@ acquisitions or strategic investments;\ne our global operations and continued expansion; and\ne general administration, including increased legal and accounting expenses associated with being a public company\n\nThese investments may not be successful on the timeline we anticipate or at all, and may not result in improvements of our ARR or\nkey operational and business metrics For instance, we anticipate that our customers will continue to increase adoption of our products\nin future periods We have offered our products for only a short period of time, and we cannot predict how increased adoption of our\nproducts will change the buying patterns of our customers or impact our future ARR or key operational and business metrics If we are\nunable to maintain or improve our ARR or key operational and business metrics at a rate sufficient to offset the expected increase in our\ncosts, our business, financial condition, and results of operations will be harmed, and we may not be able to achieve or maintain\nprofitability over the long term Additionally, we have encountered, and may in the future encounter, risks and uncertainties frequently\nexperienced by growing companies in rapidly changing industries, such as unforeseen operating expenses, difficulties, complications,\ndelays, and other known or unknown factors that may result in losses in future periods If the growth of our ARR or key operational and\nbusiness metrics does not meet our expectations in future periods, our business, financial condition, and results of operations may be\nharmed, and we may not achieve or maintain profitability in the future\n\nWe may not be able to successfully manage our growth and, if we are not able to grow efficiently, we may not be able to reach or\nmaintain profitability, and our business, financial condition, and results of operations could be harmed\n\nWe have experienced and may continue to experience rapid growth and organizational change, which has placed and may continue\nto place significant demands on our management and our operational and financial resources Actions we may decide to take in the\nfuture in our attempt to achieve profitability may not be successful in yielding our intended results and may not appropriately address\neither or both of the short term and long term strategy of our business Implementation of a go forward plan and any other cost saving\ninitiatives, including possible future restructuring efforts, may be costly and disruptive to our business, the expected costs and charges\nmay be greater than forecasted, and the estimated cost savings may be lower than forecasted Finally, our organizational structure is\nbecoming more complex as we improve our operational, financial and management controls as well as our reporting systems and\nprocedures If we fail to manage our anticipated growth, company personnel transitions, and change in a manner that preserves the key\naspects of our corporate culture, our employee retention may suffer, which could negatively affect our products, brand, and reputation\nand harm our ability to retain and attract customers and employees\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 26 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 27 of 408\n\nIn addition, as we expand our business, it is important that we continue to maintain a high level of customer service and\nsatisfaction If we are not able to continue to provide high levels of customer service, our reputation, as well as our business, results of\noperations, and financial condition, could be harmed As usage of our platform capabilities grow, we will need to continue to devote\nadditional resources to improving and maintaining our infrastructure and integrating with third party applications In addition, we have\nneeded and will continue to need to appropriately scale our internal business systems and our services organization, including customer\nsupport and professional services, to serve our growing customer base Failure of or delay in these continuing efforts could result in\nimpaired system performance and reduced customer satisfaction, resulting in decreased sales to new customers, lower dollar based net\nretention rates, the issuance of service credits, or requested refunds, which would hurt our revenue growth and our reputation Even if\nwe are successful in our expansion efforts, they will be expensive and complex, and require the dedication of significant management\ntime and attention We have faced and could continue to face inefficiencies or service disruptions as a result of our efforts to scale our\ninternal infrastructure We cannot be sure that the expansion of and improvements to our internal infrastructure will be effectively\nimplemented on a timely basis, if at all, and such failures could harm our business, financial condition, and results of operations\n\nBecause we derive substantially all of our revenue from our learning automation and information intelligence offerings, failure of\nthis platform to satisfy customer demands could adversely affect our business, results of operations, financial condition, and growth\nprospects\n\nWe derive and expect to continue to derive substantially all of our revenue from our learning automation and information\nintelligence offerings As such, market adoption of our learning automation and information intelligence offerings is critical to our\ncontinued success Demand for our learning automation and information intelligence offerings may be affected by a number of factors,\nmany of which are beyond our control, including continued market acceptance and integration of our platform into our end customers\u2019\noperations; the continued volume, variety, and velocity of automations that are generated through use of our platform; timing of\ndevelopment, and release of new offerings by our competitors; technological change, including in the areas of artificial intelligence\n(\u201cAI\u201d) and machine learning systems, and the rate of growth in our market Additionally, the utility of our learning automation and\ninformation intelligence offerings and products relies in part on the ability of our customers to use our products in connection with\nother third party software products that are important to our customers\u2019 businesses If these third party software providers were to\nmodify the terms of their licensing arrangements with our customers in a manner that would reduce the utility of our products, or\nincrease the cost to use our products in connection with these third party software products, then our customers may no longer choose\nto adopt our learning automation and information intelligence offerings or continue to use our products If we are unable to continue to\nmeet the demands of our customers and the developer community, our business operations, financial results, and growth prospects will\nbe materially and adversely affected\n\nIf we are unable to attract new customers, our business, financial condition, and results of operations will be adversely affected\n\nTo increase our revenue, we must continue to attract new customers Our success will depend to a substantial extent on the\nwidespread adoption of our platform and products as an alternative to existing solutions, including as an alternative to traditional\nsystems lacking AI driven customization and content augmentation capabilities Many enterprises have invested substantial personnel\nand financial resources to integrate traditional human driven processes into their business architecture and, therefore, may be reluctant\nor unwilling to migrate to a learning automation platform that is integrated and augmented by AI and machine learning Accordingly,\nthe adoption of our learning automation and information intelligence offerings may be slower than we anticipate A large proportion of\nour target market still uses traditional systems for a major part of their operations This market may need further education on the value\nof a learning automation platform that is integrated and augmented by AI and machine learning generally and our platform and\nproducts in particular, and on how to integrate them into current operations A lack of education as to how our learning automation and\ninformation intelligence offerings and solutions operate may cause potential customers to prefer more traditional methodologies or to\nbe cautious about investing in our platform and products, or result in difficulty integrating our platform and products into their business\narchitecture If we are unable to educate potential customers and change the market\u2019s readiness to accept our technology, we may\nexperience slower than projected growth and our business, results of operations, and financial condition may be harmed\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 28 of 408\n\nIn addition, as our market matures, our products evolve, and competitors introduce lower cost or differentiated products that are\nperceived to be alternatives to our platform and products, our ability to sell maintenance and support for our products could be\nimpaired Further, as various forms of AI, become more widely adopted and accepted, if customers were to feel that our technology was\nnot developing apace, our business and growth prospects could be harmed The rapid evolution of AI may require the application of\nresources to develop, test, and maintain our products and services so that they are ethically designed to minimize unintended, harmful\nimpacts Similarly, our sales could be adversely affected if customers or users within these organizations perceive that features\nincorporated into competitive products reduce the need for our products or if they prefer to purchase other products that are bundled\nwith solutions offered by other companies that operate in adjacent markets and compete with our products As a result of these and\nother factors, we may be unable to attract new customers, which may have an adverse effect on our business, financial condition, and\nresults of operations\n\nIf we are not able to expand our usage by existing customers, or our existing customers do not renew their maintenance and\nsupport agreements, our business, financial condition, and results of operations will be adversely affected\n\nOur success depends significantly on retaining existing customers and attracting them to different types of service offerings on our\nplatform Our customers have a range of options to meet their training and education needs, and our ability to retain customers could be\nmaterially adversely affected by a number of factors, such as failing to provide a dynamic, high quality learning automation and\ninformation intelligence offerings at competitive prices; the fees we charge to use our platform; taxes; our failure to facilitate new or\nenhanced offerings or features that our users value; the performance of our algorithms; our users not receiving timely and adequate\nsupport from us; negative perceptions of the trust and safety of our platform; negative associations with, or reduced awareness of, our\nbrand; declines and inefficiencies in our marketing efforts; our efforts or failure or perceived failure to comply with regulatory\nrequirements; or other factors we deem detrimental to our community Events beyond our control, such as macroeconomic conditions\nand pandemics or other global health concerns, also may materially adversely impact our ability to attract and retain users\n\nIn addition, if our platform is not easy to integrate into our customer\u2019s various corporate systems, users have an unsatisfactory\nexperience using our platform, the content provided by our platform is not displayed effectively, we are not effective in engaging users\nor we fail to provide a user experience in a manner that meets rapidly changing demand, we could fail to retain existing users, which\ncould materially adversely affect our business, results of operations and financial condition\n\nA limited number of contracted customers represent a substantial portion of our revenue and ARR If we fail to retain these\ncontracted customers, our revenue and ARR could decline significantly\n\nWe derive a substantial portion of our revenue and ARR from sales to our top five contracted customers, all of which are value\nadded resellers (\u201cVARs\u201d) VARs develop solutions which integrate iLearningEngines and sell their solutions directly to their customers\nAs a result, our revenue and ARR could fluctuate materially and could be materially and disproportionately impacted by the purchasing\ndecisions of these customers or any other significant future customer Sales to our top four contracted customers accounted for\napproximately 59% of our revenue for the year ended December 31, 2023 Any of our significant contracted customers may decide to\npurchase less than they have in the past, may alter their purchasing patterns at any time with limited notice, or may decide not to\ncontinue to license our platform and products at all, any of which could cause our revenue and ARR to decline and adversely affect our\nfinancial condition and results of operations If we do not further diversify our customer base, we will continue to be susceptible to\nrisks associated with customer concentration\n\n10\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 29 of 408\n\nThird parties with whom we do business may be unable to honor their obligations to us or their actions may put us at risk\n\nWe rely on third parties, including our channel partners, for various aspects of our business, including deep technology\ncollaborations, co marketing, advertising partners and technology development agreements Their actions may put our business,\nreputation and brand at risk In many cases, third parties may be given access to sensitive and proprietary information or personal\ninformation in order to provide services and support to our teams or customers, and they may misappropriate and engage in\nunauthorized use of our information, technology or customers\u2019 data In addition, the failure of these third parties to provide adequate\nservices and technologies, or the failure of the third parties to adequately maintain or update their services and technologies, could\nresult in a disruption to our business operations Further, disruptions in the financial markets, economic downturns, poor business\ndecisions, or reputational harm may adversely affect our partners and may increase their propensity to engage in fraud or otherwise\nillegal activity which could harm our business reputation, and they may not be able to continue honoring their obligations to us, or we\nmay cease our arrangements with them Alternative arrangements and services may not be available to us on commercially reasonable\nterms or at all and we may experience business interruptions upon a transition to an alternative partner or vendor If we lose one or\nmore business relationships, or experience a degradation of services, our business could be harmed and our financial results could be\nadversely affected\n\nWe rely on a channel partner for key business development, administrative, operational and other functions that are important to\nour business The loss of this service provider could materially and adversely affect our business, results of operations and financial\ncondition\n\nOne of our channel partners is involved in the performance of various functions relating to our business, such as sales, customer\nsupport, technology development and market development services, including but not limited to lead generation, business development\nand product demonstrations If such channel partner were to cease to exist, to become a debtor in a bankruptcy or an insolvency\nproceeding or to seek relief under any debtor relief laws or to terminate its relationship with us, there could be delays in our ability to\ngenerate sales and perform other administrative and operational functions for which we are currently relying on such channel partner to\nprovide, and we may not be able to promptly replace such channel partner with other different third party service providers that have\nthe ability to promptly provide the same services in the same manner and on the same economic terms As a result of any such delay or\ninability to replace such channel partner, our ability to generate sales, support our technology and perform other business functions\ncould suffer and our business, cash flows and future prospects may be negatively impacted\n\nIn 2019, iLearningEngines entered a Master Agreement (\u201cMA\u201d) with a channel partner, which allows for quarterly netting of\namounts collected by a channel partner from end users, against the cost of a channel partner\u2019s services rendered and billable to\niLearningEngines In 2020, entered into a subordination agreement with a channel partner, whereby the then net payable to a channel\npartner became subordinated to iLearningEngines\u2019 term loan debt As of December 31, 2023, the subordinated payable to a channel\npartner was $49 2 million\n\nSubsequent to the execution of the subordination agreement, iLearningEngines and a channel partner resumed quarterly netting of\ncollections and the cost of services provided As of December 31, 2023, iLearningEngines had a net receivable from a channel partner\nof $13 6 million\n\nIf, in the future, we decide to perform business development, administrative, operational and other functions internally that we\ncurrently rely on third parties to perform, our business could be harmed by our limited experience and related capabilities\n\nIn the future, for financial or operational purposes, we may elect to perform business development, administrative, operational and\nother functions internally Our limited experience with such functions could lead to difficulties in our ability to generate sales, support\nour technology and perform other business functions in a timely and cost effective manner The occurrence of any of these events could\nharm our business\n\nAdditionally, there are risks involved with establishing our own business development, administrative, operational and other\ncapabilities For example, recruiting and training a sales force is expensive and time consuming and could delay our commercial\nactivities Factors that may inhibit our efforts to develop and perform these functions on our own include, among other things, the\ninability to recruit and retain adequate numbers of effective personnel and unforeseen costs and expenses\n\n11\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 30 of 408\n\nThe markets in which we participate are competitive and, if we do not compete effectively, our business, financial condition, and\nresults of operations could be harmed\n\nOur platform and products provide automation solutions that our customers can integrate throughout their businesses Accordingly,\nwe compete with companies that provide learning and human capital management solutions and other related software as a service\n(\u201cSaaS\u201d) We also compete with companies that provide and support the traditional systems relying on manual tasks and processes that\nour platform and products are designed to replace, including companies that facilitate outsourcing of such tasks and processes to lower\ncost workers Our customers may also internally develop their own automated solutions to address tasks particular to their business\n\nThe automation market is a fast growing enterprise software market and is increasingly competitive With the introduction of new\ntechnologies and market entrants, we expect that the competitive environment will remain intense going forward Additionally, open\nsource alternatives for automation that are offered at no cost may impact our ability to sell our products to certain customers who may\nprefer to rely on these tools Our competitors may be able to respond more quickly to new or expanding technology, such as newly\nemerging generative AI technologies, and devote more resources to product development that we can The speed of technological\ndevelopment may prove disruptive to some of our markets if we are unable to maintain the pace of innovation Some of our actual and\npotential competitors have been acquired by other larger enterprises, have made or may make acquisitions, may enter into partnerships\nor other strategic relationships that may provide more comprehensive products than they individually had offered, or may achieve\ngreater economies of scale than us In addition, new entrants not currently considered to be competitors may enter the market through\nacquisitions, partnerships, or strategic relationships As we look to market and sell our products and platform capabilities to potential\ncustomers with existing internal solutions, we must convince their internal stakeholders that our products and platform capabilities are\nsuperior to their current solutions If we fail to do so, our business, results of operations, and financial condition may be harmed\n\nIf we fail to continue to differentiate our platform and products from those offered by our competitors, then our business, results of\noperations, and financial condition may be harmed\n\nWe operate at the intersection of global AI, hyperautomation and global e Learning Our competitors vary in size and in the\nbreadth and scope of the products offered Many of our competitors and potential competitors have greater name recognition, longer\noperating histories, more established customer relationships and installed customer bases, larger marketing budgets, and greater\nresources than we do Further, other potential competitors not currently offering competitive solutions may expand their product or\nservice offerings to compete with our products and platform capabilities If any of these potential competitors were to provide a\nlearning automation and information intelligence offerings within their current service offerings as a single, integrated solution, our\ncustomers and potential customers may choose to adopt the integrated solution due to administrative ease or other factors that are\noutside our control Our current and potential competitors may also establish cooperative relationships among themselves or with third\nparties that may further enhance their resources and product offerings in our addressable market Our competitors may be able to\nrespond more quickly and effectively than we can to new or changing opportunities, technologies, standards, and customer\nrequirements An existing competitor or new entrant could introduce new technology that reduces demand for our products and\nplatform capabilities In addition to product and technology competition, we face pricing competition Some of our competitors offer\ntheir on premises or SaaS solutions at a lower price, which has resulted in, and may continue to result in, pricing pressures\n\nFor all of these reasons, we may not be able to compete successfully against our current or future competitors, and this competition\n\ncould result in the failure of our platform to continue to achieve or maintain market acceptance, which would harm our business, results\nof operations, and financial condition\n\n12\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 31 of 408\n\nThe success of our platform relies on the ability of our AI enabled ecosystem to create broad solutions across corporate functions,\nand a failure to do so would adversely affect our business, financial condition, and results of operations\n\nWe use proprietary AI and machine learning technology in an effort to maximize customer satisfaction and retention, as well as to\noptimize return on marketing expenses Built to improve with data science, we have carefully designed algorithms to leverage growing\nscale by helping our users obtain efficiency driven and targeted learning experiences as our user network expands Successfully using\nour algorithms to customize learning experiences and optimize learning outcomes for our users is crucial to our continued success, as\nbetter learning outcomes can lead to more users, more data and, in turn, further improvements to our algorithms Any failure to\nsuccessfully operate or improve our algorithms or to develop other innovative proprietary technology could materially adversely affect\nour ability to maintain and expand our business Diminished learning outcomes could lead to fewer users, which could in turn lead to\nless or lower quality data, which could affect our ability to improve our algorithms and maintain, market and scale our platform\neffectively Additionally, there is increased governmental interest in regulating technology companies in areas including algorithm\nbased discrimination and AI Any failure, or perceived failure, or negative consequences associated with our efforts to comply with any\npresent or future laws or regulations in this area could subject us to claims, actions and other legal and regulatory proceedings, fines or\nother penalties and other enforcement actions and result in damage to our reputation and adversely affect our business, financial\ncondition and operating results\n\nUnfavorable conditions in our industry or the global economy, or reductions in customers\u2019 spending on learning automation, could\nlimit our ability to grow our business and negatively affect our results of operations\n\nOur results of operations may vary based on the impact of changes in our industry or the macroeconomic environment on us or our\ncustomers and potential customers Negative macroeconomic conditions both in the U S and abroad may include conditions resulting\nfrom changes in gross domestic product growth; rising interest rates; labor shortages; supply chain disruptions; monetary supply shifts;\ninflationary pressures, including those caused by the recent strengthening of the U S dollar against certain foreign currencies in the\nmarkets in which we operate (particularly against the Indian Rupee); potential debt downgrade of the U S government\u2019s credit rating as\naresult of recent U S debt ceiling and budget deficit concerns; financial and credit market fluctuations, recent and potential future\ndisruptions in access to bank deposits or lending commitments due to bank failures; international trade relations and/or the imposition\nof trade tariffs; political turmoil; natural catastrophes; regional or global outbreaks of contagious diseases such as COVID 19; and\nwarfare and terrorist attacks on the U S , Europe, Asia, India, Africa or elsewhere, including military actions affecting Israel, the Gaza\nStrip, Russia, Ukraine or elsewhere These negative macroeconomic conditions have caused and may continue to cause a decrease in\nbusiness investments, including spending on learning solutions, and disruption of the timing and cadence of key industry and marketing\nevents, and could materially and adversely affect the growth of our business and our results of operations The global economy,\nincluding credit and financial markets, has experienced extreme volatility and disruptions As a result of these factors, our revenues\nmay be affected by both decreased customer acquisition and lower than anticipated revenue growth from existing customers Any such\nvolatility and disruptions may have material and adverse consequences on us, the third parties on whom we rely, or our customers\nIncreased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs Any significant\nincreases in inflation and related increase in interest rates could have a material and adverse effect on our business, financial condition,\nor results of operations\n\nFor example, these types of unfavorable conditions have in the past disrupted and could in the future disrupt the timing and\nattendance of key industry events, which we rely upon in part to generate sales of our products If those events are disrupted in the\nfuture, our marketing investments, sales pipeline, and ability to generate new customers and sales of our products could be negatively\nand adversely affected In addition, the increased pace of consolidation in certain industries may result in reduced overall spending on\nour products Further, to the extent there is a general economic downturn and our platform are perceived by customers and potential\ncustomers as too costly or too difficult to deploy, our revenue may be disproportionately affected by delays or reductions in general\nlearning spending Also, competitors, many of whom are larger and more established than we are, may respond to market conditions by\nlowering prices and attempting to lure away our customers In addition, the increased pace of consolidation in certain industries may\nresult in reduced overall spending on our maintenance and support offerings and related services\n\n13\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 32 of 408\n\nGeopolitical risks, including those arising from trade tension and/or the imposition of trade tariffs, terrorist activity, or acts of civil\nor international hostility, are increasing Similarly, the conflicts between Russia and Ukraine and Israel and Hamas, respectively, have\ncreated volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of\nthe global supply chain and energy markets Further, other events outside of our control, including natural disasters, climate change\nrelated events, pandemics (such as the COVID 19 pandemic), or health crises may arise from time to time and be accompanied by\ngovernmental actions that may increase international tension Any such events and responses, including regulatory developments, may\ncause significant volatility and declines in the global markets, disproportionate impacts to certain industries or sectors, disruptions to\ncommerce (including to economic activity, travel, and supply chains), loss of life, and property damage, and may materially and\nadversely affect the global economy or capital markets, as well as our business and results of operations\n\nWe cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any\nparticular industry If the economic conditions of the general economy or markets in which we operate worsen from present levels, our\nbusiness, results of operations, and financial condition could be adversely affected\n\nIf we fail to retain and motivate members of our management team or other key employees or to integrate new team members, fail to\nexecute management transitions, or fail to attract additional qualified personnel to support our operations, our business and future\ngrowth prospects could be harmed\n\nOur success and future growth depend largely upon the continued services of our executive officers, particularly, as well as our\nother key employees in the areas of research and development and sales and marketing From time to time, there have been and may\ncontinue to be changes in our executive management team or other key employees resulting from the hiring or the departure of these\npersonnel Our executive officers and other key employees are employed on an at will basis, which means that these personnel could\nterminate their employment with us at any time The loss of one or more of our executive officers, or the failure by our executive team\nto effectively work with our employees and lead the Company, could harm our business Any of these changes may not achieve our\ndesired results As we experience personnel turnover, we may experience some loss of internal knowledge from time to time We also\nare dependent on the continued service of our existing software engineers because of the complexity of our products and platform\ncapabilities\n\nIn addition, competition for these personnel is intense, especially for engineers experienced in designing and developing AI, and\nmachine learning applications, and experienced sales professionals From time to time, we have experienced, and we expect to continue\nto experience, difficulty in hiring and retaining employees with appropriate qualifications Potential candidates may not perceive our\ncompensation package, including our equity awards, as favorably as employees hired in the past given the recent volatility in the price\nof our common stock and in the public markets In addition, our recruiting personnel, methodology, and approach has been and may in\nthe future need to be altered to address a changing candidate pool and profile We may not be able to identify or implement such\nchanges in a timely manner\n\nMany of the companies with which we compete for experienced personnel have greater resources than we have If we hire\nemployees from competitors or other companies, their former employers may in the future attempt to assert that these employees or we\nhave breached their legal obligations, resulting in a diversion of our time and resources In addition, prospective and existing\nemployees often consider the value of the equity awards they receive in connection with their employment As some of our employees\u2019\nperception of our equity awards may decline from time to time due to the lower price of our common stock, if the common stock\ncontinues to experience significant volatility, or volatility increases such that prospective employees believe there is limited upside to\nthe value of our equity awards, it may adversely affect our ability to recruit and retain key employees If we fail to attract new\npersonnel or fail to retain and motivate our current personnel, our business and future growth prospects could be harmed\n\n14\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 33 of 408\n\nMarket adoption of automated learning solutions is relatively new and may not grow as we expect, which may harm our business\nand results of operations\n\nOur future success will depend in part on the growth, if any, in the demand for online and AI learning solutions While the COVID\n19 pandemic caused an acceleration of the market for online and AI learning solutions, it is still less mature than the market for in\nperson learning and training, which many businesses currently utilize, and these businesses may be slow or unwilling to migrate from\nthese legacy approaches As such, it is difficult to predict customer demand/adoption and renewal for our platform, the rate at which\nexisting customer expand their engagement with our platform, the size and growth rate of the market for our platform, the entry of\ncompetitive offerings into the market, or the success of existing competitive offerings Furthermore, even if enterprises want to adopt\nonline and AI learning solutions, it may take them a substantial amount of time and resources to fully transition to this type of learning\nsolution or they could be delayed due to budget constraints, weakening economic conditions, or other factors Even if market demand\nfor online and AI learning solutions generally increases, we cannot assure you that adoption of our platform will also increase If the\nmarket for online and AI learning solutions does not grow as we expect or our platform does not achieve widespread adoption, it could\nresult in reduced customer spending, learner and partner attrition, and decreased revenue, any of which would adversely affect our\nbusiness and results of operations\n\nWe may need to change the contract terms, including our pricing model, for our platform which in turn would impact our operating\nresults\n\nWe have limited experience with respect to determining the optimal prices and contract length for our platform, and as a result, we\nhave in the past, and expect that we may in the future, need to change our pricing model or target contract length from time to time,\nwhich could impact our financial results As the market for our learning automation and information intelligence offerings grows (if\never), aS new competitors introduce competitive applications or services, or as we enter into new international markets, we may be\nunable to attract new customers at the same price or based on the same pricing models we have historically used, or for contract lengths\nconsistent with our historical averages Pricing and contract length decisions may also impact the mix of adoption among our offerings\nand negatively impact our overall revenue Moreover, competition may require us to make substantial price concessions or accept\nshorter contract durations Our revenue and financial position may be adversely affected by any of the foregoing, and we may have\nincreased difficulty achieving profitability\n\nWe rely on our channel partners to generate a substantial amount of our revenue, and if we fail to expand and manage our\ndistribution channels, our revenue could decline and our growth prospects could suffer\n\nOur success significantly depends upon maintaining and growing our relationships with a variety of channel partners, and we\nanticipate that we will continue to depend on these partners in order to grow our business Our channel partners enable us to extend our\nlocal and global reach, in particular with smaller customers and in geographies and industry verticals where we have less direct sales\npresence For fiscal years 2023, 2022 and 2021, we derived a substantial amount of our revenue from sales through channel partners,\nand we expect to continue to derive a substantial amount of our revenue from channel partners in future periods\n\nOur agreements with our channel partners are generally non exclusive and do not prohibit them from working with our\ncompetitors or offering competing products, and many of our channel partners may have more established relationships with our\ncompetitors If our channel partners choose to place greater emphasis on products of their own or those offered by our competitors, do\nnot effectively market and sell our products, or fail to meet the needs of our customers, then our ability to grow our business and sell\nour products may be adversely affected In addition, the loss of one or more of our larger channel partners, who may cease marketing\nour products with limited or no notice, and our possible inability to replace them, could adversely affect our sales Moreover, our ability\nto expand our distribution channels depends in part on our ability to educate our channel partners about our platform and products,\nwhich can be complex Our failure to recruit additional channel partners, or any reduction or delay in their sales of our products or\nconflicts between channel sales and our direct sales and marketing activities may harm our results of operations Even if we are\nsuccessful, these relationships may not result in greater customer usage of our products or increased revenue We also bear the risk that\nour channel partners will fail to comply with U S or international anti corruption or anti competition laws, in which case we might be\nfined or otherwise penalized as a result of the agency relationship with such partners\n\nIn addition, the financial health of our channel partners and our continuing relationships with them are important to our success\nSome of these channel partners may be unable to withstand adverse changes in economic conditions, which could result in insolvency\nand/or the inability of such distributors to obtain credit to finance purchases of our products and services, which could negatively\nimpact our future financial performance In addition, weakness in the end user market could negatively affect the cash flows of our\nchannel partners who could, in turn, delay paying their obligations to us, which would increase our credit risk exposure Our business\n\f8:24-cy-02900-DKC Document90-2 Filed 09/18/25 ae 9ge 34 of 408\n\nC\ncould be harmed if the financial condition of some of these c el partners substantially weakene e were unable to timely\nsecure replacement channel partners\n\n15\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 35 of 408\n\nIf we and our channel partners or VARs fail to provide sufficient high quality consulting, training, support, and maintenance\nresources to enable our customers to realize significant business value from our platform, we may see a decrease in customer\nadoption of our platform\n\nOur customers sometimes request consulting and training to assist them in integrating our platform into their business, and rely on\nour customer support personnel to resolve issues and realize the full benefits that our platform provides As a result, an increase in the\nnumber of customers is likely to increase demand for consulting, training, support, and maintenance related to our products Given that\nour customer base and products continue to grow, we will need to provide our customers with more consulting, training, support, and\nmaintenance to enable them to realize significant business value from our platform We rely on our ecosystem of partners that build,\ntrain, and certify skills on our technology, as well as deploy our technology on behalf of their customers We have been increasing our\nchannel partner and customer enablement training initiatives designed to create an ecosystem of people that are skilled in the use and\nintegration of our platform in business operations However, if we and our channel partners or VARs are unable to provide sufficient\nhigh quality consulting, training, integration, and maintenance resources, our customers may not effectively integrate our learning\nautomation and information intelligence offerings into their business or realize sufficient business value from our products to justify\nfollow on sales, which could impact our future financial performance Additionally, tf our channel partners or VARs fail to perform or\nif any of our channel partners suffer reputational or brand harm, our customers may choose to not rely on our channel partners or VARs\nfor consulting, training, integration, and maintenance resources Finally, the investments required to meet the increased demand for our\nconsulting services could strain our ability to deliver our consulting engagements at desired levels of profitability, thereby impacting\nour overall profitability and financial results\n\nIf we are not able to introduce new features or services successfully and to make enhancements to our platform or products, our\nbusiness and results of operations could be adversely affected\n\nOur ability to attract new customers and increase revenue from existing customers depends in part on our ability to enhance and\nimprove our platform and to introduce new features and services To grow our business and remain competitive, we must continue to\nenhance our platform with features that reflect the constantly evolving nature of automation and AI technology and our customers\u2019\nevolving needs The success of new products, enhancements, and developments depends on several factors including, but not limited\nto our anticipation of market changes and demands for product features, including successful product design and timely product\nintroduction, sufficient customer demand, cost effectiveness in our product development efforts, and the proliferation of new\ntechnologies that are able to deliver competitive products and services at lower prices, more efficiently, more conveniently, or more\nsecurely In addition, because our platform is designed to operate with a variety of systems, applications, data, and devices, we will\nneed to continuously modify and enhance our platform to keep pace with changes in such systems We may not be successful in\ndeveloping these modifications and enhancements Furthermore, the addition of features and solutions to our platform will increase our\nresearch and development expenses Any new features that we develop may not be introduced in a timely or cost effective manner or\nmay not achieve the market acceptance necessary to generate sufficient revenue to justify the related expenses It is difficult to predict\ncustomer adoption of new features Such uncertainty limits our ability to forecast our future results of operations and subjects us to a\nnumber of challenges, including our ability to plan for and model future growth If we cannot address such uncertainties and\nsuccessfully develop new features, enhance our software, or otherwise overcome technological challenges and competing technologies,\nour business and results of operations could be adversely affected\n\nIf we cannot introduce new services or enhance our existing services to keep pace with changes in our customers\u2019 deployment\n\nstrategies, we may not be able to attract new customers, retain existing customers, and expand their use of our software or secure\nrenewal contracts, which are important for the future of our business\n\n16\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 36 of 408\n\nWe target enterprise customers, and sales to these customers involve risks that may not be present or that are present to a lesser\nextent with sales to smaller entities\n\nOur enterprise sales force focuses on sales to educational institutions and to large enterprise, organizational, and government\nagency customers As of December 31, 2023, we had four contracted customers with ARR of $42 million or more, which accounted for\napproximately 19 3%, 16 0%, 11 9% and 11 7% of our revenue, respectively, for the period then ended As of December 31, 2022, we\nhad five contracted customers with ARR of $31 million or more, which accounted for approximately 17 4%, 17 0%, 14 9%, 14 3% and\n10 3% of our revenue, respectively, for the period then ended See the section titled \u201ciLearningEngines Management s Discussion and\nAnalysis of Financial Condition and Results of Operations Key Performance Metrics\u201d for a description of ARR Sales to large\ncustomers involve risks that may not be present or that are present to a lesser extent with sales to smaller entities, such as longer sales\ncycles, more complex customer requirements (and higher contractual risk as a result), substantial upfront sales costs, less favorable\nterms, and less predictability in completing some of our sales For example, enterprise customers may require considerable time to\nevaluate and test our solution and those of our competitors prior to making a purchase decision and placing an order A number of\nfactors influence the length and variability of our sales cycle, including the need to educate potential customers about the uses and\nbenefits of our learning automation and information intelligence offerings and products, the discretionary nature of purchasing and\nbudget cycles, and the competitive nature of evaluation and purchasing approval processes As a result, the length of our sales cycle,\nfrom identification of the opportunity to deal closure, may vary significantly from customer to customer, with sales to large enterprises\ntypically taking longer to complete and requiring greater organizational resources Moreover, large enterprise customers often begin to\ndeploy our products on a limited basis, but nevertheless demand configuration, integration services, and pricing negotiations, which\nincrease our upfront investment in the sales effort with no guarantee that these customers will deploy our products widely enough\nacross their organization to justify our substantial upfront investment\n\nTf our marketing strategies fail to lead to customers purchasing paid licenses, our ability to grow our revenue will be adversely\naffected\n\nOur principal marketing programs include webinars, roadshows, exhibitions and events that we sponsor, cooperative marketing\nefforts with channel partners, and use of our website To encourage awareness, use, familiarity, and adoption of our platform and\nproducts, we offer sales proofs of concept to prospective customers To the extent that users do not become or we are unable to\nsuccessfully attract paying customers, we will not realize the intended benefits of these marketing strategies and our ability to grow our\nrevenue will be adversely affected\n\nReal or perceived errors, failures, or bugs in our platform and products could adversely affect our business, results of operations,\nfinancial condition, and growth prospects\n\nOur platform and products are complex Undetected errors, failures, or bugs have occurred in our platform and products in the past\nand may occur in the future Our platform and products are used throughout our customers\u2019 business environments and with different\noperating systems, system management software, applications, devices, databases, servers, storage, middleware, custom and third party\napplications and equipment, and networking configurations, which may cause errors or failures in the business environment into which\nour platform and products are deployed This diversity of applications increases the likelihood of errors or failures in those business\nenvironments Despite testing by us, real or perceived errors, failures, or bugs may not be found until our customers use our platform\nand products In addition, use of our platform in complicated, large scale computing environments may expose errors, failures,\nvulnerabilities, or bugs in integrations Any such errors, failures, vulnerabilities, or bugs may not be found until after new features,\nintegrations, or capabilities have been released to organizations on our platform Such failures or bugs can cause reputational damage,\nand in some cases can affect our revenue due to the impact of service level commitments that we offer to our customers, as described\nbelow\n\n17\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 37 of 408\n\nOur platform and products also empower our customers to develop their own use cases for our learning automation and\ninformation intelligence offerings and products We cannot guarantee that these user developed platform and products will be effective\nor that they do not include errors, failures, or bugs that then may be attributed, correctly or not, to our underlying technologies For\ninstance, our customers may use our products in a manner in which they were not intended and that could cause our platform or\nproducts to be implicated in any resulting errors or failures Real or perceived errors, failures, or bugs in our platform and products\ncould result in negative publicity, loss of or delay in market acceptance of our platform and products, regulatory investigations and\nenforcement actions, harm to our brand, weakening of our competitive position, claims by customers for losses sustained by them, or\nfailure to meet the stated service level commitments in our customer agreements In such an event, we may be required, or may choose,\nfor customer relations or other reasons, to expend significant additional resources in order to help correct the problem Any errors,\nfailures, or bugs in our platform or products could also impair our ability to attract new customers, retain existing customers, or expand\ntheir use of our software, which would adversely affect our business, results of operations, and financial condition\n\nIncorrect or improper implementation or use of our platform and products could result in customer dissatisfaction and harm our\nbusiness, results of operations, financial condition, and growth prospects\n\nOur learning automation and information intelligence offerings and products and related services are designed to be deployed in a\nwide variety of technology environments, including in large scale, complex technology environments across a wide range of use cases\nWe believe our future success will depend, at least in part, on our ability and the ability of our channel partners to support such\ndeployments Implementations of our platform may be technically complicated and it may not be easy to maximize the value of our\nplatform without proper implementation and training If our customers are unable to implement our platform successfully, or ina\ntimely manner, or if our customers perceive that the implementation of our platform is too complex or time consuming, customer\nperceptions of us and our platform may be impaired, our reputation and brand may suffer, and customers may choose not to renew their\nlicenses or increase their purchases of our related services\n\nWe regularly train our customers and channel partners in the proper use of and the variety of benefits that can be derived from our\nlearning automation and information intelligence offerings and products to maximize their potential We and our channel partners often\nwork with our customers to achieve successful implementations, particularly for large, complex deployments Our failure or the failure\nof our channel partners to train customers on how to efficiently and effectively deploy and use our platform and products, or our failure\nor the failure of our channel partners to provide effective support or professional services to our customers, whether actual or\nperceived, may result in negative publicity or legal actions against us Also, as we continue to expand our customer base, any actual or\nperceived failure by us or our channel partners to properly provide these services will likely result in lost opportunities for follow on\nsales of our related services\n\nWe expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of\nsecurities analysts or investors with respect to our results of operations, our stock price could decline\n\nOur results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of\nwhich are outside of our control As a result, our past results may not be indicative of our future performance In addition to the other\nrisks described herein, factors that may affect our results of operations include the following\n\ne fluctuations in demand for or pricing of our platform and products;\n\ne fluctuations in usage of our platform and products;\n\ne fluctuations in our mix of revenue from licenses and service arrangements;\n\ne our ability to attract new customers;\n\ne our ability to retain our existing customers;\n\n@ customer expansion rates and the pricing and quantity of licenses renewed;\n\n18\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 38 of 408\n\ne fluctuations in mix of revenue, cost of revenue, and gross margin from sales directly to end customers and/or through channel\npartners including our strategic alliances;\n\ne timing and amount of our investments to expand the capacity of our third party cloud infrastructure providers;\n\ne seasonality;\n\ne the investment in new products and features relative to investments in our existing infrastructure and products;\n\ne = the timing of customer purchases;\n\ne fluctuations or delays in purchasing decisions in anticipation of new products or enhancements by us or our competitors;\ne changes in customers\u2019 budgets and in the timing of their budget cycles and purchasing decisions;\n\ne our ability to control costs, including our operating expenses;\n\ne the amount and timing of payment for operating expenses, particularly sales and marketing and research and development\nexpenses, including commissions;\n\ne the amount and timing of non cash expenses, including stock based compensation, goodwill impairments, and other non cash\ncharges;\n\ne the amount and timing of costs associated with recruiting, training, and integrating new employees and retaining and\nmotivating existing employees;\n\ne the effects of acquisitions and their integration;\n\n\u00ae general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting\nindustries in which our customers participate;\n\ne the impact of new accounting pronouncements;\n\ne changes in regulatory or legal environments that may cause us to incur, among other elements, expenses associated with\ncompliance;\n\ne changes in the competitive dynamics of our market, including consolidation among competitors or customers; and\n\ne significant security breaches of, technical difficulties with, or interruptions to the delivery and use of our products and\nplatform capabilities\n\nAny of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary\nsignificantly If our quarterly or annual results of operations fall below the expectations of investors or securities analysts who follow\nour stock, the price of our common stock could decline substantially, and we could face lawsuits that are costly and may divert\nmanagement\u2019s attention, including securities class action suits\n\n19\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 39 of 408\n\nIf the estimates and assumptions we have used to calculate the size of our addressable market opportunity are inaccurate, our\nfuture growth rate may be limited\n\nWe have estimated the size of our addressable market opportunity based on data published by third parties and on internally\ngenerated data and assumptions While we believe our market size information is generally reliable, such information is inherently\nimprecise, and relies on our and third parties\u2019 projections, assumptions, and estimates within our target market, which are necessarily\nsubject to a high degree of uncertainty and risk due to a variety of factors, including those described in this prospectus If such third\nparty or internally generated data prove to be inaccurate or we make errors in our projections, assumptions, or estimates based on that\ndata, including how current customer data and trends may apply to potential future customers and the number and type of potential\ncustomers, our addressable target market opportunity and/or our future growth rate may be less than we currently estimate In addition,\nthese inaccuracies or errors may cause us to misallocate capital and other business resources, which could divert resources from more\nvaluable alternative projects and harm our business\n\nThe variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that\nany particular number or percentage of addressable users or companies covered by our addressable target market opportunity estimates\nwill purchase our products at all or generate any particular level of revenue for us Any expansion in our market depends on a number\nof factors, including the cost, performance, and perceived value associated with our platform and products and those of our\ncompetitors Even if our target market meets our size estimates, our business could fail to grow at similar rates, if at all Our growth is\nsubject to many factors, including our success in expanding our international operations, continuing to expand the use of our products\nby our customers and otherwise implementing our business strategy, which are subject to many risks and uncertainties Accordingly, the\ninformation regarding the size of our addressable market opportunity included in this prospectus should not be taken as indicative of\nour future growth\n\nWe may require additional capital to support the growth of our business, and this capital may not be available on acceptable terms,\nif at all\n\nWe have funded our operations since inception primarily through debt financings, customer payments and net proceeds from sales\nof equity securities We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations,\nour planned investments, or the growth of our business Following the Closing, we plan to focus on growing our business to take\nadvantage of our market opportunities While growth remains important, we are also focused on the path to profitability Our planned\ninvestments to drive growth may require us to engage in equity or debt financings to secure additional funds Additional financing may\nnot be available on terms favorable to us, if at all The effects of the disruptions to and volatility in the credit and financial markets in\nthe U S and worldwide from geopolitical and macroeconomic events, including the COVID 19 pandemic, the ongoing conflict\nbetween Hamas and Israel, the ongoing conflict between Russia and Ukraine conflict and related sanctions, bank failures and\nheightened liquidity concerns at certain banks and financial institutions, could limit our access to financing and increase our costs of\nborrowing\n\nIf adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could\nharm our business, results of operations, and financial condition If we incur debt, the debt holders would have rights senior to holders\nof common stock to make claims on our assets, and the terms of any future debt could restrict our operations, including our ability to\npay dividends on our common stock Furthermore, if we issue additional equity securities, stockholders will experience dilution, and\nthe new equity securities could have rights senior to those of our common stock Because our decision to issue securities in the future\nwill depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or\nnature of any future issuances of debt or equity securities As a result, our stockholders bear the risk of future issuances of debt or\nequity securities reducing the value of our common stock and diluting their interests\n\n20\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 40 of 408\n\nIf we fail to maintain and enhance our brand, our ability to expand our customer base will be impaired and our business, financial\ncondition, and results of operations may suffer\n\nWe believe that maintenance and enhancement of the iLearningEngines brand is important to support the marketing and sale of our\nexisting and future products to new customers and expand sales of our platform and products to existing customers We also believe\nthat the importance of brand recognition will increase as competition in our market increases Successful maintenance and\nenhancement of our brand will depend largely on the effectiveness of our marketing efforts, our ability to provide reliable products that\ncontinue to meet the needs of our customers at competitive prices, our ability to maintain our customers\u2019 trust, our ability to show that\nour products improve efficiency for our customers while improving engagement and satisfaction of their employees, our ability to\ncontinue to develop new functionality and use cases, our ability to successfully differentiate our products and platform capabilities from\ncompetitive products, and our ability to adequately obtain and protect our trademarks and trade names Our brand promotion activities\nmay not generate customer awareness or yield increased revenue, and even if they do, any increased revenue may not offset the\nexpenses we incur in building our brand\n\nOur ability to maintain and enhance our brand may also be subject to factors that are outside of our control For instance, media\nstories regarding the potential effects on employment of automation, AI and technologies that replace traditional, human driven\nsystems are commonplace Unfavorable publicity regarding the impact automation and AI may have on unemployment could harm our\nbrand and reputation, even if unrelated to our products Such negative publicity could also reduce the potential demand and size of the\nmarket for our products and decrease our revenue\n\nWe may not be able to protect all of our registered or unregistered trademarks or trade names relevant to our brand and our rights\nmay be challenged, infringed, circumvented, declared generic, lapsed, or determined to be infringing on or dilutive of other marks If\nwe are unable to protect our rights in these trademarks and trade names, third parties may file for registration of trademarks similar or\nidentical to our trademarks, thereby impeding our ability to build brand identity and possibly leading to market confusion If we fail to\nsuccessfully promote and maintain our brand, our business, financial condition, and results of operations may suffer\n\nIf we are unable to ensure that our platform integrates with a variety of software applications that are developed by others,\nincluding our integration partners, we may become less competitive and our results of operations may be harmed\n\nWe need to continuously modify and enhance our platform to adapt to changes in hardware, software, and browser technologies In\nparticular, we have developed our platform to be able to easily integrate with third party applications, including the applications of\nsoftware providers that compete with us as well as our partners, through the interaction of Application Programming Interface\n(\u201cAPIs\u201d) In general, we rely on the providers of such software systems to allow us access to their APIs to enable these integrations We\nare typically subject to standard terms and conditions of such providers, which govern the distribution, operation, and fees of such\nsoftware systems, and which are subject to change by such providers from time to time Our business will be harmed if any provider of\nsuch software systems\n\ne modifies its terms of service or other policies, including fees charged to, or other restrictions on us, or other application\ndevelopers;\n\ne changes how information is accessed by us or our customers; or\ne develops or otherwise favors its own competitive offerings over our platform\n\nThird party services and products are constantly evolving, and we may not be able to modify our platform to assure its\ncompatibility with that of other third parties In addition, some of our competitors may be able to disrupt the operations or compatibility\nof our platform with their products or services, or exert strong business influence on our ability to, and terms on which we, operate our\nplatform Should any of our competitors modify their products or standards in a manner that degrades the functionality of our platform\nor gives preferential treatment to competitive products or services, whether to enhance their competitive position or for any other\nreason, the interoperability of our platform with these products could decrease and our business, results of operations, and financial\ncondition would be harmed If we are not permitted or able to integrate with these and other third party applications in the future, our\nbusiness, results of operations, and financial condition would be harmed\n\n21\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 41 of 408\n\nIn addition, our platform interoperates with servers and software applications predominantly through the use of protocols, many of\nwhich are created and maintained by third parties We, therefore, depend on the interoperability of our platform with such third party\nservices, as well as cloud enabled hardware, software, networking, browsers, database technologies, external open sources and\nprotocols that we do not control The loss of interoperability, whether due to actions of third parties or otherwise, and any changes in\ntechnologies that degrade the functionality of our platform or give preferential treatment to competitive services could adversely affect\nadoption and usage of our platform Also, we may not be successful in ensuring that our platform operate effectively with a range of\noperating systems, networks, devices, browsers, protocols, and standards If we are unable to effectively anticipate and manage these\nrisks, or if it is difficult for customers to access and use our platform, our business, results of operations, and financial condition may be\nharmed\n\nIf we cannot maintain our corporate culture as we grow, our success and our business and competitive position may be harmed\n\nOur success is supported and progressed by the passionate team we have assembled We believe our culture has been a key\ncontributor to our success to date and that the critical nature of the technology that we develop promotes a sense of greater purpose and\nfulfillment in our employees As we continue to hire more employees to keep pace with our growth, it may become more difficult for us\nto find employees that exhibit these values or to instill them in our new employees Any failure to preserve our culture could negatively\naffect our ability to retain and recruit personnel, which is critical to our growth, and our ability to effectively focus on and pursue our\ncorporate objectives As we grow and develop our corporate infrastructure, we may find it difficult to maintain these important aspects\nof our culture If we fail to maintain our company culture, our business and competitive position may be harmed\n\nOur growth strategy relies in part on making accretive strategic investments Acquisitions, strategic investments, partnerships, or\nalliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute\nstockholder value, and adversely affect our business, financial condition, and results of operations\n\nWe have in the past and may in the future seek to acquire or invest in businesses, joint ventures, products and platform capabilities,\nor technologies that we believe could complement or expand our services and platform capabilities, enhance our technical capabilities,\nor otherwise offer growth opportunities Any such acquisition or investment may divert the attention of management and cause us to\nincur various expenses in identifying, investigating, and pursuing suitable opportunities, whether or not the transactions are completed,\nand may result in unforeseen operating difficulties and expenditures In particular, we may encounter difficulties assimilating or\nintegrating the businesses, technologies, products and platform capabilities, personnel or operations of any acquired companies,\nparticularly if the key personnel of an acquired company choose not to work for us, their software is not easily adapted to work with\nour platform, or we have difficulty retaining the customers of any acquired business due to changes in ownership, management, or\notherwise Additionally, these transactions may also disrupt our business, divert our resources, and require significant management\nattention that would otherwise be available for development of our existing business Any such transactions that we are able to\ncomplete may not result in any synergies or other benefits we had expected to achieve, which could result in impairment charges that\ncould be substantial In addition, we may not be able to find and identify desirable acquisition targets or business opportunities or be\nsuccessful in entering into an agreement with any particular strategic partner These transactions could also result in dilutive issuances\nof equity securities or the incurrence of debt, which could adversely affect our results of operations In addition, if the resulting\nbusiness from such a transaction fails to meet our expectations, our business, financial condition, and results of operations may be\nadversely affected or we may be exposed to unknown risks or liabilities\n\nOur business, financial condition, results of operations, or cash flows could be significantly hindered by the occurrence of a natural\ndisaster, military action, terrorist attack, or other catastrophic event\n\nOur business operations may be susceptible to outages due to fire, floods, unusual weather conditions, power loss,\ntelecommunications failures, military actions, terrorist attacks, and other events beyond our control Natural disasters including\ntornados, hurricanes, floods, and earthquakes may damage the facilities of our customers or those of their suppliers or retailers or their\nother operations, which could lead to reduced revenue for our customers and thus reduced spending on our platform and products In\naddition, a substantial portion of our revenue is derived through channel partners with operations in India and the United Arab\nEmirates To the extent that fire, floods, unusual weather conditions, power loss, telecommunications failures, military actions, terrorist\nattacks, and other events beyond our control materially impacts our ability to operate those offices, it may have a material impact on\nour business operations as a whole\n\nTo the extent that such events disrupt our business or the business of our current or prospective customers, or adversely impact our\nreputation, such events could adversely affect our business, financial condition, results of operations, and cash flows\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 42 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 43 of 408\n\nAny future litigation against us could be costly and time consuming to defend\n\nWe are and may in the future become subject to legal proceedings and claims that arise in the ordinary course of business, such as\nclaims brought by our customers in connection with commercial disputes or employment claims made by our current or former\nemployees Litigation might result in substantial costs and may divert management\u2019s attention and resources, which might seriously\nharm our business, financial condition, and results of operations Insurance might not cover such claims, might not provide sufficient\npayments to cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us A\nclaim brought against us that is uninsured or underinsured could result in unanticipated costs, potentially harming our business,\nfinancial condition, and results of operations\n\nIndemnity provisions in various agreements to which we are party potentially expose us to substantial liability for potential losses,\nincluding those arising from intellectual property or data protection claims\n\nOur agreements with our customers and other third parties may include indemnification provisions under which we agree to\nindemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of infringement, misappropriation, or other\nviolation of intellectual property rights, breaches of data protection obligations, damages caused by us to property or persons, or other\nliabilities relating to or arising from our software, services, or platform, our acts or omissions under such agreements, or other\ncontractual obligations Some of these indemnity agreements provide for uncapped liability and some indemnity provisions survive\ntermination or expiration of the applicable agreement Large indemnity payments could harm our business, financial condition, and\nresults of operations Although we attempt to contractually limit our liability with respect to such indemnity obligations, we are not\nalways successful and may still incur substantial liability related to them, and we may be required to cease use of certain functions of\nour platform or products as a result of any such claims Any dispute with a customer or other third party with respect to such\nobligations could have adverse effects on our relationship with such customer or other third party and other existing or prospective\ncustomers, reduce demand for our products and services, and adversely affect our business, financial condition, and results of\noperations In addition, although we carry general liability and cybersecurity insurance, our insurance may not be adequate to\nindemnify us for all liability that may be imposed or otherwise protect us from liabilities or damages with respect to claims alleging\ncompromises of customer data, and any such coverage may not continue to be available to us on acceptable terms or at all\n\nOur outstanding indebtedness could adversely affect our financial condition and our ability to operate our business and pursue our\nbusiness strategies and we may not be able to generate sufficient cash flows to meet our debt service obligations\n\nAs of April 30, 2024, we had $40 0 million in principal amount of loans outstanding under our Loan and Security Agreement (the\n\u201cRevolving Loan Agreement\u201d), by and among iLearningEngines Holdings, Inc , the Company, the lenders party thereto and East West\nBank, as administrative agent and collateral agent for the lenders See the section of this registration statement titled \u201ciLearningEngines\nManagement\u2019s Discussion and Analysis of Financial Condition and Results of Operations Credit Facilities\u201d for more information In\naddition, subject to certain restrictions under our Revolving Loan Agreement, we may incur additional debt\n\n23\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 44 of 408\n\nOur debt could have important consequences to you, including the following\n\ne it may be difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt, resulting in\npossible defaults on and acceleration of such indebtedness;\n\ne our ability to obtain additional financing for working capital, capital expenditures, debt service requirements or other general\ncorporate purposes may be impaired;\n\ne apportion of cash flow from operations may be dedicated to the payment of principal and interest on our debt, therefore\nreducing our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities,\nacquisitions and other general corporate purposes;\n\n@ our increased vulnerability to economic downturns and adverse industry conditions;\n\ne our flexibility to plan for, or react to, changes in our business or industry;\n\ne our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, may\nbe compromised due to our level of debt; and\n\ne our ability to borrow additional funds or to refinance debt may be limited\n\nRestrictions imposed by our outstanding indebtedness may limit our ability to operate our business, execute our growth strategy,\nand to finance our future operations or capital needs or to engage in other business activities\n\nThese covenants restrict our ability, among other things, to\n\ne incur additional debt;\n\ne = grant liens on assets;\n\ne sell or dispose of assets;\n\n@ merge with or acquire other companies, or make other investments;\n\ne liquidate or dissolve ourselves; engage in businesses that are not in a related line of business; or\ne@ pay dividends or make other distribution\n\nAny breach of any of the covenants in the Revolving Loan Agreement that is not otherwise waived or cured within the applicable\ncure period would result in an event of default, which could trigger acceleration of our indebtedness and may result in the acceleration\nof or default under other debt we may incur in the future, which could have a material adverse effect on our business, results of\noperations and financial condition In the event of such event of default under the Revolving Loan Agreement, the applicable lenders\ncould elect to terminate their commitments and declare all outstanding loans, together with accrued and unpaid interest and any fees\nand other obligations, to be due and payable, and/or exercise their rights and remedies under the loan documents governing our\nRevolving Loan Agreement or any applicable law Our obligations under the Revolving Loan Agreement are secured by substantially\nall of the assets of the Company, iLearningEngines Holdings, Inc and in2vate, L L C\n\nIf we were unable to repay or otherwise refinance these loans when due, the applicable lenders could proceed against the collateral\ngranted to them to secure such indebtedness, which could force us into bankruptcy or liquidation In the event the applicable lenders\naccelerate the repayment of our loans, we and our subsidiaries may not have sufficient assets to repay such indebtedness Any\nacceleration of amounts due under the Revolving Loan Agreement or the exercise by the applicable lenders of their rights and remedies\nwould likely have a material adverse effect on our business\n\nThese restrictions may affect our ability to grow in accordance with our strategy\n\nFurthermore, the terms of any future indebtedness we may incur could have further additional restrictive covenants We may not be\nable to maintain compliance with these covenants in the future, and in such event, we cannot assure you that we will be able to obtain\n\fCase 8:24-cv-Q2900-DKC Document 90-2 Filed 09/18/25 Page 45 of 408\n\nwaivers from the lenders or amend the covenants\n\n24\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 46 of 408\n\nUnfavorable media coverage could materially adversely affect our business, brand image or reputation\n\nUnfavorable publicity or media reports regarding us, our privacy practices, our social media activities, data security compromises\nor breaches, product changes, product or service quality or features, litigation or regulatory activity or regarding the actions of our\npartners, our users, our employees or other companies in our industry, could materially adversely affect our brand image or reputation,\nregardless of the veracity of such publicity or media reports If we fail to protect our brand image or reputation, we may experience\nmaterial adverse effects to the size, demographics, engagement, and loyalty of our user base, resulting in decreased revenue, fewer\ninstallations of our platform (or increased installations of our platform), or slower user growth rates Damage to our brand or reputation\ncould also adversely affect the willingness of educational institutions and enterprise partners to utilize our product and platform, which\nin turn could slow the growth of, or reduce, our revenue In addition, if securities analysts or investors perceive any media coverage of\nus to be negative, the price of our common stock may be materially adversely affected Any of the foregoing could materially adversely\naffect our business, financial condition and results of operations\n\nWe rely on data sets from our customers If we are not able to acquire or utilize such data sets, or regulations limit us from doing so,\nour business, financial condition, and results of operations could be adversely affected\n\nOur platform currently relies on data sets from our channel partners and customers, as well as our proprietary AI, data and machine\nlearning algorithms, to optimize our automation product For example, we have invested more than $152 million to purchase\nproprietary datasets to date to train our model, and we plan to continue purchasing strategic datasets in the future Our channel partners\nand customers may impose restrictions on our use of such data, increase the price they charge us for this data, refuse altogether to\nlicense the data to us or license the data to our competitors If we are unable to use the data from any of our channel partners and\ncustomers, our business, financial condition and our results of operations could be materially adversely affected\n\nOur current operations are international in scope, and we plan further geographic expansion, creating a variety of operational\nchallenges\n\nWe currently operate internationally, and a component of our growth strategy involves the further expansion of our operations and\ncustomer base internationally Customers outside the United States generated 57%, 66% and 81% of our revenue as of December 31,\n2023, 2022 and 2021, respectively Beyond the United States, we have operational presence internationally, including, among others, in\nIndia and the United Arab Emirates We are continuing to adapt to and develop strategies to further address international markets, but\nthere is no guarantee that such efforts will have the desired effect For example, we anticipate that we will need to establish\nrelationships with new partners in order to expand into certain countries, and if we fail to identify, establish, and maintain such\nrelationships, we may be unable to execute on our expansion plans\n\nAs of May 2024, we had 101 full time employees and 428 contract employees globally, which can either be provided by our\nchannel partners or contracted directly with iLearningEngines While our headquarters is in Bethesda, Maryland, our workforce is\ncurrently remote first This allows us to find the right talent to serve our users, regardless of location In the United States, we have\nconcentrations of employees in Alaska, Connecticut, Illinois, Maryland, Oklahoma, Texas and Virginia, which allows our employees a\nmix of in person and remote work This approach continues to be an asset in our recruiting efforts, especially as other companies begin\nto require employees to return to the office or take reductions in pay Our non US based employees are located in Australia, India, the\nUnited Kingdom and the United Arab Emirates We expect that our international activities will continue to grow for the foreseeable\nfuture as we continue to pursue opportunities in existing and new international markets, which will require significant dedication of\nmanagement attention and financial resources\n\n25\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 47 of 408\n\nOur current and future international business and operations involve a variety of risks, including\n\nslower than anticipated availability and adoption of our platform and products by international businesses;\nchanges in a specific country\u2019s or region\u2019s political, regulatory, or economic conditions;\n\nthe need to adapt and localize our products for specific countries;\n\ngreater difficulty collecting accounts receivable and longer payment cycles;\n\npotential changes in trade relations, regulations, or laws;\n\nunexpected changes in laws, regulatory requirements, or tax laws;\n\nmore stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and\npersonal information, particularly in Europe;\n\ndiffering and potentially more onerous labor regulations, especially in Europe, where labor laws are generally more\nadvantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these\nlocations;\n\nchallenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over\nlarge geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs\n\nthat are specific to each jurisdiction;\n\ndifficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative\ndispute systems, and regulatory systems;\n\nincreased travel, real estate, infrastructure, and legal compliance costs associated with international operations;\n\ncurrency exchange rate fluctuations and the resulting effect on our revenue and expenses and the cost and risk of entering into\nhedging transactions if we chose to do so in the future;\n\nlimitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in\nother countries;\n\nlaws and business practices favoring local competitors or general market preferences for local vendors;\n\nlimited or insufficient intellectual property protection or difficulties obtaining, maintaining, protecting, or enforcing our\nintellectual property rights, including our trademarks and patents;\n\npolitical instability or terrorist activities;\n\nan outbreak of a contagious disease, which may cause us or our third party providers and/or customers to temporarily suspend\nour or their respective operations in the affected city or country;\n\nexposure to liabilities under anti corruption and anti money laundering laws, including the Foreign Corrupt Practices Act\n(\u201cFCPA\u201d), U S bribery laws, the United Kingdom Bribery Act, and similar laws and regulations in other jurisdictions;\n\nexposure to anti competition laws in foreign jurisdictions that may conflict with or be more restrictive than similar U S anti\ncompetition laws; and\n\n26\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 48 of 408\n\ne adverse changes to domestic and foreign tax law and the burdens of foreign exchange controls that could make it difficult to\nrepatriate earnings and cash\n\nIf we invest substantial time and resources to further expand our international operations and are unable to do so successfully and\nin a timely manner, our business and results of operations will suffer\n\nRaising additional capital may cause dilution to our stockholders or restrict our operations\n\nUntil such time, if ever, as we can generate substantial net income from the commercialization of our platform, we will need\nsubstantial additional financing to develop our platform and implement our operating plans To the extent that we raise additional\ncapital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities\nmay include liquidation or other preferences that could adversely affect your rights as a common stockholder Debt financing and\npreferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific\nactions, such as incurring additional debt, making capital expenditures or declaring dividends\n\nIf we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with\nthird parties, we may be required to relinquish valuable rights to our platform or grant licenses on terms that may not be favorable to us\nor that may be at less than the full potential value of such rights If we are unable to raise additional funds through equity or debt\nfinancings or other arrangements with third parties when needed, we may be required to delay, limit, reduce or terminate our product\ndevelopment or future commercialization efforts or grant rights to third parties to develop and market the platform that we would\notherwise prefer to develop and market ourselves\n\nRisks Related to Data Privacy and Cybersecurity\n\nWe are subject to stringent and changing obligations related to data privacy and security Our actual or perceived failure to comply\nwith such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business\noperations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences\n\nIn the ordinary course of business, we collect, receive, access, generate, transfer, store, disclose, share, make accessible, protect,\nsecure, dispose of, use, and otherwise process general personal data Our data processing activities may subject us to numerous data\nprivacy and security obligations, such as various laws, codes, regulations, industry standards, external and internal privacy and security\npolicies, contracts, and other obligations that govern the processing of personal data by us and on our behalf\n\nInthe U 8S , federal, state, and local governments have enacted numerous data privacy and security laws, including data breach\nnotification laws, personal data privacy laws, and consumer protection laws (e g , Section 5 of the Federal Trade Commission Act), and\nother similar laws (e g , wiretapping laws) The California Consumer Privacy Act (*CCPA\u201d) applies to personal information of\nconsumers, business representatives, and employees, and requires businesses to provide specific disclosure in privacy notices and\nhonor requests of California residents to exercise certain privacy rights The CCPA provides for civil penalties of up to $7 500 per\nviolation and allows private litigants affected by certain data breaches to recover significant statutory damages In addition, the\nCalifornia Privacy Rights Act of 2020, which became operative on January 1, 2023, expanded the CCPA\u2019s requirements to apply to\npersonal information of business representatives and employees and established a new regulatory agency to implement and enforce the\nlaw\n\nOther states, such as Virginia, Colorado, Utah and Connecticut, have also passed comprehensive privacy laws, and similar laws are\n\nbeing considered in several other states, as well as at the federal and local levels These developments may further complicate\ncompliance efforts, and may increase legal risk and compliance costs for us and the third parties upon whom we rely\n\n27\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 49 of 408\n\nAdditionally regulations promulgated pursuant to the federal Health Insurance Portability and Accountability Act of 1996, as\namended by the Health Information Technology for Economic and Clinical Health Act or, collectively, HIPAA, establish privacy and\nsecurity standards that limit the use and disclosure of individually identifiable health information, or protected health information, and\nrequire the implementation of administrative, physical, and technological safeguards to protect the privacy of protected health\ninformation and ensure the confidentiality, integrity, and availability of electronic protected health information Determining whether\nprotected health information has been handled in compliance with applicable privacy standards and our contractual obligations can be\ncomplex and may be subject to changing interpretation These obligations may be applicable to some or all of our business activities\nnow or in the future\n\nIf we are unable to properly protect the privacy and security of protected health information, we could be found to have breached\nour contracts, including HIPAA required business associate agreements Further, if we fail to comply with applicable privacy laws,\nincluding applicable HIPAA privacy and security standards, we could face civil and criminal penalties The U S Department of Health\nand Human Services enforcement activity can result in financial liability and reputational harm, and responses to such enforcement\nactivity can consume significant internal resources In addition, state attorneys general are authorized to bring civil actions seeking\neither injunctions or damages in response to violations that threaten the privacy of state residents We cannot be sure how these\nregulations will be interpreted, enforced, or applied to our operations In addition to the risks associated with enforcement activities and\npotential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be\ncostly and require ongoing modifications to our policies, procedures, and systems\n\nOutside of the U S , an increasing number of laws, regulations, and industry standards apply to data privacy and security The EU\nGeneral Data Protection Regulation (\u201cGDPR\u201d) and the U K GDPR impose strict requirements for processing personal data Under the\nGDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to 20 million euros\nor 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal data brought by classes of\ndata subjects or consumer protection organizations authorized by law to represent their interest We also target customers in Asia and\nhave operations in India and Australia and are subject to new and emerging data privacy regimes in Asia In addition, privacy advocates\nand industry groups have proposed, and may propose, standards with which we are legally or contractually bound to comply\n\nCertain jurisdictions have enacted data localization laws and cross border personal data transfer laws, which could make it more\ndifficult to transfer information across jurisdictions (such as transferring or receiving personal data that originates in the EU or in other\nforeign jurisdictions) Existing mechanisms that facilitate cross border personal data transfers may change or be invalidated For\nexample, absent appropriate safeguards or other circumstances, the EU GDPR generally restricts the transfer of personal data to\ncountries outside of the EEA that the European Commission does not consider providing an adequate level of data privacy and security,\nsuch as the US The European Commission released a set of Standard Contractual Clauses (\u201cSCCs\u201d) that are designed to be a valid\nmechanism to facilitate personal data transfers out of the EEA to these jurisdictions In addition, the EU U \u00a7 Data Privacy Framework\n(\u201cData Privacy Framework\u201d) that went into effect in July 2023 allows for transfers for relevant U S based organizations who self\ncertify compliance and participate in the Framework are valid transfer mechanism Currently, the SCCs or certification under the Data\nPrivacy Framework are valid mechanisms to transfer personal data outside of the EEA, but there exists some uncertainty regarding\nwhether they will remain valid mechanisms, since they are subject to legal challenges, and there is no assurance that we can satisfy or\nrely on these measures to lawfully transfer personal data to the United States Additionally, the SCCs impose additional compliance\nburdens, such as conducting transfer impact assessments to determine whether additional security measures are necessary to protect the\nat issue personal data Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out\nof Europe for allegedly violating the GDPR\u2019s cross border data transfer limitations\n\n28\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 50 of 408\n\nIf we cannot implement a valid compliance mechanism for cross border data transfers to countries, such as the U K , we may face\nincreased exposure to regulatory actions, substantial fines, and injunctions against processing or transferring personal data from the\nUK or other foreign jurisdictions The inability to import personal data to the U S_ could significantly and negatively impact our\nbusiness operations, including by limiting our ability to collaborate with parties that are subject to such cross border data transfer or\nlocalization laws, by or requiring us to increase our personal data processing capabilities and infrastructure in foreign jurisdictions at\nsignificant expense\n\nThe privacy of children\u2019s personal data collected online is also becoming increasingly scrutinized both in the United States and\ninternationally For example, the United Kingdom\u2019s Age Appropriate Design Code, or AADC, and incoming Online Safety Bill, focuses\non online safety and protection of children\u2019s privacy online In the U S , we may have obligations on the federal level under the\nChildren\u2019s Online Privacy Protection Act, or COPPA COPPA applies to operators or co operators of commercial websites and online\nservices directed to US children under the age of 13 that collect personal information from children and operators of general audience\nsites with actual knowledge that they are collecting information from US children under the age of 13 Our platform is aimed at a\ngeneral audience, and any information that we might collect from third party business partners about any data subjects under the age of\n13 would be de identified There may be situations, however, where despite the de identification, we could be alleged to be collecting\npersonal information from children or that we are a co operator under COPPA\n\nOur obligations related to data privacy and security are quickly changing in an increasingly stringent fashion, creating some\nuncertainty as to the effective future legal framework Use and development of AI and machine learning systems is also an area of\ndeveloping laws, rules, and regulations Our employees and personnel may use generative AI technologies to perform their work, and\nthe disclosure and use of personal information in generative AI technologies is subject to various privacy laws and other privacy\nobligations Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or\nconflict among jurisdictions Preparing for and complying with these obligations requires significant resources and may necessitate\nchanges to our information technologies, systems, and practices and to those of any third parties that process personal data on our\nbehalf In addition, these obligations may require us to change our business model Our use of this technology could result in additional\ncompliance costs, regulatory investigations and actions, and consumer lawsuits If we are unable to use generative AI, 1t could make\nour business less efficient and result in competitive disadvantages We use Al/machine learning to assist us in making certain decisions,\nwhich is regulated by certain privacy laws Due to inaccuracies or flaws in the inputs, outputs, or logic of the AI/machine learning, the\nmodel could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely\nimpact their rights, employment, and ability to obtain certain pricing, products, services, or benefits\n\nOur business model materially depends on our ability to process user engagement data, so we are particularly exposed to the risks\nassociated with the rapidly changing legal landscape For example, we may be at heightened risk of regulatory scrutiny, and any\nchanges in the regulatory framework could require us to fundamentally change our business model Moreover, despite our efforts, our\npersonnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business\noperations and compliance posture For example, any failure by a third party processor to comply with applicable laws, regulations, or\ncontractual obligations (including as a result of a data breach or similar incident) could result in adverse effects, including inability to\nor interruption in our ability to operate our business and proceedings against us by governmental entities or others\n\nIf we fail, or are perceived to have failed, to address or comply with data privacy and security obligations, we could face\nsignificant consequences These consequences may include, but are not limited to, government enforcement actions (e g ,\ninvestigations, fines, penalties, audits, inspections, and similar); litigation (including class related claims); additional reporting\nrequirements and/or oversight; bans on processing personal data; orders to destroy or not use personal data; and imprisonment of\ncompany officials Any of these events could have a material adverse effect on our reputation, business, or financial condition,\nincluding but not limited to loss of customers; interruptions or stoppages in our business operations (including, interruptions or\nstoppages of data collection needed to train our algorithms); inability to process personal data or to operate in certain jurisdictions;\nlimited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse\npublicity; or revision or restructuring of our operations\n\nSeveral jurisdictions around the globe, including Europe and certain U S states, have proposed or enacted laws governing\nAl/machine learning For example, European regulators have proposed a stringent AI regulation, and we expect other jurisdictions will\nadopt similar laws Additionally, certain privacy laws extend rights to consumers (such as the right to delete certain personal data) and\nregulate automated decision making, which may be incompatible with our use of AI/machine learning These obligations may make it\nharder for us to conduct our business using Al/machine learning, lead to regulatory fines or penalties, require us to change our business\npractices, retrain our AI/machine learning, or prevent or limit our use of AI/machine learning For example, the FTC has required other\ncompanies to turn over (or disgorge) valuable insights or trainings generated through the use of Al/machine learning where they allege\n\fCase 8:24-cv-02900-DKC \u2014Document.90-2 Filed 09/48/25 Page 51 of 408\n\nthe company has violated privacy and consumer protection laws If we cannot use achine learning o restricted, our\nbusiness may be less efficient, or we may be at a competitive disadvantage\n\n29\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 52 of 408\n\nAdditionally, we maintain privacy policies and other documentation regarding our processing of personal data Although we\nendeavor to comply with our privacy policies and other data protection obligations, we may at times fail to do so or may be perceived\nto have failed to do so Moreover, despite our efforts, we may not be successful in achieving compliance if our employees, contractors,\nservice providers, or vendors fail to comply with our policies and documentation Such failures can subject us to potential foreign,\nfederal, state, and local action if they are found to be deceptive, unfair, or misrepresentative of our actual practices Claims that we have\nviolated individuals\u2019 privacy rights or failed to comply with privacy policies and other data protection obligations, even if we are not\nfound liable, could be expensive and time consuming to defend and could result in adverse publicity that could harm our business We\nare also bound by contractual obligations related to data privacy and security (including related to industry standards), and our efforts to\ncomply with such obligations may not be successful For example, certain privacy laws, such as the GDPR and the CCPA, require our\ncustomers to impose specific contractual restrictions on their service providers Additionally, some of our customer contracts require us\nto host personal data locally\n\nWe may in the future receive inquiries from or be subject to investigations by data protection authorities regarding, among other\nthings, our privacy, data protection, and information security practices Any such investigations could impact our brand reputation,\nsubject us to monetary remedies and costs, interrupt or require us to change our business practices, divert resources and the attention of\nmanagement from our business, or subject us to other remedies that adversely affect our business\n\nIf our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could\nexperience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions;\nlitigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of\ncustomers or sales; and other adverse consequences\n\nIn the ordinary course of our business, we may process proprietary, confidential, and sensitive data, including personal data,\nintellectual property, and trade secrets We may rely on third party service providers, sub processors, and technologies to operate\ncritical business systems to process sensitive information in a variety of contexts, including without limitation, third party providers of\ncloud based infrastructure, encryption and authentication technology, employee email, content delivery to customers, and other\nfunctions Our ability to monitor these third parties\u2019 information security practices is limited, and these third parties may not have\nadequate information security measures in place We may share or receive sensitive information with or from third parties If any of our\nthird party service providers experience a security incident or other interruption, we could experience adverse consequences While we\nmay be entitled to damages if our third party service providers fail to satisfy their privacy or security related obligations to us, any\naward may be insufficient to cover our damages, or we may be unable to recover such award\n\nCyberattacks, malicious internet based activity, and online and offline fraud are prevalent and continue to increase These threats\ncome from a variety of sources, including traditional computer \u201chackers,\u201d threat actors, \u201chacktivists,\u201d organized criminal threat actors,\npersonnel (such as employee theft or misuse), and sophisticated nation state and nation state supported actors We and the third parties\nupon which we rely may be subject to a variety of evolving threats, including but not limited to social engineering attacks (including\nthrough phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat\nintrusions), denial of service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks,\nsupply chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology\nassets, adware, telecommunications failures, and other similar threats Some actors now engage and are expected to continue to engage\nin cyberattacks, including without limitation nation state actors for geopolitical reasons and in conjunction with military conflicts and\ndefense activities During times of war and other major conflicts, we, the third party service providers upon which we rely, and our\ncustomers may be vulnerable to a heightened risk of these attacks, including retaliatory cyberattacks, that could materially disrupt our\nsystems and operations, supply chain, and ability to produce, sell, and distribute our goods and services\n\nRansomware attacks have become increasingly prevalent and severe and can lead to significant interruptions in our operations, loss\nof data and income, reputational harm, and diversion of funds Extortion payments may alleviate the negative impact of a ransomware\nattack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such\npayments Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and\ninfrastructure in our supply chain or our third party partners\u2019 supply chains have not been compromised or that they do not contain\nexploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our\nproducts/services) or the third party information technology systems that support us and our services\n\n30\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 53 of 408\n\nOur platform is embedded into the systems and workflows on customer infrastructure and rely on cloud security management from\nthe client or channel partner who is directly using cloud provider services and third party tools and, as a result, 1f our solutions are\ncompromised, the client or channel partner could be simultaneously affected\n\nThe potential liability and associated consequences we could suffer as a result of such a large scale event could be catastrophic and\nresult in irreparable harm Remote work has become more common and has increased risks to our information technology systems and\ndata, as more of our employees utilize network connections, computers and devices outside our premises or network, including\nworking at home, while in transit, and in public locations Future business transactions (such as acquisitions or integrations) could\nexpose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in\nacquired or integrated entities\u2019 systems and technologies Furthermore, we may discover security issues that were not found during due\ndiligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology\nenvironment and security program Any of the previously identified or similar threats could cause a security incident or other\ninterruption, which could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration,\nencryption, disclosure of, or access to our sensitive information A security incident or other interruption could disrupt our ability (and\nthat of third parties upon whom we rely) to provide our platform\n\nWhile we have implemented security measures designed to protect against security incidents, there can be no assurance that these\nmeasures will be effective While we take steps to detect and remediate vulnerabilities, we may be unable in the future to detect\nvulnerabilities in our information technology systems because such threats and techniques change frequently, are often sophisticated in\nnature, and may not be detected until after a security incident has occurred Despite our efforts to identify and remediate vulnerabilities,\nif any, in our information technology systems (including our products), our efforts may not be successful These vulnerabilities may\npose material risks to our business Further, we may experience delays in developing and deploying remedial measures designed to\naddress any such identified vulnerabilities\n\nApplicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents Such\ndisclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences If we (or\na third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may\nexperience adverse consequences These consequences may include government enforcement actions (for example, investigations,\nfines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive\ninformation (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational\nharm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms\nSecurity incidents and attendant consequences may cause customers to stop using our platform and products, deter new customers from\nusing our platform and products, and negatively impact our ability to grow and operate our business A security breach may cause us to\nbreach customer contracts Our contracts may not contain limitations of liability, and even when they do, there can be no assurance that\nlimitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and\nsecurity obligations\n\nA security breach could lead to claims by our customers or other relevant stakeholders that we have failed to comply with such\nlegal or contractual obligations As a result, we could be subject to legal action or our customers could end their relationships with us\nThere can be no assurance that the limitations of liability or disclaimers in our contracts would be enforceable or adequate or would\notherwise protect us from liabilities or damages, and in some cases our customer agreements do not limit our remediation costs or\nliability with respect to data breaches\n\nLitigation resulting from security breaches may adversely affect our business Unauthorized access to our platform, systems,\nnetworks, or physical facilities, or those of our vendors, could result in litigation with our customers or other relevant stakeholders\nThese proceedings could force us to spend money in defense or settlement, divert management\u2019s time and attention, increase our costs\nof doing business, or adversely affect our reputation We could be required to fundamentally change our business activities and\npractices or modify our products and/or platforms capabilities in response to such litigation, which could have an adverse effect on our\nbusiness If a security breach were to occur and the confidentiality, integrity, or availability of personal information was disrupted, we\ncould incur significant liability or our platform, systems, or networks may be perceived as less desirable, which could negatively affect\nour business and damage our reputation\n\nWe may not have adequate insurance coverage for security incidents or breaches The successful assertion of one or more large\nclaims against us that exceeds our available insurance coverage or results in changes to our insurance policies (including premium\nincreases or the imposition of large deductible or co insurance requirements) could have an adverse effect on our business In addition,\nwe cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on\nacceptable terms or that our insurers will not deny coverage as to any future claim\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 54 of 408\n\n31\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 55 of 408\n\nRisks Related to Regulatory Compliance and Governmental Matters\n\nWe are subject to anti corruption, anti bribery, anti money laundering, and similar laws, and noncompliance with such laws can\nsubject us to criminal or civil liability and harm our business, financial condition, and results of operations\n\nWe are subject to the Foreign Corrupt Practices Act (\u201cFCPA\u201d), U S domestic bribery laws, the United Kingdom Bribery Act, and\nother anti corruption and anti money laundering laws in the countries in which we conduct activities Due to the international scope of\nour operations, we must comply with these laws in each jurisdiction where we operate Additionally, many anti bribery and anti\ncorruption laws, including the FCPA, have long arm statutes that can expand the applicability of these laws to our operations\nworldwide Accordingly, we must incur significant operational costs to support our ongoing compliance with anti bribery and anti\ncorruption laws at all levels of our business If we fail to comply with these laws, we may be subject to significant penalties Anti\ncorruption and anti bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit\ncompanies, their employees, and their third party intermediaries from authorizing, offering, or providing, directly or indirectly,\nimproper payments or benefits to recipients in the public or private sector As we increase our international sales and business and sales\nto the public sector, we may engage with business partners and third party intermediaries to market our products and to obtain\nnecessary permits, licenses, and other regulatory approvals In addition, we or our third party intermediaries may have direct or indirect\ninteractions with officials and employees of government agencies or state owned or affiliated entities We can be held liable for the\ncorrupt or other illegal activities of these third party intermediaries, our employees, representatives, contractors, partners, and agents,\neven if we do not explicitly authorize such activities\n\nWhile we have policies and procedures to address compliance with such laws, we cannot assure you that all of our employees and\nagents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible As we\nincrease our international sales and business, our risks under these laws may increase\n\nDetecting, investigating, and resolving actual or alleged violations of anti corruption laws can require a significant diversion of\ntime, resources, and attention from senior management In addition, noncompliance with anti corruption, anti bribery, or anti money\nlaundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, enforcement actions,\nfines, damages, other civil or criminal penalties or injunctions, suspension or debarment from contracting with certain persons,\nreputational harm, adverse media coverage, and other collateral consequences If any subpoenas or investigations are launched, or\ngovernmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal proceeding, our business,\nfinancial condition, and results of operations could be harmed In addition, responding to any action will likely result in a materially\nsignificant diversion of management\u2019s attention and resources and significant defense costs and other professional fees\n\nSales to highly regulated organizations are subject to a number of challenges and risks\n\nWe currently sell to customers in highly regulated industries such as insurance, healthcare and education Sales to such customers\nare subject to a number of challenges and risks Selling to such customers can be highly competitive, expensive, and time consuming,\noften requiring significant upfront time and expense without any assurance that these efforts will generate a sale These current and\nprospective customers may also be required to comply with stringent regulations in connection with purchasing and implementing our\nplatform and products or particular regulations regarding third party vendors that may be interpreted differently by different customers\nIn addition, regulatory agencies may impose requirements on third party vendors generally, or our company in particular, that we may\nnot be able to or may not choose to meet In addition, customers in these highly regulated industries often have a nght to conduct audits\nof our systems, products, and practices In the event that one or more customers determine that some aspect of our business does not\nmeet regulatory requirements, we may be limited in our ability to continue or expand our business In addition, if our platform and\nproducts do not meet the standards of new or existing regulations, we may be in breach of our contracts with these customers, allowing\nthem to terminate their agreements\n\nThese customers may also be subject to a rapidly evolving regulatory framework that may impact their ability to use our platform\nand products Moreover, changes in the underlying statutory and regulatory conditions that affect these types of customers could harm\nour ability to efficiently provide them access to our platform and to grow or maintain our customer base If we are unable to enhance\nour platform and products to keep pace with evolving customer requirements, or if new technologies emerge that are able to deliver\ncompetitive products at lower prices, more efficiently, more conveniently, or more securely than our platform, our business, financial\ncondition, and results of operations could be adversely affected\n\n32\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 56 of 408\n\nFurther, highly regulated entities may demand contract terms that differ from our standard arrangements and are less favorable than\nterms agreed with private sector customers, including preferential pricing or \u201cmost favored nation\u201d terms and conditions or contract\nprovisions that are otherwise time consuming and expensive to satisfy If we undertake to meet special standards or requirements and\ndo not meet them, we could be subject to significant liability from our customers or regulators Even if we do meet these special\nstandards or requirements, the additional costs associated with providing our platform to government and highly regulated customers\ncould harm our results of operations\n\nSuch entities may have statutory, contractual, or other legal rights to terminate contracts with us or our partners for convenience or\nfor other reasons Any such termination may adversely affect our ability to contract with other government customers as well as our\nreputation, business, financial condition, and results of operations\n\nWe are subject to governmental export and import controls that could impair our ability to compete in international markets or\nsubject us to liability if we violate the controls\n\nOur business activities are subject to various export, import, and trade and economic sanction laws and regulations, including,\namong others, the U S Export Administration Regulations, administered by the U 8S Department of Commerce\u2019s Bureau of Industry\nand Security, and economic and trade sanctions regulations maintained by the U S Department of the Treasury\u2019s Office of Foreign\nAssets Control, which we refer to collectively as \u201cTrade Controls \u201d Trade Controls may prohibit or restrict the sale or supply of certain\nproducts, including encryption items and other technology, and services to certain governments, persons, entities, countries, and\nterritories, including those that are the target of comprehensive sanctions\n\nWhile we have implemented controls designed to promote and achieve compliance with applicable Trade Controls, our platform\nand products may have been provided in the past, and could in the future, be provided in violation of such laws, despite the precautions\nwe take Any failure to comply with applicable Trade Controls may materially affect us through reputational harm, as well as other\nnegative consequences, including government investigations and penalties Accordingly, we must incur significant operational costs to\nsupport our ongoing compliance with Trade Controls at all levels of our business\n\nAlso, various countries in addition to the U S_ have enacted Trade Controls that could limit our ability to distribute our platform\nand products or could limit our customers\u2019 ability to implement our platform and products in those countries Changes in our platform\nor products or future changes in Trade Controls may create delays in the introduction of our platform and products in international\nmarkets or, in some cases, prevent the export or import of our platform and products to certain countries, governments, or persons\naltogether Any change in Trade Controls could result in decreased use of our platform and products by, or decrease in our ability to\nexport or sell our platform and products to, existing or potential customers Any decreased use of our platform or products or limitation\non our ability to export or sell our platform and products would adversely affect our business, results of operations, and growth\nprospects\n\nThe evolving geopolitical situation in Ukraine has resulted in Trade Controls being implemented by the U S , the United Kingdom,\nthe EU, Australia, and Japan and other countries against officials, individuals, entities, regions, and industries in Russia, Ukraine, and\nBelarus, as well as counter sanctions by Russia Such Trade Controls and any further restrictions that may be promulgated by relevant\ngovernmental authorities could adversely affect our business\n\nRisks Related to Our Intellectual Property\n\nAny failure to obtain, maintain, protect, or enforce our intellectual property and proprietary rights could impair our ability to\nprotect our proprietary technology and our brand\n\nOur success depends to a significant degree on our ability to obtain, maintain, protect, and enforce our intellectual property rights,\nincluding our proprietary technology, know how, and our brand We rely on a combination of trademarks, trade secret laws, patents,\ncopyrights, contractual restrictions, and other intellectual property laws and confidentiality procedures to establish and protect our\nproprietary rights However, the steps we take to obtain, maintain, protect, and enforce our intellectual property rights may be\ninadequate We may not be able to protect our intellectual property rights if, for example, we are unable to enforce our rights against\ninfringement or misappropriation, or if we do not detect unauthorized use of our intellectual property rights If we fail to protect our\nintellectual property rights adequately, our competitors may gain access to our proprietary technology, or develop and commercialize\nsubstantially identical products, services, or technologies and our business, financial condition, results of operations, or prospects may\nbe harmed\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 57 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 58 of 408\n\nIn addition, defending our intellectual property rights may entail significant expense Any patent, trademark, or other intellectual\nproperty rights that we have or may obtain may be challenged or circumvented by others or invalidated or held unenforceable through\nadministrative processes and proceedings or litigation, both in the U S and abroad Moreover, there can be no assurance that our future\npatent applications will result in issued patents Even if we continue to seck patent protection in the future, we may be unable to obtain\nor maintain patent protection for our technology In addition, any patents issued from pending or future patent applications or licensed\nto us in the future may not be sufficiently broad to protect our proprietary technologies, may not provide us with competitive\nadvantages, or may be successfully challenged by third parties The U S Patent and Trademark Office and various foreign\ngovernmental patent and trademark agencies also require compliance with a number of procedural, documentary, fee payment, and\nother similar provisions during the patent and trademark application process and after a patent or trademark registration has issued\nThere are situations in which noncompliance can result in abandonment or lapse of the patent, patent application, or trademark filing,\nresulting in partial or complete loss of patent or trademark rights in the relevant jurisdiction If this occurs, our competitors might be\nable to enter the market\n\nFurthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are\nuncertain Despite our precautions, it may be possible for unauthorized third parties to copy our brands, products, and platform\ncapabilities, and use information that we regard as proprietary to create brands and products that compete with ours Effective\nintellectual property protection may not be available to us or commercially feasible in every country in which our products are\navailable Further, intellectual property law, including statutory and case law, particularly in the U S , is constantly developing, and any\nchanges in the law could make it harder for us to enforce our rights The value of our intellectual property could diminish if others\nassert rights in or ownership of our trademarks and other intellectual property rights, or adopt trademarks that are similar to our\ntrademarks We may be unable to successfully resolve these types of conflicts to our satisfaction In some cases, as noted below,\nlitigation or other actions may be necessary to protect or enforce our intellectual property rights against infringement or\nmisappropriation As we expand our international activities, our exposure to unauthorized copying and use of our products and platform\ncapabilities and proprietary information will likely increase Moreover, policing unauthorized use of our technologies, trade secrets, and\nintellectual property may be difficult, expensive, and time consuming, particularly in foreign countries where the laws may not be as\nprotective of intellectual property rights as those in the U S and where mechanisms for enforcement of intellectual property nghts may\nbe weak or inadequate Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon,\nmisappropriating, or otherwise violating our intellectual property rights Any of the foregoing could adversely impact our business,\nfinancial condition, and results of operations\n\nWe may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming, and\nunsuccessful\n\nThird parties, including our competitors, could be infringing, misappropriating, or otherwise violating our intellectual property\nrights, and we may be required to spend significant resources to monitor and protect those rights Litigation may be necessary in the\nfuture to enforce our intellectual property nghts and to protect our trade secrets Litigation brought to protect and enforce our\nintellectual property rights could be costly, time consuming, and distracting to management, and could result in the impairment or loss\nof portions of our intellectual property\n\nFurther, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking\nthe validity and enforceability of our intellectual property rights and if such defenses, counterclaims, or countersuits were successful,\nwe could lose valuable intellectual property rights An adverse determination of any litigation proceedings could put our intellectual\nproperty at risk of being invalidated or interpreted narrowly and could put our future patents, future patent applications, and trademark\nfilings at risk of being invalidated, not issued, or cancelled Furthermore, because of the substantial amount of discovery required in\nconnection with intellectual property litigation, there is a risk that some of our confidential or sensitive information could be\ncompromised by disclosure in the event of litigation In addition, during the course of litigation there could be public announcements of\nthe results of hearings, motions, or other interim proceedings or developments, which could have a substantial adverse effect on the\nprice of our common stock or our reputation Our inability to protect our proprietary technology against unauthorized copying or use,\nas well as any costly litigation or diversion of our management\u2019s attention and resources, could delay further sales or the\nimplementation of our products and platform capabilities, impair the functionality of our products and platform capabilities, delay\nintroductions of new solutions, result in our substituting inferior or more costly technologies into our products, or injure our reputation\nAny of the foregoing could adversely impact our business, financial condition, and results of operations\n\n34\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 59 of 408\n\nIf we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed\n\nWe rely heavily on trade secrets and confidentiality agreements to protect our unpatented know how, technology, and other\nproprietary information and to maintain our competitive position However, trade secrets and know how can be difficult to protect We\nseek to protect these trade secrets and other proprietary technology, in part, by entering into non disclosure and confidentiality\nagreements with parties who have access to them, such as our employees, consultants, and other third parties, including suppliers and\nother partners However, we cannot guarantee that we have sufficient contractual protections in place with each party that has or may\nhave had access to our proprietary information, know how, and trade secrets Similarly, no assurance can be given that these\nagreements will be effective in controlling access to, distribution, use, misuse, misappropriation, reverse engineering, or disclosure of\nour proprietary information, know how, and trade secrets Further, these agreements may not prevent our competitors from\nindependently developing technologies that are substantially equivalent or superior to our products and platform capabilities These\nagreements may be breached, and we may not have adequate remedies for any such breach For example, past employees have sought\nto misappropriate source code relevant to certain of our products While we have taken steps to enjoin misappropriation that we are\naware of, such steps may not ultimately be successful and we may not be aware of all such misappropriation Any of the foregoing\ncould adversely impact our business, financial condition, and results of operations\n\nWe may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of\ntheir current or former employers or claims asserting ownership of what we regard as our own intellectual property\n\nMany of our employees and consultants are currently or were previously employed at other companies in our field, including our\ncompetitors or potential competitors Although we try to ensure that our employees and consultants do not use the proprietary\ninformation or know how of others in their work for us, we may be subject to claims that we or these individuals have used or\ndisclosed intellectual property, including trade secrets or other proprietary information, of any such individual\u2019s current or former\nemployer Litigation may be necessary to defend against these claims If we fail in defending any such claims, in addition to paying\nmonetary damages, we may lose valuable intellectual property rights or personnel Even if we are successful in defending against such\nclaims, litigation could result in substantial costs and be a distraction to management\n\nIn addition, the assignment of intellectual property rights from our employees and contractors may not be self executing, or the\nassignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may\nbring against us, to determine the ownership of what we regard as our intellectual property Any of the foregoing could adversely\nimpact our business, financial condition, and results of operations\n\nWe use open source software in our products, which could negatively affect our ability to sell our services or subject us to litigation\nor other actions\n\nWe use open source software in our products and we expect to continue to incorporate open source software into our products in\nthe future Few of the licenses applicable to open source software have been interpreted by courts, and there is a risk that these licenses\ncould be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products\nWhile we employ practices designed to monitor our compliance with the licenses of third party open source software and to avoid\nusing the open source software in a manner that would put our valuable proprietary source code at risk, we cannot ensure that we have\nnot incorporated additional open source software in our products in a manner that is inconsistent with the terms of the applicable\nlicenses or our current policies and procedures If we fail to comply with these licenses, we may be subject to certain requirements,\nincluding requirements that we offer our products that incorporate the open source software for no cost, that we make available source\ncode for modifications or derivative works we create based upon, incorporating, or using the open source software, and that we license\nsuch modifications or derivative works under the terms of applicable open source licenses This could result in us losing revenue, allow\nour competitors to create similar offering with lower development costs and ultimately result in a loss of our competitive advantages\nFurthermore, if we were to receive a claim of non compliance with the terms of any of our open source licenses, we may be required to\npublicly release certain portions of our proprietary source code or expend substantial time and resources to re engineer some or all of\nour software, which may divert resources away from our product development efforts and, as a result, adversely affect our business In\naddition, we could be required to seek licenses from third parties to continue offering our products for certain uses, or cease offering the\nproducts associated with such software, which may be very costly\n\n35\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 60 of 408\n\nFrom time to time, there have been claims challenging the ownership rights in open source software against companies that\nincorporate it into their products and the licensors of such open source software provide no warranties or indemnities with respect to\nsuch claims As a result, we and our customers could be subject to lawsuits by parties claiming ownership of what we believe to be\nopen source software Litigation could be costly for us to defend, have a negative effect on our business, financial condition, and\nresults of operations, or require us to devote additional research and development resources to change our products\n\nIn addition, our use of open source software may present greater risks than use of other third party commercial software, as open\nsource licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringement\nclaims or the quality of the code To the extent that our business operations depend upon the successful and secure operation of open\nsource software, any undetected errors or defects in open source software that we use could prevent the deployment or impair the\nfunctionality of our systems and injure our reputation In addition, the public availability of such software may make it easier for others\nto compromise our systems Any of these risks could be difficult to eliminate or manage and, if not addressed, could have an adverse\neffect on our business, financial condition and results of operations\n\nIf we cannot license rights to use technologies on reasonable terms, we may be unable to license rights that are critical to our\nbusiness\n\nIn the future we may identify additional third party intellectual property that we may need to license in order to engage in our\nbusiness, including to develop or commercialize new products or services However, such licenses may not be available on acceptable\nterms or at all The licensing or acquisition of third party intellectual property rights is a competitive area, and more established\ncompanies may pursue strategies to license or acquire third party intellectual property rights that we may consider attractive or\nnecessary These more established companies may have a competitive advantage over us due to their size, capital resources, and greater\ndevelopment or commercialization capabilities In addition, companies that perceive us to be a competitor may be unwilling to assign\nor license rights to us Even if such licenses were available, we might be required to pay the licensor substantial royalties based on sales\nof our products and services Such royalties are a component of the cost of our products or services and may affect the margins on our\nproducts and services If we are unable to enter into the necessary licenses on acceptable terms or at all, it could adversely impact our\nbusiness, financial condition, and results of operations\n\nWe may become subject to intellectual property claims from third parties, which may subject us to significant liability, increased\ncosts, and impede our ability to operate our business\n\nOur success depends, in part, on our ability to develop and commercialize our products and services without infringing,\nmisappropriating or otherwise violating the intellectual property rights of third partics However, we may not be aware that our\nproducts, services, or intellectual property are infringing, misappropriating, or violating third party intellectual property rights\nAdditionally, the technology industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade\nsecrets, and other intellectual and proprietary rights Companies in the industry are often required to defend against litigation claims\nbased on allegations of infringement, misappropriation or other violations of intellectual property nights, and third parties have brought\nsuch claims against us and may bring additional claims against us in the future We expect that the occurrence of infringement claims is\nlikely to grow as the market for our products grows\n\nLawsuits are time consuming and expensive to resolve, and they divert management\u2019s time and attention, and our technologies or\nintellectual property may not be able to withstand third party claims against their use Any intellectual property litigation to which we\n\nmight become a party, or for which we are required to provide indemnification, may require us to do one or more of the following\n\ne cease selling or using products or services that incorporate the intellectual property rights that we allegedly infringe,\nmisappropriate or violate;\n\ne make substantial payments for legal fees, settlement payments or other costs or damages;\n\n36\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 61 of 408\n\ne obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or\n\ne redesign the allegedly infringing products to avoid infringement, misappropriation or violation, which could be costly, time\nconsuming or impossible\n\nWe cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on\nour business, financial condition or results of operations Even if the claims do not result in litigation or are resolved in our favor, these\nclaims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and\noperating results Moreover, there could be public announcements of the results of hearings, motions or other interim proceedings or\ndevelopments, which could have a substantial adverse effect on the price of our common stock or our reputation\n\nRisks Related to Tax and Accounting Matters\n\nOur corporate structure and intercompany arrangements cause us to be subject to the tax laws of various jurisdictions, and we\ncould be obligated to pay additional taxes, which could materially adversely affect our business, financial condition, results of\noperations, and prospects\n\nOur international operations and personnel have rapidly expanded to support our business in numerous international markets We\ngenerally conduct our international operations through directly or indirectly wholly owned subsidiaries, and we are or may be required\nto report our taxable income in various jurisdictions worldwide with increasingly complex tax laws based upon our business operations\nin those jurisdictions Our intercompany relationships and agreements are subject to complex transfer pricing regulations administered\nby tax authorities in various jurisdictions with potentially divergent tax laws Tax authorities may disagree with tax positions that we\nhave taken For example, the U S Internal Revenue Service (the \u201cIRS\u201d) or another tax authority could challenge our allocation of\nincome by tax jurisdiction and the amounts paid between our affiliated companies pursuant to our intercompany arrangements and\ntransfer pricing policies, including amounts paid with respect to our intellectual property in connection with our intercompany research\nand development cost sharing arrangement and legal structure\n\nThe amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions,\nincluding the U \u00a7S , to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax\nlaws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany\narrangements The authorities in these jurisdictions could review our tax returns or require us to file tax returns in jurisdictions in which\nwe are not currently filing and could impose additional tax, interest, and penalties In addition, the authorities could claim that various\nwithholding requirements apply to us or our subsidiaries, assert that benefits of tax treaties are not available to us or our subsidiaries, or\nchallenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing If such a\nchallenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and\npenalties, which could result in one time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of\nour operations Our financial statements could fail to reflect adequate reserves to cover such contingencies Furthermore, we are subject\nto periodic audits in the various jurisdictions in which we operate, which if determined aversely could have an adverse impact on our\nfinancial conditions\n\nChanges in tax laws or tax rulings could materially affect our financial condition, results of operations, and cash flows\n\nThe tax regimes that we are subject to or operate under, including income and non income taxes, may be subject to significant\nchange or differing interpretations Changes in tax laws, regulations, or rulings, or changes in interpretations of existing laws and\nregulations, could materially affect our financial condition and results of operations, possibly on a retroactive basis, and we must\nmonitor such changes closely For example, the Tax Cuts and Jobs Act (the \u201cTCJA\u201d) enacted in 2017, the Coronavirus Aid, Relief, and\nEconomic Security Act enacted in 2020, and the Inflation Reduction Act enacted in 2022 (the \u201cIRA\u201d) made many significant changes\nto US tax laws In particular, the IRA imposes a 15% minimum tax on the book income of certain large corporations as well as a 1%\nexcise tax on certain corporate stock repurchases Further, effective January 1, 2022, the TCJA eliminated the option to deduct research\nand development expenses for tax purposes in the year incurred, and instead requires taxpayers to capitalize and subsequently amortize\nsuch expenses over five years for research activities conducted in the U S and over 15 years for research activities conducted outside\nthe U S Although there have been legislative proposals to repeal or defer the capitalization requirement to later years, there can be no\nassurance that the provision will be repealed or otherwise modified Future guidance from the IRS and other tax authorities with respect\nto any existing or new laws may affect us, and certain aspects of such laws could be repealed or modified in future legislation In\naddition, it is uncertain if and to what extent various states in the U S will conform to U S federal tax laws\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 62 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 63 of 408\n\nIn addition, the Organization for Economic Cooperation and Development (the \u201cOECD\u201d) has been working on a BEPS Project and\nissued a report in 2015, an interim report in 2018, and has issued additional guidelines, model rules, and final proposals that may\nchange various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we\ndo business In particular, the OECD is coordinating the implementation of rules to be adopted from 2023 for taxing the digital\neconomy, specifically with respect to nexus and profit allocation (\u201cPillar One\u201d), and for a global minimum tax (\u201cPillar Two\u201d) While\nthese and other BEPS initiatives are in the final stages of approval and/or implementation, we cannot predict their outcome or what\npotential impact they may have on our tax obligations and operations or our financial statements, up to their final enactment in national\nand international legislation\n\nAdditionally, the European Commission and several countries have issued (and continue to issue) proposals that could change\nvarious aspects of the current tax framework under which we are taxed These proposals include changes to the existing framework to\ncalculate income tax, as well as proposals to change or impose new types of non income taxes, including taxes based on a percentage\nof revenue or online sale For example, several countries have proposed or enacted taxes applicable to digital services, which could\napply to our business (subject to any scaling back or withdrawal of such proposals or enactments following the implementation of Pillar\nOne and Pillar Two and/or the introduction of mechanisms to avoid double taxation currently being assessed)\n\nChanges to the taxation of our activities, the realization of losses and other deferred tax assets, the taxation of foreign earnings, and\nthe deductibility of expenses could increase our effective tax rate, increase the amount of taxes imposed on our business, and harm our\nfinancial position\n\nChanges in our effective tax rate or tax liability may have an adverse effect on our results of operations\n\nWe are subject to income taxes in the U \u00a7 and various foreign jurisdictions The determination of our worldwide provision for\nincome taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate\ntax determination is uncertain We believe that our provision for income taxes is reasonable, but the ultimate tax outcome may differ\nfrom the amounts recorded in our consolidated financial statements and may materially affect our financial results in the period or\nperiods in which such outcome is determined\n\nOur effective tax rate could increase due to several factors, including\n\ne changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing\nstatutory tax rates;\n\ne changes in tax laws, tax treaties, and regulations or the interpretation of them;\n\ne changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results,\nthe prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do\nbusiness;\n\ne the outcome of current and future tax audits, examinations, or administrative appeals;\ne changes international tax frameworks; and\ne the effects of acquisitions\nAny of these developments could adversely affect our results of operations\nOur business may be subject to sales and other taxes\n\nThe application of indirect taxes, such as sales and use taxes, value added taxes, provincial taxes, goods and services taxes,\nbusiness taxes, digital service taxes, and gross receipt taxes to businesses like ours is a complex and evolving issue Significant\njudgment is required to evaluate applicable tax obligations, and as a result, amounts recorded are estimates and could change In many\ncases, the ultimate tax determination is uncertain because it is not clear how existing statutes apply to our business One or more\nUS states, the federal government, or foreign jurisdictions may seck to impose additional reporting, recordkeeping, or indirect tax\ncollection obligations on businesses like ours that facilitate ecommerce For example, in 2018, the US Supreme Court ruled that, in\ncertain situations, states may require online merchants to collect and remit sales taxes on transactions in the state, despite not having a\nphysical presence in the state New taxes could also require us to incur substantial costs to capture data and collect and remit taxes If\n\f__. Case 8.24-cv-02900-DKC Document 90-2, Filed 09/18/25, Page 64 of 408\nsuch obligations were imposed, the ad\n\nitional costs associated with tax collection, remittance, and audit requirements could affect our\noperating results or, in the event that we change our pricing models to account for increased obligations, make accessing offerings\nthrough our platform less attractive and more costly, which could harm our business\n\n38\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 65 of 408\n\nOur ability to use our net operating losses (\u201cNOLs\u201d) to offset future taxable income may be subject to certain limitations\n\nCertain of our NOLs could expire unused and be unavailable to offset future income tax liabilities because of their limited duration\nor because of restrictions under applicable tax law Under applicable U S federal income tax law, NOLs generated in taxable years\nbeginning before January 1, 2018 are permitted to be carried forward for only 20 taxable years, and NOLs generated in taxable years\nbeginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such NOLs generally will be limited to\n80% of current year taxable income The extent to which U S state income tax law will conform to U S federal income tax law is\nuncertain\n\nIn addition, in general, under Section 382 of the Internal Revenue Code of 1986, as amended (the \u201cCode\u201d), a corporation that\nundergoes an \u201cownership change\u201d (generally defined as a greater than 50% change (by value) in the equity ownership of certain\nstockholders over a rolling three year period) is subject to limitations on its ability to utilize its pre change NOLs to offset post change\ntaxable income It is possible that we have in the past undergone ownership changes under Section 382 of the Code, and future changes\nin our equity ownership, some of which are outside of our control, could result in ownership changes under Section 382 of the Code\nFurthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations There is also a\nrisk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could\nexpire or otherwise be unavailable to reduce future income tax liabilities, including for state tax purposes For these reasons, we may\nnot be able to utilize a material portion of our NOLs, which could potentially result in increased future tax liability to us and could\nadversely affect our results of operations and financial condition\n\nOur reported financial results may be adversely affected by changes in GAAP\n\nGAAP is subject to interpretation by the FASB, SEC, and various bodies formed to promulgate and interpret appropriate\naccounting principles A change in these principles or interpretations could have a significant effect on our reported results of\noperations and could affect the reporting of transactions already completed before the announcement of a change\n\nOur revenue recognition policy and other factors may cause variability of our financial results in any given period and make them\ndifficult to predict\n\nWe derive our revenue from the sale of our software licenses for use of our proprietary software, maintenance and support for our\nlicenses and implementation services Under ASC 606, Revenue from Contracts with Customers, we recognize revenue when a\ncustomer obtains control of promised goods or services are delivered The amount of revenue recognized reflects the consideration that\nwe expect to receive in exchange for these goods or services Licenses revenue (including the term license portion of Flex Offerings) is\nrecognized when we transfer control of the respective license to the customer Revenue from licenses, maintenance and support are\nrecognized ratably over time since control passes to our customers over the arrangement\u2019s contractual period Implementation services\nrevenue is recognized as services are rendered\n\nFurthermore, the presentation of our financial results requires us to make estimates and assumptions that may affect revenue\nrecognition In some instances, we could reasonably use different estimates and assumptions, and changes in estimates may occur from\n\nperiod to period\n\nGiven the foregoing factors, our actual results could differ significantly from our estimates Comparing our revenue and operating\nresults on a period to period basis may not be meaningful, and our past results may not be indicative of our future performance\n\nFor more information on our revenue recognition policy, refer to \u201ciLearningEngines Management s Discussion and Analysis of\nFinancial Condition and Results of Operations | Revenue Recognition\u201d\n\n39\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 66 of 408\n\nRisks Related the Ownership of Our Securities\n\nWe have limited experience operating as a United States public company and may not be able to adequately develop and implement\nthe governance, compliance, risk management and control infrastructure and culture required for a public company, including\ncompliance with the Sarbanes Oxley Act\n\nWe have limited experience operating as a United States public company Certain of our executive officers lack experience in\nmanaging a United States public company, which makes their ability to comply with applicable laws, rules and regulations uncertain\nOur failure to comply with all laws, rules and regulations applicable to United States public companies could subject us and our\nmanagement to regulatory scrutiny or sanction, which could harm our reputation and share price\n\nWe have limited experience preparing and filing periodic or other reports with the SEC or complying with the other requirements\nof United States federal securities laws applicable to public companies We also have limited experience establishing and maintaining\nthe disclosure controls and procedures and internal controls over financial reporting applicable to a public company in the United\nStates, including the Sarbanes Oxley Act Although we are in the process of developing and implementing our governance, compliance,\nrisk management and control framework and culture required for a public company, we may not be able to meet the requisite standards\nexpected by the SEC and/or our investors We may also encounter errors, mistakes and lapses in processes and controls resulting in\nfailures to meet the requisite standards expected of a public company In May 2024, we were unable to file our Quarterly Report on\nForm 10 Q for the period ended March 31, 2024 by the initial deadline due to the reasons described in our Notification of Late Filing\non Form 12b 25, filed with the SEC on May 16, 2024 Although we were able to file the 10 Q within the extension period provided\npursuant to SEC rules, there is no assurance that we will be able to timely file our periodic reports in the future Our failure to file\nperiodic and certain current reports with the SEC in a timely manner, among other things, could further preclude or delay us in the\nfuture from being eligible to use a short form registration statement on Form 8 3 to register certain sales of our Common Stock by us or\nour stockholders and could even result in the delisting and suspension of trading of our Common Stock on Nasdaq and/or the\nrevocation of our registration by the SEC\n\nAs a United States public reporting company, we incur significant legal, accounting, insurance, compliance, and other expenses\nWe cannot predict or estimate the amount of additional costs we may incur or the timing of such costs Compliance with reporting,\ninternal control over financial reporting and corporate governance obligations requires members of our management and our finance\nand accounting staff to divert time and resources from other responsibilities to ensure these new regulatory requirements are fulfilled\n\nIf we fail to adequately implement the required governance and control framework, we could be at greater risk of failing to comply\nwith the rules or requirements associated with being a public company Such failure could result in the loss of investor confidence,\ncould harm our reputation, and cause the market price of our securities to decline Other challenges in complying with these regulatory\nrequirements may arise because we may not be able to complete our evaluation of compliance and any required remediation in a timely\nfashion Furthermore, any current or future controls may be considered as inadequate due to changes or increased complexity in\nregulations, our operating environment or other reasons\n\nDue to inadequate governance and internal control policies, misstatements or omissions due to error or fraud may occur and may\nnot be detected, which could result in failures to make required filings in a timely manner and make filings containing incorrect or\nmisleading information Any of these outcomes could result in SEC enforcement actions, monetary fines or other penalties, as well as\ndamage to our reputation, business, financial condition, operating results and share price\n\n40\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 67 of 408\n\nWe have incurred and will continue to incur increased costs as a result of operating as a public company, and our management now\ndevotes substantial time to new compliance initiatives and corporate governance practices We may fail to comply with the rules that\napply to public companies, including Section 404 of the Sarbanes Oxley Act, which could result in sanctions or other penalties that\nwould adversely impact our business\n\nAs a public company, and particularly after we are no longer an \u201cemerging growth company,\u201d we incur significant legal,\naccounting, and other expenses that we did not incur as a private company, including costs resulting from public company reporting\nobligations under the Securities Act and the Exchange Act, and regulations regarding corporate governance practices The Sarbanes\nOxley Act, the Dodd Frank Wall Street Reform and Consumer Protection Act, the rules of the SEC, the listing requirements of Nasdaq,\nand other applicable securities rules and regulations impose various requirements on public companies, including establishment and\nmaintenance of effective disclosure and financial controls and corporate governance practices We have begun to hire additional\naccounting, finance, and other personnel in connection with becoming a public company, and our management and other personnel\ndevotes a substantial amount of time towards maintaining compliance with these requirements These requirements will increase our\nlegal and financial compliance costs and will make some activities more time consuming and costly We are currently evaluating these\nrules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs These\nrules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their\napplication in practice may evolve over time as new guidance is provided by regulatory and governing bodies This could result in\ncontinuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance\npractices We cannot predict or estimate the amount of additional costs we will incur as a result of becoming a public company or the\ntiming of such costs Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations\nas a public company on a timely basis, or at all These reporting requirements, rules and regulations, coupled with the increase in\npotential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain\nqualified persons to serve on the Board or committees of the Board or to serve as executive officers, or to obtain certain types of\ninsurance, including directors\u2019 and officers\u2019 insurance, on acceptable terms\n\nPursuant to Sarbanes Oxley Act Section 404, we are required to furnish a report by our management on our internal control over\nfinancial reporting beginning with the filing of our Annual Report on Form 10 K with the SEC for the year ending December 31, 2024\nIn order to continue to maintain effective internal controls to support growth and public company requirements, we will need additional\nfinancial personnel, systems and resources However, while we remain an emerging growth company, we are not required to include an\nattestation report on internal control over financial reporting issued by our independent registered public accounting firm To achieve\ncompliance with Section 404 of the Sarbanes Oxley Act within the prescribed period, we are engaged in a process to enhance our\ndocumentation and evaluate our internal control over financial reporting, which is both costly and challenging In this regard, we will\nneed to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and\ndocument the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate\nthrough testing that controls are functioning as documented, and implement a continuous reporting and improvement process for\ninternal control over financial reporting Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed\ntime frame or at all, that our internal control over financial reporting is effective as required by Sarbanes Oxley Act Section 404 Our\nmanagement has identified material weaknesses, and, in the future, our management may identify one or more material weaknesses,\nwhich could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial\nstatements\n\nOur management has identified material weaknesses and significant deficiencies in our internal control over financial reporting\nand we may identify additional material weaknesses and significant deficiencies in the future If we fail to remediate the material\nweaknesses and significant deficiencies or if we otherwise fails to establish and maintain effective control over financial reporting,\nwe may adversely affect our ability to accurately and timely report our financial results, and may adversely affect investor\nconfidence and business operations\n\nIn connection with the preparation of our consolidated financial statements as of and for the fiscal years ended December 31, 2023,\n2022, 2021 and 2020, we identified potential material weaknesses and significant deficiencies in our internal control over financial\nreporting The Public Company Accounting Oversight Board (\u201cPCAOB\u201d) defines a material weakness as \u201ca deficiency, or a\ncombination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material\nmisstatement in the registrant\u2019s annual or interim financial statements will not be prevented or detected on a timely basis by the\ncompany\u2019s internal controls \u201d Deficient levels of internal controls could also result in a reasonable possibility that an occurrence of a\nmaterial fraud will not be prevented or detected\n\nWe did not design or maintain an effective control environment commensurate with our financial reporting requirements\nSpecifically, we did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting\n\fknowledge, experience, an\n\nCase 8:24-cv-02900-DKC = epcument 90-2 _ Filed 09/18/25 Page 68 of 408\n\nraining commensurat our accounting and reporting requirements Under public company standards,\n\nsuch lack of adequate competence in the accounting and reporting function and deficient level of internal controls could be considered\nmaterial weaknesses This potential material weakness contributed to the following additional potential material weaknesses\n\nWe did not design and maintain formal governance policies, procedures and controls over significant corporate actions to\nachieve complete, accurate and timely review and recording of corporate actions in 2023, we were non compliant with certain\nprovisions of a term loan requiring a separate bank account set up to hold $2,000,000 separated from operating cash to be used\nshould the Business Combination not be consummated and formal minutes of the Board and executive team actions, such as\nthe approval of RSUs issued during the year Further, there should be evidence of review and approval of all financial\ntransactions, which is not currently being documented\n\n4]\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 69 of 408\n\ne We did not design and maintain formal policies, procedures and controls over significant compliance with statutory\nregulations to achieve complete, accurate and timely reporting and payment of payroll taxes This material weakness resulted\nin the payment of fines and penalties for untimely reporting and payment of obligations Additionally, in 2023, we filed our\n2022 Federal and State income tax returns late, after the extended deadline\n\nWe also noted the following deficiencies that we believe to be significant deficiencies A significant deficiency is a deficiency, or\ncombination of deficiencies in internal control over financial reporting, that adversely affects the entity\u2019s ability to initiate, authorize,\nrecord, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more\nthan a remote likelihood that a misstatement of the entity\u2019s financial statements that is more than inconsequential will not be prevented\nor detected by the entity\u2019s internal control\n\ne We did not design and maintain effective controls over information technology (\u201cIT\u201d) general controls for information systems\nthat are relevant to the preparation of our financial statements Specifically, we did not design and maintain user access\ncontrols to ensure appropriate segregation of duties that adequately restricts users and privileged access to financial\napplications, programs, and data to appropriate Company personnel The deficiency could impact maintaining effective\nsegregation of duties, as well as the effectiveness of IT dependent controls (such as automated controls that address the risk of\nmaterial misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness\nof system generated data and reports) that could result in misstatements potentially impacting all financial statement accounts\nand disclosures that would not be prevented or detected We do not perform periodic reviews of all user accounts within\ndepartments to validate that access is appropriate If inappropriate user rights are identified, corrective action should be taken\nto revoke or modify access Documentation of the completion of this evaluation should also be maintained Further,\nmanagement is responsible to evaluate all third party service providers including evaluating the service organization controls\nwhich may include the review of a SOC report to verify that relevant controls over financial reporting and in place at the\nservice organization and such controls are tested appropriately Management\u2019s review of the SOC report should also evaluate\ncomplementary user entity controls that we have in place to ensure that relevant control objectives are achieved Currently,\nmanagement has not performed such tasks which we believe is an indication of insufficient control surrounding financial\nreporting and constitutes a significant deficiency in internal control\n\nWe are in the process of designing and implementing measures to improve our internal control over financial reporting to\nremediate these material weaknesses and significant deficiencies While we are designing and implementing measures to remediate\nthese material weaknesses and significant deficiencies, we cannot predict the success of such measures or the outcome of our\nassessment of these measures at this time We can give no assurance that these measures will remediate the deficiencies in internal\ncontrol or that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be\nidentified in the future Our failure to implement and maintain effective internal control over financial reporting could result in errors in\nour financial statements that may lead to a restatement of our financial statements or cause us to fail to meet our reporting obligations\n\nIf we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce\ntimely and accurate financial statements or comply with applicable regulations could be impaired\n\nAs a public company, we are required to comply with the requirements of the Sarbanes Oxley Act, including, among other things,\nthat we maintain effective disclosure controls and procedures and internal control over financial reporting We continue to develop and\nrefine our disclosure controls and other procedures that are designed to ensure that information we are required to disclose in the\nreports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC\nrules and forms and that information required to be disclosed in reports under the Exchange Act, is accumulated and communicated to\nour management, including our principal executive and financial officers Further, in June 2023, our registered public accounting firm\nagreed to a settlement with the SEC with respect to certain matters relating to systemic quality control failures and violations of audit\nstandards in connection with audit work for hundreds of special purpose acquisition company (\u201cSPAC\u201d) clients beginning at the latest\nin 2020 and continuing through 2022 We are actively monitoring the situation but do not currently believe this settlement will affect\nour financial statements or Legacy iLearningEngines financial statements\n\nWe must continue to improve our internal control over financial reporting Our management will be required to make a formal\nassessment of the effectiveness of our internal control over financial reporting pursuant to Sarbanes Oxley Act Section 404(a), and we\nmay in the future be required to include an attestation report on internal control over financial reporting issued by our independent\nregistered public accounting firm To achieve compliance with these requirements within the prescribed time period, we will be\nengaging in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging In\nthis regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work\nplan to assess and document the adequacy of our internal control over financial reporting, validate through testing that controls are\n\fse 8:24-cv-02900-DKC, Document90-2 Filed 09/18/25 Page 70 of 408\n\nfunctioning as Case Sic and implement a continuous reporting and improvement process for internal Control over financial\nreporting There is a risk that we will not be able to conclude, within the prescribed time period or at all, that our internal control over\nfinancial reporting is effective as required by Section 404 of the Sarbanes Oxley Act\n\nAny failure to implement and maintain effective disclosure controls and procedures and internal control over financial reporting,\nincluding the identification of one or more material weaknesses, could cause investors to lose confidence in the accuracy and\ncompleteness of our financial statements and reports, which would likely adversely affect the market price of our common stock In\naddition, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC and\nother regulatory authorities\n\n42\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 71 of 408\n\nThe price of our Common Stock and Warrants may be volatile\n\nThe price of our Common Stock and warrants has significantly fluctuated in the past and may continue to fluctuate in the future\ndue to a variety of factors, including, without limitation\n\ne changes in the industry in which we operate;\ne the volume and timing of sales of our products and services;\ne the success of existing or new competitive products or technologies;\n\ne the introduction of new services, products or product enhancements by us or others in our industry and other developments\ninvolving our competitors;\n\n@ announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or\ncapital commitments;\n\ne regulatory or legal developments in the United States and other countries;\ne developments or disputes concerning our intellectual property or other proprietary rights;\ne the recruitment or departure of key personnel;\n\ne actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities\nanalysts;\n\n@ variations in our financial results or those of companies that are perceived to be similar to us;\ne publication of research reports by securities analysts about us or our competitors or our industry;\ne the public\u2019s reaction to our press releases, our other public announcements and our filings with the SEC;\n\ne our failure or the failure of our competitors to meet analysts\u2019 projections or guidance that we or our competitors may give to\nthe market;\n\n@ commencement of, or involvement in, litigation involving us;\ne changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;\ne =the volume of shares of Common Stock available for public sale;\n\ne general economic and political conditions, such as recessions, interest rates, social, political and economic risks and acts of\nwar or terrorism; and\n\ne that the information we are required to disclose in the reports that we file with the SEC is recorded, processed, summarized,\nand reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports\nunder the Exchange Act is accumulated and communicated to our management, including our principal executive and financial\nofficers\n\nThese market and industry factors may materially reduce the market price of our Common Stock and warrants regardless of our\n\noperating performance It is also possible that an active trading market will not be sustained Any of these effects would make it\ndifficult for you to sell shares of our Common Stock or our Warrants at an attractive price or at all\n\n43\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 72 of 408\n\nWe may be unable to maintain the listing of our securities on Nasdag in the future\n\nWe cannot guarantee that our securities will continue to be listed on Nasdaq If we fail to meet the requirements of the applicable\nlisting rules, such failure may result in a suspension of the trading of our shares or delisting in the future This may further result in\nlegal or regulatory proceedings, fines and other penalties, legal liability for us, the inability for our stockholders to trade their shares\nand negatively impact our share price, reputation, operations and financial position, as well as our ability to conduct future fundraising\nactivities If Nasdaq delists our securities and we are not able to list our securities on another national securities exchange, we expect\nthat our securities could be quoted on an over the counter market If this were to occur, we could face significant material adverse\nconsequences, including\n\ne a limited availability of market quotations for our securities;\n\ne reduced liquidity for our securities;\n\ne alimited amount of news and analyst coverage for the company; and\n\n@ adecreased ability to issue additional securities or obtain additional financing in the future\n\nUnstable market and economic conditions may have serious adverse consequences on our business, financial condition and share\nprice\n\nThe global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely\ndiminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment\nrates, increases in inflation rates, higher interest rates and uncertainty about economic stability For example, the COVID 19 pandemic\nresulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets Similarly, the ongoing\nconflicts between Russia and Ukraine and Hamas and Israel have created extreme volatility in the global capital markets and is\nexpected to have further global economic consequences, including disruptions of the global supply chain and energy markets Any such\nvolatility and disruptions may have adverse consequences on us or the third parties on whom we rely If the equity and credit markets\ndeteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain\nin atimely manner or on favorable terms, more costly or more dilutive Increased inflation rates can adversely affect us by increasing\nour costs, including labor and employee benefit costs In addition, higher inflation could also increase customers\u2019 operating costs,\nwhich could result in reduced budgets for customers and potentially less demand for our products and services Any significant\nincreases in inflation and related increase in interest rates could have a material adverse effect on our business, results of operations and\nfinancial condition\n\nIf our operating and financial performance in any given period does not meet the guidance provided to the public or the\nexpectations of investment analysts, the market price of Common Stock may decline\n\nWe may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods Any\nsuch guidance will consist of forward looking statements, subject to the risks and uncertainties described in this filing and in our public\nfilings and public statements The ability to provide this public guidance, and the ability to accurately forecast our results of operations,\nwill be impacted by a number of factors, many of which are out of our control Actual results may not always be in line with or exceed\nany guidance we have provided, especially in times of economic or regulatory uncertainty If, in the future, our operating or financial\nresults for a particular period do not meet any guidance provided or the expectations of investment analysts, or if we reduce our\nguidance for future periods, the market price of Common Stock may decline as well Even if we issue public guidance, there can be no\nassurance that we will continue to do so in the future\n\nWe could be subject to securities class action litigation\nIn the past, securities class action litigation has often been brought against a company following a decline in the market price of\nour securities If we face such litigation, it could result in substantial costs and a diversion of management\u2019s attention and our resources,\n\nwhich could harm our business\n\nReports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the\nprice and trading volume of our securities\n\fCase 8:2 eee oliehs snd pubeent nent 90-2 . Filed 09/18/25 Page 73 of 408\n\nSecurities research lysts may establish an ir own periodic projections of us These projections may vary widely and\nmay not accurately predict the results that we actually achieve Our share price may decline if our actual results do not match the\nprojections of these securities research analysts Similarly, if one or more of the analysts who write reports on us downgrades our stock\nor publishes inaccurate or unfavorable research about our business, our share price could decline If one or more of these analysts\nceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline While we expect\nresearch analyst coverage to continue, if analysts cease to continue coverage of us, the market price and volume for our securities could\nbe adversely affected\n\n44\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 74 of 408\n\nThe shares of common stock being offered in this prospectus represent a substantial percentage of our outstanding common stock,\nand the sales of such shares, or the perception that these sales could occur, could cause the market price of our common stock to\ndecline significantly\n\nThis prospectus also relates to the offer and sale, from time to time, by the Selling Securityholders of (4) up to 100,774,669 Resale\nSecurities consisting of up to (a) 8,089,532 2024 Convertible Note Shares issued in satisfaction of an aggregate of $29,414 500\n(equivalent to a per share price of $3 64) of the convertible notes payable to such investors, (b) 6,787 500 Founder Shares originally\nissued at a price of approximately $0 004 per share in a private placement to the Sponsor prior to ARRW\u2019s initial public offering, (c)\n82,091 Meteora Shares issued at a fair value price of $10 00 per share to certain investors pursuant to a non redemption agreement with\ncertain investors as consideration for the non exercise of redemption rights by such investors in connection with the shareholder\nmeetings preceding the Business Combination, (d) 3,763 378 Lender Shares issued at a fair value price of $10 00 per share to the\nLenders pursuant to the Second Omnibus Amendment, as consideration, in part, for the revision of amortization schedules under the\nWTI Loan Agreements prior to the Business Combination and, after the Business Combination, the repayment in full of all outstanding\nobligations under the WTI Loan Agreements, (ce) 460 384 Working Capital Shares issued to the Sponsor as consideration for the\nrepayment of $4,510,000 (equivalent to a per share price of $9 80), which represented part of the then outstanding obligations under\nunsecured promissory notes issued to ARRW, (f) 78,730 Unvested Shares issuable upon the vesting and settlement of Assumed RSUs,\n(g) 8 250,000 shares of Common Stock acquired by the Sponsor at a purchase price of $8 250,000 (equivalent to a per share price of\n$1 00) issuable upon exercise of the Private Placement Warrants at an exercise price of $11 50 per share of Common Stock, (h)\n\n1,508 370 Control Shares issued to certain directors and officers at a fair value price of $10 00 per share as merger consideration for\nsuch shares originally issued by Legacy iLearningEngines to such directors and officers as consideration for employment and services\nprovided to Legacy iLearningEngines prior to the Business Combination, (i) 511,073 shares of Common Stock that were issued at a\nprice of $5 87 per share pursuant to the BTIG Amendment in connection with the payment of certain Business Combination transaction\nexpenses, (j) 1,022,146 shares of Common Stock that were issued in lieu of payment of deferred underwriting commissions in an\naggregate amount of $6,000,000 at a price of $5 87 per share pursuant to the Fee Modification Agreement in connection with the\nClosing, and (k) 221,465 shares of Common Stock that were issued at a price of $5 87 per share pursuant to the Cooley Fee Agreement\nin connection with the payment of Business Combination transaction expenses; and (ii) up to 8 250,000 Private Placement Warrants\nWe will not receive any proceeds from the sale of shares of common stock or Warrants by the selling securityholders pursuant to this\nprospectus\n\nThe number of Resale Securities represents approximately 90 9% of our public float and approximately 63 9% of our outstanding\nshares of common stock (after giving effect to the issuance of shares of common stock upon exercise of the Warrants) as of May 31,\n2024 The sale of all Resale Securities by the selling securityholders, or the perception that these sales could occur, could depress the\nmarket price of our common stock Even if our trading price were to trade significantly below $10 00 per share, the offering price for\nthe units sold in the ARRW IPO, certain of the selling securityholders may still have an incentive to sell our common stock because\nthey may still experience a positive rate of return on the securities they purchased due to the differences in the purchase prices\ndescribed in the preceding paragraph and the public trading price of our common stock While these selling securityholders may, on\naverage, experience a positive rate of return based on the current market price of the common stock they purchased, public\nsecurityholders may not experience a similar rate of return on the common stock they purchased due to differences in the purchase\nprices and the current market price For example, based on the closing price of our Common Stock of $10 49 per share on July 18, 2024\n(the \u201cJuly 18, 2024 Closing Price\u201d) (i) the holders of the 2024 Convertible Note Shares would experience a potential profit of up to\napproximately $6 85 per share, or up to approximately $55 4 million in the aggregate; (ii) the holders of the Founder Shares would\nexperience a potential profit of up to approximately $10 49 per share that they purchased prior to the initial public offering of ARRW,\nor up to approximately $71 2 million in the aggregate (not giving effect to the issuance of Common Stock issuable upon exercise of the\nWarrants held by them); (iii) the holders of the Meteora Shares would experience a potential profit of up to approximately $0 49 per\nshare, or up to approximately $0 04 million in the aggregate; (iv) the holders of the Lender Shares would experience a potential profit\nof up to approximately $0 49 per share, or up to approximately $1 8 million in the aggregate; (v) the holders of the Working Capital\nShares would experience a potential profit of up to approximately $0 69 per share, or up to approximately $0 3 million in the aggregate;\n(vi) the holders of the Unvested Shares would experience a potential profit of up to approximately $10 49 per share, or up to\napproximately $0 8 million in the aggregate; (vii) the holders of the Control Shares would experience a potential profit of up to\napproximately $0 49 per share, or up to approximately $35 0 million in the aggregate; (viii) the holders of the BTIG Shares would\nexperience a potential profit of up to approximately $4 62 per share, or up to approximately $2 4 million in the aggregate; (ix) the\nholders of the Cantor Shares would experience a potential profit of up to approximately $4 62 per share, or up to approximately $4 7\nmillion in the aggregate; (x) the holders of the Cooley Shares would experience a potential profit of up to approximately $4 62 per\nshare, or up to approximately $1 0 million in the aggregate; and (xi) the holders of the Warrant Shares would experience a potential\nprofit of up to approximately $9 49 per share, or up to approximately $78 3 million in the aggregate\n\fe 8:24-cv-02900-DKC | Document90-2 Filed 09/1.8/ 3 >, age pal 408\n\nSales of our coass, Stock and/or Warrants or the perception of such sales, b y US OF ti g Secu ers pursuant to this\nprospectus, in the public market or otherwise, could cause the market price for our securities to decline, even though the selling\nsecurityholders would still realize a profit on sales at lower prices Resales of the securities offered by this prospectus may cause the\nmarket price of such securities to drop significantly, even if our business is doing well\n\nThe sale of our Common Stock in the public market or otherwise, including sales pursuant to this prospectus, or the perception that\nsuch sales could occur, could harm the prevailing market price of our Common Stock These sales, or the possibility that these sales\nmay occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem\nappropriate Resales of our Common Stock may cause the market price of our securities to drop significantly, even if our business is\ndoing well\n\nIn addition, the selling securityholders named in this prospectus hold a disproportionately large portion of our outstanding\nCommon Stock In particular, Harish Chidambaran, Preeta Chidambaran and the Sponsor, collectively the beneficial owners of\n103,852 211 shares of Common Stock, constituting approximately 76 9% of our issued and outstanding Common Stock as of the date\nof this prospectus, will be able to sell up to 71,700,299 shares of Common Stock, constituting approximately 53 1% of our issued and\noutstanding Common Stock as of the date of this prospectus, pursuant to this prospectus, upon the expiration of the relevant lock up\nperiod that these shares are subject to, for so long as the registration statement of which this prospectus forms a part is available for use\n\n45\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 76 of 408\n\nAlthough Harish Chidambaran, Preeta Chidambaran and the Sponsor will be prohibited from transferring any Common Stock until\nthe lock up periods contained in the Amended and Restated Bylaws of the Company (the \u201cBylaws\u201d) expire, upon the effectiveness of\nany registration statement the Company files or otherwise in accordance with Rule 144 under the Securities Act and after expiration or\nearly termination or release of the applicable lock up provisions, the Company stockholders may sell our Common Stock in the open\nmarket or in privately negotiated transactions, which could have the effect of increasing the volatility in the trading price of our\nCommon Stock or putting significant downward pressure on the price of our Common Stock\n\nOur stockholders will be able to sell all of their securities held for so long as the registration statement of which this prospectus\nforms a part is in effect, subject to any applicable lock up restrictions contained in the Bylaws Such restrictions began at the Closing\nand end on the earliest of (1) April 16, 2025; (ii) the first day after the date on which the closing price of the Common Stock equals or\nexceeds $12 00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading\ndays within any 30 trading day period commencing at least 150 days after the date of the Closing; or (iii) the date on which we\ncomplete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our public\nshareholders having the right to exchange their Common Stock for cash, securities or other property On April 25, 2024, we waived the\nlock up restrictions under the Bylaws, effective as of April 29, 2024, with respect to (i) the Convertible Note Shares and (ii) the Merger\nShares held by former Legacy iLearningEngines stockholders that hold, individually, less than three percent (3%) of the Common\nStock issued as consideration in connection with the Business Combination, which resulted in the release of approximately 19 367,095\nshares of Common Stock held by these lock up parties (the \u201cReleased Shares\u201d), of which 13 906,097 became immediately available\nfor trading As of the date of the filing of this prospectus, the lock up restrictions are applicable only to Harish Chidambaran, Preeta\nChidambaran and the Sponsor Even if the trading price of our Common Stock falls to or significantly below the current trading price,\nthe selling securityholders may still have an incentive to sell and profit due to the nominal purchase prices paid by such selling\nsecurityholders, which are significantly lower than the purchase prices paid by the public securityholders\n\nCertain of our selling securityholders acquired the Common Stock at prices that are significantly lower than the current trading\nprice of our Common Stock The original holder of the Founder Shares paid approximately $0 004 per share for each share of Common\nStock and $1 00 per private placement warrant for each private placement warrant being offered pursuant to this prospectus The\nCommon Stock being offered for resale pursuant to this prospectus by the selling securityholders would represent approximately 61 7%\nof our outstanding Common Stock as of April 16, 2024 (after giving effect to the issuance of the shares issuable upon exercise of the\nWarrants and the settlement of assumed restricted stock units) While such selling securityholders may experience a positive rate of\nreturn based on the current trading price of our Common Stock, the public securityholders may not experience a similar rate of return\non the securities they purchased due to differences in the purchase prices and the trading price at the time of such sales\n\nWe may be required to repurchase up to 445,000 shares of Common Stock from the investors with whom we entered into the\nForward Purchase Agreement in connection with the closing of the Business Combination, which would reduce the amount of cash\navailable to us to fund our business\n\nOn April 26, 2023, the Company entered into the Forward Purchase Agreement with Polar Multi Strategy Master Fund (\u201cPolar\u201d),\ndated April 26, 2023, which was subsequently amended by a letter agreement on April 9, 2024 (as amended, the \u201cForward Purchase\nAgreement\u201d), pursuant to which the Company agreed to purchase in the aggregate, on the date that is one year after the Closing, subject\nto the occurrence of an FPA Acceleration Event, as defined below (the \u201cMaturity Date\u201d), up to 445,000 shares of common stock then\nheld by Polar (subject to certain conditions and purchase limits set forth in the Forward Purchase Agreement) The per price at which\nPolar has the right to sell the shares to us on the Maturity Date will not be less than $2 00 per share\n\nIf Polar holds some or all of the 445,000 forward purchase agreement shares on the Maturity Date, and the per share trading price\nof our common stock is less than the per share price at which Polar has the right to sell the shares of Common Stock to us on the\nMaturity Date, we would expect that Polar will exercise this repurchase right with respect to such shares In the event that we are\nrequired to repurchase these forward purchase agreement shares, or in the event that the forward purchase agreement is terminated, the\namount of cash available to fund our liquidity and capital resource requirements would be reduced accordingly, which could adversely\naffect our business, financial condition and results of operations\n\nOther events may result in Polar having no payment obligations to the Company at settlement under the Forward Purchase\nAgreement\n\nThe occurrence of certain events may accelerate the Maturity Date and may result in Polar having no payment obligation to the\nCompany at settlement Such events (collectively, \u201cFPA Acceleration Events\u201d) include (a) if the VWAP Price, for any 10 trading days\nduring a 30 consecutive trading day period beginning 30 days following the Closing, is below $2 00 per share, (b) if the Company\u2019s\nshares of Common Stock cease to be listed on a national securities exchange or upon the filing of a Form 25, or (c) if the Registration\n\f_ Case 8:24-cv-02900-DKC. . Document.90-2. Filed 09/18/25 Page 77 of 408\n\nStatement is not declared ies by fe Oi Gission within he time periods set gs i Re Forward Piichase Rereement, or if the\nRegistration Statement after it is declared effective ceases to be continuously effective as required by the Forward Purchase Agreement,\nwhich will result in the unregistered shares being excluded from the calculation of the amounts due at settlement\n\nOur Warrants may not be exercised at all or may be exercised on a cashless basis and we may not receive any cash proceeds from\nthe exercise of the Warrants\n\nThe exercise price of the Warrants may be higher than the prevailing market price of the underlying shares of common stock The\nexercise price of the Warrants is subject to market conditions and may not be advantageous if the prevailing market price of the\nunderlying shares of common stock is lower than the exercise price The cash proceeds associated with the exercise of Warrants to\npurchase our common stock are contingent upon our stock price The value of our common stock will fluctuate and may not align with\nthe exercise price of the warrants at any given time If the Warrants are \u201cout of the money,\u201d meaning the exercise price is higher than\nthe market price of our common stock, there is a high likelihood that warrant holders may choose not to exercise their warrants As a\nresult, we may not receive any proceeds from the exercise of the Warrants\n\n46\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 78 of 408\n\nFurthermore, with regard to the Private Placement Warrants, it is possible that we may not receive cash upon their exercise, since\nthese warrants may be exercised on a cashless basis A cashless exercise allows warrant holders to convert the warrants into shares of\nour common stock without the need for a cash payment Instead of paying cash upon exercise, the warrant holder would receive a\nreduced number of shares based on a predetermined formula As a result, the number of shares issued through a cashless exercise will\nbe lower than if the warrants were exercised on a cash basis, which could impact the cash proceeds we receive from the exercise of\nsuch warrants\n\nThe Public Warrants may only be exercised for cash provided there is then an effective registration statement registering the shares\nof common stock issuable upon the exercise of such warrants If there is not a then effective registration statement, then such warrants\nmay be exercised on a \u201ccashless basis,\u201d pursuant to an available exemption from registration under the Securities Act\n\nOur Warrants are exercisable for Common Stock, the exercise of which would increase the number of shares eligible for future\nresale in the public market and result in dilution to our shareholders\n\nOur 14 374,975 Public Warrants to purchase an aggregate of 14 374,975 shares of Common Stock and 8,250,000 Private\nPlacement Warrants to purchase an aggregate of 8,250,000 shares of Common Stock will become exercisable on May 16, 2024 in\naccordance with the terms of that certain warrant agreement, dated March 4, 2021 by and between us and Continental Stock Transfer &\nTrust Company, as warrant agent (the \u201cWarrant Agreement\u201d) The exercise price of the Warrants is $11 50 per share, or approximately\n$260 2 million in the aggregate, assuming none of the Warrants are exercised through \u201ccashless\u201d exercise\n\nTo the extent such warrants are exercised, additional Common Stock will be issued, which will result in dilution to the holders of\nCommon Stock and will increase the number of shares eligible for resale in the public market We believe the likelihood that warrant\nholders will exercise their warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading\nprice of our Common Stock If the trading price for our Common Stock is less than $11 50 per share, we believe holders of our\nWarrants that were issued will be unlikely to exercise their warrants on a cash basis On July 18, 2024, the last reported sales price of\nour Common Stock was $10 49 per share and the last reported sales price of our Public Warrants was $1 32 per warrant Sales of\nsubstantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the\nmarket price of Common Stock\n\nCertain of our Warrants are accounted for as liabilities and the changes in value of such Warrants could have a material effect on,\nor cause volatility in, our financial results\n\nIn connection with the Business Combination, we assumed our Public Warrants to purchase up to 14,374 975 shares of our\nCommon Stock (which were originally issued as warrants to purchase shares of ARRW Class A common stock in connection with\nARRW\u2019s IPO) We evaluated the accounting treatment of such Warrants and determined to classify certain of such Warrants as\nliabilities measured at fair value The fair value of such Warrants is remeasured on a quarterly basis with changes in the estimated fair\nvalue recorded in Other (expense) income on the condensed consolidated statement of operations and comprehensive loss Due to the\nrecurring fair value measurement, we expect that we will recognize non cash gains or losses on such Warrants each reporting period\nand that the amount of such gains or losses could materially impact or cause volatility in our financial results At March 31, 2024, the\nfair value of the liability associated with the Public Warrants was determined by the Company to be approximately $2 6 million\n\nOur Certificate of Incorporation designates the Delaware Court of Chancery or Delaware state or United States federal district\ncourts as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit such\nstockholders\u2019 ability to obtain a favorable judicial forum for disputes with us or our directors, officers, other employees or other\nstockholders\n\nOur Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of\nChancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state\ncourt located within the State of Delaware or, if all such state courts lack subject matter jurisdiction, the federal district court for the\nDistrict of Delaware) shall be the sole and exclusive forum for state law claims for (i) any derivative claim or cause of action brought\non behalf of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers,\nother employees or stockholders, us or our stockholder; (ii) any action against us or any of our current or former directors, officers or\nother employees asserting a claim arising pursuant to any provision of the DGCL, the Certificate of Incorporation or Bylaws; (iv) any\nclaim or cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or Bylaws (as\neach may be amended from time to time, including any right, obligation, or remedy thereunder); (v) any claim or cause of action as to\nwhich the DGCL confers jurisdiction on the Delaware Court of Chancery; and (vi) any action asserting a claim against us or any of our\ncurrent or former directors, officers or other employees governed by the internal affairs doctrine or otherwise related to our internal\n\fCase 8.24-CV-02900-DKC Document 20-2 Filed 09/18/28 nah ds e 79 of 408\n\naffairs The foregoing provisions will not apply to any claims as to whic determines that there is an\nindispensable party not subject to the jurisdiction of such court, which is rested in the exclusive jurisdiction of a court or forum other\nthan such court\n\nSection 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any\nduty or liability created by the Securities Act or the rules or regulations promulgated thereunder Accordingly, both state and federal\ncourts have jurisdiction to entertain such Securities Act claims To prevent having to litigate claims in multiple jurisdictions and the\nthreat of inconsistent or contrary rulings by different courts, among other considerations, the Certificate of Incorporation will provide\nthat, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America\nshall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act\n\n47\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 80 of 408\n\nAny person or entity purchasing or otherwise acquiring, holding or owning (or continuing to hold or own) any interest in any of\nour securities shall be deemed to have notice of and consented to the forum provisions in the Certificate of Incorporation Although we\nbelieve these exclusive forum provisions will benefit us by providing increased consistency in the application of Delaware law and\nfederal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder\u2019s ability to\nbring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or\nstockholders, which may discourage lawsuits with respect to such claims There is uncertainty as to whether a court would enforce such\nprovisions, and the enforceability of similar choice of forum provisions in other companies\u2019 charter documents has been challenged in\nlegal proceedings It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were\nto find the choice of forum provision contained in the Certificate of Incorporation to be inapplicable or unenforceable in an action, we\nmay incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of\noperations and financial condition Furthermore, investors cannot waive compliance with the federal securities laws and rules and\nregulations promulgated thereunder\n\nOur Certificate of Incorporation, to the extent permitted by applicable law, contains provisions renouncing our interest and\nexpectation to participate in certain corporate opportunities identified or presented to our non employee directors or stockholders\n\nOur officers and directors and their respective affiliates may hold, and may, from time to time in the future, acquire interests in or\nprovide advice to businesses that directly or indirectly compete with certain areas of our business The Certificate of Incorporation\nprovides that we renounce, to the fullest extent permitted by Delaware or other applicable law, any expectancy that any of our non\nemployee directors, stockholders or the affiliates of such stockholders will offer any corporate opportunity of which such director or\nstockholder may become aware to us except with respect to a corporate opportunity that was offered to a director solely in his or her\ncapacity as our director and (i) such opportunity is one we are legally and contractually permitted to undertake and (ii) the director is\npermitted to refer that opportunity to us without violating any legal obligation As a result, these arrangements could adversely affect\nour business, results of operations, financial condition or prospects if attractive business opportunities are allocated to any of our non\nemployee directors, stockholders or the affiliates of such stockholders instead of to us\n\nIf the perceived benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market\nprice of New iLearningEngines\u2019 securities may decline\n\nFollowing the Business Combination, fluctuations in the price of our Common Stock could contribute to the loss of all or part of\nyour investment Any of the factors listed below could have a material adverse effect on your investment, and our Common Stock may\ntrade at a price significantly below the price you paid for it In such circumstances, the trading price of our Common Stock after the\nClosing may not recover and may experience a further decline\n\nBroad market and industry factors may materially harm the market price of our Common Stock, irrespective of our operating\nperformance The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated\nor disproportionate to the operating performance of the particular companies affected The trading prices and valuations of these stocks,\nand of our securities, may not be predictable A loss of investor confidence in the market for retail stocks or the stocks of other\ncompanies, notably in the education technology industry, which investors perceive to be similar to us, could depress our stock price\nregardless of its business, prospects, financial conditions or results of operations A decline in the market price for our Common Stock\nalso could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future\n\n48\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 81 of 408\n\nWe anticipate spending substantial funds in connection with the tax liabilities that arise upon the settlement of RSUs as a result of\nthe Business Combination\n\nThe RSUs previously issued by Legacy iLearningEngines that we have issued to date vest upon the satisfaction of two vesting\nrequirements a service based vesting requirement and a liquidity event based vesting requirement and the RSUs do not vest until both\nrequirements are satisfied The service based vesting requirement is satisfied after the holder has worked for iLearningEngines for some\nperiod of time, generally four years The liquidity event based vesting requirement was satisfied upon the consummation of the\nBusiness Combination\n\nPursuant to the terms of the RSU award agreement, once the RSUs vest, the Company must settle and deliver the shares underlying\nthe RSU on the vesting date (\u201cOriginal Issue Date\u201d) However if the Original Issue Date does not occur during an open window period\napplicable to the RSU holder or on a date when the RSU holder is otherwise permitted to sell shares on an established stock exchange\nor stock market, then the RSU settlement may be delayed until the RSU holder is no longer prohibited from selling shares on the open\nmarket, but in no event later than December 31 of the calendar year of the Original Issue Date or, if and only if permitted in a manner\nthat complies with Treasury Regulations Section 1 409A 1(b)(4), March 15 of the year immediately following the year in which the\nshares are no longer subject to a substantial risk of forfeiture within the meaning of Treasury Regulations 1 409A 1(d) Since the RSU\nholders were restricted from selling the shares underlying the RSUs in the open market, the Company did not settle the RSUs at\nClosing\n\nUpon settlement of the RSUs discussed above, we can satisfy the income tax withholding obligations (\u201ctax related items\u201d)\nassociated with the settlement of the RSUs, if any, by any of the following means or by a combination of such means (i) withholding\nfrom any compensation otherwise payable to the RSU holder by New iLearningEngines; (ii) causing the RSU holder to tender a cash\npayment; (iii) entering on behalf of the RSU holder (pursuant to this authorization without further consent) into a \u201csame day sale\u201d\ncommitment with a broker dealer that is a member of the Financial Industry Regulatory Authority (a \u201cFINRA Dealer\u2019) whereby the\nRSU holder irrevocably elects to sell a portion of the shares to be issued under the RSU to satisfy any tax related items and whereby\nthe FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the tax related items directly to New\niLearningEngines and/or its affiliates; (iv) withholding shares of common stock from the shares of common stock issued or otherwise\nissuable to the RSU holder in connection with the RSU with a fair market value (measured as of the date shares of common stock are\nissued to RSU holder or, if and as determined by New iLearningEngines, the date on which the tax related items are required to be\ncalculated) equal to the amount of such tax related items (a \u201cWithhold to Cover\u2019); or (v) any other method of withholding determined\nby New iLearningEngines and permitted by applicable law\n\nPursuant to the RSU Award Agreements with S Farhan Naqvi, Mr Naqvi may require that we satisfy any tax related items\nassociated with the settlement of his RSUs pursuant to a Withhold to Cover If so, we estimate that we could be required to withhold an\naggregate of 544 304 shares of the New iLearningEngines\u2019 Common Stock in settlement of such RSUs to satisfy tax withholding and\nremittance obligations at an assumed tax rate of 40%, and to pay approximately $3 2 million in cash to the relevant tax authorities to\nsatisfy our tax withholding and remittance obligations related to the settlement of such RSUs The amounts in our estimate are based\nupon the closing price of $5 95 per share, which is our closing price on May 31, 2024, the most recent practicable date prior to the date\nof this prospectus Our income and employment tax withholding obligations when Mr Naqvi\u2019s RSUs are settled are expected to be\nbased on the fair market value of our Common Stock as of the date the transfer instructions are given to the settlement agent, which\nmay be higher or lower than the closing price of $5 95 per share The cash remittance to satisfy Mr Naqvi\u2019s RSU tax related items\ncould adversely affect the business, results of operations or financial condition of New iLearningEngines\n\nFuture resales of our securities may cause the market price of such securities to drop significantly, even if our business is doing\nwell\n\nThe sale of our securities in the public market, including by entities to which we have issued shares in connection with\ntransactions, or the perception that such sales could occur, could harm the prevailing market price of our securities These sales, or the\npossibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a\nprice that we deem appropriate\n\nThe Bylaws contain lock up provisions that broadly prohibit the sale, pledge, transfer or otherwise disposition of the ownership\ninterest in the Company\u2019s common stock, par value $0 0001 per share (the \u201cCommon Stock\u2019) until the earlier to occur of (i) one year\nafter completion of the Business Combination, (ii) the last trading day when the closing price of the Common Stock equals or exceeds\n$12 00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading\ndays within any 30 trading day period commencing at least 150 days after the Business Combination and (iii) upon the consummation\nof a change of control, subject to certain customary exceptions The lock up provisions were applicable to holders of shares of\n\fe 8:24-cv-02900-DKC . Document ook Filed 09/18/25 PageS 4 of 408\n\nCommon Stock fat were issued (1) as consideration under the Merger Agreement (the \u201cMerger Shares\u201d), (11) to directors, officers and\nemployees of the Company and other individuals upon the settlement or exercise of Adjusted RSUs (as defined in the Merger\nAgreement) or Adjusted Restricted Stock (as defined in the Merger Agreement); and (iii) as consideration pursuant to the convertible\npromissory notes issued by Legacy iLearningEngines pursuant to convertible note purchase agreements by and between Legacy\niLearningEngines and certain investors (the \u201cConvertible Note Shares\u201d)\n\n49\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 83 of 408\n\nOn April 25, 2024, we waived the lock up restrictions under the Bylaws, effective as of April 29, 2024, with respect to (4) the\nConvertible Note Shares and (ii) the Merger Shares held by former Legacy iLearningEngines stockholders that hold, individually, less\nthan three percent (3%) of the Common Stock issued as consideration in connection with the Business Combination, which resulted in\nthe release of approximately 19 367,095 shares of Common Stock held by these lock up parties, of which 13,906,097 became\nimmediately available for trading As of the date of the filing of this prospectus, the lock up restrictions are applicable only to Harish\nChidambaran, Preeta Chidambaran and the Sponsor\n\nFollowing the expiration of the applicable lock up period, equity holders who remain subject to the lock up provisions will not be\nrestricted from selling shares of our Common Stock held by them, other than by applicable securities laws As such, sales of a\nsubstantial number of shares of our Common Stock in the public market could occur at any time These sales, or the perception in the\nmarket that the holders of a large number of shares intend to sell shares, could reduce the market price of our Common Stock As\nrestrictions on resale end and registration statements (filed after the Closing to provide for the resale of such shares from time to time)\nare available for use, the sale or possibility of sale of these shares could have the effect of increasing the volatility in our share price or\nthe market price of our Common Stock could decline if the holders of currently restricted shares sell them or are perceived by the\nmarket as intending to sell them\n\nPursuant to the Registration Rights Agreement, we are registering the Private Placement Warrants for resale The resale or possible\nresale of the Private Placement Warrants could have the effect of increasing the volatility in the price of our Warrants or cause such\nprice to decline\n\nAdditionally, in August 2021, iLearningEngines granted Harish Chidambaran 34,225,600 shares of restricted stock and Preeta\nChidambaran 5,657,788 shares of restricted stock, pursuant to Common Stock Purchase Agreements, both dated August 12, 2021 The\nrestricted stock will vest annually over 10 years commencing on April 16, 2025, subject to Mr Chidambaran and Dr Chidambaran\u2019s\nservice with the Company through each date When the restricted stock vests, if any of such shares are sold into the market (including\nto cover the income tax obligations associated with this vesting event or otherwise), such sales could harm the prevailing market price\nof our securities\n\nNew iLearningEngines may issue additional shares or other equity securities without your approval, which would dilute your\nownership interest and may depress the market price of New iLearningEngines\u2019 Common Stock\n\nPursuant to the 2024 Plan, we may issue an aggregate of up to the number of shares equal to 10% of our Common Stock issued\nand outstanding at the Effective Time, which amount will be subject to increase from time to time For additional information about this\nplan, please read the discussion under the heading \u201cExecutive Compensation 2024 Equity Incentive Plan\u201d We may also issue\nadditional shares of our Common Stock or other equity securities of equal or senior rank in the future in connection with, among other\nthings, future acquisitions or repayment of outstanding indebtedness, without shareholder approval, in a number of circumstances\n\nThe issuance of additional shares or other equity securities of equal or senior rank would have the following effects\n\ne existing shareholders\u2019 proportionate ownership interest in the Company will decrease;\n\ne the amount of cash available per share, including for payment of dividends in the future, may decrease;\n\ne the relative voting strength of each share of previously outstanding common stock may be diminished; and\n\ne the market price of our Common Stock may decline\n\n50\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 84 of 408\n\nFluctuations in operating results, quarter to quarter earnings and other factors, including incidents involving customers and\nnegative media coverage, may result in significant decreases in the price of our securities\n\nThe stock markets experience volatility that is often unrelated to operating performance These broad market fluctuations may\nadversely affect the trading price of our Common Stock, and, as a result, there may be significant volatility in the market price of our\nCommon Stock Separately, if we are unable to achieve profitability in line with investor expectations, the market price of our Common\nStock will likely decline when it becomes apparent that the market expectations may not be realized In addition to operating results,\nmany economic and seasonal factors outside of our control could have an adverse effect on the price of our Common Stock and\nincrease fluctuations in our results These factors include certain of the risks discussed herein, operating results of other companies in\nthe same industry, changes in financial estimates or recommendations of securities analysts, speculation in the press or investment\ncommunity, negative media coverage or risk of proceedings or government investigation, change in government regulation, foreign\ncurrency fluctuations and uncertainty in tax policies, the possible effects of war, terrorist and other hostilities, other factors affecting\ngeneral conditions in the economy or the financial markets or other developments affecting the education industry\n\nAn active market for our securities may not develop, which would adversely affect the liquidity and price of our securities\n\nThe price of our securities may vary significantly due to factors specific to us as well as to general market or economic conditions\nFurthermore, an active trading market for our securities may never develop or, if developed, it may not be sustained You may be\nunable to sell your securities unless a market can be established and sustained\n\nOur President and Chief Executive Officer has control over key decision making as a result of his control of a majority of our\ncommon stock\n\nHarish Chidambaran, our co founder and Chief Executive Officer, owned approximately 70% of the voting power of our\noutstanding common stock as of June 24, 2024, including restricted stock and shares held by family members of Mr Chidambaran As\na result, Mr Chidambaran has the ability to control the outcome of matters submitted to our stockholders for approval, including the\nelection of directors and any merger, consolidation, or sale of all or substantially all of our assets This concentrated control could\ndelay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other\nstockholders support, or conversely this concentrated control could result in the consummation of such a transaction that our other\nstockholders do not support This concentrated control could also discourage a potential investor from acquiring our common stock due\nto the limited voting power of such stock In addition, Mr Chidambaran has the ability to control the management and major strategic\ninvestments of our company as a result of his position as our Chief Executive Officer and his ability to control the election or\nreplacement of our directors In the event of his death, the shares of our capital stock that Mr Chidambaran owns will be transferred to\nthe persons or entities that he designates As a board member and officer, Mr Chidambaran owes a fiduciary duty to our stockholders\nand must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders As a stockholder, even a\ncontrolling stockholder, Mr Chidambaran is entitled to vote his stock in his own interests, which may not always be in the interests of\nour stockholders generally\n\nAs long as our principal stockholders hold a majority of the voting power of our capital stock, we may rely on certain exemptions\nfrom the corporate governance requirements of the Nasdaq available for \u201ccontrolled companies \u201d\n\nWe are a \u201ccontrolled company\u201d within the meaning of the corporate governance requirements of the Nasdaq because our principal\nstockholders will continue to hold more than 50% of the voting power of our outstanding shares of capital stock A controlled company\nmay elect not to comply with certain corporate governance requirements of the Nasdaq Accordingly, you will not have certain of the\nprotections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq We\nhave not and do not plan to rely on any of the exemptions available to controlled companies\n\n31\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 85 of 408\n\nClaims for indemnification by our directors and officers may reduce available funds to satisfy successful third party claims against\nus and may reduce the amount of money available to us\n\nOur organizational documents provide that we will indemnify our directors and officers, in each case to the fullest extent permitted\nby Delaware law In addition, as permitted by Section 145 of the DGCL, the Bylaws and the indemnification agreements that we have\nentered into with our directors and officers will provide that\n\ne we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at its\nrequest, to the fullest extent permitted by Delaware law Delaware law provides that a corporation may indemnify such person\nif such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests\nof the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person\u2019s conduct was\nunlawful;\n\ne we may, in its discretion, indemnify employees and agents in those circumstances where indemnification is permitted by\napplicable law;\n\n@ we will be required to advance expenses, as incurred, to its directors and officers in connection with defending a proceeding,\nexcept that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is\nnot entitled to indemnification;\n\ne we will not be obligated pursuant to the Bylaws to indemnify a person with respect to proceedings initiated by that person\nagainst us or its other indemnitees, except with respect to proceedings authorized by its board of directors or brought to\nenforce a right to indemnification;\n\ne the rights conferred in the Bylaws are not exclusive, and we are authorized to enter into indemnification agreements with its\ndirectors, officers, employees and agents and to obtain insurance to indemnify such persons; and\n\n@ we may not retroactively amend its bylaw provisions to reduce its indemnification obligations to directors, officers, employees\nand agents\n\nWe are an emerging growth company as well as a smaller reporting company within the meaning of the Securities Act and, if we\ntake advantage of certain exemptions from disclosure requirements available to \u201cemerging growth companies,\u201d our securities may\nbe less attractive to investors and it may be more difficult to compare our performance with other public companies\n\nWe qualify as an \u201cemerging growth company\u201d as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act\nAs such, we will be eligible for and intends to take advantage of certain exemptions from various reporting requirements applicable to\nother public companies that are not emerging growth companies for as long as it continues to be an emerging growth company,\nincluding, but not limited to, (a) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes\nOxley Act, (b) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and\n(c) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of\nany golden parachute payments not previously approved As a result, our stockholders may not have access to certain information they\nmay deem important We will remain an emerging growth company until the earliest of (4) the last day of the fiscal year in which the\nmarket value of shares of Common Stock that are held by non affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the\nlast day of the fiscal year in which it has total annual gross revenue of $1 235 billion or more during such fiscal year (as indexed for\ninflation), (iii) the date on which it has issued more than $1 billion in non convertible debt in the prior three year period or\n(iv) December 31, 2026, which is the last day of the fiscal year following the fifth anniversary of the date of the first sale of Common\nStock in Arrowroot\u2019s initial public offering We cannot predict whether investors will find our securities less attractive because it relies\non these exemptions If some investors find our securities less attractive as a result of its reliance on these exemptions, the trading\nprices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the\ntrading prices of our securities may be more volatile\n\n52\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 86 of 408\n\nFurther, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or\nrevised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement\ndeclared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or\nrevised financial accounting standards The JOBS Act provides that a company can elect to opt out of the extended transition period\nand comply with the requirements that apply to non emerging growth companies but any such election to opt out is irrevocable We\nhave elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different\napplication dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the\ntime private companies adopt the new or revised standard This may make comparison of our financial statements with another public\ncompany which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended\ntransition period difficult or impossible because of the potential differences in accounting standards used\n\nAS an emerging growth company, we may also take advantage of certain exemptions from various reporting requirements that are\napplicable to other public companies that are not emerging growth companies including, but not limited to, not being required to obtain\nan assessment of the effectiveness of our internal controls over financial reporting from our independent registered public accounting\nfirm pursuant to Section 404 of the Sarbanes Oxley Act, reduced disclosure obligations regarding executive compensation in our\nperiodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive\ncompensation and stockholder approval of any golden parachute payments not previously approved We cannot predict if investors will\nfind our shares of common stock less attractive because we will rely on these exemptions If some investors find our shares of common\nstock less attractive as a result, there may be a less active market for our shares of common stock and our share price may be more\nvolatile\n\nAdditionally, we qualify as a \u201csmaller reporting company\u201d as defined in Item 10(f)(1) of Regulation S K Smaller reporting\ncompanies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of\naudited financial statements We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market\nvalue of our Common Stock held by non affiliates exceeds $250 million as of the end of that year\u2019s second fiscal quarter, or (2) our\nannual revenues exceeded $100 million during such completed fiscal year and the market value of Common Stock held by non\naffiliates equals or exceeds $700 million as of the end of that year\u2019s second fiscal quarter To the extent that we take advantage of such\nreduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or\nimpossible\n\nAnti takeover provisions contained in the Certificate of Incorporation and Bylaws, as well as provisions of Delaware law, could\nimpair a takeover attempt\n\nThe Certificate of Incorporation and Bylaws contain provisions that could have the effect of delaying or preventing changes in\ncontrol or changes in our management without the consent of our board of directors These provisions include\n\n@ no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;\n\ne =the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of\ndirectors or the resignation, death, or removal of a director with or without cause by stockholders, which prevents stockholders\nfrom being able to fill vacancies on our board of directors;\n\ne =the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and\nother terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to\nsignificantly dilute the ownership of a hostile acquirer;\n\ne aprohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special\n\nmeeting of our stockholders;\n\n53\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 87 of 408\n\ne the requirement that a special meeting of stockholders may be called only by the chairperson of the board of directors, the\nchief executive officer or the board of directors, which may delay the ability of our stockholders to force consideration of a\nproposal or to take action, including the removal of directors;\n\ne limiting the liability of, and providing indemnification to, our directors and officers;\ne controlling the procedures for the conduct and scheduling of stockholder meetings;\n\ne\u00ae providing for a staggered board, in which the members of the board of directors are divided into three classes to serve fora\nperiod of three years from the date of their respective appointment or election;\n\ne = granting the ability to remove directors with cause by the affirmative vote of 66 2/3% in voting power of the outstanding\nshares of our Common Stock entitled to vote thereon;\n\ne requiring the affirmative vote of at least 66 2/3% of the voting power of the outstanding shares of capital stock of New\niLearningEngines entitled to vote generally in the election of directors, voting together as a single class, to amend the Bylaws\nor ARTICLE V, ARTICLE VI, ARTICLE VI, ARTICLE VHUI, and ARTICLE IX of the Certificate of Incorporation; and\n\ne@ advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose\nmatters to be acted upon at a stockholders\u2019 meeting, which may discourage or deter a potential acquirer from conducting a\nsolicitation of proxies to elect the acquirer\u2019s own slate of directors or otherwise attempting to obtain control of us\n\nThese provisions, alone or together, could delay hostile takeovers and changes in control of the Company or changes in our Board\nand management\n\nAs a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the DGCL, which will\nprevent some stockholders holding more than 15% of our outstanding Common Stock from engaging in certain business combinations\nwithout approval of the holders of substantially all of our Common Stock Any provision of the Certificate of Incorporation or Bylaws\nor Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to\nreceive a premium for their shares of our Common Stock and could also affect the price that some investors are willing to pay for our\nCommon Stock\n\n54\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 88 of 408\n\nUSE OF PROCEEDS\n\nAll of the shares of Common Stock and Warrants offered by the Selling Securityholders pursuant to this prospectus will be sold by\nthe Selling Securityholders for their respective accounts We will not receive any of the proceeds from these sales We will pay certain\nexpenses associated with the registration of the securities as described in the \u201cPlan of Distribution\u201d section in this prospectus\n\nWe will receive up to an aggregate of approximately $260,187,213 from the exercise of the Warrants, assuming the exercise in full\nof all of the Warrants for cash We expect to use the net proceeds we may receive from the exercise of the Warrants for general\ncorporate purposes Due to the uncertainty regarding the exercise of the Warrants, none of our projected liquidity requirements\ndiscussed in this prospectus assume the receipt of any proceeds from the exercise of the Warrants We will have broad discretion over\nthe use of proceeds from the exercise of the Warrants The Private Placement Warrants may be exercised for cash or on a \u201ccashless\nbasis * The Public Warrants may only be exercised for cash provided there is then an effective registration statement registering the\nshares of common stock issuable upon the exercise of such warrants If there is not a then effective registration statement, then such\nwarrants may be exercised on a \u201ccashless basis,\u201d pursuant to an available exemption from registration under the Securities Act There is\nno assurance that the holders of the Warrants will elect to exercise any or all of such Warrants To the extent that the Warrants are\nexercised on a \u201ccashless basis,\u201d the amount of cash we would receive from the exercise of the Warrants will decrease So long as the\ntrading price for our Common Stock is less than $11 50 per share, meaning the the warrants are \u201cout of the money,\u201d the warrant holders\nare not likely to exercise their warrants There can be no assurance that such Warrants will be in the money prior to their respective\nexpiration dates, and therefore, we may not receive any cash proceeds from the exercise of such Warrants\n\n55\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 89 of 408\n\nDETERMINATION OF OFFERING PRICE\n\nThe offering price of the shares of Common Stock underlying the Warrants offered hereby is determined by reference to the\nexercise price of the Warrants of $11 50 per share The Public Warrants are listed on Nasdaq under the symbol \u201cATLEW\u201d\n\nWe cannot currently determine the price or prices at which shares of Common Stock or Warrants may be sold by the Selling\nSecurityholders under this prospectus\n\n56\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 90 of 408\n\nMARKET INFORMATION FOR SECURITIES AND DIVIDEND POLICY\nMarket Information\n\nOur Common Stock and Public Warrants are currently listed on Nasdaq Global Market under the symbols \u201cAILE\u201d and \u201cAILEW,\u201d\nrespectively Prior to the Closing, ARRW\u2019s units, Class A Common Stock and Public Warrants were historically quoted on the Nasdaq\nCapital Market under the symbols \u201cARRWU,\u201d \u201cARRW\u201d and \u201cARRWW,\u201d respectively As of April 16, 2024, and following the\nconsummation of the Business Combination, there were 90 holders of record of our Common Stock and one holder of record of our\nPublic Warrants We currently do not intend to list the Private Placement Warrants on any stock exchange or stock market\n\nDividend Policy\n\nWe have not declared or paid any dividends on shares of Common Stock to date We anticipate that we will retain our future\nearnings to finance the further development and expansion of our business and do not intend to pay cash dividends in the foreseeable\nfuture Any future determination to pay dividends will be at the discretion of the Board and will depend on our financial condition,\nresults of operations, capital requirements and future agreements and financing instruments, business prospects, and such other factors\nas the Board deems relevant\n\n57\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 91 of 408\n\nMANAGEMENT?\u2019S DISCUSSION AND ANALYSIS OF\nFINANCIAL CONDITION AND RESULTS OF OPERATIONS\n\nThe following discussion and analysis of the financial condition and results of operations of iLearningEngines Inc (for purposes\nof this section the Company iLearningEngines we us and our refer to iLearningEngines Inc (which changed its name to\niLearningEngines Holdings Inc in connection with the Business Combination (as defined below)) and its subsidiaries prior to the\nconsummation of the Business Combination and iLearningEngines Inc (formerly known as Arrowroot Acquisition Corp) after the\nconsummation of the Business Combination unless the context otherwise requires) should be read in conjunction with our unaudited\ninterim consolidated financial statements and the related notes thereto as of March 31 2024 and for the three months ended March 31\n2024 and 2023 included elsewhere in this prospectus and our audited consolidated financial statements as of and for the fiscal year\nended December 31 2023 included elsewhere in this prospectus This discussion and analysis contains forward looking statements\nsuch as statements of our plans objectives expectations and intentions Any statements that are not statements of historical fact are\njorward looking statements When used the words believe plan intend anticipate target estimate expect will\n\n\u201ccontinue project and the like and/or future tense or conditional constructions ( will may could \u2014 should etc) or\nsimilar expressions identify certain of these forward looking statements These forward looking statements are subject to risks and\nuncertainties including those we describe under sections titled Special Note Regarding Forward Looking Statements and Risk\nFactors that could cause actual results or events to differ materially from those expressed or implied by the forward looking\nstatements Our actual results and the timing of events could differ materially from those anticipated in these forward looking\nstatements as a result of a variety of factors\n\nRecent Developments\nBusiness Combination\n\nOn April 27, 2023, we entered into an Agreement and Plan of Merger and Reorganization (as amended, the \u201cMerger Agreement\u2019)\nwith Arrowroot Acquisition Corp (\u201c\u201cARRW\u201d), a Delaware corporation and ARAC Merger Sub, Inc , a Delaware corporation and\nwholly owned subsidiary of ARRW (\u201cMerger Sub\u201d) On April 16, 2024 (the \u201cClosing Date\u201d), we consummated the merger transactions\ncontemplated by the Merger Agreement, following the approval by ARRW\u2019s stockholders at a special meeting of stockholders held on\nApril 1, 2024, whereby Merger Sub merged with and into iLearningEngines with the separate corporate existence of Merger Sub\nceasing (the \u201cMerger\u201d and, together with the other transactions contemplated by the Merger Agreement, the \u201cBusiness Combination\u2019)\nThe closing of the Business Combination is herein referred to as \u201cthe Closing \u201d In connection with the consummation of the Merger on\nthe Closing Date, ARRW changed its name from Arrowroot Acquisition Corp to iLearningEngines, Inc and iLearningEngines changed\nits name to iLearningEngines Holdings, Inc (in such post closing capacity, \u201cLegacy iLearningEngines\u2019)\n\nAs a result of the Merger and upon the Closing, among other things, (1) each share of Legacy iLearningEngines Common Stock\nissued and outstanding as of immediately prior to the Closing was exchanged for the right to receive the number of shares of common\nstock, par value $0 0001 per share, of New iLearningEngines (\u201cNew iLearningEngines Common Stock\u201d) equal to the exchange ratio of\n0 8061480 (the \u201cExchange Ratio\u201d) for an aggregate of 77,242 379 shares of New iLearningEngines Common Stock; (2) each share of\nLegacy iLearningEngines Common Stock held in the treasury of Legacy iLearningEngines was cancelled without any conversion\nthereof and no payment or distribution was or will be made with respect thereto; (3) each Vested RSU was cancelled and converted into\nthe right to receive, subject to settlement and delivery in accordance with the Legacy iLearningEngines equity incentive plan, a number\nof New iLearningEngines Common Stock equal to the Exchange Ratio, for an aggregate of 5,675,890 shares of New iLearningEngines\nCommon Stock; (4) each Unvested RSU was cancelled and converted into the right to receive a number of restricted stock units issued\nby the New iLearningEngines equal to the Exchange Ratio (\u201cNew iLearningEngines Converted RSU Award\u201d), with each New\niLearningEngines Converted RSU Award subject to the same terms and conditions as were applicable to the original Legacy\niLearningEngines restricted stock unit award, for an aggregate of 78,730 shares of New iLearningEngines Common Stock subject to\nNew iLearningEngines RSU Awards; (5) each share of vested Legacy iLearningEngines restricted stock was converted into the right to\nreceive a number of shares of New iLearningEngines Common Stock equal to the Exchange Ratio, for an aggregate of 290,447 shares\nof New iLearningEngines Common Stock; (6) each share of unvested Legacy iLearningEngines restricted stock was converted into the\nright to receive a number of restricted shares of New iLearningEngines Common Stock (\u201cNew iLearningEngines Converted Restricted\nStock\u201d) equal to the Exchange Ratio, with substantially the same terms and conditions as were applicable to such unvested Legacy\niLearningEngines restricted stock immediately prior to the Effective Time, which shares will be restricted subject to vesting on the\nbooks and records of Legacy iLearningEngines, for an aggregate of 32,151,912 shares of New iLearningEngines Converted Restricted\nStock; (7) each Convertible Note (as defined below) was converted into the night to recetve a number of shares of New\niLearningEngines Common Stock equal to the Convertible Note Balance, divided by $10 00, for an aggregate of 13,060,608 shares of\nNew iLearningEngines Common Stock; (8) the 2020 Lender, 2021 Lender and 2023 Lender received 4,419 998 shares of New\niLearningEngines Common Stock on the Closing Date based on amendments to term loans; (9) Former ARRW public stockholders\n\freceived 638 PIES ANN, PEO RCs choc fat oo tis c1otill\u00a7 6 oft SIF we EAR enee ARRAS ibtic shares,\nwhich included (a) 82,091 shares of New iLearningEngines Common Stock issued pursuant to a non redemption agreement with an\ninvestor as consideration for the non exercise of redemption rights by such investor in connection with the shareholder meetings\npreceding the Business Combination, and (b) 556,886 shares of New iLearningEngines Common Stock as a result of the conversion of\nformer ARRW Class A common stock; (10) the former ARRW founders received 6,705,409 shares of New iLearningEngines Common\nStock in exchange for former ARRW Class B Common Stock; and (11) the former ARRW sponsor received 460 384 shares of New\niLearningEngines Common Stock as consideration, in part, for the repayment in full of all outstanding obligations under unsecured\npromissory notes issued to Arrowroot\n\n58\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 93 of 408\n\nUpon the consummation of the Business Combination and payment of certain other amounts that were contingent on the closing of\nthe Business Combination, the most significant change in our reported financial position was an increase in cash and cash equivalents\nof approximately $5 9 million primarily due to proceeds from the Trust Account, partially offset by cash payments that were disbursed\nat the Closing which included $0 2 million of transaction expenses, $5 0 million prepayment for forward purchase agreement, $0 1\nmillion in directors\u2019 and officers\u2019 insurance premiums, and $0 5 million payments to ARRW promissory notes For more information,\nsee\u201c Liquidity and Capital Resources\u201d\n\nIn connection with the April 1 special meeting of shareholders of ARRW (and related postponements) and the closing of the\nBusiness Combination, the holders of ARRW\u2019s Class A common stock, par value $0 0001 per share exercised their right to redeem their\nshares for cash at a redemption price of approximately $10 36 per share, for an aggregate redemption amount of approximately $41 1\nmillion As a result, approximately $5 9 million was the balance remaining in such trust account As a result, the condition to\niLearningEngines\u2019 obligation to consummate the Business Combination that the amount of cash available in ARRW\u2019s trust account\nimmediately prior to the effective time of the Business Combination, after deducting the amount required to satisfy payments to ARRW\nstockholders in connection with the redemptions, the payment of any deferred underwriting commissions being held in ARRW\u2019s trust\naccount and the payment of certain transaction expenses, is equal to or greater than $100 million (such condition, the \u201cMinimum Cash\nCondition\u201d) was not satisfied Therefore, in connection with the closing of the Business Combination, on April 16, 2024, we waived the\nMerger Agreement\u2019s minimum cash condition of $100 0 million and minimum Market Value of Publicly Held Shares (as defined in\nNasdaq\u2019s listing requirements) condition To offset the impacts of such waiver (i) on March 27, 2024, we entered cach of the Fee\nReduction Agreement, the Amended Mizuho Engagement Letter and the BTIG Amendment; (ii) on April 9, 2024, we entered into the\nLetter Agreement; (1i1) on April 16, 2024, we entered into the 2024 Convertible Note Purchase Agreement; and (iv) on April 17, 2024\nwe entered into the Revolving Loan Agreement Each agreement is more fully described below, including the Letter Agreement, which\nis described in\u201c Liquidity and Capital Resources | Forward Purchase Agreement\n\nConcurrently with the Closing, in addition to approximately $5 9 million from the ARRW trust account, we received\napproximately $46 8 million in gross proceeds, comprising approximately $17 4 million from the 2023 Convertible Notes and\napproximately $29 4 million from the 2024 Convertible Notes For more information, see\u201c Recent Developments 2023\nConvertible Note\u201d and\u201c Recent Developments 2024 Convertible Note\u201d Subsequently, on April 17, 2024, the Company received\nan aggregate of up to $60 0 million, consisting of (i) a revolving credit facility in an aggregate principal amount of up to $40 0 million\nand (ii) an uncommitted accordion facility allowing the Company to increase the revolving commitments by an additional principal\namount of $20 0 million pursuant to the Revolving Loan Facility On June 27, 2024, the Borrower amended the Revolving Loan\nAgreement to, among other things, increase the revolving credit facility from $40 0 million to $60 0 million Borrower drew $20 0\nmillion in Revolving Loans on June 27, 2024, which will be used for general corporate purposes For more information, see\u201c Recent\nDevelopments Revolving Loan Agreement\u201d\n\nWe believe that cash raised in the Business Combination is sufficient to fund our continuing operations through May 2025\nHowever, based on the disparity between the exercise price of the Warrants and the current trading price of the Common Stock, it is\nunlikely that the Company will receive significant proceeds from exercises of the Warrants In light of both the unlikelihood of such\nexercises and the significant number of redemptions in connection with the Business Combination, additional funds would be required\nto fund our continuing operations thereafter Our ability to raise additional capital through the sale of equity or convertible debt\nsecurities could be significantly impacted by the resale of shares of our common stock by the selling securityholders pursuant to this\nprospectus, which could result in a significant decline in the trading price of our common stock and potentially hinder our ability to\nraise capital at terms that are acceptable to us or at all In addition, debt and equity financing, if available, may involve agreements that\ninclude covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital\nexpenditures or declaring dividends If we are unable to raise additional funds through equity or debt financings when needed, we may\nbe required to delay, limit, or substantially reduce our operations\n\nNon Redemption Agreement\n\nOn February 2, 2024, the Company entered into a Non Redemption Agreement (the \u201cNon Redemption Agreement\u201d) with Meteora\nto not redeem its shares of the Company\u2019s Class A common stock (the \u201cClass A Common Stock\u201d) at the special meeting of stockholders\nheld on February 2, 2024 (the \u201cExtension Special Meeting\u201d) Pursuant to the Non Redemption Agreement, Meteora agreed not to\nrequest redemption of 410,456 shares of Class A Common Stock (the \u201cNon Redeemed Shares\u201d) in connection with the Extension\nSpecial Meeting In consideration of Meteora entering into the Non Redemption Agreement, immediately following the closing of the\nCompany\u2019s initial business combination, Arrowroot agreed to forfeit 82,091 shares of Class B common stock (the \u201cClass B Common\nStock\u201d), or 41,046 shares of Class B Common Stock in the event the initial business combination was consummated in February 2024\nPursuant to the terms of the Non Redemption Agreement, Arrowroot forfeited, and the Company issued, 82,091 shares of Common\nStock to Meteora promptly following the consummation of the Business Combination\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 94 of 408\nDeferred Underwriting Fee\n\nOn March 27, 2024, Arrowroot and Cantor entered into the Fee Reduction Agreement, pursuant to which Cantor has agreed to\nforfeit $4 1 million of the deferred underwriting fees payable, resulting in a remainder of $6 0 million of deferred underwriting fees\npayable (the \u201cReduced Deferred Fee\u201d) by Arrowroot to Cantor subject to the Closing The Reduced Deferred Fee shall be payable to\nCantor in the form of shares of New iLearningEngines Common Stock in an amount of shares equal to the greater of (i) $6 0 million,\ndivided by $10 00 and (ii) the quotient obtained by dividing (x) $6 0 million by (y) the VWAP (as defined in the Fee Reduction\nAgreement) of New iLearningEngines Common Stock over the seven (7) trading days immediately prior to the initial filing of the\nResale Registration Statement (as defined in the Fee Reduction Agreement) On June 3, 2024, the Company issued 1,022,146 shares of\nCommon Stock to Cantor at a price of $5 87 per share pursuant to the Fee Reduction Agreement Under the Fee Reduction Agreement,\nthe combined company will be subject to, among others, certain obligations with respect to the filing of the resale registration statement\nand maintaining the continued effectiveness of the resale registration statement, and a failure of the combined company to discharge\nsuch obligations may result in the ability of Cantor to require the combined company to pay the Reduced Deferred Fee in cash The Fee\nReduction Agreement only applies to the consummation of the Business Combination with iLearningEngines and no other potential\nbusiness combinations that may be contemplated or consummated by Arrowroot The form of Fee Reduction Agreement is attached to\nthis Form \u00a7 1 as Exhibit 10 35 and the terms of such agreement are incorporated herein by reference\n\n59\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 95 of 408\n\nMizuho Fee Agreement\n\nOn June 5, 2020, Mizuho and iLearningEngines entered into a letter agreement (the \u201cMizuho Engagement Letter\u201d) pursuant to\nwhich iLearningEngines engaged Mizuho as a financial advisor in connection with the Business Combination On March 27, 2024, the\nCompany and Mizuho amended the Mizuho Engagement Letter (the \u201cAmended Mizuho Engagement Letter\u201d), to provide that, in lieu of\npayment in cash of the full amount of any advisory fees or other fees or expenses owed under the Mizuho Engagement Letter, the\niLearningEngines shall pay (or cause the combined company to pay) Mizuho the $7 5 million Mizuho Fee in cash or New\niLearningEngines Shares, at the sole discretion of the combined company To date, the Company has paid approximately $1 1 million\nin cash to Mizuho If iLearningEngines elects to pay the Mizuho Fee in New iLearningEngines Shares, then prior to the issuance of\nsuch shares, iLearningEngines has agreed to register such shares on Form 8 3 or Form S\u00a7 1 or any similar long form registration\nstatement that may be available at such time and to list such shares on the principal national securities exchange on which the New\niLearningEngines Shares are then listed and traded The form of the Amended Mizuho Engagement Letter is attached to this Form S 1\nas Exhibit 10 36 and the terms of such agreement are incorporated herein by reference\n\nBTIG Fee Agreement\n\nOn July 25, 2023, BTIG and Arrowroot entered into a letter agreement (the \u201cBTIG Engagement Letter\u201d) pursuant to which\nArrowroot engaged BTIG as a financial advisor in connection with the Business Combination On March 27, 2024, the BTIG and\nArrowroot amended the BTIG Engagement Letter (the \u201cBTIG Amendment\u201d), to provide that, in lieu of payment in cash of the full\namount of any advisory fees or other fees and expenses owed under the BTIG Engagement Letter, Arrowroot will pay to BTIG $3 0\nmillion in advisory fees (the \u201cBTIG Advisory Fee\u201d) and BTIG Expenses The BTIG Expenses will be paid in cash upon the\nconsummation of the Business Combination The BTIG Advisory Fee will be payable to BTIG in the form of shares of New\niLearningEngines Common Stock in an amount of shares equal to the greater of (i) $3 0 million, divided by $10 00 and (ii) the quotient\nobtained by dividing (x) $3 0 million by (y) the VWAP (as defined in the BTIG Amendment) of New iLearningEngines Common Stock\nover the seven (7) trading days immediately prior to the initial filing of the Resale Registration Statement (as defined in the BTIG\nAmendment) On June 3, 2024, the Company issued 511,073 shares of Common Stock to BTIG at a price of $5 87 per share pursuant\nto the BTIG Amendment Under the BTIG Amendment, the combined company will be subject to, among others, certain obligations\nwith respect to the filing of the resale registration statement and maintaining the continued effectiveness of the resale registration\nstatement, and a failure of the combined company to discharge such obligations may result in the ability of BTIG to require the\ncombined company to pay the BTIG Advisory Fee in cash The form of the BTIG Amendment is attached to this Form \u00a7 1 as Exhibit\n10 37 and the terms of such agreement are incorporated herein by reference\n\nCooley Fee Agreement\n\nOn October 20, 2020, Cooley and Arrowroot entered into a letter agreement (as amended, the \u201cCooley Engagement Letter\u201d)\npursuant to which Arrowroot engaged Cooley as a law firm in connection with the Business Combination On March 27, 2024, Cooley\nand Arrowroot amended the Cooley Engagement Letter (the \u201cFirst Cooley Amendment\u201d), to provide that, Arrowroot will pay to Cooley\n$2 0 million in law fees (the \u201cCooley Deferred Law Fee\u201d) in the form of a certain number of shares (the \u201cCooley Fee Shares\u201d) The\nCooley Fee Shares will be issued in the form of shares of New iLearningEngines Common Stock in an amount of shares equal to the\ngreater of (i) $2 0 million, divided by $10 00 and (ii) the quotient obtained by dividing (x) $2 0 million by (y) the VWAP (as defined in\nthe Cooley Amendment) of New iLearningEngines Common Stock over the seven (7) trading days immediately prior to the initial\nfiling of the Resale Registration Statement (as defined in the Cooley Amendment) On May 31, 2024, the parties amended the First\nCooley Amendment (the \u201cSecond Cooley Amendment\u201d) to change the Cooley Deferred Law Fee from $2 0 million to $1 3 million On\nJune 3, 2024, the Company issued 221,465 shares of Common Stock to Cooley at a price of $5 87 per share pursuant to the Cooley\nEngagement Letter Under the Cooley Amendment, the combined company will be subject to, among others, certain obligations with\nrespect to the filing of the resale registration statement and maintaining the continued effectiveness of the resale registration statement\nThe form of the First Cooley Amendment is attached to this Form S 1 as Exhibit 10 38 and the terms of such agreement are\nincorporated herein by reference, and the Second Cooley Amendment is attached to this Form \u00a7 1 as Exhibit 10 39 and the terms of\nsuch agreement are incorporated herein by reference\n\n2023 Convertible Note\n\nOn April 27, 2023, Legacy iLearningEngines entered into a convertible note purchase agreement (the \u201c2023 Convertible Note\nPurchase Agreement\u2019), with certain investors (collectively, with all investors who may become party to the 2023 Convertible Note\nPurchase Agreement thereafter, the \u201c2023 Convertible Note Investors\u201d), pursuant to which, among other things, Legacy\niLearningEngines issued and sold to the 2023 Convertible Note Investors convertible notes due in October 2025 (\u201c2023 Convertible\nNotes\u201d) with aggregate principal amount of $17,400,000, including to affiliates of the Sponsor Each 2023 Convertible Note accrued\n\finterest at arate 455 Bg 4 Cv -02900-DKC Document 90-2. Filed 09/18/25 Page 96 of 408\n\n\u00a9 per annum unti aggregate accrued interest thereunder equals 25% of the principal amount of such note,\nand (ii) 8% per annum thereafter Immediately prior to the consummation of the Business Combination, each 2023 Convertible Note\nautomatically converted into 4,971,076 shares of Legacy iLearningEngines thereby entitling the holder thereof to receive, in connection\nwith the consummation of the Business Combination, a number of shares New iLearningEngines Common Stock (rounded down to the\nnearest whole share) equal to (i) 2 75, multiplied by the outstanding principal under such 2023 Convertible Note, plus all accrued and\nunpaid interest thereon, divided by (ii) $10 00\n\n60\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 97 of 408\n\n2024 Convertible Note\n\nOn March 21, 2024, Legacy iLearningEngines entered into the 2024 convertible note purchase agreement (the \u201c2024 Convertible\nNote Purchase Agreement\u201d) with an investor (the \u201cMarch Investor\u2019) pursuant to which, among other things, Legacy iLearningEngines\nissued and sold the Initial 2024 Convertible Note in an aggregate principal amount of $700,000 On April 16, 2024, Legacy\niLearningEngines entered into the 2024 Convertible Note Purchase Agreement with certain investors (collectively, the \u201cApril\nInvestors\u201d and, together with the March Investor, the \u201c2024 Convertible Note Investors\u201d), pursuant to which, among other things,\nLegacy iLearningEngines issued and sold to the 2024 Convertible Note Investors convertible notes due in October 2026 (\u201c2024\nConvertible Notes\u201d) with aggregate principal amount of $29,414,500 (including the initial $700,000 note) Each 2024 convertible note\naccrued interest at a rate of (i) 15% per annum until the aggregate accrued interest thereunder equals 25% of the principal amount of\nsuch note, and (ii) 8% per annum thereafter Immediately prior to the consummation of the Business Combination, each 2024\nConvertible Note automatically converted into 8,089 532 shares of Legacy iLearningEngines thereby entitling the holder thereof to\nreceive, in connection with the consummation of the Business Combination, a number of shares New iLearningEngines Common Stock\n(rounded down to the nearest whole share) equal to (1) 2 75, multiplied by the outstanding principal under such convertible note, plus\nall accrued and unpaid interest thereon, divided by (ii) $10 00 The price per share at which the Principal (as defined in the 2024\nConvertible Note Purchase Agreement), together with accrued but unpaid interest, on each 2024 Convertible Note converts into\nIncentive Shares (as defined in the 2024 Convertible Note Purchase Agreement) is referred to as the \u201cConversion Price\u201d herein\n\nIn the event that the Volume Weighted Average Price (\u201cVWAP\u201d) (as defined in the 2024 Convertible Note Purchase Agreement) of\nthe New iLearningEngines Common Stock over the ten (10) trading days immediate preceding November 30, 2024 (the \u201cReference\nDate\u201d) is below the Conversion Price, then the 2024 Convertible Note shall be converted into shares of New iLearningEngines\nCommon Stock, together with a make whole payment equal to a number of additional Incentive Shares (rounded down to the nearest\nwhole share) equal to (i) the Conversion Price, divided by the Reference Price (as defined below), minus (ii) one (1) \u201cReference Price\u201d\nmeans the greater of (i) the VWAP of the New iLearningEngines Common Stock over the ten (10) trading days immediately preceding\nthe Reference Date and (ii) $1 00 Notwithstanding the foregoing, the maximum number of shares issuable pursuant to the 2024\nConvertible Notes shall not exceed 10,000,000 Incentive Shares\n\nIn connection with the issuance of the 2024 Convertible Notes, on March 21, 2024, (4) Legacy iLearningEngines entered into a\noinder to the Amended and Restated Registration Rights Agreement with each of the 2024 Convertible Note Investors, and (ii) the\n2024 Convertible Note Investors entered into subordination agreements in favor of any holder of senior debt\n\nRevolving Loan Agreement\n\nOn April 17, 2024 (the \u201cLoan Closing Date\u201d), Legacy iLearningEngines entered into a Loan and Security Agreement (as amended,\nthe \u201cRevolving Loan Agreement\u201d), by and among Legacy iLearningEngines as borrower (\u201cBorrower\u201d), the lenders party thereto (the\n\u201cLenders\u201d) and East West Bank, as administrative agent and collateral agent for the Lenders (\u2018Agent\u201d) The Revolving Loan\nAgreement provides for (i) a revolving credit facility in an aggregate principal amount of up to $40 0 million and (ii) an uncommitted\naccordion facility allowing the Borrower to increase the revolving commitments by an additional principal amount of $20 0 million at\nBorrower\u2019s option and upon Agent\u2019s approval (collectively, the \u201cRevolving Loans\u201d) Borrower drew $40 0 million in Revolving Loans\non the Loan Closing Date, which was used (x) to repay in full Borrower\u2019s existing indebtedness under the (1) Loan and Security\nAgreement, dated as of December 30, 2020, between Legacy iLearningEngines and Venture Lending & Leasing IX, Inc , (ii) Loan and\nSecurity Agreement, dated as of October 21, 2021, between Legacy iLearningEngines, and Venture Lending & Leasing [X, Inc and\nWTI Fund X, Inc and (iii) Loan and Security Agreement, dated as of October 31, 2023, between Legacy iLearningEngines and WTI\nFund X, Inc (the \u201cWTI Loan Agreements\u201d) and which will be used for (y) for general corporate purposes On June 27, 2024, Legacy\niLearningEngines entered into that certain First Amendment to Loan and Security Agreement (the \u201cRevolving Loan Amendment\u201d) with\nthe Lenders and the Agent, pursuant to which the parties agreed to amend the Revolving Loan Agreement to, among other things (i)\nincrease the Maximum Revolving Advances Limit (as defined therein) from $40 0 million to $60 0 million; (ii) designate Valley\nNational Bank as a new lender to the Loan Agreement with a Revolving Advance Commitment (as defined therein) of $20 0 million;\nand (iii) modify the minimum liquidity financial covenant to require that Legacy iLearningEngines maintain at least $12,000,000 in\ncash and cash equivalents with the Agent at all times Borrower drew $20 0 million in Revolving Loans on June 27, 2024, which will\nbe used for general corporate purposes\n\n61\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 98 of 408\n\nThe obligations under the Revolving Loan Agreement are secured by a perfected security interest in substantially all of the\nBorrower\u2019s assets except for certain customary excluded property pursuant to the terms of the Revolving Loan Agreement On the Loan\nClosing Date, the Company and In2Vate, L L C , an Oklahoma limited liability company and wholly owned subsidiary of Legacy\niLearningEngines (the \u201cGuarantors\u201d), entered into a Guaranty and Suretyship Agreement (the \u201cGuaranty\u201d) with the Agent, pursuant to\nwhich the Guarantors provided a guaranty of Borrower\u2019s obligations under the Revolving Loan Agreement and provided a security\ninterest in substantially all of the Guarantors\u2019 assets except for certain customary excluded property pursuant to the terms of the\nGuaranty\n\nThe interest rate applicable to the Revolving Loans is Adjusted Term Secured Overnight Financing Rate (\u201cSOFR\u201d) (with an\ninterest period of 1 or 3 months at the Borrower\u2019s option) plus 3 50% per annum, subject to an Adjusted Term SOFR floor of 4 00%\n\nThe maturity date of the Revolving Loans is April 17, 2027 The Revolving Loan Agreement contains customary representations\nand warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens,\ninvestments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions Borrower is also required\nto comply with the following financial covenants, which are more fully set forth in the Revolving Loan Agreement (i) minimum\nliquidity, (ii) minimum revenue performance to plan, (iii) minimum fixed charge coverage ratio and (iv) maximum leverage ratio\n\nThe Revolving Loan Agreement also includes customary events of default, including failure to pay principal, interest or certain\nother amounts when due, material inaccuracy of representations and warranties, violation of covenants, specified cross default and\ncross acceleration to other material indebtedness, certain bankruptcy and insolvency events, certain undischarged judgments, material\ninvalidity of guarantees or grant of security interest, material adverse effect and change of control, in certain cases subject to certain\nthresholds and grace periods If one or more events of default occurs and continues beyond any applicable cure period, the Agent may,\nwith the consent of the Lenders holding a majority of the loans and commitments under the facility, or will, at the request of such\nLenders, terminate the commitments of the Lenders to make further loans and declare all of the obligations of the Company under the\nRevolving Loan Agreement to be immediately due and payable\n\nPrepayment of Term Loan\n\nOn April 18, 2024, the Company prepaid the full amount of the Amended Term Loan using a combination of $22 4 million cash\nand 159,379 shares of our Common Stock Based on the timing of the prepayment, 815 999 Loan Restructuring Shares were canceled\n\nOverview\n\niLearningEngines is an out of the box AI platform that empowers customers to \u201cproductize\u201d their institutional knowledge and\ngenerate and infuse insights in the flow of work to drive mission critical business outcomes iLearningEngines\u2019 customers \u201cproductize\u201d\ntheir institutional knowledge by transforming it into actionable intellectual property that enhances outcomes for employees, customers\nand other stakeholders Our platform enables enterprises to build intelligent \u201cKnowledge Clouds\u201d that incorporate large volumes of\nstructured and unstructured information across disparate internal and external systems, and to automate organizational processes that\nleverage these Knowledge Clouds to improve performance Our Learning Experience Platform addresses the corporate learning market\nand our Information Intelligence Platform addresses the information management, analytics and automation markets We combine our\nplatforms with vertically focused capabilities and data models to operationalize AI and automation to effectively and efficiently address\ncritical challenges facing our customers Our customers utilize our platform to analyze and address employee knowledge gaps, provide\npersonalized cognitive assistants or chatbots, and make predictive decisions based on real time insights\n\n62\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 99 of 408\n\nWe serve more than 1,000 enterprise end customers, with over 4 7 million licensed users across 12+ industry verticals Our\nrevenue by end licensed user industry vertical is set forth below\n\nThree months ended March 31, 2024 (Dollars in\n\nthousands)\n\n11,634 1,482\n\n@ Education @HCM / Upskilling @Enterprise @Healthcare/insurance mg Other\n\nYear ended December 31, 2023 (Dollarsin\nthousands)\n\n5,927\n\n45,332\n\n@Education @HCM/ Upskilling @ Enterprise @ Healthcare/insurance m Other\n\nOther includes customers in the oil & gas, aviation, retail, automobile, utilities, government, and logistics industries\n\n63\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 100 of 408\n\nOur customers are broadly distributed geographically with a focus on North America and India Our revenue by customer\ngeography is shown below\n\nThree months ended March 31, 2024 (Dollars\nin thousands)\n\n18,745\n\neindia \u00ab\u00a9 North America Other\n\nYear ended December 31, 2023 (Dollarsin\nthousands)\n\nainda: # North America Other\n\nWith respect to our disaggregation of revenue by customer geography, geography is primarily determined based on the location of\nthe customer identified in the contract. As described in the Technology Partner policy note in Note 2 of the unaudited financials for the\nthree months ended March 31, 2024, we enter contracts with the Technology Partner through which the Technology Partner purchases\nand integrates our platform into the Technology Partner\u2019s own software solution provided to one of the Technology Partner\u2019s\ncustomers. In this type of contractual arrangement, we identify the Technology Partner as our customer. In contractual arrangements in\nwhich the Technology Partner is identified as the customer, the Technology Partner\u2019s end customer may or may not be known by us. In\ncases in which the Technology Partner\u2019s customer is known to the Company, the geography is determined based on the location of the\nTechnology Partner\u2019s customer and conversely, in cases in which the Technology Partner\u2019s customer is not known, the customer\ngeography is determined based on the geography of the Technology Partner.\n\nWe provide access to our platform through software licenses that grant our customers the right to use our proprietary software and\naccess to our maintenance and support services. Most of the value of our contracts relates to software licenses for the use of our\nsoftware and related maintenance and support, but we also allocate a portion of the consideration to implementation services. Nearly all\nof our revenues are generated from long term maintenance and support agreements, which are typically one to three years in length and\ncontain provisions to auto-renew for one-year periods. As a result of our deep integration within the operations of our clients and our\nmulti-period maintenance and support agreements, our business model provides us with significant visibility into our future\nperformance and considerable predictability of our results.\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 101 of 408\n\n64\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 102 of 408\n\nPricing for our contracts is determined based on scale, use cases, usage patterns of our customers and strategic value to us, as well\nas the amount of support we expect will be required Therefore, our pricing is highly variable We offer user licenses for both Experts\nand end users (\u201cLearners\u201d) Experts are the designated \u201cgatekeepers\u201d within our customers\u2019 organizations that are granted content\naugmentation capabilities and are provided with the ability to create and distribute content to improve outcomes Learners utilize the\nplatform for the consumption of learning and other content Expert licenses are priced higher since they require more consistent\nongoing support from us\n\nThe following contracted customers accounted for more than 10% of our revenue in the periods shown below\n\nThree Months Ended Three Months Ended\nMarch 31, 2024 March 31, 2023\n\n(%) (%)\nCustomer A 16.7% Customer A 21.5%\nCustomer B 13.5% Customer B 17.7%\nCustomer C 11.3% Customer C 13.0%\nCustomer D 10.3% Customer D 11.8%\n\nYear Ended Year Ended Year Ended\nDecember 31, 2023 December 31, 2022 December 31, 2021\n\n(%) (%) (%)\nCustomer A 19 3% Customer A 17 4% Customer B 22 8%\nCustomer B 160% Customer B 17 0% Customer D 20 2%\nCustomer C 117% Customer C 149% Customer C 13 1%\nCustomer D 119% Customer D 14 3% Customer E 110%\n\nCustomer E 10 3%\n\nAs of March 31, 2024, we generated $125 million of revenue, representing 33% growth over the prior year, with 69% gross\nmargins Our near term profitability will be affected mainly by our ability to grow revenue, the gross margins we can achieve on sales,\nand our ability to control our selling. general and administrative and research and development (\u201cR&D\u201d) expenses while strategically\ninvesting in our growth and solution capabilities We expect that our cost of revenue will increase on an absolute basis over the next\nfew quarters as a result of implementation and dedicated application and content support for newly added customers to ensure that our\ncustomers are able to increase engagement and optimizing the value of our products Our sales strategy includes leveraging channel\npartners with significant domain expertise to provide us with access to new customers, verticals and markets, and our direct salesforce\nhas proven to be effective in expanding our presence within our customers Over time, we intend to prioritize our growth within\nindustry verticals and geographies that we believe will provide the greatest profitability prospects for us over the longer term\n\n65\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 103 of 408\n\nKey Performance Metrics\n\nWe regularly review the following performance metrics to evaluate our business, identify trends affecting our business, prepare\nfinancial projections, and make strategic decisions The calculation of these metrics may differ from other similarly titled metrics used\nby other companies, securities analysts or investors\n\nAnnual Recurring Revenue Annual Recurring Revenue (\u201cARR\u201d) is defined as the annualized recurring value of all active\nmaintenance and support contracts at the end of a reporting period We believe ARR is useful for assessing the performance of our\nrecurring maintenance and support revenue base and identifying trends affecting our business ARR mitigates fluctuations due to\nseasonality, contract term, sales mix, and revenue recognition timing resulting from revenue recognition methodologies under GAAP\nARR should be viewed independently of revenue as it is an operating measure and is not intended to be combined with or to replace\nGAAP revenue\n\nThree Months Ended\nMarch 31,\n(dollars in thousands) 2024 2023\nARR $ 478,941 $ 357,282\nYear Ended\nDecember 31,\n\n(dollars in thousands) 2023 2022 2021\nARR $ 447,343 $ 313,667 $ 224,332\n\nNet Dollar Retention. Net Dollar Retention (\u201cNDR\u201d) is an operational performance measure that we use to assess our client\nretention and its dollar impact on our business. We define Net Dollar Retention (\u201cNDR\u201d) as the ARR in dollars generated in the current\nperiod by clients that existed in the prior comparable period divided by the ARR in dollars by those same clients in the prior period.\nNDR illustrates the impact of upgrades, downgrades and cancellations in the current period on the existing client base. Since NDR does\nnot factor in revenue from clients acquired in the current period and includes any churn from existing contracted customers, we believe\nit is an accurate measure of client retention. For the avoidance of doubt, NDR does not exclude prior year contracted customers that\nwere not retained in the current year. Our NDR has varied between 115% and 140% over the periods presented. We intend to continue\nto employ a \u201cland and expand\u201d strategy which will help grow our NDR, but NDR may also begin to be affected by the maturation of\nour existing client base which could stabilize their dollar spend with us.\n\nNDR is calculated as the dollar value of recurring revenue from existing clients at the end of the prior period, plus the current\nperiod\u2019s dollar impact of upsells or cross-sells from the prior period\u2019s existing clients, minus the current period\u2019s dollar impact of churn\nor downgrades from the prior period\u2019s existing clients, divided by prior period recurring revenues from existing clients.\n\nThe dollar impact of upsells or cross-sells is calculated as the sum of incremental recurring revenue between the end of the prior\nperiod and the end of the current period from the prior period\u2019s existing clients that expanded usage of our products resulting in\nincremental recurring revenues earned in the current period.\n\nThe dollar impact of churn or downgrades is calculated as the difference in recurring revenue between the end of the prior period\nand the end of the current period from the prior period\u2019s existing clients that have decreased in usage or are no longer revenue\ncontributing customers.\n\nThree Months Ended\nMarch 31,\n2024 2023\nNet Dollar Retention 132% 125%\nYear Ended December 31,\n2023 2022 2021\nNet Dollar Retention 125% 117% 139%\n\n66\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 104 of 408\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 105 of 408\n\nThe increase in NDR for the 3 month period ended March 31, 2024 as compared to the 3 month period ended March 31, 2023 was\nthe result of increased spend on learning automation, adoption of integrated school tutoring solution and AI driven work automation by\ncustomers who had decreased spending during the pandemic\n\nThe slight drop in NDR from 2021 to 2022 can be attributed to the lower contribution of upsell/cross sell in 2022 as some of our\nclients curtailed the pace of their spending increases on virtual learning post pandemic\n\nAdjusted EBITDA\n\nAdjusted EBITDA is a performance measure that we use to assess our operating performance and the operating leverage within our\nbusiness We define Adjusted EBITDA as net (loss) income, before interest, income taxes, depreciation and amortization, non\ncapitalizable transaction costs, stock based compensation. change in fair value of warrant liability, change in fair value of convertible\nnotes and loss on debt extinguishment, and other non operating income and expenses We monitor Adjusted EBITDA as a non GAAP\nfinancial measure to supplement the financial information we present in accordance with GAAP to provide investors with additional\ninformation regarding our financial results We expect Adjusted EBITDA to fluctuate in future periods as we continue to invest in our\nbusiness to achieve greater scale and efficiencies\n\nWe report our financial results in accordance with GAAP but management believes that Adjusted EBITDA provides investors with\nadditional useful information in evaluating our performance Adjusted EBITDA is a financial measure that is not required by or\npresented in accordance with GAAP We believe that Adjusted EBITDA, when taken together with our financial results presented in\naccordance with GAAP. provides meaningful supplemental information regarding our operating performance and facilitates internal\ncomparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of\nour business, results of operations or outlook In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it\nis a measure used by management in assessing the health of our business and evaluating our operating performance, as well as for\ninternal planning and forecasting purposes\n\nAdjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not\nbe considered in isolation or as a substitute for financial information presented in accordance with GAAP Some of these limitations\ninclude that (1) it does not properly reflect capital commitments to be paid in the future: (ii) although depreciation and amortization are\nnon cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures; (iii)\nit does not reflect other non operating expenses; (iv) it does not reflect tax payments that may represent a reduction in cash available to\nus; (vii) it does not reflect transaction costs which were capitalized In addition, our use of Adjusted EBITDA may not be comparable to\nsimilarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner, limiting its\nusefulness as a comparative measure Because of these limitations, when evaluating our performance, you should consider Adjusted\nEBITDA alongside other financial measures, including our net (loss) income and our other results stated in accordance with GAAP\n\nThe following table presents a reconciliation of Adjusted EBITDA to net (loss) income. the most directly comparable financial\nmeasure stated in accordance with GAAP. for the periods presented\n\nThree Months Ended\nMarch 31,\n2024 2023\n\nNet (loss) income $ (25,935) $ 451\nInterest expense 1,986 1.588\nIncome tax expense (benefit) 1,222 (152)\nDepreciation and amortization 54 26\nEBITDA (22,673) 1,913\nOther expense 60\nTransaction costs 1,060 26\nChange in fair value of warrant liability 15,118 280\nChange in fair value of convertible notes 5,465 -\nLoss on Debt Extinguishment 10,041\n\nAdjusted EBITDA $ 9,011 $ 2,279\n\n67\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 106 of 408\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 107 of 408\n\nYear Ended December 31,\n2023 2022 2021\n(Dollars in thousands)\nNet (loss) income $ (4,407) $ 11,466 \u00a7 2,521\nInterest expense 6,274 6.614 5.047\nIncome tax expense (benefit) 2,157 (5,975) 32\nDepreciation and amortization 128 77 -\nEBITDA 4,152 12,182 7,600\nOther expense 45 21 3\nShare-based compensation expense - - 39\nTransaction costs 4280 709 159\nChange in fair value of warrant liability 771 (248) 83\nChange in fair value of convertible notes 14,147 - -\nAdjusted EBITDA $ 23,395 $ 12,664 \u00a7$ 7,884\n\n(1) Represents legal, tax, accounting, consulting, and other professional fees related to the Merger with ARRW and previously\nexplored strategic alternatives, all of which are non recurring in nature\n\nKey Factors Affecting Our Performance\n\nWe believe that our performance and future success depend on several factors that present significant opportunities, risks and\nchallenges for us\n\nAbility to attract and engage new customers To grow our business, we must attract additional clients in the industries we\ncurrently serve and attract new customers in new industries We added 301,000 new licensed users in the three months ended March 31,\n2024 and 497,000 new licensed users in 2023 In some of our newer industry verticals, we will need to further develop tailored\nsolutions to best serve their interests Engaging with new customers in any industry generally involves longer sales cycles and\ndeveloping specialized industry solutions will require additional R&D expenses\n\nAbility to expand within our existing customer relationships We have significant opportunities to further expand sales to our\nexisting customer base, including expanding into new divisions and adding additional users Our sales strategy is product led and\nfocuses on business units within companies, which we believe lends itself to expansion within organizations by demonstrating effective\noutcomes for our customers As companies continue to embrace the power of our AI and automation tools, we target additional use\ncases across their enterprise We intend to focus on these opportunities to expand our presence within our existing customers over time\nOur business and results of operations will depend on our ability to continue to drive higher usage rates and new use cases within our\nexisting customer base\n\nAbility to expand our geographic footprint We have demonstrated the value of our solutions across many different use cases in a\nvariety of verticals, and we believe that there are many geographic markets in the U S and around the world that are currently\nunderpenetrated that can benefit from our solutions However, our growth could be affected if we are unable to establish effective\nchannel partner relationships in our target geographies on commercially reasonable terms or at all, if our solutions are not as well\nreceived in these new markets, or if competition or cultural norms impede our ability to penetrate these markets\n\n68\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 108 of 408\n\nAdoption rate of AI driven solutions Our ability to grow our customer base and drive adoption of our platform is affected by\noverall demand levels for AI assisted learning, automation, and information intelligence solutions As advanced \u201cintelligent\u201d\ntechnology becomes increasingly critical to business operations, we believe the need for AI enhanced development solutions,\nparticularly an integrated platform such as ours, will increase However, our growth could be affected if AI solutions are not embraced\nrapidly or are affected by some of the actual or perceived shortcomings of AI\n\nPotential Merger and Acquisition We intend to complement our organic growth by pursuing strategic and tuck in acquisition\nopportunities We believe we can acquire attractive established customer bases in new markets and industry subsectors where we can\nleverage data sets and create new or better curriculums However, there is no guarantee that these potential transactions can be\ncompleted on commercially reasonable terms or at all Additionally, these acquisitions may divert management\u2019s attention and require\nmeaningful integration efforts, which could impact our performance\n\nPublic company costs Following the consummation of the Business Combination, iLearningEngines was deemed the accounting\nacquirer and the Business Combination was accounted for as a reverse recapitalization As a result of the Business Combination,\niLearningEngines became the successor to an SEC registered and Nasdaq listed company, which will require us to hire additional\npersonnel and implement procedures and processes to address public company regulatory requirements and customary practices We\nexpect to incur additional annual expenses as a public company for, among other things, directors\u2019 and officers\u2019 liability insurance,\ndirector fees, and additional internal and external accounting, legal and administrative resources\n\nKey Components of Statement of Operations\nRevenue\n\nWe generate our revenue primarily from software licenses for use of our proprietary software and related maintenance and support\nImplementation services\n\nAll customers require implementation services prior to being able to use the iLearningEngines platform To date iLearningEngines\nhas outsourced these services to its technology partner (\u201cTechnology Partner\u201d) who has been trained to provide the implementation\nservices Implementation services generally take one to three months and consist of the phases we follow as part of our customer\nonboarding process We are the principal in the delivery of implementation services\n\nThe implementation services do not involve significant customization or creating new software functionality Instead, the services\nmainly focus on configuration and mapping customer data with the required attributes within the software platform to ensure the\nplatform\u2019s built in functionalities can be utilized by the customer Revenues from implementations are recognized over time as such\nservices are performed using an input method of efforts expended, compared to total estimated efforts to complete the project\n\nCombined software license and maintenance\n\nThe combined software license and maintenance performance obligation relates to the license to our AI platform and related\nmaintenance services (including critical support functions and updates) provided over the license term The software license to the AI\nplatform is not considered distinct from the maintenance services, because the customer cannot derive the intended value from the\nsoftware without ongoing critical support services and updates that are provided by the maintenance services We recognize revenue\nfrom the combined software license and maintenance performance obligation ratably over the contract term beginning on the date that\nthe software license is delivered to the customer and related maintenance services are made available, as the customer simultaneously\nreceives and consumes the benefits of the combined software license and maintenance performance obligation Contracts with\ncustomers typically include a fixed amount of consideration and are generally cancellable with 24 months\u2019 notice We typically invoice\ncustomers quarterly in advance for our software license and maintenance services upon execution of the initial contract or subsequent\nrenewal\n\n69\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 109 of 408\n\nA contract\u2019s transaction price, which is generally a fixed fee in our arrangements, is allocated to cach performance obligation and\nrecognized as revenue as the respective performance obligation is satisfied Our process for determining the standalone selling price\n(\u201cSSP\u201d) involves significant management judgment since our performance obligations are not sold separately In determining the SSP\nof implementation services, we estimate the cost of providing the services and add a reasonable margin Our cost estimates are\nprimarily based on historical cost data for similar implementation projects The SSP of the combined software license and maintenance\nperformance obligation uses the residual approach to estimate SSP as we sell our AI platform and related maintenance services to\ndifferent customers at a highly variable range of amounts\n\nCost of Revenue\n\nCost of revenue is comprised of expenses related to customer support and fees paid to third parties We have level 1 support related\nto helpdesk, application and content support These are variable costs that are linked to the number of active contracts Application\nsupport in cost of revenue refers to application support and maintenance activities including integration of iLearningEngines into\nenterprise systems, process workflow configurations, issue triage, quality assurance and upgrade rollout support Content support\nincludes support provided for business operations on content maintenance, new content onboarding, SME support, ongoing re training\nof AI models\n\nOperating Expenses\nOur operating expenses consist of selling, general and administrative expenses and R&D expenses\nSelling General and Administrative Expenses\n\nSelling, general and administrative expenses primarily consist of employee related compensation, including stock based\ncompensation, for management and administrative functions, including our finance and accounting, legal, and people teams Selling,\ngeneral and administrative expenses also include certain professional services fees, insurance, our facilities costs, and other general\noverhead costs that support our operations\n\nOur sales strategy is comprised of two main constituents our direct sales team and our channel partners Our direct sales team is\ntasked with both acquiring direct clients in established verticals and acquiring new channel partners in expansion markets We leverage\nour channel partners to generate leads in new verticals and geographies which we then scale through our direct sales force Our sales\nteam is supported by engineers with deep technical expertise and responsibility for pre sales technical support, solutions for\nengineering for our customers and technical training for our channel partners\n\nWe generate customer leads, accelerate sales opportunities and build brand awareness through our marketing programs and\nthrough our channel partner relationships Our marketing programs target the business units within companies rather than their\npurchasing, human resources or administrative departments to drive sales by demonstrating the impact of our product capabilities on\nresults Our principal marketing programs include webinars, roadshows, exhibitions and events that we sponsor, cooperative marketing\nefforts with channel partners, and use of our website\n\nResearch and Development Expenses\n\nA critical part of our development efforts in AI is the data to train AI R&D expense primarily consist of compensation costs, for\nemployees in engineering, design and product development and maintenance, outsourced costs related to development partners,\nexternal contractors, data purchase cost and the allocation of other R&D costs To date, our total spend on data purchases is over $160\nmillion Costs incurred by us between establishment of technological feasibility and the point at which the product is ready for general\nrelease are capitalized, subject to their recoverability, and amortized over the economic life of the related products As of March 31,\n2024, no costs have been capitalized\n\n70\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nInterest Expense\n\nFiled 09/18/25\n\nPage 110 of 408\n\nInterest expense consists primarily of interest expense, amortization of debt issuance cost incurred under our long term debt\n\nfacility\n\nChange in Fair Value of Warrant Liability\n\nChange in fair value of warrant liability consists of gains or losses from change in fair value of warrant liabilities\n\nChange in Fair Value of Convertible Notes\n\nThe Company elected the fair value option for convertible notes Change in fair value of convertible notes consists of gains or\n\nlosses from change in fair value of the convertible notes\n\nLoss on Debt Extinguishment\n\nThe Company entered into an amended debt agreement that caused the current book value of debt to be extinguished and the new\ndebt to be accounted for using the fair value option The difference between these two amounts resulted in a loss\n\nProvision (Benefit) for Income Taxes\n\nThe provision (benefit) for income taxes represents the tax expense (benefit) associated with our operations based on the tax laws\n\nof the jurisdictions in which we operate\n\nResults of Operations\n\nThe following tables set forth our results of operations for the periods presented\n\nComparison of the Three Months Ended March 31, 2024 and 2023\n\nThree months Ended Amount\nMarch 31, Change % Change\n(Dollars in thousands) 2024 2023 2024 vs 2023 2024 vs 2023\nRevenue $ 124.935 $ 93.980 $ 30,955 32.9%\nCost of revenue 38.714 31,551 7.163 22.7%\nGross profit 86,221 62,429 23,792 38.1%\nOperating expenses:\nSelling, general, and administrative expenses 41,223 31,612 9.611 30.4%\nResearch and development expenses 37.099 28,582 8,517 29 8%\nTotal operating expenses 78,322 60,194 18,128 30.1%\nOperating income 7,899 2,235 5,664 253 4%\nOther expense:\nInterest expense (1.986) (1,588) (398) 25.1%\nChange in fair value of warrant liability (15,118) 280) (14,838) 5,299.3%\nChange in fair value of convertible notes (5,465) - (5,465) NM\nLoss on debt extinguishment (10,041) - (10,041) NM\nOther expense - (60) 60 NM\nForeign exchange loss (2) (8) 6 NM\nTotal other expense (32,612) (1.936) (30,676) 1,584.5%\nNet (loss) income before income tax (expense) benefit (24.713) 299 (25.012) NM\nIncome tax (expense) benefit (1,222) 152 (1,374) NM\nNet (loss) income $ (25,935) $ 451 $ (26,386) NM\n\nNM \u2014 not meaningful\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 111 of 408\n\n71\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 112 of 408\n\nComparison of the Three Months Ended March 31, 2024 and 2023\n\nRevenue by Geographical Region\n\nThree Months Ended\nMarch 31,\n\n(Dollars in thousands) 2024 2023 Change % Change\nIndia $ 51.873 \u00a7$ 34,795 $ 17,078 49.1%\nPercentage of revenue 41.5% 37.0%\n\nNorth America $ 54,317 $ 45,011 $ 9,306 20.7%\nPercentage of revenue 43.5% 47.9%\n\nOther $ 18.745 $ 14,174 $ 4.571 32.2%\nPercentage of revenue 15.0% 15.1%\n\nTotal revenue $ 124935 $ 93.980 $ 30 955 32.9%\n\nGlobal Revenue\n\nGlobal revenue increased by $31.0 million or 32.9% for the three months ended March 31, 2024 compared to the three months\nended March 31, 2023, primarily due to 10 new contracts. Please see further discussion of the change by region below.\n\nIndia\n\nRevenue in India increased by $17.1 million or 49.1% for the three months ended March 31, 2024 compared to the three months\nended March 31, 2023, primarily due to four new contracts, through upsell to our existing customers of $13.4 million, one new contract\nto anew customer of $1.4 million, a reduction of $0.1 million to customer churn and remaining coming from an increase in license\nrevenue as part of renewals.\n\nNorth America\n\nRevenue in North America increased by $9.3 million or 20.7% for the three months ended March 31, 2024 compared to the three\nmonths ended March 31, 2023, primarily due to two new contracts through upsell to our existing customers of $3.4 million, one new\ncontract to a new customer of $5.1 million, and the remaining coming from an increase in license revenue as part of renewals.\n\nOther\nRevenue in other region, which includes Middle East and Europe, increased by $4.6 million or 32.2% for the three months ended\nMarch 31, 2024 compared to the three months ended March 31, 2023, primarily due to one new contracts, through upsell to our\n\nexisting customer of $3.0 million, one new contract to a new customer of $1.5 million and remaining coming from an increase in\nlicense revenue as part of renewals.\n\n72\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 113 of 408\n\nCost of Revenue and Gross Margin\n\nThree Months Ended\nMarch 31,\n(Dollars in thousands) 2024 2023 Change % Change\nCost of revenue $ 38,714. $ 31.551 $\u00a7 7.163 22.7%\nGross margin 69.0% 66.4% 2.6%\n\nCost of revenue increased by $7.2 million, or 22.7%, for the three months ended March 31, 2024 compared to the three months\nended March 31, 2023, primarily due to 10 new contracts that were added. We had an increase in cost of revenue due to new\nimplementation costs, application & content support costs and operations and support costs related to new accounts.\n\nGross margin increased to 69.0% for the three months ended March 31, 2024 compared to 66.4% for the three months ended\nMarch 31, 2023, primarily due to the higher dedicated support needs and related costs being higher in the first year for newly added\ncontracts, which contributes to higher cost as the new contracts are in implementation stage.\n\nCosts and Expenses\n\nSelling, General and Administrative Expenses\n\nThree Months Ended\nMarch 31,\n(Dollars in thousands) 2024 2023 Change % Change\nSelling, general and administrative expenses $ 41,223 $ 31.612 \u00a7$ 9.611 30.4%\nPercentage of revenue 33.0% 33.6% (0.6)%\n\nSelling, general and administrative expenses increased by $9.6 million, or 30.4%, for the three months ended March 31, 2024\ncompared to the three months ended March 31, 2023, primarily due to new business development expense costs, marketing costs,\ntransaction costs, and proof of concept development costs linked to larger pipeline in line with growth projections. Additionally,\nsuccess-based commissions have also increased related to new direct contract wins.\n\nResearch and Development Expenses\n\nThree Months Ended\nMarch 31,\n(Dollars in thousands) 2024 2023 Change Change\nResearch and development expenses $ 37,099 $ 28,582 $ 8.517 29.8%\nPercentage of revenue 29.7% 30.4% (0.7 %\n\nR&D expenses increased by $8.5 million, or 29.8%, for the three months ended March 31, 2024 compared to the three months\nended March 31, 2023, primarily due to R&D activities related to new AI digital asset development, existing AI digital asset\nmaintenance including monitoring, machine learning/AI model improvements, enhancement, data validation and testing and quality\nassurance activities. This is required to maintain our product edge and build competitive barriers and drive future growth.\n\n73\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 114 of 408\n\nOther Income and Expenses\n\nInterest Expense\nThree Months Ended\nMarch 31,\n(Dollars in thousands) 2024 2023 Change Change\nInterest expense $ 1,986 $ 1,588 $ 398 25.1%\nPercentage of revenue 1.6% 1.7% (0.1 %\n\nInterest expense increased by $0.4 million, or 25.1%, for the three months ended March 31, 2024 compared to the three months\nended March 31, 2023, primarily due to increase in interest expense to the Technology Partner.\n\nChange in Fair Value of Warrant Liability\n\nThree Months Ended\nMarch 31,\n(Dollars in thousands) 2024 2023 Change % Change\nChange in fair value of warrant liability $ 15,118 \u00a7$ 280 $ 14,838 5,299.3%\nPercentage of revenue 12.1% 0.3% 11.8%\n\nChange in fair value of warrant liability increased by $14.8 million, or 5,299.3%, for the three months ended March 31. 2024\ncompared to the three months ended March 31, 2023. In connection with the 2020 Term Loans, 2022 Term Loans, the 2023 Term Loan\nand the Amended Term Loan the Company issued the lenders warrants to purchase our stock, which may be exercisable for common or\npreferred stock in accordance with the terms of the warrants. The warrants were classified as a liability carried at fair value because\nthere are certain put rights that may obligate us to repurchase the warrants in the future, based on events that are outside of our control.\n\nChange in Fair Value of Convertible Notes\n\nThree Months Ended\nMarch 31,\n(Dollars in thousands) 2024 2023 Change % Change\nChange in fair value of convertible notes $ 5,465 $ - \u00a7$ 5,465 NM\nPercentage of revenue 44% - 4.4%\n\nChange in fair value of convertible debt increased by $5.5 million for the three months ended March 31, 2024 compared to the\nthree months ended March 31, 2023. The Company elected fair value option for the convertible notes. The Company issued convertible\nnotes in April 27, 2023 and March 21, 2024, whereas no convertible notes outstanding as of March 31, 2023.\n\nLoss on Debt Extinguishment\n\nThree Months Ended\nMarch 31,\n(Dollars in thousands) 2024 2023 Change % Change\nLoss on Debt Extinguishment $ 10,041 \u00a7$ $ 10,041 NM\nPercentage of revenue 8 0% 8 0%\n\nLoss on Debt Extinguishment increased by $10 0 million for the three months ended March 31, 2024 compared to the three months\nended March 31, 2023 The Company\u2019s Amended Term Loan agreement was accounted for as a debt extinguishment in the current\nperiod, no such event occurred in 2023\n\n74\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 115 of 408\n\nIncome Tax (Expense) Benefit\n\nThree Months Ended\nMarch 31,\n(Dollars in thousands) 2024 2023 Change % Change\nIncome tax (expense) benefit $ (1,222) \u00a7$ 152 $ (1,374 NM\nPercentage of revenue (1.0)% 0.2% (1.2 %\n\nIncome tax expense for the three months ended March 31, 2024 was $1.2 million whereas income tax benefit for the three months\nended March 31, 2023 was $0.2 million, primarily due to the negative change in the fair value of the warrant and convertible notes as\nwell as a loss on the debt extinguishment related to the WTI debt amendment, which were classified as permanent difference for tax\npurposes.\n\nComparison of the Years Ended December 31, 2023, 2022 and 2021\n\nYear Ended December 31, Amount Change % Change\n2023 vs 2022 vs 2023 vs 2022 vs\n(Dollars in thousands) 2023 2022 2021 2022 2021 2022 2021\nRevenue $ 420,582 $ 309,170 $ 217,867 $ 111,412 $ 91,303 36.0% 41.9%\nCost of revenue 132,154 93.890 64,834 38,264 29,056 40.8% 44.8%\nGross profit 288,428 215,280 153,033 73,148 62,247 34.0% 40.7%\nOperating expenses:\nSelling, general, and administrative\nexpenses 140,897 105.966 74,434 34,931 31,532 33.0% 42.4%\nResearch and development expenses 128,544 97,436 70,913 31,108 26,523 319% 374%\nTotal operating expenses 269.441 203.402 145,347 66,039 58,055 32.5% 39.9%\nOperating income 18.987 11,878 7.686 7.109 4,192 59 9% 54 5%\nOther (expense) income:\nInterest expense (6,274) (6.614) (5,047) 340 (1,567) 5.1% 31.0%\nChange in fair value of warrant\nliability (771) 248 (83) (1,019) 331 NM NM\nChange in fair value of convertible\nnotes (14,147) - \u201c (14,147) ms NM NM\nOther expense (45) (21) (3) (24) (18) NM NM\nTotal other expense, net (21,237) (6,387) (5,133) (14.850) (1,254) NM 24.4%\nNet income before income tax\n(expense) benefit (2,250) 5,491 2.553 (7.741) 2,938 NM NM\nIncome tax (expense) benefit (2,157) 5.975 (32) (8.132) 6,007 NM NM\nNet (loss) income $ (4,407) $ 11.466 $ 2,521 $ (15,873) $ 8,945 NM NM\nOe\n\nNM _ not meaningful\n\n75\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 116 of 408\n\nComparison of Years Ended December 31, 2023 and 2022\n\nRevenue by Geographical Region\n\nYear Ended\nDecember 31,\n\n(Dollars in thousands) 2023 2022 Change % Change\nIndia $ 162.854 $ 138,048 \u00a7$ 24,806 18.0%\nPercentage of revenue 38.7% 44.7%\n\nNorth America 194,886 116,112 78.774 67.8%\nPercentage of revenue 46.4% 37.5%\n\nOther 62,842 55.010 7,832 14.2%\nPercentage of revenue 14.9% 17.8%\n\nTotal revenue $ 420582 $ 309.170 $ 111.412 36.0%\n\nGlobal Revenue\n\nGlobal revenue increased by $111.4 million or 36% for the year ended December 31, 2023 compared to the year ended December\n31, 2022, primarily due to 17 new contracts. Please see further discussion of the change by region below.\n\nIndia\n\nRevenue in India increased by $24.8 million or 18.0% for the year ended December 31, 2023 compared to the year ended\nDecember 31, 2022, primarily due to two new contracts, through upsell to our existing customers of $19.4 million, one contract chum\nand remaining coming from an increase in license revenue as part of renewals.\n\nNorth America\n\nRevenue in North America increased by $78.8 million or 67.8% for the year ended December 31, 2023 compared to the year ended\nDecember 31, 2022, primarily due to 14 new contracts, with two new VARs contracted, eleven new customer contracts sold through\nVARs being added to our existing client base of $48.4 million and three contracts through upsell to our existing customers of $14.8\nmillion and the remaining coming from an increase in license revenue as part of renewals.\n\nOther\nRevenue in other region, which includes Middle East and Europe, increased by $7.8 million or 14.2% for the year ended December\n31, 2023 compared to the year ended December 31, 2022, primarily due to one new contract, through upsell to our existing customer of\n\n$6.0 million and remaining coming from an increase in license revenue as part of renewals.\n\nCost of Revenue and Gross Margin\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2023 2022 Change % Change\nCost of revenue $ 132,154 $ 93.890 \u00a7$ 38,264 40.8%\nGross margin 68.6% 69.6% (1.0 %\n\nCost of revenue increased by $38.3 million, or 40.8%, for the year ended December 31, 2023 compared to the year ended\nDecember 31, 2022, primarily due to 17 new contracts that were added. We had an increase in cost of revenue due to new\nimplementation costs, application & content support costs and operations and support costs related to new accounts.\n\n76\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 117 of 408\n\nGross margin decreased to 68 6% for the year ended December 31, 2023 compared to 69 6% for the year ended December 31,\n2022, primarily due to the higher dedicated support needs and related costs being higher in the first year for newly added contracts,\nwhich contributes to higher cost as the new contracts are in implementation stage\n\nCosts and Expenses\n\nSelling General and Administrative Expenses\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2023 2022 Change % Change\nSelling, general and administrative expenses $ 140,897 $ 105,966 $ 34,931 33.0%\nPercentage of revenue 33.5% 34.3% (0.8)%\n\nSelling, general and administrative expenses increased by $34.9 million, or 33.0%, for the year ended December 31, 2023\ncompared to the year ended December 31, 2022, primarily due to new business development expense costs, marketing costs, and proof\nof concept development costs linked to larger pipeline in line with growth projections. Additionally, success-based commissions have\nalso increased related to new direct contract wins.\n\nResearch and Development Expenses\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2023 2022 Change % Change\nResearch and development expenses $ 128,544 \u00a7$ 97,436 $ 31,108 31.9%\nPercentage of revenue 30.6% 31.5% (0.9)%\n\nR&D expenses increased by $31.1 million, or 31.9%, for the year ended December 31, 2023 compared to the year ended\nDecember 31, 2022, primarily due to R&D activities related to new AI digital asset development, existing AI digital asset maintenance\nincluding monitoring, machine learning/AI model improvements, enhancement, data validation and testing and quality assurance\nactivities. This is required to maintain our product edge and build competitive barriers and drive future growth.\n\nOther Income and Expenses\n\nInterest Expense\nYear Ended\nDecember 31,\n(Dollars in thousands) 2023 2022 Change % Change\nInterest expense $ 6,274 $ 6.614 $ 340 5.1%\nPercentage of revenue 1.5% 2.1% 0.6%\n\nInterest expense decreased by $0.3 million, or 5.1%, for the year ended December 31, 2023 compared to the year ended December\n31, 2022, primarily due to net principal amount increase of $4.8 million between the two periods.\n\nae\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 118 of 408\n\nChange in Fair Value of Warrant Liability\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2023 2022 Change % Change\nChange in fair value of warrant liability $ (771) $ 248 $\u00a7 (1,019) NM\nPercentage of revenue (0.2)% 0.1% (0.3)%\n\nChange in fair value of warrant liability decreased by $1.0 million for the year ended December 31, 2023 compared to the year\nended December 31, 2022. In connection with the 2020 Term Loans, the 2021 Term Loans, and the 2023 Term Loan we issued the\nlenders warrants to purchase our stock, which may be exercisable for common or preferred stock in accordance with the terms of the\nwarrants. The warrants were carried as a liability at its fair value because there are certain put rights that may obligate us to repurchase\nthe warrants in the future, based on events that are outside of our control.\n\nChange in Fair Value of Convertible Notes\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2023 2022 Change % Change\nChange in fair value of convertible notes $ (14,147) $ - \u00a7$ (14,147) NM\nPercentage of revenue (3.4)% NM (3.4)%\n\nChange in fair value of convertible debt is due to issue of convertible note of $17.4 million in year ended December 31, 2023. The\nCompany elected fair value option for the convertible notes. There were no convertible notes issued in 2022.\n\nIncome Tax (Expense) Benefit\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2023 2022 Change % Change\nIncome tax (expense) benefit $ (2,157) $ 5.975 $ (8,132 NM\nPercentage of revenue (0.5)% 1.9% (24%\n\nIncome tax expense for the year ended December 31, 2023 was $2.2 million whereas income tax benefit for the year ended\nDecember 31, 2022 was $6.0 million, primarily due to increased revenue and operating income as well as the add back of items treated\nas permanent differences to taxable income.\n\n78\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 119 of 408\n\nComparison of Years Ended December 31, 2022 and 2021\n\nRevenue\nYear Ended\n\nDecember 31,\n(Dollars in thousands) 2022 2021 Change % Change\nIndia $ 138,048 $ 126371 $ 11,677 9.2%\nPercentage of revenue 44.7% 58.0%\nNorth America $ 116,112 \u00a7$ 47,953 \u00a7$ 68,159 142.1%\nPercentage of revenue 37.5% 22.0%\nOther $ 55,010 \u00a7$ 43,543 \u00a7$ 11,467 26.3%\nPercentage of revenue 17.8% 20.0%\nTotal revenue $ 309.170 $ 217.867 $ 91 303 41.9%\nGlobal Revenue\n\nGlobal revenue increased by $91.3 million or 41.9% for the year ended December 31, 2022 compared to the year ended December\n31, 2021, primarily due to 16 new contracts. Please see further discussion of the change by region below.\n\nIndia\n\nRevenue in India increased by $11.7 million or 9.2% for the year ended December 31, 2022 compared to the year ended December\n31, 2021, primarily through upsell to our existing customers of $11.7 million.\n\nNorth America\n\nRevenue in North America increased by $68.2 million or 142.1% for the year ended December 31, 2022 compared to the year\nended December 31, 2021, primarily due to 15 new contracts sold through VARs being added to our existing client bases of $53.7\nmillion and the remaining increase was due to upsell to our existing customers of $14.5 million.\n\nOther\nRevenue in other region, which includes Middle East and Europe, increased by $11.5 million or 26.3% for the year ended\nDecember 31, 2022 compared to the year ended December 31, 2021, primarily due to one new contract sold through a VAR being\n\nadded to our existing client bases of $4.3 million and the remaining increase was due to upsell to our existing customers of $7.1\nmillion.\n\nCost of Revenue and Gross Margin\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2022 2021 Change % Change\nCost of revenue $ 93.890 $ 64.834 \u00a7 29,056 44.8%\nGross margin 69.6% 70.2% (0.6)%\n\nCost of revenue increased by $29.1 million, or 44.8%, for the year ended December 31, 2022 compared to the year ended\nDecember 31, 2021, primarily due to 16 new contracts that were added. We had an increase in cost of revenue due to implementation\ncosts, application & content support costs and operations and support costs.\n\n79\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 120 of 408\n\nGross margin decreased to 69 6% for the year ended December 31, 2022 compared to 70 2% for the year ended December 31,\n2021, primarily due to the higher dedicated support needs & related costs being higher in the first year for newly added contracts\n\nCosts and Expenses\n\nSelling General and Administrative Expenses\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2022 2021 Change % Change\nSelling, general and administrative expenses $ 105,966 $ 74.434 \u00a7 31,532 42.4%\nPercentage of revenue 34.3% 34.2% 0.1%\n\nSelling, general and administrative expenses increased by $31.5 million, or 42.4%, for the year ended December 31, 2022\ncompared to the year ended December 31, 2021, primarily due to new market development expense costs and proof of concept\ndevelopment costs linked to larger pipeline. The selling, general and administrative expenses as a percentage of revenue decreased by\n100 basis points though, in line with the expected trends. With economies of scale kicking in. The selling, general and administrative\nexpenses as a percentage of revenue is expected to decrease marginally over the next few quarters.\n\nResearch and Development Expenses\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2022 2021 Change % Change\nResearch and development expenses $ 97,436 $ 70,913 \u00a7$ 26,523 37.4%\nPercentage of revenue 31.5% 32.5% (1.0 %\n\nR&D expenses increased by $26.5 million, or 37.4%, for the year ended December 31, 2022 compared to the year ended\nDecember 31, 2021, primarily due to activities related to new AI digital asset development, existing AI digital asset maintenance\nincluding monitoring, machine learning/AI model improvements, enhancement, data validation & testing and quality assurance\nactivities. The R&D expenses as a percentage of revenue decreased by 100 basis points though, in line with the expected trends. With\n$30.0 million in annual expense, data purchases form a significant portion of our R&D outlay in any given year. This portion of the\nR&D expense however is expected to stay constant for the foreseeable future, and not scale in tandem with the revenue. Consecutively,\nwhile the total R&D expense outlay in dollars would continue to increase, R&D expenses as a percentage of revenue should continue to\ndecrease and stabilize at the 30% benchmark over the next few years.\n\nOther Income and Expenses\n\nInterest Expense\nYear Ended\nDecember 31,\n(Dollars in thousands) 2022 2021 Change Change\nInterest expense $ 6.614 $ 5.047 \u00a7$ 1,567 31.0%\nPercentage of revenue 2.1% 2.3% (0.2)%\n\nInterest expense increased by $1.6 million, or 31.0%, for the year ended December 31, 2022 compared to the year ended December\n31, 2021, primarily due to net principal amount increase of $5.2 million between the two periods.\n\n80\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 121 of 408\n\nChange in Fair Value of Warrant Liability\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2022 2021 Change % Change\nChange in fair value of warrant liability $ 248 $ (83) $ 331 NM\nPercentage of revenue 0.1% NM 0.1%\n\nThe change in fair value of warrant liability increased by $0.3 million for the year ended December 31, 2022 compared to the year\nended December 31, 2021. In connection with the 2020 Term Loans and the 2021 Term Loans, we issued the lenders warrants to\npurchase our stock, which may be exercisable for common or preferred stock in accordance with the terms of the warrants. The\nwarrants were carried as a liability at its fair value because there are certain put rights that may obligate us to repurchase the warrants in\nthe future, based on events that are outside of our control.\n\nIncome Tax Expense\n\nYear Ended\nDecember 31,\n(Dollars in thousands) 2022 2021 Change % Change\nIncome tax benefit (expense) $ 5,975 $ (32) $ 6,007 NM\nPercentage of revenue 1.9% NM 1.9%\n\nIncome tax benefit for the year ended December 31, 2022 was $6.0 million whereas income tax expense for the year ended\nDecember 31, 2021 was less than $0.1 million. Change between the periods was primarily due to net operating loss carryforward and\ncredits from foreign derived intangible income reductions during the year ended December 31, 2022.\n\nLiquidity and Capital Resources\n\nOur liquidity requirements arise from our working capital needs, our obligations to make scheduled payments of principal and\ninterest on our indebtedness and our need to fund capital expenditures to support our current operations and to facilitate growth and\nexpansion, including future acquisitions. We have financed our operations and expansion with a combination of debt and equity.\n\nOn March 31, 2024, we had total shareholders\u2019 deficit of $47.1 million, net of an accumulated deficit of $83.5 million. Our\nprimary sources of liquidity consisted of cash totaling $0.8 million as of March 31, 2024. Upon consummation of the Business\nCombination, we received approximately $5.9 million primarily due to proceeds from the Trust Account, partially offset by cash\npayments that were disbursed at the Closing which included $0.2 million of transaction expenses, $5.0 million in prepayment for\nforward purchase agreement, $0.1 million in directors\u2019 and officers\u2019 (\u201cD&O\u201d) insurance premiums, and $0.5 million payment to ARRW\npromissory notes. Certain other transaction costs associated with and liabilities assumed as a result of the Business Combination\ntotaling approximately $9.6 million as of June 24, 2024 have been deferred, consisting of approximately $9.2 million deferred until\nlater in 2024 and approximately $0.4 deferred until 2025, and we entered into agreements to equitize up to an additional approximately\n$16.8 million (which includes the election by Arrowroot to convert approximately $10.3 million of Acquiror Transaction Expenses into\nshares of our Common Stock) in expenses related to the Business Combination. For more information, please see \u201c\u2014 Recent\nDevelopments\u201d. In connection with the Business Combination, over 3.8 million shares were submitted for redemption for an aggregate\nredemption amount of approximately $41.1 million. The proceeds we received in connection with the Business Combination were\nsignificantly less than the originally expected proceeds of approximately $46 million (assuming no redemptions). As discussed below\nand above under \u201c\u2014 Recent Developments\u2019, the reduction in available cash upon closing of the Business Combination due to share\nredemptions has negatively impacted our growth initiatives, our revenue and net loss projections prepared in connection with ARRW\u2019s\nevaluation of the Business Combination, and our liquidity, including the likelihood that holders of Warrants will exercise their Warrants\nand the Company will receive cash proceeds from the Warrants.\n\nAs of the date of filing. we believe our existing cash and cash equivalents will be sufficient to support working capital and capital\nexpenditure requirements until at least September 2025.\n\n81\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 122 of 408\n\nOur ability to pay dividends on our common stock is limited by restrictions under the terms of the agreements governing our\nindebtedness Subject to the full terms and conditions under the agreements governing our indebtedness, we may be permitted to make\ndividends and distributions under such agreements if there is no event of default\n\nWe will receive the proceeds from any cash exercise of any Warrants The aggregate amount of proceeds could be up to $260 2\nmillion if all the Warrants are exercised for cash However, to the extent the Warrants are exercised on a \"cashless basis,\" the amount of\ncash we would receive from the exercise of the Warrants will decrease The Private Placement Warrants may be exercised for cash or\nona \"cashless basis \" The Public Warrants may only be exercised for cash provided there is then an effective registration statement\nregistering the shares of common stock issuable upon the exercise of such warrants If there is not a then effective registration\nstatement, then such warrants may be exercised on a \"cashless basis,\" pursuant to an available exemption from registration under the\nSecurities Act We expect to use any such proceeds for general corporate and working capital purposes, which would increase our\nliquidity\n\nOur future capital requirements will depend on many factors, including our global growth rates, our ability to expand our\noperational footprints in the United States, our ability to grow our platform through acquisitions and our decisions around future\ninvestments required in R&D We may, in the future, enter into arrangements to acquire or invest in complementary businesses,\nproducts, and technologies We may be required to seek additional equity or debt financing In the event that we require additional\nfinancing, we may not be able to raise such financing on terms acceptable to us or at all If we are unable to raise additional capital or\ngenerate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete\nsuccessfully, which would harm our business, operations and financial condition\n\nAs of December 31, 2023, the Company maintained a $2 0 million restricted cash balance, and this reserve was not used in the\nordinary course of business As of March 31, 2024, the $2 0 million restricted cash requirement was waived by the respective lenders\n\nPurchase Commitments\n\nWe entered into a long term software licensing contract with a major customer that commenced in 2018 and is set to expire in June\n2024, subject to an additional 5 year renewal The contract has an annual value of $50 3 million As part of the agreement, we install\nour software licenses on the customer\u2019s servers, and in exchange, the customer pays an annual fee for access to the software license and\nrelated maintenance services Additionally, we have a separate contract with the customer for the purchase of the customer\u2019s end user\ndata This data is essential for our development and utilization of its next generation AI platform The annual price for this data\nacquisition amounts to approximately $30 0 million\n\nCredit Facilities\n\nOn March 27, 2024, we entered into the Second Omnibus Amendment to Loan Documents agreement (\u201cAmended Term Loan\u2019)\nwith Venture Lending & Leasing [X and WTI Fund X, Inc (collectively, the \u201cLenders\u201d), to amend the 2020, 2021 and 2023 term loans\n(collectively the \u201cTerm Loans\u201d) Commencing on April 1, 2024, and continuing on the first day of each consecutive month thereafter\nthrough maturity, we shall pay to the Lenders monthly installments scheduled under the Amended Term Loan according to the modified\npayment schedule noted In exchange for the amendment to payment schedule, the Lenders will receive 1,019 999 shares of our\nCommon Stock to be issued upon completion of the SPAC Transaction (the \u201cLoan Restructuring Shares\u201d) In addition, the Lenders will\nterminate the outstanding warrants issued in connection with the Term Loans and the respective put rights associated with each, upon\nreceipt of 3,399 999 shares of our common stock to be issued upon completion of the SPAC Transaction\n\nIf we repay the Term Loans on or before (i) April 15, 2024, then 90% of the Loan Restructuring Shares will be canceled, (ii) May\n1, 2024, then 80% of the Loan Restructuring Shares will be canceled, and (iii) July 1, 2024, then 50% of the Loan Restructuring Shares\nwill be canceled\n\nIn addition, the Amended Term Loan provides that, if we prepay the Term Loans, then at our option, we may prepay 50% of the\namount of scheduled but unpaid payments of interest that would have accrued after the prepayment date by issuing a number of shares\nof our common stock obtained by dividing (A) the product of (x) the unpaid scheduled interest payments and (y) 2 75, by (B) the\nVWAP of our common stock over the seven (7) trading days immediately preceding the date of issuance On April 18, 2024, we\nprepaid the full amount of the Amended Term Loan using a combination of cash and 159 379 shares of our common stock Based on\nthe timing of the prepayment, 815 999 Loan Restructuring Shares were canceled\n\n82\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 123 of 408\n\nOther Equity Financing\n\nThe ability of the Selling Securityholders to sell securities pursuant to this registration statement may affect the ability of the\nCompany to sell its own shares of Common Stock or securities exercisable for shares of Common Stock should management elect to\nraise additional capital through a registered offering or private placement The sale of a substantial amount of shares of Common Stock\npursuant to this prospectus, or the perception that such sale may occur, may materially and adversely affect the prevailing market price\nof our Common Stock and thus restrict the amount we are able to raise in an equity offering, or require us to issue and sell more shares\nof Common Stock to generate the same amount of gross proceeds than we would otherwise have had to, which would result in greater\ndilution to our existing stockholders Furthermore, we expect that because there is a large number of shares being registered pursuant to\nthe registration statement of which this prospectus forms a part, the holders thereunder will continue to offer the securities covered\nthereby for a significant period of time, the precise duration of which cannot be predicted Accordingly, the adverse market and price\npressures and constraint on our ability to raise additional capital resulting from the shares registered hereunder may continue for an\nextended period of time and may have material adverse effect on the Company\u2019s liquidity given its need to raise additional capital to\nconduct its operations See \u201cRisk Factors Sales of our Common Stock and/or Warrants or the perception of such sales, by us or the\nselling securityholders pursuant to this prospectus, in the public market or otherwise, could cause the market price for our securities to\ndecline, even though the selling securityholders would still realize a profit on sales at lower prices Resales of the securities offered by\nthis prospectus may cause the market price of such securities to drop significantly, even if our business is doing well \u201d\n\nIn particular, Harish Chidambaran, Preeta Chidambaran and the Sponsor, collectively the beneficial owners of 103,852 211 shares\nof Common Stock, constituting approximately 76 9% of our issued and outstanding Common Stock as of the date of this prospectus,\nwill be able to sell up to 71,700 299 shares of Common Stock, constituting approximately 53 1% of our issued and outstanding\nCommon Stock as of the date of this prospectus, pursuant to this prospectus, upon the expiration of the relevant lock up period that\nthese shares are subject to, for so long as the registration statement of which this prospectus forms a part is available for use Although\nHarish Chidambaran, Preeta Chidambaran and the Sponsor will be prohibited from transferring any Common Stock until the lock up\nperiods contained in the Bylaws expire, upon the effectiveness of any registration statement the Company files or otherwise in\naccordance with Rule 144 under the Securities Act and after expiration or early termination or release of the applicable lock up\nprovisions, the Company stockholders may sell our Common Stock in the open market or in privately negotiated transactions, which\ncould have the effect of increasing the volatility in the trading price of our Common Stock or putting significant downward pressure on\nthe price of our Common Stock\n\nForward Purchase Agreement\n\nOn April 26, 2023, the Company and Polar entered into the Forward Purchase Agreement, dated April 26, 2023 (the \u201c2023\nForward Purchase Agreement\u201d), pursuant to which the Company agreed to purchase in the aggregate, on the date that is one year after\nthe Closing, subject to certain FPA Acceleration Events (the \u201cMaturity Date\u201d), up to 2 500,000 shares of common stock then held by\nPolar (subject to certain conditions and purchase limits set forth in the 2023 Forward Purchase Agreement) On April 9, 2024, the\nCompany and Polar entered into a letter agreement (\u201cLetter Agreement\u2019) to the 2023 Forward Purchase Agreement (as amended, the\n\u201cForward Purchase Agreement\u201d), pursuant to which the Company and Polar agreed to remove any obligations for Polar to purchase,\nand for the Company to pay any prepayment amount relating to, the Private Shares (as defined in the 2023 Forward Purchase\nAgreement) in exchange for the Company\u2019s payment of approximately $0 2 million to Polar thereby reducing the aggregate number of\nshares of Common Stock the Company could be required to purchase from Polar from 2,500,000 shares to 445,000 shares Pursuant to\nthe Forward Purchase Agreement, at the Closing, (i) the Company paid approximately $10 67 per share (the \u201cFPA Redemption Price\u201d)\nor $4 7 million in the aggregate (the \u201cPrepayment Amount\u201d), in cash to Polar as a prepayment for the purchase of 445,000 shares of the\nCommon Stock of the Company held by Polar (the \u201cForward Purchase Shares\u201d), and (ii) Polar waived its redemption rights in\nconnection with the Business Combination To date, Polar has received approximately $5 0 million in cash, consisting of $4 7 million\nof the Prepayment Amount and $0 2 pursuant to the Letter Agreement The forward purchase will settle one year from the Closing, ie\nApril 16, 2025 (the \u201cMaturity Date\u201d), provided that the Maturity Date may be accelerated if the shares of the Common Stock of the\nCompany trade below $2 00 per share for 10 out of 30 days or the shares are delisted by Nasdaq At the settlement of the Forward\nPurchase Agreement, if the per share price of the shares of the Common Stock has appreciated to a value in excess of the FPA\nRedemption Price upon settlement, then the Company and its stockholders would benefit from an opportunity to repurchase shares of\nthe Common Stock at a price less than the current trading price should Polar not exercise its right to termination all or a portion of the\nForward Purchase Agreement early If the Forward Purchase Agreement is not terminated, then, on the Maturity Date, the Company\nwould be required to pay to Polar an amount in cash equal to $0 60 per share for each non terminated Forward Purchase Shares, up to a\ntotal of $267,000 upon settlement of the forward purchase, which would take the price per share paid by the Company pursuant to the\nForward Purchase Agreement to $11 27 per share\n\fThe transacase ingisased the Fe Gamer oe the Compt OOo S! E34 Decade Polat org Bt to redeem\n\nthe shares in connection with the completion of the Business Combination If and to the extent that the per share price of the shares of\nthe Company\u2019s Common Stock does not increase in excess of the FPA Redemption Price upon settlement, then the cost of the\narrangement for the Company will be limited to the aggregate repayment amount Polar may terminate the Forward Purchase\nAgreement with respect to some or all of the Forward Purchase Shares prior to the Maturity Date, in which case, Polar will make a\npayment equal to the number of such terminated shares multiplied by the FPA Redemption Price On the Maturity Date, if Polar has\nnot terminated the Forward Purchase Agreement in full, then the Company may be required to make a cash payment to Polar equal to\nthe number of Forward Purchase Shares (less any shares terminated prior to the Maturity Date) multiplied by $0 60 Among the reasons\nthat the Company entered into the Forward Purchase Agreement was to increase the liquidity available for trading in shares of the\nCompany\u2019s Common Stock at the Closing, potentially increase the amount of working capital available to the Company following the\nClosing, reduce the number of redemptions in connection with the Business Combination to help ensure that, following completion of\nthe Business Combination, the Company\u2019s stockholder base would continue to comply with Nasdaq listing standards, including with\nrespect to the minimum number of round lot holders and aggregate market value of publicly held shares See \u201cRisk Factors We may\nbe required to repurchase up to 445,000 shares of Common Stock from the investors with whom we entered into the Forward Purchase\nAgreement in connection with the closing of the Business Combination, which would reduce the amount of cash available to us to fund\nour business \u201d and \u201cRisk Factors Other events may result in Polar having no payment obligations to the Company at settlement under\nthe Forward Purchase Agreement \u201d for a discussion of the risks related to the Forward Purchase Agreement\n\n83\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 125 of 408\n\nThe description of the Forward Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to\nthe full text of the Forward Purchase Agreement, a copy of which is filed as Exhibit 10 40 and 10 41 to the registration statement of\nwhich this prospectus forms a part and are incorporated herein by reference\n\nCash Flows\n\nThe following table summarizes our cash flows for the period indicated\n\nThree Months Ended\nMarch 31,\n\nDollars in thousands 2024 2023\nCash used in operating activities $ (3,610) $ (2,200)\nCash used in investing activities $ (9) $ -\nCash (used in) provided by financing activities $ (2,329) $ 2,937\n\nYear Ended December 31,\n(Dollars in thousands) 2023 2022 2021\nCash used in operating activities $ (16,166) $ (8,943) $ (8,234)\nCash (used in) provided by investing activities $ (24) $ 161 $ (18)\nCash provided by financing activities $ 22,097 $ 5,231 $ 6.729\n\nOperating Activities\n\nOur largest source of operating cash is payments received from our customers. Our primary uses of cash from operating activities\nare R&D and sales and marketing expenses. We have historically generated negative cash flows and have supplemented working\ncapital requirements primarily through net proceeds from debt.\n\nNet cash used in operating activities for the three months ended March 31, 2024 of $3.6 million was primarily related to net\nworking capital cash outflows of $10.2 million and net loss of $25.9 million adjusted for non-cash adjustments of $32.6 million. The\nmain drivers of the changes in working capital cash out flows were increases in accounts receivable and receivables from Technology\nPartner, partially offset by cash inflows due to an increase in trade payables.\n\nNet cash used in operating activities for the three months ended March 31, 2023 of $2.2 million was primarily related to our net\nincome of $0.5 million adjusted for non-cash adjustments of $1.6 million and net cash outflows of $4.2 million provided by changes in\nour operating assets and liabilities. Non-cash charges primarily consisted of amortization of debt issuance cost. The main drivers of the\nchanges in operating assets and liabilities were the accounts receivables and the receivables from Technology Partner. These amounts\nwere partially offset by change in contract asset.\n\nNet cash used in operating activities for the year ended December 31, 2023 of $16.2 million was primarily related to net working\ncapital cash outflows of $32.0 million and net loss of $4.4 million adjusted for non-cash adjustments of $20.2 million. The main driver\nof the changes in operating assets and liabilities was the increase accounts receivables. These amounts were partially offset by change\nin contract asset.\n\nNet cash used in operating activities for the year ended December 31, 2022 of $8.9 million was primarily related to our net income\nof $11.5 million adjusted for non-cash adjustments of $2.1 million and net cash outflows of $18.4 million provided by changes in our\noperating assets and liabilities. Non-cash charges primarily consisted of amortization of debt. The main drivers of the changes in\noperating assets and liabilities were the accounts receivables and the receivables from Technology Partner. These amounts were\npartially offset by change in contract asset.\n\nNet cash used in operating activities for the year ended December 31, 2021 of $8.2 million was primarily related to our net income\nof $2.5 million adjusted for non-cash adjustments of $4.0 million and net cash outflows of $14.7 million provided by changes in our\noperating assets and liabilities. Non-cash charges primarily consisted of amortization of debt issuance cost. The main drivers of the\nchanges in operating assets and liabilities were the accounts receivables and the receivables from Technology Partner. These amounts\nwere partially offset by change in contract asset.\n\n84\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 126 of 408\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 127 of 408\n\nInvesting Activities\n\nFor the three months ended March 31, 2024 the cash used in investing activities was $0 01 million approximately and was\nprimarily related to purchase of property and equipment\n\nThere was no change to net cash provided by investing activities for the three months ended March 31, 2023\n\nFor the year ended December 31, 2023 the cash used in investing activities was $0 02 million approximately was primarily related\nto purchase of property and equipment\n\nNet cash provided by investing activities for the year ended December 31, 2022 of $0 2 million was primarily related to cash\nacquired from business acquisition and cash used in for the year ended December 31, 2021 of $0 02 million was primarily related to\npurchases of property and equipment\n\nFinancing Activities\n\nNet cash used in financing activities for the three months ended March 31, 2024 of $2 3 million was primarily related to $3 0\nmillion debt pay down and proceeds from $0 7 million convertible notes\n\nNet cash provided by financing activities for the three months ended March 31, 2023 of $2 9 million was primarily related to the\n$5 0 million in venture debt that we took from Western Technology Investments in two different tranches offset by the debt taken in\nprevious tranches that we paid down\n\nNet cash provided by financing activities for the year ended December 31, 2023 of $22 1 million was primarily related to the $15 0\nmillion in venture debt that we took from Western Technology Investments offset by the debt taken in previous tranches that we paid\ndown and proceeds from the convertible notes of $17 4 million\n\nNet cash provided by financing activities for the year ended December 31, 2022 of $5 2 million was primarily related to the $10\nmillion in venture debt that we took from Western Technology Investments in three different tranches offset by the debt taken in\nprevious tranches that we paid down\n\nNet cash provided by financing activities for the year ended December 31, 2021 of $6 7 million was primarily related to the $7\nmillion in venture debt that we took from Western Technology Investments in two different tranches offset by the debt taken in\nprevious tranches that we paid down\n\nProceeds from Warrants\n\nWe will not receive any of the proceeds from sales of Warrants, except with respect to amounts we may receive upon the cash\nexercise of the Warrants Whether warrant holders will exercise their Warrants, and therefore the amount of cash proceeds we would\nreceive upon exercise, is dependent upon the trading price of the common stock, the last reported sales price for which was $5 95 per\nshare on May 31, 2024 Each Warrant is exercisable for one share of common stock at an exercise price of $11 50 Therefore, if and\nwhen the trading price of the common stock is less than $11 50 per share, we expect that warrant holders would not exercise their\nWarrants To the extent the Warrants are exercised on a \u201ccashless basis,\u201d the amount of cash we would receive from the exercise of the\nWarrants will decrease The Private Placement Warrants may be exercised for cash or on a \u201ccashless basis \u201d The Public Warrants may\nonly be exercised for cash provided there is then an effective registration statement registering the shares of common stock issuable\nupon the exercise of such warrants If there is not a then effective registration statement, then such warrants may be exercised on a\n\u201ccashless basis,\u201d pursuant to an available exemption from registration under the Securities Act\n\nWe could receive up to an aggregate of approximately $260 2 million if all of the Warrants are exercised for cash, but we would\nonly receive such proceeds if and when the warrant holders exercise their Warrants, which, based on the current trading price of our\ncommon stock, is unlikely unless there is a significant increase in the trading price of our common stock The Warrants may not be, or\nremain, in the money during the period they are exercisable and prior to their expiration and, therefore, it is possible that the Warrants\nmay not be exercised prior to their maturity, even if they are in the money, and as such, may expire worthless with minimal proceeds\nreceived by us, if any, from the exercise of the Warrants To the extent that any of the Warrants are exercised on a \u201ccashless basis,\u201d we\nwill not receive any proceeds upon such exercise As a result, we do not expect to rely on the cash exercise of Warrants to fund our\noperations Instead, we intend to rely on other sources of cash discussed elsewhere in this prospectus to continue to fund our operations\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 128 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 129 of 408\n\nQuantitative and Qualitative Disclosures about Market Risk\n\nWe are exposed to market risk in the ordinary course of our business Market risk represents the risk of loss that may impact our\nfinancial position due to adverse changes in financial market prices and rates Our market risk exposure is principally the result of\nfluctuations in interest rates and foreign currency exchange rates\n\nInterest Rate Risk\n\nWe had cash of $0 8 million as of March 31, 2024, which consisted entirely of bank deposits We do not enter into investments for\ntrading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure As of\nMarch 31, 2024, we had $22 0 million principal outstanding in debt A hypothetical 10% change in interest rates during the period\npresented would not have had a material impact on our consolidated financial statements The Company did not have any investments\nas of March 31, 2024\n\nWe had cash of $1 6 million as of March 31, 2023, which consisted entirely of bank deposits A hypothetical 10% change in\ninterest rates during the period presented would not have had a material impact on our consolidated financial statements\n\nWe had unrestricted and restricted cash of $6 8 million as of December 31, 2023, which consisted entirely of bank deposits Of the\n$6 8 million in cash, $2 0 million are in restricted cash The unrestricted cash are held for working capital purposes As of December\n31, 2023, we had $21 2 million outstanding under the Term Loan agreements A hypothetical 10% change in interest rates during the\nperiod presented would not have had a material impact on our consolidated financial statements The Company did not have any\ninvestment as of December 31, 2023\n\nWe had cash of $0 9 million as of December 31, 2022, which consisted entirely of bank deposits As of December 31, 2022, we\nhad $17 9 million outstanding under the Term Loan agreements A hypothetical 10% change in interest rates during the period\npresented would not have had a material impact on our consolidated financial statements\n\nForeign Currency Exchange Risk\n\nWe have operations internationally that are denominated in foreign currencies, including India rupee, Emirati dirham, and Australia\ndollar, which subject us to foreign currency exchange risk Therefore, we are exposed to foreign exchange rate fluctuations as we\nconvert the financial statements of our foreign subsidiary into U S$ dollars Our subsidiary remeasures monetary assets and liabilities at\nperiod end exchange rates, while non monetary items are remeasured at historical rates If there is a change in foreign currency\nexchange rates, the conversion of our foreign subsidiary\u2019s financial statements into U S dollars would result in a realized gain or loss\nwhich is recorded in our consolidated statements of operations We do not currently engage in any hedging activity to reduce our\npotential exposure to currency fluctuations, although we may choose to do so in the future A hypothetical 10% change in foreign\nexchange rates during the period presented would not have had a material impact on our consolidated financial statements\n\nInflation Risk\n\nWe do not believe that inflation has had a material effect on our business, financial condition, or results of operations, other than its\nimpact on the general economy Nonetheless, if our costs were to become subject to inflationary pressures, we may not be able to fully\noffset such higher costs through price increases Our inability or failure to do so could harm our business, financial condition and\nresults of operations\n\nCritical Accounting Estimates\n\nPolicies determined to be critical are those policies that have the most significant impact on our financial statements and require us\nto use a greater degree of judgment in forming assumptions or estimates Judgments are subject to an inherent degree of uncertainty,\nand therefore actual results could differ from our estimates\n\nRevenue Recognition\n\nIn applying the ASC 606 revenue recognition model, the Company\u2019s determination of whether products and services are\nconsidered distinct performance obligations that should be accounted for separately versus together, may require significant judgment\nThe Company\u2019s contracts with customers generally include two performance obligations, (i) implementation, and (ii) combined\nsoftware license and maintenance\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 130 of 408\n\n86\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 131 of 408\n\nIn determining the SSP of implementation services, the Company estimates the cost of providing the services and adds a\nreasonable margin The estimates are expected to change over time as the Company accumulates additional cost data for completed\nimplementations\n\nIn determining the SSP of combined software license and maintenance performance obligation, the Company uses the residual\napproach It sells an AI platform and related maintenance services to different customers at a highly variable range of amounts When\nthe Company sells the AI platform and related maintenance services to customers, it presents the price of the license and maintenance\nto the customer by quoting both a price a per user per month and per expert per month There are a number of factors that affect the per\nuser and per expert prices charged to different customers including, but not limited to, the customer\u2019s bespoke products which the AI\nplatform is replacing, the complexity of the use case for which the AI platform is meant to solve, the number of customer systems into\nwhich the platform is integrated, the number of dedicated support personnel required to provide maintenance services, and the outcome\nof contract negotiations with the customer\n\nConvertible Notes\n\nThe Company\u2019s convertible notes are accounted under the fair value option election, in which the convertible notes are reported at\nfair value as of the end of each reporting period, with changes recognized in the statements of operations\n\nThe fair value of the convertible notes is estimated using a scenario based approach which considers various events, the conversion\nfeature and related payoffs within each scenario Unobservable (Level 3) inputs and assumptions used in valuation methodologies\ninclude management\u2019s probability assumptions for various conversion scenarios, including estimates of the time until the respective\nconversion scenarios may occur, the risk free interest rate and a discount spread The risk free rate is based on the United States\nTreasury benchmark yield curves\n\nAmended Term Loan\n\nThe Company\u2019s Amended Term Loan is accounted under the fair value option election, in which the Amended Term Loan is\nreported at fair value as of the end of each reporting period, with changes recognized in the statements of operations\n\nThe fair value of the Amended Term Loan is estimated using a scenario based approach which considers various events, the\nconversion feature and related payoffs within each scenario Unobservable (Level 3) inputs and assumptions used in valuation\nmethodologies include management\u2019s probability assumptions for various conversion scenarios, including the term matched risk free\ninterest rate, credit rating, and a discount spread\n\n87\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 132 of 408\n\nWarrant Liability\n\nThe fair value of the warrant liability is estimated using an option pricing model Unobservable (Level 3) inputs and assumptions\nused in valuation methodologies include management\u2019s probability assumptions associated with various settlement scenarios, selected\nvolatility and discount rates, selected guideline public companies, and the risk free interest rate The risk free rate is based on the\nUnited States Treasury benchmark yield curves\n\nRecent Accounting Pronouncements\n\nAS an emerging growth company (\u201cEGC\u201d), the JOBS Act allows us to delay adoption of new or revised accounting\npronouncements applicable to public companies until such pronouncements are applicable to private companies We have elected to use\nthis extended transition period under the JOBS Act until such time we are no longer considered to be an EGC\n\nSee Note 2 in the notes to the unaudited consolidated financial statements included elsewhere in this filing for more information\nabout recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their\npotential impact on our financial condition and our results of operations\n\nEmerging Growth Company Status\n\nSection 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised\nfinancial accounting standards The JOBS Act provides that a company can choose not to take advantage of the extended transition\nperiod and comply with the requirements that apply to non emerging growth companies, and any such election to not take advantage of\nthe extended transition period is irrevocable Arrowroot previously elected to avail itself of the extended transition period, and\nfollowing the consummation of the business combination, we will be an emerging growth company and will take advantage of the\nbenefits of the extended transition period that the emerging growth company status permits During the extended transition period, it\nmay be difficult or impossible to compare our financial results with the financial results of another public company that complies with\npublic company effective dates for accounting standard updates because of the potential differences in accounting standards used\n\nWe will remain an emerging growth company under the JOBS Act until the earlier of (1) the last day of the fiscal year\n(a) following the fifth anniversary of the closing of Arrowroot\u2019s initial public offering (i e , December 31, 2026), (b) in which we have\ntotal annual gross revenue of at least $1 235 billion, or (c) in which we are deemed to be a \u201clarge accelerated filer\u201d under the rules of\nthe SEC, which means the market value of our common equity that is held by non affiliates exceeds $700 0 million as of the end of the\nprior fiscal year\u2019s second fiscal quarter; and (2) the date on which we have issued more than $1 0 billion in non convertible debt\nsecurities during the prior three year period\n\n88\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 133 of 408\n\nOUR BUSINESS\n\nThe following discussion reflects the business of iLearningEngines Inc as currently embodied by each of Legacy\niLearningEngines and iLearningEngines after the Closing of the Business Combination As used in this section iLearningEngines\n\nwe us and our generally refer to Legacy iLearningEngines prior to the Closing of the Business Combination and\niLearningEngines following the Closing of the Business Combination unless the context specifically indicates otherwise\n\nOur Mission\n\nWe aim to transform the way enterprises approach learning, work automation and information intelligence Our goal is to create\nthe preeminent AI ecosystem that empowers companies to make themselves better at what they do Our vision is to remove limitations\nfor companies by helping them re imagine themselves as engaged, informed and empowered enterprise ecosystems\n\nOverview\n\niLearningEngines is an out of the box AI platform that empowers customers to \u201cproductize\u201d their institutional knowledge and\ngenerate and infuse insights in the flow of work to drive mission critical business outcomes iLearningEngines\u2019 customers \u201cproductize\u201d\ntheir institutional knowledge by transforming it into actionable intellectual property that enhances outcomes for employees, customers\nand other stakeholders Our platform enables enterprises to build intelligent \u201cKnowledge Clouds\u201d that incorporate large volumes of\nstructured and unstructured information across disparate internal and external systems, and to automate organizational processes that\nleverage these Knowledge Clouds to improve performance Our Learning Experience Platform addresses the corporate learning market\nand our Information Intelligence Platform addresses the information management, analytics and automation markets We combine our\nplatforms with vertically focused capabilities and data models to operationalize AI and automation to effectively and efficiently address\ncritical challenges facing our customers Our customers utilize our platform to analyze and address employee knowledge gaps, provide\npersonalized cognitive assistants or chatbots, and make predictive decisions based on real time insights We serve more than 1,000\nenterprise end customers with over 4 7 million licensed users across 12+ industry verticals, including education, healthcare, insurance,\nmanufacturing, cybersecurity and energy and utilities In 2023, we generated $421 million of revenue, representing 36% growth over\nthe prior year, with 69% gross margins\n\nWe believe that enterprises today are unable to extract the full potential of their institutional knowledge They struggle with siloed\nknowledge sources and expertise that is widely dispersed throughout the organization Employees need to navigate multiple systems to\nperform their daily responsibilities and subject matter experts do not have a platform to share their expertise in a systematic or scalable\nway These disparate systems and inefficient employee environments lead to performance gaps and pose risks to daily operations and\nthe achievement of strategic goals Our platform enables enterprises to cultivate, harness and leverage their own institutional\nknowledge and pertinent external information, and drive the consumption of this knowledge to elevate their performance By\nestablishing enterprise wide AI solutions, we help our customers improve outcomes at scale The power of this scalable AI\ninfrastructure is fundamentally changing the way our customers operate\n\nOur proprietary AI platform integrates within our customers\u2019 systems and workflows, ingesting content from various formats\nincluding audio, video and PDF, and converting it into knowledge \u201cartifacts\u201d that aggregate to comprise Knowledge Clouds Content\nfrom these Knowledge Clouds is then optimized by designated subject matter experts within an organization and delivered to users\nthrough the organizations\u2019 messenger and communications channels, cognitive AI assistants or chatbots, and other productivity\nsystems We combine our specialized data sets with meticulous supervision of our AI outputs to enable our customers to leverage the\npower of AI without the inherent risks of uncontrolled open AI The knowledge artifacts can be tailored to specific business units or\nfunctions, and our platform can further personalize them based on ongoing usage and performance patterns For example, our insurance\ncustomers utilize our AI Claims Assist tool to automate claims processing and generate actionable insights through an intelligent\ndashboard by integrating with enterprise systems and leveraging intelligent character recognition and optical character recognition\ntechnologies\n\n89\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 134 of 408\n\nWe believe we are uniquely positioned in the marketplace at the intersection of global AI, hyperautomation and global e Learning\nand are well positioned for future growth and profitability We are one of the fastest growing technology companies in North America,\nhaving been named to Deloitte\u2019s Technology Fast 500 for each of the last six years Our strong competitive position is built upon the\nmore than 400,000 hours we have invested in research and development since our founding in 2010 Our highly curated, company\nspecific data sets cannot be replicated without deep enterprise integrations, which creates customer stickiness and results in minimal\nchurn across our customer base With the strong and aligned support of Arrowroot Capital, we believe we are well positioned to\nestablish iLearningEngines as the leader in the enterprise AI learning market\n\nOur Platform\n\nOur platform is transforming learning and workflows inside enterprises Companies use our platform to \u201cproductize\u201d their\ninstitutional knowledge and convert it into valuable IP to drive mission critical outcomes at scale Our solution is comprised of the\nfollowing critical components\nKnowledge Cloud\n\nOur first priority with a customer is to help them create an intelligent Knowledge Cloud, or enterprise \u201cbrain \u201d This brain is a\ncollated repository of institutional knowledge gathered from wide range of internal and external sources, powered by extensive\nintegrations with connected enterprise sources, including\n\ne Enterprise applications, such as Salesforce and SAP;\n\ne Human capital systems, such as Oracle, Workday and SuccessFactors;\n\ne Ticketing systems, such as Freshdesk, BMC and Zendesk;\n\ne Front end communications channels, such as Microsoft Teams, Slack, WhatsApp and Google Meet;\n\ne Internal content platforms, such as SharePoint, Dropbox and OneDrive;\n\ne External open sources, such as YouTube and Vimeo; and\n\ne Custom integrations with paid external sources\n\nThe Knowledge Cloud aggregates data from these sources across a variety of formats including audio, video, text, PDF, and others,\nand compiles it to be managed as enterprise IP Our AI only accesses approved content from prescribed sources, reducing the risks\npresented by uncontrolled open AI\n\nWith our Knowledge Cloud integrated across all relevant sources, our embedded AI adjusts in real time to further improve content,\ncreating a virtuous cycle as enterprise data grows We believe this automated process of self learning is highly applicable to corporate\nlearning and work automation and drives quantifiable returns on investment\nOut of the Box AI Engine\n\nOur out of the box AI platform currently comprises numerous proprietary AI algorithms, encompassing advanced machine\nlearning, natural language processing capabilities, neural networks and adaptive learning models We have invested over 400,000 hours\nof research and development since our inception, and we have invested over $300 million in research and development since 2019 to\ncreate highly specialized, customer specific data sets that are fully integrated into our customers\u2019 organizations Our AI solutions are\n\ndeployed across some of the most complex and compliance oriented vertical markets as we continue to redefine next generation\nlearning and work automation\n\n90\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 135 of 408\n\nOur data sets train our AI model effectively through an automated process of self learning This model, combined with user\nengagement signatures, can intelligently respond to event triggers from the enterprise and dispense the \u201cright\u201d intelligence to prevent\nand solve problems in the flow of work Our proprietary dashboards provide valuable visibility into engagement through intuitive\nvisualizations of multiple cross sections of data\n\nWe develop the algorithms for our out of the box AI platform by following an iterative agile development approach In the\nmodeling and evaluation phase we test the confidence of an AI model and the outputs of the platform using a set of pre validated\ninputs Key tasks include data collection, data governance and data monitoring of the AI models for quality and performance prior to\nand after deployment We deploy additional quality assurance activities to cover the overall platform, application and model testing\nAfter an AI platform is live, both model performance and application performance are monitored simultaneously and benchmarked\nagainst prior performance Fixes for any customer reported bugs will be performed on an as needed basis or as part of the next release\ndepending on the severity We have monthly and quarterly releases pursuant to which machine learning and artificial intelligence model\ntuning, product maintenance and customer product support fixes are rolled out\n\nNo Code Workflow and AI Canvas\n\nOnce the Knowledge Cloud has been created, our no code workflow and AI canvas (the \u201cCanvas\u201d) unlocks the potential of an\nenterprise\u2019s institutional knowledge The Canvas integrates various systems inside an organization through AI and without the need for\ncustom computer programming It encompasses neural networks, configurable AI and personalized user journeys by role or by\nfunction Our Canvas is used to optimize workflows, including delivering hyper specific training, creating expert chatbots with subject\nmatter expertise, and providing smart decision making\nOther Platform Features Content Delivery\n\nBy embedding our numerous proprietary AI algorithms into the fully integrated enterprise IP, we deliver productivity\nenhancements through cognitive AI assistants, chatbots, and other messenger channels, significantly reducing the cost and effort of\ndeveloping content Designated in house subject matter experts around each process take what the AI generates and tailor it for specific\nusers and specific needs\nOther Platform Features Document Augmentation\n\nOur platform includes AI powered natural language understanding, which allows for automatic intent identification and\ndisambiguation, synthetic data creation, query generation and abstractive summarization Our AI automatically generates text\ntranscripts and summarizations for audio and video content, and creates tags and query recommendations\nOur Offerings\n\nOur core offerings include Learning Automation and Information Intelligence\nLearning Automation\n\nLearning Automation enables our customers to create personalized learning pathways and close performance gaps by automatically\ndelivering \u201csmarter\u201d learning solutions in real time We target medium and large enterprise customers who are seeking to upgrade aging\n\ninfrastructure and modernize their learning and personnel development approach Key features of Learning Automation include\n\ne Knowledge Cloud A collated repository of institutional knowledge gathered from a wide range of internal and external\nsources, powered by extensive integrations with connected enterprise sources\n\ne Personalized Learning Pathways Curated, individualized learning journeys with significant granularity using advanced AI\nmodels that operate in real time\n\n91\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 136 of 408\n\nCo Create Courses Design and implement tailored courses that combine an organization\u2019s content libraries with rich external\nsources driven by sophisticated AI recommendations\n\nAugment and Curate Content Smart AI tagging that organizes and collates relevant content to enrich enterprise learning\ncourses, including AI generated quizzes and questions that augment content and improve retention\n\nContent Ingestion A powerful and versatile AI engine that understands context and applicability to flexibly ingest multimedia\ncontent, including documents, audio and video\n\nKnowledge Shelves Augment learning by delivering contextualized, high quality content from digital libraries and third party\nrepositories\n\nExternal System Integration Versatile application programming interfaces (\u201cAPIs\u201d) combine seamlessly with leading\nenterprise and academic management systems, communications platforms and content providers to bring structured data into\n\nthe Knowledge Cloud and workflows\n\nTraining in the flow of work Training delivered on the job and in the flow of work to create shared team experiences and\nunlock collaborative learning\n\nBlended Learning Combines e Learning with third party instructor led online training via live web conferencing or offline\nmode\n\nTests and Assessments Flexible AI driven tests with multiple question types that enable AI led scoring, assessments and\n\u201cdrill down\u201d reports\n\nWhite Labelling Flexible labeling solutions are customized to reflect customer branding and are implemented on client\ndomains with their logos\n\nDashboards and Reports Full repository of detailed reports for learners, trainers, managers and learning and development\nleaders to track progress and compliance\n\nNotifications Configurable notifications that facilitate the tracking of content assignments and tests\n\nInformation Intelligence\n\nInformation Intelligence facilitates learning within the enterprise user experience through deep integrations and a no code\nworkflow and AI canvas Our AI Assistants, which are configured for industry specific needs, help transform applications by\naccelerating, augmenting and automating conversations, processes and decisions Enterprises can leverage Information Intelligence\nthrough our AI assistants, which are embedded at multiple touchpoints throughout employee and user journeys, enabling enterprises to\noffer personalized service to their customers and make predictive and preventive decisions based on real time data insights Our target\ncustomers for Information Intelligence are medium and large companies seeking cost savings with aging Enterprise Resource Planning,\nCustomer Relationship Management or Document Management systems that are challenging to automate Key features of Information\nIntelligence include\n\nKnowledge Cloud A collated repository of institutional knowledge gathered from wide range of internal and external sources,\npowered by extensive integrations with connected enterprise sources\n\nAI Canvas Creates individualized user journeys and granular personalization, while defining advanced AI led models in real\ntime\n\nAI Recommendation Engine AI curation and augmentation enable quicker, more \u201cintelligent\u201d course creation\n\n92\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 137 of 408\n\ne@ Al Expert Assist Combines in process learning and industry use cases to provide expert support and assistance on demand\n\ne Al Automation Engine Cognitive based adaptive testing, assisted grading, and process and task automation that delivers\nlearning and process benefits\n\ne Al Enterprise Search Simple AI bolt on to enterprise content repositories enables powerful index searching for contextual and\nrelevant learning\n\ne Enterprise Integration Aneasy to implement AI Canvas delivers multi tenancy and robust scalability, integrating easily with\nenterprise back end systems\n\ne JILE 360 Outcome Score Card 360 degree view of results for enterprises, with a management dashboard and scores for\nlearners and trainers\n\ne AlInsights Identification of learning gaps and success markers through user engagement signatures\n\n@ Conversational AI Semantic understanding powered by AI and Natural Language Processing models capable of handling both\nstructured and unstructured data\n\n@ Flexible Deployment On premises or in the cloud deployment facilitates seamless configuration\n\nWe utilize multi tenant and cloud agnostic architecture Our offerings are designed to work on customer infrastructure on\npremises, public or private cloud Our platform can be offered as a white labeled solution or an embedded experience Our platform is\noffered primarily through user licenses that provide end customers and their licensed users with the right to use our software and access\nto continuous support We have two types of user licenses subject matter experts (\u201cSMEs\u201d or \u201cExperts\u201d), and licensed users Licensed\nusers are charged for using the platform and for consumption of content Experts are the internal gatekeepers designated by our end\ncustomers to improve enterprise outcomes and have significant content augmentation capabilities\n\nMarket Opportunity\n\nWe believe that iLearningEngines is defining a new category at the intersection of global AI, hyperautomation and global e\nLearning Each of these markets is sizable and growing, and provide significant opportunity for iLearningEngines to grow its existing\nbusiness as well as expand into new opportunities provided by its existing platform capabilities\n\nGlobal e Learning is expected to grow at a 16% compound annual growth rate (\u201c\u201cCAGR\u201d) through 2025 resulting in an annual\nspend of over $250 billion, according to TechNavio Within the global e Learning market, the North American and Asia MEA\neducation markets present massive opportunity The North American e Learning market was the largest region in the overall market,\nwhich is expected to grow at a 17% CAGR from 2021 to 2025 to approximately $58 billion It will contribute 34% to the incremental\ngrowth of the overall market between 2021 and 2026, according to TechNavio The Asia MEA geography is growing even faster, with\neducation sector expected to grow at a 14% CAGR from 2020 to 2025 to approximately $225 billion, and Education Tech expected to\ngrow at a 45% CAGR from 2021 to 2031 to approximately $30 billion, according to the India Brand Equity Foundation\n\nHyperautomation is creating a total software market opportunity that will reach over $1 trillion by 2026, with a CAGR of 11 9%\nfrom 2021 through 2026, according to Gartner Process agnostic software made up 6 3% of the total hyperautomation enablement\nmarket and is expected to reach more than $65 billion in 2026, with a CAGR of 16 1%, according to Gartner We believe that this\nmarket is highly fragmented across a variety of sub categories from low code and process discovery and mining to business process\nmanagement software and that players that bring differentiated offerings could grow at an accelerated pace relative to traditional\nsoftware players in the market\n\n93\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 138 of 408\n\nThe market for AI software will reach almost $135 billion in 2025 from $45 billion in 2020, according to Gartner The market\ngrowth will accelerate from 14 4% in 2021 to reach 31 1% in 2025 at an aggregate CAGR of 24 5% over the five years Global AI\nsystems are expected to drive over $200 billion of annual spending by 2025, according to IDC MaturityScape, representing a CAGR of\n26% from 2021 to 2025 The AI market spans from AI components embedded in applications to the market for AI tools used for\nbuilding AI systems AI is disrupting how enterprises function as it reshapes the way companies leverage their data and other relevant\ncontent that is available to them McKinsey & Company estimates that AI\u2019s impact on productivity could yield approximately\n$4 4 trillion in annual Gross Domestic Product across the 63 use cases it identified Massachusetts Institute of Technology researchers\nfound that customer support agents using an AI tool as a guide generated a nearly 14% increase in productivity, including a 35%\nimprovement for the lowest performers\n\nDemand for learning automation and autonomous learning inside enterprises is also growing An increasing number of buyers are\ndemanding next generation learning systems that are more open in terms of integration and content range, and improved training\nthrough better learning experiences According to TechNavio, suppliers in the global e Learning market outperforming the overall\nindustry are expected to focus on the higher potential segments within the market Many schools, colleges and universities are\nincreasingly opting for software based learning systems, which is fueling the ongoing digitization of the learning processes According\nto IDC, by 2024 approximately 40% of education will be taught by AI systems that are personalized, adaptive, and focused on solving\ncomplex real life challenges There is also significant demand for capturing and leveraging enterprise knowledge, especially as\nworkforces have become considerably more distributed and transient over time Companies recognize the need for platform solutions\nthat not only collect and preserve institutional knowledge, but also analyze and distribute it throughout the company effectively\n\nOur platform is broadly applicable across various verticals and business functions, with new use cases continually emerging We\ncurrently serve a wide array of customers in a variety of verticals in many key areas, from learning and development to supply chain\n\nmanagement and beyond Proven use cases include\n\ne Industrials Intelligently allocating crew members and operators, employee/safety performance indicators & support though a\ncentral dashboard;\n\ne Oil & Gas Improved safety processes leveraging data from high priority areas, strengthened employee training to improve\nonboarding and upskilling programs;\n\ne EduTech Provides personalized learning pathways, customized for every student, transforms learning infrastructure of\nphysical schools to improve engagement;\n\ne Logistics Departmental staff profiles with streamlined communication channels, AI enhanced tracking metrics to improve\noperational efficiency;\n\ne Healthcare and Life Sciences Improved patient education through triggered appointment scheduling, enhanced patient\nengagement and outcomes within budget;\n\ne Retail Al technologies enhance engagement automating labor intensive tasks, reskills existing teams, imparting the\ntechnological skills needed for modern retail;\n\ne Technology Media & Telecom AI enabled customer representatives and account operations, improving efficiency, AI\nenhanced customer engagement and outcomes to track KPIs;\n\ne Financial Services AI developed financial models and document automation, fraud prevention through AI generated\nalgorithms;\n\n\u00ae Government Veterans\u2019 Employment and Training (\u201cVET\u201d) and workforce reinduction readiness, government distributions\nprocessing with automation;\n\n94\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 139 of 408\n\ne insurance Improve safety and compliance with real time reports and live dashboards, AI driven risk identification to improve\ncustomer acquisition and engagement;\n\ne Automobile Infuse learning into enterprise processes across enterprise systems and communication channels Track employee\nand partner engagement and providing real time insights to functional owners; and\n\n@ Business Services Usage pattern analysis, proactive notifications to increase efficiency, Usage optimizations and insights to\ntrack performance\n\nOver time, we believe that many new use cases will emerge and will continue to permeate across industry verticals\nOur Competitive Strengths\nOur competitive strengths include\nAn Al technology platform for enterprises\n\nWe have been committed to refining our AI platform over time, which currently comprises numerous proprietary AI algorithms\nThese algorithms encompass advanced machine learning, natural language processing capabilities, neural networks and adaptive\nlearning models Our AI solutions are deployed across some of the most complex and compliance oriented vertical markets as we\ncontinue to redefine next generation learning and work automation\nHigh barriers to entry and strong customer stickiness\n\nThe creation of a highly intelligent AI platform is significant in terms of time, investment and expertise We have invested over\n400,000 hours of research and development since our inception, and we have invested over $300 million in research and development\nsince 2019 to create highly specialized, customer specific data sets that are fully integrated into our customers\u2019 organizations This\ncontributes to our high customer retention rates and low customer churn rates In 2023, we achieved a net dollar retention rate of 125%\nand 0 2% churn\nDiverse global customer base\n\nAs of March 2024, we serve over 1,000 enterprise end customers representing more than 4 7 million licensed users Our 2023\nrevenue was broadly distributed globally from Asia, the Middle East and North America We focus our sales approach on business units\nand not enterprises as a whole, making our expansive customer reach a valuable potential source of new business opportunities\nEstablished channel partner network\n\nWe utilize channel partners who have deep domain expertise and existing relationships to reach across 12+ industry verticals Our\nrelationships with established channel partners underpin our expansion strategy as we typically rely on our partners to break into new\ngeographies or industry verticals with scaling by our direct sales team to follow This approach is cost efficient and helps qualify leads,\nvalidate opportunities and define our value proposition in the market\nScaled and predictable business model\n\nWe generated revenue of $421 million in 2023, representing a 36% increase over 2022 revenue Nearly all of our 2023 revenue\n\nwas generated from long term maintenance and support agreements with an average duration of one to three years We have also scaled\nour business over time, achieving a gross margin of 69% in 2023\n\n95\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 140 of 408\n\nExperienced founder led management team\n\nWe have a passionate management team led by our CEO, Harish Chidambaran, who founded the company in 2010 after nearly\nfive years at Sun MicroSystems leveraging AI principles to improve computing power Balakrishnan Arackal, our Chief Business\nOfficer, joined iLearningEngines in 2014 and leads our sales and marketing efforts following similar roles at IBS Software, Solutions\nMiddle East, and BCL Hewlett Packard Our Chief Financial Officer and Treasurer, S Farhan Naqvi, was previously a technology\ninvestment banker at Deutsche Bank and held prior roles at MHT Partners, Nomura, Bain and EY This senior management team is\nsupported by a deep roster of industry experts with decades of combined experience across business lines We believe that this\ncombination of industry, technical, operational and financial expertise positions us for success in the public markets\n\nOur Growth Strategies\n\nOur vision is to remove limitations for companies by helping them re imagine themselves as engaged, informed and empowered\nenterprise ecosystems We intend to achieve this vision by leveraging our competitive strengths to capitalize on growing market\ndemand through the following strategies\n\nContinue to expand our platform\u2019s capabilities\nP Pp p\n\nOur company was founded on a culture of innovation We intend to continue to enhance our existing solutions and develop new\nsolutions to empower corporate learning and workflows across verticals We believe we can further leverage the direct integration of\nour solutions within day to day corporate activities to create new use cases by making greater use of cross functional data sets For\ninstance, we can leverage our technology to combine risk prevention activity and assessment data with claim and exposure data for our\ninsurance clients to form a comprehensive risk profile that is unique to each policy holder, enabling greater accuracy in risk forecasts\nand more insightful and valuable trend benchmarking We also intend to leverage our AI platform to help optimize newer technologies,\nsuch as the Internet of Things (\u201cIoT\u201d), Augmented Reality, Virtual Reality, cognitive enterprise search and cognitive AI\nrecommendations For example, in the IoT arena, insurance companies can use our technology to track policyholder accidents or other\nadverse incidents, triggering efficient and effective deployment of defensive driving and related training modules to mitigate risk in\nreal time\n\nWe also have a robust product roadmap strategy that is led by the core leadership team that meets every month We are looking to\ndevelop AI driven digital assets in many verticals to maintain our product edge and build competitive barriers for its AI driven learning\nautomation and information intelligence offerings Our development of AI assets is a long term investment into future products and we\nbelieve it can drive future growth for the company\n\nFurther penetrate our existing customer base\n\nWe believe we have significant upsell opportunities across our customer base, including expanding into new business divisions and\nadding additional users Our sales strategy is product led and focuses on business units within companies, which lends itself to\nexpansion within organizations by demonstrating effective outcomes for our customers As companies recognize the power of our AI\nand automation tools, they quickly discover additional use cases across the enterprise We intend to focus on these opportunities to\nexpand our presence within our existing customers over time\n\nLeverage our existing use cases to further penetrate industry verticals\n\nWe plan to grow our direct salesforce and onboard new channel partners in verticals where we have achieved significant success to\nleverage the distribution of our offerings Historically we have focused on the education, healthcare and insurance verticals, and the\ndemonstrated efficacy of our existing solutions enhances our ability to sell deeper into these verticals For example, we have added\nafter school tutoring products for our education customers that are fully integrated with school curriculums to help learners with test\npreparation and achieve other academic goals As of March 31, 2024, our education solutions have served over 858,150 users across\nover 323 sites In healthcare, where our platform has served over 260,000 users across 142 sites, integration with hospital systems\ncould improve pre and post surgery patient engagement based on the patient\u2019s condition and history, with an \u201cintelligent push\u201d of\ncritical communication through preferred channels Our insurance capabilities include a scalable digital infrastructure that distributes\nservices and gathers policyholder data into a high impact data stream that provides actionable insight to inform strategic decision\nmaking\n\n96\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 141 of 408\n\nExpand into new verticals and new geographies\n\nWe have demonstrated the power of our solutions through many different use cases across a variety of verticals and geographies,\nand we believe there are significant use cases in many other verticals and geographies that can benefit from our solutions Soon, we\nintend to focus on a few strategic verticals including cybersecurity, construction, retail and financial services We have also identified a\nnumber of attractive and underpenetrated geographic markets both in the United States and around the world\n\nPursue opportunistic acquisition opportunities\n\nWe intend to complement our organic growth by pursuing strategic and tuck in acquisition opportunities We believe we can\nacquire attractive established customer bases in new markets and industry subsectors where we can leverage data sets and create new or\nbetter curriculums We believe that our relationship with Arrowroot Capital, a 10 year old growth equity firm focused solely on\nenterprise software, could help us identify attractive targets across the highly fragmented industry landscape We also believe that our\npublic listing will be an attractive differentiator as we evaluate alternatives and can utilize our stock as acquisition currency\n\nCustomers\n\nValue added resellers (\u201cVARs\u201d) are customers who develop their own solutions which integrate our AI and automation platform\nand then sell their solutions directly to their end customers Some of our VARs operate as channel partners whose deep domain\nexpertise and existing relationships we leverage to reach across industry verticals to deliver solutions that fit industry specific needs\nOur relationships with established channel partners underpin our expansion strategy as we typically rely on our partners to break into\nnew geographies or industry verticals with scaling by our direct sales team to follow\n\nWe also contract directly with end customers who utilize our AI and automation platform directly These customers directly\nintegrate our platform into their systems and workflows, allowing our platform to ingest content from various formats including audio,\nvideo and PDF, and convert it into knowledge \u201cartifacts\u201d that aggregate to comprise Knowledge Clouds\n\nWe define our \u201ccontracted customers\u201d as VARs, direct end customers and end customers who purchase our services directly\nthrough channel partners, that have purchased one or more of our products under a unique customer identification number since our\ninception for our license products and individuals or entities that have an active maintenance and support agreement for at least one of\nour maintenance and support products Each unique customer identification number constitutes a separate customer regardless of the\namount purchased We may have multiple purchasers of our products within a single organization, each of which may be assigned a\nunique customer identification number and deemed a separate customer As of March 31, 2024 and December 31, 2023, December 31,\n2022 and 2021, we had 29, 26, 24 and 11 contracted customers, respectively For each of the three months ended March 31, 2024 and\nthe years ended December 31, 2023, 2022 and 2021, newly contracted customers represented 3, 3, 14 and 1 of our total contracted\ncustomers\n\nWe define enterprise end customers as entities or organizations that have 250 or more licensed users on our AI and automation\nplatform Our enterprise end customers include our VARs\u2019 customers Our enterprise end customer base is comprised of companies\noperating across a variety of verticals, including education, healthcare, insurance, manufacturing, energy and utilities Our enterprise\nend customers are geographically dispersed across Asia, the Middle East and North America\n\nWe define licensed users as individuals with access to the platform As of March 31, 2024, and December 31, 2023, 2022 and\n2021, we had over 4 7, 4 4, 3 9 million and 2 8 million licensed users, respectively\n\nWhen we refer to customers, we are referring generally to all of the categories of customers detailed above, including VARs,\ncontracted customers, enterprise end customers and licensed users\n\n97\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 142 of 408\n\nWe typically enter into product license and content agreements (\u201cProduct License\u201d) with VARs and direct end customers based on\na standard form that contains standard terms and conditions, including billing and payment, default, termination, limitations of liability,\nconfidentiality, assignment and notification, and other key terms and conditions Under the terms of our Product Licenses, which\ntypically include a set term and automatically renew for further set terms, but which generally may be terminated by either party with\n24 months\u2019 notice, our customers are granted the combined software license and maintenance performance obligation and may directly\nutilize the platform or incorporate the platform to deliver customized solutions using our platform Sales under our Product Licenses\nare generally made on a maintenance and support agreement basis (with no spend or purchase commitments) We also typically enter\ninto maintenance and support orders with our customers which are typically one to three years in length and contain provisions to auto\nrenew for one year periods We typically estimate the implementation fees by estimating the cost of providing the services and adding a\nreasonable margin, and combined software license and maintenance fees using the residual approach as we sell our AI platform and\nrelated maintenance services to different customers at a highly variable range of amounts\nCompetition\n\nThe market for our products and services is intensely competitive and characterized by rapid changes in technology, customer\nrequirements, and by frequent new product and service offerings and improvements We operate at the intersection of global AI,\nhyperautomation and global e Learning We compete directly or indirectly with\n\ne Legacy e Learning services;\n\ne Direct to consumer training and e Learning offerings;\n\ne Automation and workflow solutions;\n\ne Data management, machine learning, and analytics players; and\n\ne Bespoke solutions developed by enterprises in house\n\nWe believe that the principal competitive factors in our markets include the ability to deliver\n\ne dynamic AI powered capabilities and workflows;\n\ne highly advanced and sophisticated content augmentation and recommendations embedded in the flow of work;\n\ne flexibility and scalability across multiple use cases with end to end integrations across an enterprise;\n\ne thorough structured and unstructured data comprehension;\n\n@ company specific data sets that cannot be replicated without deep enterprise integrations;\n\n\u00ae pricing and contract terms;\n\ne customer relationships;\n\ne = brand reputation;\n\n@ privacy and security; and\n\n\u00ae continued innovation\n\nAlthough some of our competitors enjoy greater resources, higher brand recognition, broader range of IT, larger existing customer\nbases, or more mature intellectual property portfolios, we believe that we compete favorably on the basis of these factors above and do\nnot believe that any company offers the same overall value proposition as we do across our markets However, conditions in our market\n\ncould change rapidly and significantly as a result of technological advancements, partnerships, or acquisitions by competitors or\ncontinuing market consolidation and we expect the competitive environment to remain intense\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 143 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 144 of 408\n\nSales and Marketing\n\nWe serve over 1,000 enterprise end customers by helping them achieve their learning, automation and information intelligence\ngoals\n\nOur client base is comprised of companies operating across a variety of verticals, including education, healthcare, insurance,\nmanufacturing, energy and utilities Over time, we believe there are valuable use cases for our platform in many other verticals Our\ncustomers are geographically dispersed across Asia, the Middle East and North America, and in 2023 our largest contracted customer\naccounted for less than 20% of our total revenue\n\nOur sales strategy is comprised of two main constituents our direct sales team and our channel partners Our direct sales team is\ntasked with both acquiring clients in established verticals and acquiring new channel partners in expansionary markets We leverage our\nchannel partners to generate leads in new verticals and geographies which we then scale through our direct sales force Our sales team\nis supported by engineers with deep technical expertise and responsibility for pre sales technical support, solutions for engineering for\nour customers and technical training for our channel partners\n\nWe generate customer leads, accelerate sales opportunities and build brand awareness through our marketing programs and\nthrough our channel partner relationships Our marketing programs target business units within companies rather than purchasing,\nhuman resources or administrative departments to drive sales by demonstrating the impact of our product capabilities on results Our\nprincipal marketing programs include webinars, roadshows, iLearningEngines sponsored exhibitions and events, cooperative marketing\nefforts with channel partners, and use of our website\n\nWe typically enter into a services agreement (a \u201cServices Agreement\u201d) with our channel partners which provide for the provision\nof specific services Our Services Agreements are generally not exclusive and we have the ability to contract with any number of\nchannel partners for various sales, business development, administrative, operational and other functions as we sees fit Our Services\nAgreements generally do not include a (4) term or duration or (ii) and spend or purchase commitments Our Services Agreements\ngenerally provide that either party may terminate the agreement with 60 to 90 days\u2019 prior written notice or immediately for non\nperformance\n\nIntellectual Property\n\nIntellectual property is an important aspect of our business, and we seek protection for our intellectual property as appropriate We\nrely on trademarks, copyrights, trade secrets, license agreements, intellectual property assignment agreements, confidentiality\nprocedures, non disclosure agreements, and employee non disclosure and invention assignment agreements to establish and protect our\nproprietary rights We believe that our intellectual property rights are valuable and critical to our business\n\nWe have an ongoing trademark and service mark registration program pursuant to which we register our brand names and product\nnames, taglines and logos in the United States and other countries to the extent we determine appropriate We are the registered holder\nof over 50 domestic and international domain names across our product and service footprint, including \u201cilearningengines com,\u201d\n\u201cjlearningengines in\u2019 and similar variations\n\nWe intend to pursue additional intellectual property protection to the extent we believe it would be beneficial Despite our efforts to\nprotect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged In\naddition, the laws of various foreign countries where our products are distributed may not protect our intellectual property rights to the\nsame extent as laws in the United States\n\nGovernment Regulation\n\nOur business is and will continue to be subject to extensive U 8 federal and state and foreign laws and regulations, including laws\nand regulations involving privacy, data protection, education, security, intellectual property, competition, taxation, anti corruption, anti\nbribery, anti money laundering, and other similar laws Many of these laws and regulations are still evolving and are likely to remain\nuncertain for the foreseeable future, and these laws and regulations can vary significantly from jurisdiction to jurisdiction The costs of\ncomplying with these laws and regulations are high and likely to increase in the future Further, the impact of these laws and\nregulations may disproportionately affect our business in comparison to our competitors that have greater resources\n\n99\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 145 of 408\n\nIn the United States, we are subject to data security and privacy rules and regulations promulgated under the authority of the\nFederal Trade Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer\nPrivacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (CPRA and collectively, the \u201cCCPA\u201d), and other state\nand federal laws relating to privacy and data security The CCPA requires covered businesses to provide new disclosures to California\nresidents and to provide them new ways to opt out of the sale of personal information, and provides a private right of action and\nstatutory damages for data breaches Other jurisdictions in the United States are beginning to propose laws similar to the CCPA\n\nIn the United States, the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health\nInformation Technology for Economic and Clinical Health Act (collectively \u201cHIPAA\u201d) protects the privacy and security of protected\nhealth information, used or disclosed by covered entities including certain healthcare providers, health plans and healthcare\nclearinghouses HIPAA also regulates standardization of data content, codes and formats used in healthcare transactions and\nstandardization of identifiers for health plans and providers HIPAA also imposes certain obligations on the business associates of\ncovered entities that obtain protected health information in providing services to or on behalf of covered entities HIPAA may apply to\nus in certain circumstances and may also apply to our customers in ways that may impact our relationships with them\n\nFurther, as a result of information we collect from third parties, we may be subject to the United Kingdom\u2019s Age Appropriate\nDesign Code (\u201cAADC\u201d) and incoming Online Safety Bill that focus on online safety and protection of children\u2019s privacy online In the\nUS. we may have obligations on the federal level under the Children\u2019s Online Privacy Protection Act (\u201cCOPPA\u201d) COPPA applies to\noperators and co operators of commercial websites and online services directed to US children under the age of 13 that collect personal\ninformation from children\n\nAs a result of our international operations, we must comply with a multitude of data security and privacy laws that may vary\nsignificantly from jurisdiction to jurisdiction Virtually every jurisdiction in which we operate has established or is in the process of\nestablishing data security and privacy legal frameworks with which we or our customers must comply Our failure to comply with the\nlaws of each jurisdiction may subject us to significant penalties For example, the data protection landscape in Europe, including with\nrespect to cross border data transfers, is currently unstable and other countries outside of Europe have enacted or are considering\nenacting cross border data transfer restrictions and laws requiring local data residency\n\nVarious state laws in the United States govern the corporate practice of medicine and other healthcare professions and prohibit the\nunauthorized practice of medicine The state licensure and corporate practice statutes, regulations, and agency and court decisions that\nenumerate the specific corporate practice rules vary considerably from state to state and are enforced by both the courts and regulatory\nauthorities, each with broad discretion Violations of these laws may result in significant sanctions\n\nFurther, the federal Food and Drug Administration (\u201cFDA\u201d) acting under the scope of the Food, Drug, & Cosmetic Act (FDCA\u201d)\nand its implementing regulations, has broad authority to regulate the manufacture, distribution, and labeling of many products,\nincluding medical devices The FDA has become increasingly active in addressing the regulation of computer software functions\nintended for use in healthcare settings The FDA has the authority to regulate a software function as a medical device if it falls within\nthe definition of a \u201cdevice\u201d under the FDCA If the FDA determines that our AI platform is a medical device, we may be required to\nobtain premarket approval or clearance or risk distributing an unapproved medical device in violation of the FDCA Violations of the\nFDCA may result in significant penalties\n\nFor a discussion of the various risks we face from regulation and compliance matters, see the sections titled \u201cRisk Factors Risks\n\nRelated to Data Privacy and Cybersecurity\u2019 and \u201cRisk Factors Risks Related to Regulatory Compliance and Governmental\nMatters\u201d\n\n100\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 146 of 408\n\nSecurity, Privacy and Data Protection\n\nWe prioritize the protection of customer and company data We have developed and implemented what we believe is an effective\nframework comprising both technical and operational controls We ensure that there is both internal and independent external oversight\nof the security framework to ensure its continued implementation and effectiveness\n\nInternal Cloud Security\n\nFor all our product development work, our internal platform security is managed using hosting cloud provider services The cloud\nprovider adheres to security controls for ISO 27001, ISO 27018, SOC 1, SOC 2, SOC3, FedRAMP, HITRUST, MTCS, IRAP, and\nENS\n\nClient Cloud Security\n\nFor all production deployments of our platform, cloud security is managed by Client/Channel Partner directly using cloud provider\nservices and third party tools We work jointly with our partners and end customers to ensure adherence to required security and\nprivacy needs\n\nWe are an ISO 27001 and ISO 9001 certified organization and follow the required controls and compliances\nOur Employees, Culture and Values\n\nOur success is supported and progressed by the passionate team we have assembled Across our company, we have an aligned\n\u201cPeople & Process\u201d culture that drives our products, research, services, and our customers\u2019 efforts to make the world a better place As\nof March 31, 2024, we had 101 full time employees and 428 contracted employees globally, which can either be provided by our\nchannel partners or contracted directly with iLearningEngines While our headquarters is in Bethesda, Maryland, our workforce is\ncurrently remote first This allows us to find the right talent to serve our users, regardless of location In the United States, we have\nconcentrations of employees in Alaska, Connecticut, Illinois, Maryland, Oklahoma, Texas and Virginia, which allows our employees a\nmix of in person and remote work This approach continues to be an asset in our recruiting efforts, especially as other companies begin\nto require employees to return to the office or take reductions in pay Our non US based employees are located in Australia, India, the\nUnited Kingdom and the United Arab Emirates We believe that our employee relations are good\n\niLearningEngines empowers enterprises to realize their CSR goals and drive social impact programs On our platform, enterprises\ncan seamlessly roll out educational programs that positively impact their employees, customers, and the wider community in which\nthey operate\n\nOur platform offers personalized learning pathways and powerful content creation capabilities that help enterprises build a\npurpose driven culture by engaging users and supporting subject matter experts Our multi tenant and extensive integration features\nalso make us an effective solution for enterprises looking for a partner with experience in driving impact programs across multiple\nregions We have powered multiple programs globally with key areas of impact including employee wellbeing, empowering women,\nequal education, youth mentorship and child protection A key tenet of our business is focused on making expert learning more\naccessible and improving outcomes across our global customer base\n\nOur Facilities\n\nWe have a global presence with six leased offices in premier locations across the United States, United Arab Emirates and India\nOur corporate headquarters is located in Bethesda, Maryland, pursuant to a lease that expires in July 31, 2024 We believe that our\nproperties are in good operating condition and adequately serve our current business operations We also anticipate that suitable\nadditional or alternative space, including those under lease options, will be available at commercially reasonable terms for future\nexpansion\n\nLegal Proceedings\n\nFrom time to time, we or our customers or partners, for whom we may act as an indemnitor, may be subject to legal proceedings\nthat arise in the ordinary course of business In addition, we or our customers or partners have received, and may in the future receive,\nvarious types of claims including potential claims from third parties asserting, among other things, infringement of their intellectual\nproperty rights We are not currently a party to any litigation, the outcome of which, if determined adversely to us, would individually\n\fCase 8:24 cv-02900-DKC ,Pocument 90-6. Filed 09/18/25 Page 147 of 40\n\nor in the aggregate be reasonably expecte material ct on our business, financial position, results of operations or\ncash flows\n\n101\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 148 of 408\n\nMANAGEMENT\nDirectors and Executive Officers\n\nThe following table sets forth the names, ages and positions of our directors and executive officers as of May 1, 2024\n\nName Age Position\n\nExecutive Officers\n\nPuthugramam \u201cHarish\u201d Chidambaran 55 Chief Executive Officer and Chairman\n\nSayyed Farhan Naqvi 42 Chief Financial Officer and Treasurer\n\nBalakrishnan Arackal 56 President, Chief Business Officer and Director\n\nDavid Samuels 61 Chief Legal Officer, Executive Vice President \u2014 Corporate Affairs and\nSecretary\n\nRamakrishnan Parameswaran 52 Senior Vice President \u2014 Technology and Products\n\nNon-Employee Directors\n\nMatthew Barger\u201c) @) 66 Director\n\nBruce Mehlman 55 Director\n\nThomas Olivier 56 Director\n\nMichael Moe\u201c? 61 Director\n\nIan Davis WG) 73 Director\n\n1) Member of our audit committee\n2) Member of our compensation committee\n3) Member of our nominating and corporate governance committee\n\nExecutive Officers\nHarish Chidambaran\n\nMr. Chidambaran has served as our Chief Executive Officer and as our Chairman of the Board since April 2024. Prior to the\nBusiness Combination, Mr. Chidambaran served as President and Chief Executive Officer of Legacy iLearningEngines from\nNovember 2010 to April 2024. Mr. Chidambaran has extensive experience in the technology industry having worked at companies such\nas Sun Microsystems, Lucent Technologies, Maple Optical Systems, Google, and Ninth Sense, Inc. Mr. Chidambaran received a B.T. in\nElectrical and Electronics Engineering from College of Engineering, Trivandrum, a MLS. in Electrical Engineering from the University\nof Idaho and a M.S. in Management from Stanford Graduate School of Business. We believe that Mr. Chidambaran is qualified to serve\non our Board based on his substantial business. leadership and management experience in the technology sector.\n\nS. Farhan Naqvi\n\nMr. Naqvi has served as our Chief Financial Officer and Treasurer since April 2024. Prior to the Business Combination, Mr. Naqvi\nserved as Chief Financial Officer of Legacy iLearningEngines from February 2019 to April 2024. Prior to joining Legacy\niLearningEngines, Mr. Naqvi served as a Transaction Advisor at Ernst & Young from 2017 to February 2019 and as an investment\nbanker at Deutsche Bank Securities, Inc. from 2013 to 2017. Mr. Naqvi received a Bachelor of Technology in Engineering from Indian\nInstitute of Technology. Kapur, and an M.B.A. from Harvard Business School.\n\nBalakrishnan Arackal\n\nMr. Arackal has served as our President and Chief Business Officer and as a member of the Board since April 2024. Prior to the\nBusiness Combination, Mr. Arackal served as Chief Business Officer of Legacy iLearningEngines from February 2021 to April 2024,\nhaving previously served as Executive Vice President \u2014 Sales & Strategy of Legacy iLearningEngines from October 2018 to February\n2021. Previously, Mr. Arackal served as an Independent Contractor for Legacy iLearningEngines from 2014 to September 2018 and as\nan Executive Director at Experion Technologies from 2011 to 2014. Mr. Arackal received a Bachelor of Technology in Electronics &\nCommunication from Mepco Schlenk Engineering College and his M.B.A. from G.R.Damodaran Academy of Management. We\nbelieve that Mr. Arackal is qualified to serve on our Board based on his substantial business experience in the technology sector.\n\fCase 8:24-cv-02900-DKC Document 99-2 Filed 09/18/25 Page 149 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 150 of 408\n\nDavid Samuels\n\nMr Samuels has served as our Chief Legal Counsel, EVP Corporate Affairs and Secretary since April 2024 Prior to the\nBusiness Combination, Mr Samuels served as Chief Legal Counsel and EVP Corporate Affairs of Legacy iLearningEngines from\nOctober 2023 to April 2024 Prior to joining Legacy iLearningEngines, Mr Samuels served as Chief Legal Officer and Secretary of\nDefinitive Healthcare Corp (Nasdaq DH), a provider of healthcare commercial intelligence from February 2021 to January 2023\nFrom October 2016 to November 2019, Mr Samuels served as Chief Executive Officer and Chief Legal Officer of ReferralMob, Inc ,\n(\u201cReferralMob\u201d\u2019) a mobile only, peer to peer job referral platform, having previously served as Chief Legal Officer from 2015 to\nOctober 2016 Prior to joining ReferralMob, Mr Samuels served as Chief Strategy Officer of Interactions Corporation, and served in a\nnumber of executive leadership positions, including as General Counsel for seven years and for two years as Chairman of the Board of\nStrategic Advisors, at EnerNOC, Inc ((Nasdaq ENOC) since renamed Enel X North America) Earlier in his career, Mr Samuels\nserved as General Counsel, Vice President Corporate Development and Secretary of International Integration, Inc (Nasdaq ICUB) Mr\nSamuels served on the board of directors of ReferralMob from 2015 to 2019, Magnus Textile LLC from 2017 to 2018 and ANSWR\nfrom 2014 until 2017, each a private company Mr Samuels holds a B A from Brandeis University anda JD from Northeastern\nUniversity School of Law\n\nRamakrishnan Parameswaran\n\nMr Parameswaran has served as our Senior Vice President Technology and Products since April 2024 Prior to the Business\nCombination, Mr Parameswaran served as Senior Vice President Technology and Products of Legacy iLearningEngines from\nMay 2019 to April 2024 Prior to joining Legacy iLearningEngines, Mr Parameswaran served in a variety of roles at Infosys Ltd , most\nrecently as Practice Manager and Vertical Head of the Digital Department from 2015 to April 2019 Mr Parameswaran received a B T\nin Electrical and Electronics Engineering from College of Engineering Trivandrum\n\nNon Employee Directors\n\nOur Board consists of seven directors In addition to Harish Chidambaran and Balakrishnan Arackal, iLearningEngines\u2019 directors\nare\n\nMatthew Barger\n\nMr Barger has served as a member of our Board since April 2024 Mr Barger has served as the Managing Member of MRB\nCapital LLC since 2008 Mr Barger has also served as Senior Advisor at Hellman & Friedman, LLC (\u201c\u201cH&F\u201d) since 2007 and\npreviously served as Managing Director of H&F from 1984 to 2006 Mr Barger has served on the Board of Directors of Hall Capital\nPartners LLC since 2007 and Artisan Partners Asset Management Inc since 2013, and on the Advisory Board of Mustard Seed since\nFebruary 2022 Mr Barger received a bachelor\u2019s degree in history from Yale University and aM B A from Stanford Graduate School\nof Business We believe that Mr Barger is qualified to serve on our Board based on his investment management expertise and director\nleadership experience\n\nBruce Mehlman\n\nMr Mehlman has served as a member of our Board since April 2024 Mr Mehlman founded Mehlman Consulting and has served\nas a Partner of Mehlman Consulting since December 2003 Mr Mehlman also serves on the board of non governmental organizations\nand as the Executive Director of the Technology CEO Council Mr Mehlman received aB A in History from Princeton University and\naJD from the University of Virginia School of Law We believe that Mr Mehlman is qualified to serve on our Board based on his\nexpertise in public policy and experience in executive leadership\n\nThomas Olivier\n\nMr Olivier has served as a member of our Board since April 2024 Mr Olivier has served as Arrowroot\u2019s President and Chief\nFinancial Officer and the Vice Chairman of its board of directors since its inception in November 2020 Mr Olivier is a managing\ndirector at Arrowroot Capital and has held this position since March 2021 Previously, Mr Olivier was a Managing Director in\nHoulihan Lokey\u2019s Technology, Media & Telecom (TMT) Group from May 2017 until April 2021 Prior to his time at Houlihan Lokey,\nMr Olivier served as a Managing Director at Pacific Crest Securities, Inc , an investment bank focused on the technology sector which\nwas acquired by Key Bank in 2016, from April 2012 to May 2017 Mr Olivier was also a member of the board of directors of Brain\nScientific Inc , a neurology focused medical device and software company, from November 2021 to June 2023 Mr Olivier received\n\fCase 8.24-cv-02 00-DKC Document 90-2 _ Filed 09/1.8/25 Page 151 of 408\n\nhis B S in Economics from Boston College and his JD from the George Washington University Law elieve that Mr\nOlivier is qualified to serve on our Board based on his significant investment banking and financial expertise\n\n103\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 152 of 408\n\nlan Davis\n\nSir Ian Davis has served as a member of our Board since April 2024 Since June 2021, Mr Davis has served on the board of\ndirectors of Thoughtworks Holding, Inc and is currently the Chairperson of the board of directors of Thoughtworks Holding, Inc He is\na Non Executive Director of Majid al Futtaim and of two private companies, and as an advisor to Apax Partners and Mubadala From\n2013 to October 2021, Mr Davis was the Chairman of Rolls Royce Holdings plc Mr Davis worked with McKinsey & Company for\nover 30 years and served as Chairman and Worldwide Managing Partner of McKinsey & Company from 2003 until 2009 He is now\nSenior Partner Emeritus Mr Davis also served on the board of Johnson & Johnson as a non executive director from 2010 to March\n2023 From 2010 to December 2020, he was a Non Executive Director of BP p 1c, where he was also Senior Independent (Lead)\nDirector From 2011 to 2017, Mr Davis was a non executive director of the United Kingdom Cabinet Office and of Teach for All, a\nnot for profit educational foundation Mr Davis earned a Bachelor of Arts and Master of Arts in Politics, Philosophy and Economics\nfrom Balliol College, University of Oxford We believe that Mr Davis is qualified to serve on our Board due to his significant\nleadership experience, deep understanding of global business trends and expertise in finance, strategy and business transformation\n\nMichael Moe\n\nMichael T Moe has served as a member of our Board since April 2024 Mr Moe co founded GSV Asset Management, LLC and\nhas served as its Chief Executive Officer, Co Managing Partner and Chief Investment Officer since 2010 Mr More currently serves\nNon Executive Chairman of the board of directors of Genius Group Limited (NYSE American GNS) since March 2024 and previously\nserved as Chairman of the board of directors of LZG International, Inc from March 2023 to March 2024, before it was acquired by\nGenius Group Mr Moe co founded Hi Solutions, Inc and has served as its Executive Chairman of the board of directors since July\n2021 Previously, Mr Moe was Chief Executive Officer of Class Acceleration Corp , a special purpose acquisition company, from\nSeptember 2020 to January 2023 From 2010 to 2018, Mr Moe served as the President, Chief Executive Officer, and Chairman of the\nboard of directors for GSV Capital Corp , now known as SuRo Capital Corp (NASDAQ SSSS) Mr Moe co founded and served as\nChairman and Chief Executive Officer of ThinkEquity Partners LLC from 2001 to 2008 Mr Moe has served on the board of directors\nfor BookClub, Inc since July 2020 Mr Moe received aB A in Political Science and Economics at the University of Minnesota and\nholds a Chartered Financial Analyst (CFA) designation We believe that Mr Moe is qualified to serve on our Board based on his\ninvestment management, director and executive leadership and financial services experience\n\nFamily Relationships\n\nBalakrishnan Arackal, who serves as our President and Chief Business Officer and as a member of our Board, and Ramakrishnan\nParameswaran, who serves as our Senior Vice President of Technology and Products, are brothers There are no other family\nrelationships among any of our directors or executive officers that are required to be disclosed by Regulation S K\n\nBoard Composition\n\nOur business and affairs are organized under the direction of our Board Our Board consists of seven members Mr Chidambaran\nserves as our Chairman of the Board The primary responsibilities of our Board are to provide oversight, strategic guidance, counseling\nand direction to our management Our Board will meet on a regular basis and additionally as required\n\nIn accordance with the terms of the Certificate of Incorporation, the Board is divided into three classes, Class I, Class IT and\nClass IT, with only one class of directors being elected each year and each class serving a three year term There is no cumulative\nvoting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of\ndirectors can elect all of the directors Our Board is divided into the following classes\n\ne Class I, which consists of Harish Chidambaran and Balakrishnan Arackal, whose terms will expire at our first annual meeting\nof stockholders following the Closing;\n\n104\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 153 of 408\n\ne@ Class II, which consists of Matthew Barger and Thomas Olivier, whose terms will expire at our second annual meeting of\nstockholders following the Closing; and\n\ne Class IT, which consists of Bruce Mehlman, Michael Moe and Ian Davis, whose terms will expire at our third annual meeting\nof stockholders following the Closing\n\nAt each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms then\nexpire will be elected to serve from the time of election and qualification until the third annual meeting following their election and\nuntil their successors are duly elected and qualified, or their earlier resignation, removal, retirement or death This classification of our\nBoard may have the effect of delaying or preventing changes in our control or management Our directors may be removed for cause by\nthe affirmative vote of the holders of at least 66 2/3% of our voting stock\n\nDirector Independence\n\nAs a result of our common stock being listed on the Nasdaq Stock Exchange (\u201cNasdaq\u201d), we are required to comply with the\napplicable rules of such exchange in determining whether a director is independent Prior to the completion of Business Combination,\nthe Board reviewed the independence of the individuals named above The Board determined that each of the directors on the current\nBoard, other than Harish Chidambaran and Balakrishnan Arackal, qualifies as independent directors, as defined under the Nasdaq Stock\nExchange listing rules (the \u201cNasdaq listing rules\u201d), and our Board consists of a majority of \u201cindependent directors,\u201d as defined under\nthe rules of the SEC and Nasdaq listing rules relating to director independence requirements In addition, we are subject to the rules of\nthe SEC and Nasdaq relating to the membership, qualifications and operations of the audit committee, as discussed below In addition,\nwe have not and do not plan to rely on any of the exemptions from certain board independence requirements available to controlled\ncompanies under the Nasdaq listing rules, to the extent such exemptions are available\n\nRole of the Board in Risk Oversight/Risk Committee\n\nOne of the key functions of our Board is to provide informed oversight of our risk management process Our Board does not\nanticipate having a standing risk management committee, but rather anticipates administering this oversight function directly through\nthe our Board as a whole, as well as through various standing committees of our Board that address risks inherent in their respective\nareas of oversight In particular, our Board is responsible for monitoring and assessing strategic risk exposure and our audit committee\nhas the responsibility to consider and discuss our major financial risk exposures and the steps its management will take to monitor and\ncontrol such exposures, including guidelines and policies to govern the process by which risk assessment and management is\nundertaken The audit committee also monitors compliance with legal and regulatory requirements Our compensation committee\nassesses and monitor whether our compensation plans, policies and programs comply with applicable legal and regulatory\nrequirements\n\nBoard Committees\n\nWe have established an audit committee, a compensation committee and a nominating and corporate governance committee Our\nBoard has adopted a charter for each of these committees, that complies with the applicable requirements of current Nasdaq rules In\naddition, from time to time, special committees may be established under the direction of our Board when the board deems it necessary\nor advisable to address specific issues We intend to comply with future requirements to the extent they are applicable to us Copies of\nthe charters for each committee are available on the investor relations portion of our website at https //investors ilearningengines com/\n\nAudit Committee\n\nOur audit committee consists of Matthew Barger, Michael Moe and Ian Davis Our Board has determined that each of the members\nof the audit committee satisfies the independence requirements of Nasdaq listing rules and Rule 10A 3 under the Exchange Act Each\nmember of the audit committee can read and understand fundamental financial statements in accordance with applicable audit\ncommittee requirements In arriving at this determination, our Board examined each audit committee member\u2019s scope of experience\nand the nature of their prior and/or current employment\n\n105\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 154 of 408\n\nMr Barger serves as the chair of the audit committee Our Board has determined that Mr Barger qualifies as an audit committee\nfinancial expert within the meaning of SEC regulations and meets the financial sophistication requirements of Nasdaq listing rules In\nmaking this determination, our Board considered Mr Barger\u2019s formal education and previous experience in financial roles Both our\nindependent registered public accounting firm and management periodically will meet privately with our audit committee\n\nThe functions of this committee include, among other things\n\nevaluating the performance, independence and qualifications of our independent auditors and determining whether to retain\nour existing independent auditors or engage new independent auditors;\n\nreviewing our financial reporting processes and disclosure controls;\n\nreviewing and approving the engagement of our independent auditors to perform audit services and any permissible non audit\nservices;\n\nreviewing the adequacy and effectiveness of our internal control policies and procedures, including reviewing, with the\nindependent auditors, management\u2019s plans with respect to the responsibilities, budget, staffing and effectiveness of our internal\naudit function, and reviewing and approving our head of internal audit (if established);\n\nwith the independent auditors the annual audit plan, including the scope of audit activities and all critical accounting policies\nand practices to be used by us;\n\nobtaining and reviewing at least annually (if required by applicable stock exchange listing requirements) or as otherwise\ndetermined, a report by our independent auditors describing the independent auditors\u2019 internal quality control procedures and\nany material issues raised by the most recent internal quality control review, peer review, or any inquiry or investigation by\ngovernmental or professional authorities;\n\nmonitoring the rotation of partners of our independent auditors on our engagement team as required by law;\n\nat least annually, reviewing relationships that may reasonably be thought to bear on the independence of the committee,\nreceiving and reviewing a letter from the independent auditor affirming their independence, discussing the potential effects of\nany such relationship, and assessing and otherwise taking the appropriate action to oversee the independence of our\nindependent auditor;\n\nreviewing our annual and quarterly financial statements and reports, including the disclosures contained in \u201cManagement\u2019s\nDiscussion and Analysis of Financial Condition and Results of Operations\u201d and \u201cRisk Factors,\u201d and discussing the statements\nand reports with our independent auditors and management;\n\nreviewing with our independent auditors and management significant issues that arise regarding accounting principles and\nfinancial statement presentation and matters concerning the scope, adequacy and effectiveness of our financial controls and\n\ncritical accounting policies;\n\nreviewing with management and our independent auditors any earnings announcements, disclosures and other financial\ninformation and guidance;\n\nestablishing procedures for the review, retention and investigation of complaints received by us regarding financial controls,\naccounting, auditing or other matters;\n\npreparing the report that the SEC requires in our annual proxy statement;\nreviewing and providing oversight of any related party transactions in accordance with our related party transaction policy and\n\nreviewing and monitoring compliance with legal and regulatory responsibilities, including our code of business conduct and\nethics;\n\n106\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 155 of 408\n\nreviewing and discussing with management risks related to data privacy, technology and information security, including\ncybersecurity, back up of information systems, and policies and procedures that we have in place to monitor and control such\nexposures;\n\nreviewing our major financial risk exposures, including the guidelines and policies to govern the process by which risk\nassessment and risk management is implemented;\n\nreviewing any analyses prepared by management or the independent auditors setting forth significant financial reporting issues\nand judgments made in connection with the preparation of the financial statements, including analyses of the effects of\nalternative GAAP methods on the financial statements;\n\nreviewing with management and the independent auditors any disagreement between them regarding financial reporting,\naccounting practices or policies, or other matters, that individually or in the aggregate could be significant to our financial\nstatements or the independent auditor\u2019s report, reviewing management\u2019s response, and resolving any other conflicts or\ndisagreements regarding financial reporting;\n\nconsidering and reviewing with management, the independent auditors, and outside advisors or accountants any\ncorrespondence with regulators or governmental agencies and any published reports that raise material issues regarding our\n\nfinancial statements or accounting policies;\n\nreviewing with management legal and regulatory compliance and any material current, pending or threatened legal matters;\nand\n\nreviewing and evaluating on an annual basis the performance of the audit committee and the audit committee charter\n\nThe composition and function of the audit committee complies with all applicable requirements of the Sarbanes Oxley Act, SEC\nrules and regulations and Nasdaq listing rules\n\nCompensation Committee\n\nOur compensation committee consists of Bruce Mehlman and Ian Davis Bruce Mehlman serves as the chair of the compensation\ncommittee Our Board has determined that each of the members of the compensation committee are non employee director, as defined\nin Rule 16b 3 promulgated under the Exchange Act, and satisfy the independence requirements of Nasdaq The functions of the\ncommittee include, among other things\n\nreviewing and approving the corporate objectives that pertain to our overall compensation strategy and policies;\n\nreviewing and approving annually the compensation and other terms of employment of our executive officers and other\nmembers of senior management, in the compensation committee\u2019s discretion;\n\nreviewing and approving the type and amount of compensation to be paid or awarded to our non employee board members;\nadministering our equity incentive plans and other benefit plans;\n\nreviewing and approving the terms of any employment agreements, severance arrangements, change in control protections,\nindemnification agreements and any other material arrangements with our executive officers and other members of senior\nmanagement, in the compensation committee\u2019s discretion;\n\nreviewing and establishing appropriate insurance coverage for our directors and officers;\n\nreviewing and discussing with management our disclosures under the caption \u201cCompensation Discussion and Analysis\u201d in our\nperiodic reports or proxy statements to be filed with the SEC, to the extent such caption is included in any such report or proxy\n\nstatement;\n\npreparing an annual report on executive compensation that the SEC requires in our annual proxy statement;\n\f. Case 8 one -DKC \u2014_ Document 90-2 Filed 09/48/25 Page 156 of 408\n\nreviewing our practices and policies for employee compensation as related to risk management\u2018and risk ng incentives to\ndetermine if such compensation policies and practices are reasonably likely to have a material adverse effect on us;\n\nestablishing and monitoring stock ownership guidelines for our directors and executive officers, if and as determined to be\nnecessary or appropriate;\n\n107\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 157 of 408\n\nproviding recommendations to our Board on compensation related proposals to be considered at our annual meeting of\nstockholders;\n\nreviewing and discussing with management, if appropriate, the independence of and any conflicts of interest raised by the\nwork of a compensation consultant, outside legal counsel, or advisor hired by the compensation committee or management\n\nand how such conflict is being addressed for disclosure in the appropriate filing or report;\n\nannually reviewing and discussing with management our human capital management practices with respect to its employees\nand, where applicable, independent contractors;\n\napproving and modifying, as needed, clawback policies allowing us to recoup improper compensation paid to employees; and\n\nreviewing and evaluating on an annual basis the performance of the compensation committee and recommending such\nchanges as deemed necessary with our Board\n\nThe composition and function of the compensation committee comply with all applicable requirements of the Sarbanes Oxley Act,\nSEC rules and regulations and Nasdaq listing rules\n\nNominating and Corporate Governance Committee\n\nOur nominating and corporate governance committee consists of Ian Davis and Matthew Barger Ian Davis serves as the chair of\nthe nominating and corporate governance committee Our Board has determined that each of the members of our nominating and\ncorporate governance committee satisfies the independence requirements of Nasdaq The functions of this committee include, among\nother things\n\ndetermining the qualifications, qualities, skills and other expertise required to be one of our directors, and developing and\nrecommending to our Board for approval criteria to be considered in selecting nominees for director;\n\nidentifying, reviewing and making recommendations of candidates to serve on our Board, including incumbent directors for\nreelection;\n\nevaluating the performance of our Board, committees of our Board and individual directors and determining whether\ncontinued service on our Board is appropriate;\n\nperiodically reviewing and making recommendations to our Board regarding our process for stockholder communications with\nour Board, and making such recommendations to our Board with respect thereto;\n\nevaluating nominations by stockholders of candidates for election to our Board;\n\nevaluating the structure and organization of our Board and its committees and making recommendations to our Board for\napprovals;\n\nconsidering possible conflicts of interest of officers and directors as set forth in our code of business conduct and ethics;\n\nreviewing and considering environmental, social responsibility and sustainability and governance matters as it determines\nappropriate and making recommendations to our Board regarding, or taking action with respect to, such matters;\n\nperiodically reviewing our corporate governance guidelines and code of business conduct and ethics and recommending to our\nBoard any changes to such policies and principles;\n\ndeveloping and periodically reviewing with our Chief Executive Officer the plans for succession for our Chief Executive\nOfficer and other executive officers, as it sees fit, and making recommendations to our Board with respect to the selection of\nappropriate individuals to succeed to these positions;\n\nconsidering our Board\u2019s leadership structure, including the separation of the roles of chairperson of the Board and the Chief\nExecutive Officer and/or the appointment of a lead independent director;\n\fperio ak 8:24-cv-02900-DKC Document 90-2 Filed 0 18/25 on Ge A 38 of 408\n\nreviewing the processes and procedures used by us to provide information and its committees and\nthe scope of such information and making recommendations to our Board and management for improvement as appropriate;\nand\n\ne reviewing periodically the nominating and corporate governance committee charter and recommending any proposed changes\nto our Board, including undertaking an annual review of its own performance\n\nThe composition and function of the nominating and corporate governance committee comply with all applicable requirements of\nthe Sarbanes Oxley Act, SEC rules and regulations and Nasdaq listing rules\n\n108\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 159 of 408\n\nCompensation Committee Interlocks and Insider Participation\n\nNone of the members of our compensation committee has ever been one of our executive officers or employees None of our\nexecutive officers currently serve, or has served during the last completed fiscal year, on the compensation committee or board of\ndirectors of any other entity that has one or more executive officers that serves as a member of our Board or compensation committee\n\nLimitation on Liability and Indemnification of Directors and Officers\n\nThe Certificate of Incorporation eliminates the liability of our officers and directors for monetary damages to the fullest extent\npermitted by applicable law The DGCL provides that officers and directors of a corporation will not be personally liable for monetary\ndamages for breach of their fiduciary duties, except for liability\n\ne for any transaction from which the director or officer derives an improper personal benefit;\n\ne for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;\ne for any unlawful payment of dividends or redemption of shares by directors; or\n\ne for any breach of a director\u2019s or officer\u2019s duty of loyalty to the corporation or its stockholders\n\nIf the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of officers and directors,\nthen the liability of our officers and directors will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended\n\nThe Bylaws require us to indemnify and advance expenses, to the fullest extent permitted by applicable law, to its directors,\nofficers and agents We maintain a directors\u2019 and officers\u2019 insurance policy pursuant to which our directors and officers are insured\nagainst liability for actions taken in their capacities as directors and officers Finally, the Certificate of Incorporation prohibits any\nretroactive changes to the rights or protections or increase the liability of any officer or director in effect at the time of the alleged\noccurrence of any act or omission to act giving rise to liability or indemnification\n\nIn addition, we have entered into separate indemnification agreements with our directors and executive officers These agreements,\namong other things, require us to indemnify its directors and executive officers for certain expenses, including attorneys\u2019 fees,\njudgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their\nservices as one of our directors or executive officers or any other company or enterprise to which the person provides services at our\nrequest\n\nWe believe these provisions in the Certificate of Incorporation and the Bylaws are necessary to attract and retain qualified persons\nas directors and officers\n\nCode of Business Conduct and Ethics for Employees, Executive Officers and Directors\n\nOur Board has adopted a Code of Conduct, applicable to all of our employees, executive officers and directors The Code of\nConduct is available on our website at https /ilearningengines com Information contained on or accessible through our website is not\na part of this registration statement, and the inclusion of our website address in this registration statement is an inactive textual\nreference only Our nominating and corporate governance committee is responsible for overseeing the Code of Conduct and must\napprove any waivers of the Code of Conduct for employees, executive officers and directors We expect that any amendments to the\nCode of Conduct, or any waivers of its requirements, will be disclosed on our website\n\nNon Employee Director Compensation\nOur Board expects to review director compensation periodically to ensure that director compensation remains competitive such\nthat we are able to recruit and retain qualified directors We intend to develop a board of directors\u2019 compensation program that is\n\ndesigned to align compensation with our business objectives and the creation of stockholder value, while enabling us to attract, retain,\nincentivize and reward directors who contribute to our long term success\n\n109\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 160 of 408\n\nEXECUTIVE COMPENSATION\n\nARRW\n\nEmployment Agreements\n\nPrior to the Closing, ARRW did not enter into any employment agreements with its executive officers and did not make any\nagreements to provide benefits upon termination of employment.\n\nExecutive Officers and Director Compensation\n\nNo ARRW executive officers or directors received any cash compensation for services rendered to ARRW. However, in January\n2021, Sponsor transferred 40,000 founder shares to each of Dixon Doll, Will Semple and Gaurav Dhillon, ARRW\u2019s non-employee\ndirectors at the time of its initial public offering. Peter Kuper did not receive any compensation for his services to ARRW as a director.\nARRW executive officers and directors, or any of their respective affiliates, were reimbursed for any out-of-pocket expenses incurred\nin connection with activities on ARRW\u2019s behalf such as identifying potential target businesses and performing due diligence on suitable\nbusiness combinations.\n\niLearningEngines\n\nAs used in this section iLearningEngines refers to Legacy iLearningEngines prior to the Closing of the Business Combination\nand New iLearningEngines after the closing of the Business Combination Upon the Closing of the Business Combination the executive\nofficers of Legacy iLearningEngines became executive officers of iLearningEngines\n\nThroughout this section unless otherwise noted we us our the Company and similar terms refer to iLearningEngines\nand its subsidiaries prior to the Closing and to iLearningEngines and its subsidiaries after the Business Combination This discussion\nmay contain forward looking statements that are based on our current plans considerations expectations and determinations\nregarding future compensation programs\n\niLearningEngines\u2019 named executive officers for the year ended December 31, 2023 were\n\ne Harish Chidambaran, President and Chief Executive Officer:\n\ne \u00a7 Farhan Naqvi, Chief Financial Officer & Treasurer; and\n\ne Balakrishnan Arackal. Chief Business Officer\n\nSummary Compensation Table\n\nThe following table sets forth information concerning the compensation of iLearningEngines\u2019 named executive officers for the\nfiscal year ended December 31, 2023:\n\nNon-Equity\nStock Option Incentive Plan All Other\nFiscal Salary Bonus Awards Awards Compensation Compensation Total\nName, Principal Position Year (sD (S) (S) (S) (S) ($)@ (S)\nHarish Chidambaran 2023 360,000 _ \u2014 \u2014 \u2014 53,145 413,145\nPresident and Chief 2022 360,000 _ \u2014 \u2014 \u2014 53,145 413,145\nExecutive Officer\nS. Farhan Naqvi 2023 300,000 _ \u2014 \u2014 \u2014 48.366 348.366\nChief Financial 2022 275,000 _ \u2014 \u2014 \u2014 48.366 323,366\nOfficer & Head of\nCorporate\nDevelopment\nBalakrishnan Arackal 2023 325,000 = \u2014 = \u2014 \u2014 325,000\n\nChief Business Officer 2022 325,000 \u2014 \u2014 \u2014 \u2014 \u2014 325,000\n\n\fCase 8:24-cv-02900-DKC ocu ent 90-2. Filed 09/18/25 Page 161 of 408\n\n(1) Salary amounts represent actual amounts earned during fiscal year 2023 See arrative Discl to Summary Compensation\nTable Base Salaries\u201d below\n\n110\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 162 of 408\n\n(2) This column reflects the aggregate value of other categories of payment, including (i) for Mr Chidambaran, $53,145 for\n401(k) plan employer matching contributions and (ii) for Mr Naqvi, $48,366 for 401(k) plan employer matching contributions\n\nNarrative Disclosure to Summary Compensation Table\nBase Salaries\n\nOur named executive officers receive an annual base salary to compensate them for the services they provide to the Company The\nannual base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the\nexecutive\u2019s skill set, experience, role and responsibilities\n\nAs of December 31, 2023, Mr Chidambaran, Mr Naqvi and Mr Arackal had annual base salaries of $360,000, $300,000 and\n$325,000, respectively\n\nBonuses\n\niLearningEngines may in the future provide cash bonuses to certain members of its executive team on an ad hoc basis as deemed\nappropriate, in the form of spot bonuses or for achievement of certain milestones or as individually negotiated in a named executive\nofficer\u2019s employment agreement or offer letter\n\nEquity Based Incentive Awards\n\niLearningEngines\u2019 equity award program is the primary vehicle for offering long term incentives to its executives\niLearningEngines believes that equity awards provide its executive officers with a strong link to long term performance, create an\nownership culture and help to align the interests of iLearningEngines\u2019 executive officers with its stockholders iLearningEngines has\nhistorically granted restricted stock awards and RSUs to its executive officers iLearningEngines believes that its equity awards are an\nimportant retention tool for its executive officers, as well as for its other employees iLearningEngines grants equity awards broadly to\nits employees, including to its non executive employees The iLearningEngines Board is responsible for approving equity grants\n\nPrior to the Business Combination, iLearningEngines made awards pursuant to the 2020 Equity Incentive Plan (the \u201c2020 Plan\u201d)\nand the Director Purchase Agreements The terms of the 2020 Plan are described under the section titled\u201c Equity Incentive Plans\u201d\nbelow The terms of the Director Purchase Agreements are described below\n\nOn August 12, 2021, iLearningEngines awarded 34 225,600 shares of restricted stock to Mr Chidambaran pursuant to a Director\nPurchase Agreement The restricted stock is subject to service based, annual vesting over ten years, starting on April 16, 2025 See\n\u201cCertain ILearningEngines Relationships and Related Party Transactions \u2014 Director Purchase Agreements\u201d for additional\ninformation regarding the Director Purchase Agreements\n\n111\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 163 of 408\n\nOn August 12, 2021, iLearningEngines awarded RSUs to each of Mr Naqvi and Mr Arackal covering the total amounts of\n1,687 979 and 3,775,957 shares of common stock, respectively The RSUs awarded are subject to two vesting requirements (i) a time\nbased vesting requirement; and (ii) a liquidity event vesting requirement and both vesting requirements must be satisfied for the RSUs\n\nto vest. Time-based vesting occurs as follows: one fourth qa/athy of the total number of shares underlying the RSUs (rounded down)\n\nwill satisfy time-based vesting on the one-year anniversary of the vesting commencement date, and thereafter one-forty eighth (/4sthy\nof the total number of shares underlying the RSUs (rounded down, except for the final scheduled vesting installment) will satisfy time-\nbased vesting on each monthly anniversary of the vesting commencement date, subject to each recipient\u2019s continuous service with\niLearningEngines through each such date. The vesting commencement dates for the RSUs awarded to Mr. Naqvi are February 1, 2019\nwith respect to 1,387,979 shares and January 1, 2020 with respect to 300,000 shares. The vesting commencement dates for the RSUs\nawarded to Mr. Arackal are October 10, 2018 with respect to 2,775,957 shares and January 1, 2020 with respect to 1,000,000 shares.\nThe liquidity-event vesting requirement was satisfied on April 16, 2024. The expiration date of the RSUs is generally the date that is\nseven years after the date of grant. See \u201c\u2014 Outstanding Equity Awards at December 31, 2023\u201d below.\n\nMr. Naqvi\u2019s RSU awards include a provision that, at Mr. Naqvi\u2019s election at the settlement of the RSU awards, the Company will\nsatisfy any tax withholding obligation by withholding the number of shares of the Company\u2019s common stock necessary to satisfy\nMr. Naqvi\u2019s tax withholding obligation, and providing Mr. Naqvi with the net shares of common stock (a \u201cwithhold-to-cover\u201d). The\nCompany will be obligated to pay cash to satisfy the tax obligation. In addition, if Mr. Naqvi\u2019s continuous service is terminated by the\nCompany for cause, then: (i) 50% of Mr. Naqvi\u2019s RSUs (rounded up to the nearest whole number) that have satisfied the time-based\nvesting requirement as of the date of such termination will be forfeited at no cost to the Company and Mr. Naqvi will have no further\nright, title or interest in or to such underlying shares of the Company\u2019s common stock, and (ii) Mr. Naqvi\u2019s remaining RSUs (those\nRSUs that are not forfeited under clause (i) above) that have satisfied the time-based vesting requirement as of the date of such\ntermination will be retained and eligible to be settled, notwithstanding Mr. Naqvi\u2019s termination for cause.\n\nImmediately prior to the Business Combination, the 2020 Plan was amended such that no further grants will be made under the\n2020 Plan. On the Closing Date, outstanding iLearningEngines RSUs under the 2020 Plan were assumed by New iLearningEngines\nand converted into RSUs covering shares of New iLearningEngines Common Stock, but will remain subject to the terms of the 2020\nPlan and the applicable award agreement; provided that such assumed iLearningEngines RSUs will be settled only for shares of New\niLearningEngines Common Stock after the Closing.\n\nHealth and Welfare and Retirement Benefits\n\nAll of iLearningEngines\u2019 named executive officers are eligible to participate in iLearningEngines\u2019 employee benefit plans,\nincluding medical, dental, vision, disability and life insurance plans, in each case on the same basis as all of iLearningEngines\u2019 other\nfull-time employees. iLearningEngines pays approximately 50% to 80% of the premiums for medical, dental, vision, group term life,\ndisability and accidental death and dismemberment insurance for all of its employees, including its named executive officers.\niLearningEngines generally does not provide other perquisites or personal benefits to its named executive officers, except in limited\ncircumstances.\n\n401(k) Plan\n\niLearningEngines\u2019 named executive officers are eligible to participate in a defined contribution retirement plan that provides\neligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees may defer eligible\ncompensation on a pre-tax or after-tax (Roth) basis, up to the statutorily prescribed annual limits on contributions under the Code.\nContributions are allocated to each participant\u2019s individual account and are then invested in selected investment alternatives according\nto the participants\u2019 directions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan\u2019s\nrelated trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the\n401(k) plan (except for Roth contributions) and earnings on those contributions are not taxable to the employees until distributed from\nthe 401(k) plan. In 2022, contributions made by participants, including the named executive officers, to the 401(k) plan were partially\nmatched by the Company up to a specified percentage of the employees\u2019 contribution. These matching contributions are fully vested\nwhen made.\n\n112\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 164 of 408\n\nOutstanding Equity Awards at December 31, 2023\n\nThe following table presents information regarding outstanding equity awards held by iLearningEngines\u2019 named executive officers\n\nas of December 31, 2023 All awards were granted pursuant to the 2020 Plan or a Director Purchase Agreement between the recipient\n\nand iLearningEngines See the section titled\n2020 Plan and the sections titled \u201c\n\nEquity Incentive Plans 2020 Plan\u201d below for additional information regarding the\nEquity Based Incentive Awards\u201d and \u201cCertain iLearningEngines Relationships and Related Party\n\nTransactions\n\nDirector Purchase Agreements\u201d for additional information regarding the Director Purchase Agreements\n\nOption Awards Stock Awards\nMarket\nNumber of Number of Number of Value of\nSecurities Securities Shares or Shares or\nUnderlying Underlying Units of Units of\nUnexercised Unexercised Option Stock That Stock That\nOptions Options Exercise Option Have Not Have Not\nExercisable Unexercisable Price Expiration Vested Vested\nName Grant Date (#) (#) ($) Date (A) ($)?\nHarish Chidambaran 8/12/2021 G)\n\u2014 \u2014 \u2014 \u2014 34,225,600 342,256,000\nS. Farhan Naqvi 8/12/2021 (4)\n1 387,979 13,879,790\n8/12/2021 (5)\n\u2014 \u2014 \u2014 \u2014 300,000 3,000,000\nBalakrishnan 8/12/2021 \u00a9\nArackal \u2014 \u2014 \u2014 2775957 27,759,570\n8/12/2021 (7)\n1,000,000 10,000,000\n1) Represents restricted stock and RSUs that are subject to vesting conditions. The restricted stock is subject to service-based, annual\n\n2)\n\n3)\n\n4)\n\n5)\n\n6)\n\nvesting over ten years, starting on the date of a liquidity event, so long as the employee retains his status as a service provider with\niLearningEngines through each such date. The RSUs are subject to two vesting conditions: (i) a time-based vesting condition: and\n\nii) a liquidity-based vesting condition, which are satisfied as described above under \u201cNarvative Disclosure to Summary\nCompensation Table \u2014 Equitv-Based Incentive Awards.\u201d\n\nAs there was no public market for iLearningEngines common stock on December 31, 2023, iLearningEngines has assumed that the\nfair value of each restricted stock and RSU on such date was $10.00.\n\nThe restricted stock is subject to service based annual vesting over ten years, so long as the employee retains his status as a service\nprovider with iLearningEngines through each such date. None of Mr. Chidambaran\u2019s restricted stock vested at the Closing.\n\nThe RSUs are subject to two vesting conditions: (i) service based vesting; and (ii) liquidity event based vesting, and both must be\nsatisfied for the RSUs to vest. The service-based vesting is satisfied over four years, so long as the employee retains his status as a\nservice provider with iLearningEngines. There is an additional liquidity event vesting requirement, which is satisfied as described\nabove under \u201cNarrative Disclosure to Summary Compensation Table \u2014 Equity-Based Incentive Awards.\u201d 1,387,979 shares of\nMr. Naqvi\u2019s RSUs vested at the Closing.\n\nThe RSUs are subject to two vesting conditions: (i) service based vesting; and (ii) liquidity event based vesting, and both must be\n\nsatisfied for the RSUs to vest. The service-based vesting is satisfied over four years, so long as the employee retains his status as a\nservice provider with iLearningEngines. There is an additional liquidity event vesting requirement, which is satisfied as described\nabove under \u201cNarrative Disclosure to Summary Compensation Table \u2014 Equity-Based Incentive Awards.\u201d 300,000 shares of\n\nMr. Naqvi\u2019s RSUs vested at the Closing.\n\nThe RSUs are subject to two vesting conditions: (i) service based vesting; and (ii) liquidity event based vesting, and both must be\nsatisfied for the RSUs to vest. The service-based vesting is satisfied over four years, so long as the employee retains his status as a\nservice provider with iLearningEngines. There is an additional liquidity event vesting requirement, which is satisfied as described\nabove under \u201cNarrative Disclosure to Summary Compensation Table \u2014 Equity-Based Incentive Awards.\u201d Since the RSUs do not\n\f(7)\n\nvest until SoR Gin That i 1 OEE curs OS es Ot dens mie nek GR 6/24 oF AYE 2 oht Me Arackal\u2019s\n\nRSUs vested at the Closing\n\nThe RSUs are subject to two vesting conditions (i) service based vesting; and (ii) liquidity event based vesting, and both must be\nsatisfied for the RSUs to vest The service based vesting is satisfied over four years, so long as the employee retains his status as a\nservice provider with iLearningEngines There is an additional liquidity event vesting requirement, which is satisfied as described\nabove under \u201cNarrative Disclosure to Summary Compensation Table | Equity Based Incentive Awards\u201d Since the RSUs do not\nvest until such time that a liquidity event occurs, no shares underlying the RSUs have vested 1,000,000 shares of Mr Arackal\u2019s\nRSUs vested at the Closing\n\n113\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 166 of 408\n\nEmployment Arrangements with Executive Officers\n\niLearningEngines initially entered into employment agreements with each of the named executive officers in connection with the\ncommencement of their employment with iLearningEngines, which set forth the terms and conditions of each executive\u2019s employment\nEffective upon the closing of the Business Combination, we intend to enter into new employment agreements with Messrs\nChidambaran, Naqvi and Arackal that will supersede and replace each such named executive officer\u2019s existing employment agreement\nand provide for specified payments and benefits in connection with a termination of employment in certain circumstances The current\nexecutive employment agreements with each of our named executive officers are summarized below\n\nEmployment Agreement with Harish Chidambaran\n\nOn January 1, 2011, the Company\u2019s predecessor, iHealthEngines Inc , entered into an at will employment agreement with Harish\nChidambaran to serve as Chief Executive Officer (the \u201cChidambaran Employment Agreement\u2019) The principal terms of the\nChidambaran Employment Agreement are summarized below\n\nThe Chidambaran Employment Agreement is effective as of January 1, 2011, and provides for an annual base salary of $300,000,\nwhich may be increased from time to time in the discretion of the iLearningEngines Board to address cost of living increases and other\nconsiderations The Chidambaran Employment Agreement further provides that Mr Chidambaran will be eligible to participate in any\nbonus or incentive programs provided to other employees as may be created by the Company and has the option to convert into shares\nof common stock at par value in the event that his base salary is not paid by the Company\n\nThe Chidambaran Employment Agreement provides for standard employment related benefits, including medical insurance\n(health, dental, vision), 401(k) benefits or an equivalent retirement plan that allows employer matching contributions, and other\nbenefits generally made available to employees under the Company\u2019s employee benefit plans\n\nThe Chidambaran Employment Agreement is an at will agreement and may be terminated at any time and for any reason or\nwithout reason However, in the event that Mr Chidambaran is terminated by the Company without Cause or he resigns for Good\nReason, the Company must provide the following \u201cSeparation Benefits\u201d (1) a lump sum severance payment equal to\nMr Chidambaran\u2019s annual base salary as of the termination date; and (ii) accelerated vesting of any outstanding and unvested equity\nawards previously granted to Mr Chidambaran Receipt of the Separation Benefits is conditioned upon Mr Chidambaran\u2019s execution\nof a full and complete release of claims in favor of the Company Mr Chidambaran\u2019s termination due to his death or disability does not\nconstitute a \u201cwithout Cause\u201d termination\n\nThe Chidambaran Employment Agreement defines \u201cCause\u201d as any of the following acts by Mr Chidambaran (i) commission of\nan act of fraud, embezzlement, misappropriation, moral turpitude, or theft in the course of Mr Chidambaran\u2019s employment with the\nCompany; (ii) willful and repeated refusal to perform specific and material duties within the scope of Mr Chidambaran\u2019s\nresponsibilities set forth in the Chidambaran Employment Agreement and consistent with the Company\u2019s policies (other than a failure\nas a result of Executive\u2019s death or disability), and such refusal is not cured within thirty (30) days after the Company provides written\nnotice to Mr Chidambaran; or (iii) material breach of any material provision of the Chidambaran Employment Agreement, and such\nfailure or breach is not cured within thirty (30) days after the Company provides written notice to Mr Chidambaran of such failure\n\n\u201cGood Reason\u201d is defined as the occurrence of any of the following events (1) the iLearningEngines Board unilaterally reduces\nMr Chidambaran\u2019s compensation (other than reduction of benefits that applies company wide) or fails to pay Mr Chidambaran any\ncompensation due and owing; (ii) the Company has breached any material of the Agreement; (iii) the Company unilaterally reduces\nMr Chidambaran\u2019s title, duties, authority or responsibilities; or (iv) the Company unilaterally requires Mr Chidambaran to relocate\nMr Chidambaran\u2019s primary place of employment by more than twenty (20) miles from its location at that time In order to constitute\n\u201cGood Reason,\u201d Mr Chidambaran must give the Company notice within 90 days of the occurrence of the Good Reason event and\nthirty (30) days to cure the alleged Good Reason event\n\nThe Chidambaran Employment Agreement contains an inventions assignment provision, a twelve (12) month non competition\nprovision, a twelve (12) month non solicitation of employees provision, confidentiality and non disclosure obligations, an executive\nindemnification agreement, and an arbitration provision\n\nThe foregoing description of the Chidambaran Employment Agreement is qualified in its entirety by reference to the full text of the\nChidambaran Employment Agreement\n\fCase 8:24-cv-02900-DKC Document 99-2 Filed 09/18/25 Page 167 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 168 of 408\n\nEmployment Agreement with S Farhan Naqvi\n\nOn February 20, 2019, iLearningEngines entered into an at will employment agreement with S Farhan Naqvi to serve as Chief\nFinancial Officer (the \u201cNaqvi Employment Agreement\u2019) The principal terms of the Naqvi Employment Agreement are summarized\nbelow\n\nThe Naqvi Employment Agreement is effective as of February 20, 2019, and provides for an annual base salary of $250,000, which\nmay be increased from time to time in the iLearningEngines\u2019 Board\u2019s discretion to address cost of living increases and other\nconsiderations The Naqvi Employment Agreement further provides that Mr Naqvi will be eligible to participate in any bonus or\nincentive programs provided to other employees The Naqvi Employment Agreement further provides for the grant of an equity award\n(in the form of restricted stock units, stock options and/or restricted stock), equivalent to 2% of the valuation of iLearningEngines at the\ntime of the first priced equity round occurring in calendar year 2021 or thereafter, which shall vest according to the following schedule\n(a) 25% upon the employment commencement date; and (b) an additional 25% each fiscal year thereafter The Naqvi Employment\nAgreement contemplates the grant of additional equity awards on an annual basis at the discretion of the iLearningEngines Board\n\nThe Naqvi Employment Agreement provides for standard employment related benefits including medical insurance (health, dental,\nvision), 401(k) benefits or an equivalent retirement plan that allows matching contributions, and other benefits generally made\navailable to employees under iLearningEngines\u2019 employee benefit plans\n\nThe Naqvi Employment Agreement is an at will agreement and may be terminated at any time and for any reason or without\nreason However, in the event that Mr Naqvi is terminated without Cause or he resigns for Good Reason, Mr Naqvi is entitled to the\nfollowing \u201cSeparation Benefits\u201d (i) a lump sum severance payment equal to Mr Naqvi\u2019s annual base salary at the time of termination;\nand (ii) accelerated vesting of any outstanding unvested equity awards previously granted to Mr Naqvi Receipt of the Separation\nBenefits is conditioned upon Mr Naqvi\u2019s execution of a full and complete release of claims in favor of the Company Mr Naqvi\u2019s\ntermination due to his death or disability does not constitute a \u201cwithout Cause\u201d termination\n\nThe Naqvi Employment Agreement defines \u201cCause\u201d as any of the following acts by Mr Naqvi (i) commission of an act of fraud,\nembezzlement, misappropriation, moral turpitude, or theft in the course of Mr Naqvi\u2019s employment with the Company; (ii) willful and\nrepeated refusal to perform specific and material duties within the scope of Mr Naqvi\u2019s responsibilities set forth in the Naqvi\nEmployment Agreement and consistent with the Company\u2019s policies (other than a failure as a result of Mr Naqvi\u2019s death or disability),\nand such refusal is not cured within thirty (30) days after the Company provides written notice to Mr Naqvi; or (iii) material breach of\nany material provision of the Naqvi Employment Agreement, and such failure or breach is not cured within thirty (30) days after the\nCompany provides written notice to Mr Naqvi of such failure\n\n\u201cGood Reason\u201d is defined as the occurrence of any of the following events (i) the iLearningEngines\u2019 Board unilaterally reduces\nMr Nagqvi\u2019s compensation (other than reduction of benefits that applies Company wide) or fails to pay Mr Naqvi any compensation\ndue and owing; (ii) the Company has breached any material term of the Naqvi Employment Agreement; (iii) the Company unilaterally\nreduces Mr Naqvi\u2019s title, duties, authority or responsibilities; or (iv) the Company unilaterally requires Mr Naqvi to relocate\nMr Nagqvi\u2019s primary place of employment by more than twenty (20) miles from its location at that time In order to constitute \u201cGood\nReason,\u201d Mr Naqvi must give the Company notice within 90 days of the occurrence of the Good Reason event and thirty (30) days to\ncure the alleged Good Reason event\n\n115\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 169 of 408\n\nThe Naqvi Employment Agreement contains an inventions assignment provision, a twelve (12) month non competition provision,\na twelve (12) month non solicitation of employees provision, confidentiality and non disclosure obligations, an executive\nindemnification agreement and an arbitration provision\n\nThe foregoing description of the Naqvi Employment Agreement is qualified in its entirety by reference to the full text of the Naqvi\nEmployment Agreement\n\nEmployment Agreement with Balakrishnan Arackal\n\nOn October 10, 2018, iLearningEngines entered into an at will employment agreement with Balakrishnan Arackal to serve as\nExecutive Vice President of Sales and Strategy (the \u201cArackal Employment Agreement\u2019) The principal terms of the Arackal\nEmployment Agreement are summarized below\n\nThe Arackal Employment Agreement is effective as of October 10, 2018, but has an employment start date of September 1, 2019\nThe Arackal Employment Agreement contemplates that Mr Arackal\u2019s primary work location will be Dubai, UAE The Arackal\nEmployment Agreement provides for an annual base salary of $325,000, which may be increased from time to time in the\niLearningEngines\u2019 Board\u2019s discretion in order to address cost of living increases and other considerations\n\nThe Arackal Employment Agreement further provides that Mr Arackal will be eligible to participate in any bonus or incentive\nprograms provided to other employees The Arackal Employment Agreement further provides for the grant of an equity award (in the\nform of restricted stock units, stock options and/or restricted stock), equivalent to 2 3% of the valuation of the Company, with the exact\npercentage in accordance with various factors contained therein and which shall vest according to the following schedule (a) 25%\nupon the employment commencement date; and (b) an additional 1/36 each month thereafter The Arackal Employment Agreement\ncontemplates the grant of additional equity awards on an annual basis in an amount equivalent to $100,000 per year\n\nThe Arackal Employment Agreement provides for standard employment related benefits including medical insurance (health,\ndental, vision), 401(k) benefits or an equivalent retirement plan that allows employer matching contributions, and other benefits\ngenerally made available to employees under the Company\u2019s employee benefit plans\n\nThe Arackal Employment Agreement is an at will agreement and may be terminated at any time and for any reason or without\nreason However, in the event that Mr Arackal is terminated without Cause or he resigns for \u201cGood Reason,\u201d Mr Arackal is entitled to\nthe following \u201cSeparation Benefits\u201d (i) a lump sum severance payment equal to Mr Arackal\u2019s annual base salary at the time of his\ntermination; and (ii) accelerated vesting of any outstanding and unvested equity awards previously granted to Mr Arackal Receipt of\nthe Separation Benefits is conditioned upon Mr Arackal\u2019s execution of a full and complete release of claims in favor of the Company\nMr Arackal\u2019s termination due to his death or disability does not constitute a \u201cwithout Cause\u201d termination\n\nThe Arackal Employment Agreement defines \u201cCause\u201d as any of the following acts by Mr Arackal (i) commission of an act of\nfraud, embezzlement, misappropriation, moral turpitude, or theft in the course of Mr Arackal\u2019s employment with the Company;\n(i) willful and repeated refusal to perform specific and material duties within the scope of Mr Arackal\u2019s responsibilities set forth in this\nagreement and consistent with the Company\u2019s policies (other than a failure as a result of Mr Arackal\u2019s death or disability), and such\nrefusal is not cured within thirty (30) days after the Company provides written notice to Mr Arackal; or (iii) material breach of any\nmaterial provision of this Agreement, and such failure or breach is not cured within thirty (30) days after the Company provides written\nnotice to Mr Arackal of such failure\n\n\u201cGood Reason\u201d is defined as the occurrence of any of the following events (1) the iLearningEngines Board unilaterally reduces\nMr Arackal\u2019s compensation (other than reduction of benefits that applies Company wide) or fails to pay Mr Arackal any compensation\ndue and owing; (ii) the Company has breached any material of the Arackal Employment Agreement; (iii) the Company unilaterally\nreduces Mr Arackal\u2019s title, duties, authority or responsibilities; or (iv) the Company unilaterally requires Mr Arackal to relocate\nMr Arackal\u2019s primary place of employment by more than twenty (20) miles from its location at that time In order to constitute \u201cGood\nReason,\u201d Mr Arackal must give the Company notice within 90 days of the occurrence of the Good Reason event and thirty (30) days to\ncure the alleged Good Reason event\n\n116\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 170 of 408\n\nThe Arackal Employment Agreement contains an invention assignment provision, a twelve (12) month non competition provision,\na twelve (12) month non solicitation provision, confidentiality and non disclosure obligations, an executive indemnification agreement,\nand an arbitration provision\n\nThe foregoing description of the Arackal Employment Agreement is qualified in its entirety by reference to the full text of the\nArackal Employment Agreement\n\nExecutive Officer Compensation\n\nWe intend to establish an executive officer compensation program pursuant to which our Compensation Committee will oversee\nour compensation policies, plans and programs and review and determine compensation to be paid to executive officers, directors and\nother senior management, as appropriate Our compensation policies will be intended to provide for compensation that is sufficient to\nattract, motivate and retain individuals who contribute to the success of our company and to establish an appropriate relationship\nbetween executive compensation and our business objectives and stockholder value\n\n2023 Director Compensation\n\nHistorically, we have not had a formalized non employee director compensation program and our directors did not receive any\ncash compensation for their service on our Board in 2023 All compensation paid to Mr Chidambaran is reported above in the\n\u201cSummary Compensation Table\u201d iLearningEngines\u2019 policy is to reimburse directors for reasonable and necessary out of pocket\nexpenses incurred in connection with attending iLearningEngines\u2019 Board and committee meetings or performing other services in their\ncapacities as directors\n\nThe following table summarizes the equity awards outstanding on December 31, 2023, for each non employee director\n\nStock\nAwards\nName (#)\nPreeta Chidambaran\\ 5,657,788\n\n(1) Dr Chidambaran resigned from the board of directors prior to the Closing\n\nPlease see \u201cCertain ILearningEngines Relationships and Related Party Transactions Director Purchase Agreements\u201d for\ninformation on how the restricted stock will be treated in the event of a change in control\n\nDirector Compensation\n\nOur Board expects to review director compensation periodically to ensure that director compensation remains competitive such\nthat we are able to recruit and retain qualified directors We intend to develop a board of directors compensation program that is\ndesigned to align compensation with our business objectives and the creation of stockholder value, while enabling us to attract, retain,\nincentivize and reward directors who contribute to our long term success\n\nEquity Incentive Plans\nEquity based compensation has been and will continue to be an important foundation in executive compensation packages as we\nbelieve it is important to maintain a strong link between executive incentives and the creation of stockholder value We believe that\n\nperformance and equity based compensation can be an important component of the total executive compensation package for\nmaximizing stockholder value while, at the same time, attracting, motivating and retaining high quality executives\n\n117\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 171 of 408\n\n2020 Equity Incentive Plan\n\nThe following summary describes the material terms of the 2020 Equity Incentive Plan, as amended (the \u201c2020 Plan\u201d), adopted by\nthe iLearningEngines Board on October 1, 2020, and last approved by the stockholders of iLearningEngines on December 1, 2021\n\nAwards The 2020 Plan provided for the grant of incentive stock options (\u201cZSOs\u201d), nonstatutory stock options (\u201cNSOs\u201d), restricted\nstock awards, restricted stock unit awards, stock appreciation rights and other stock awards (collectively, \u201c Awards\u201d) to\niLearningEngines\u2019 employees, directors, and consultants who provide services to iLearningEngines\n\nAuthorized Shares Subject to certain capitalization adjustments, as of December 31, 2023, the aggregate number of shares of\niLearningEngines Common Stock that may be issued pursuant to non qualified stock awards under the 2020 Plan was\n10,000,000 shares\n\nShares subject to awards granted under the 2020 Plan that expire or terminate without being settled or that are settled in cash rather\nthan in shares do not reduce the number of shares available for issuance under the 2020 Plan Also, any shares reacquired to cover\nwithholding obligations will again become available for issuance under the 2020 Plan Additionally, if any shares issued pursuant to a\nstock award are forfeited back to iLearningEngines or repurchased because of the failure to meet a contingency or condition required to\nvest, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the 2020 Plan\n\nPlan Administration The 2020 Plan is administered by the iLearningEngines Board, or a duly authorized committee of the\niLearningEngines Board, that is referred to as the \u201cadministrator\u201d in the 2020 Plan Subject to the provisions of the 2020 Plan, the\nadministrator determines in its discretion the persons to whom Awards are granted, the sizes of such Awards and all of their terms and\nconditions The administrator has the authority to construe and interpret the terms of the 2020 Plan and Awards granted under it The\nadministrator may also delegate to one or more of iLearningEngines\u2019 officers the authority to (1) designate employees (other than\nofficers) to receive specified awards; and (2) determine the number of shares subject to such awards\n\nUnder the 2020 Plan, the administrator also generally has the authority to effect, with the consent of any adversely affected\nparticipant (A) the reduction of the exercise, purchase, or strike price of any outstanding award; (B) the cancellation of any outstanding\naward and the grant in substitution therefor of other awards, cash, or other consideration; or (C) any other action that is treated as a\nrepricing under generally accepted accounting principles\n\nRestricted Stock Unit Awards Restricted stock unit awards are granted under restricted stock unit award agreements adopted by the\nadministrator Restricted stock unit awards may be granted in consideration for any form of legal consideration that may be acceptable\nto iLearningEngines\u2019 Board and permissible under applicable law A restricted stock unit award may be settled by cash, delivery of\nstock, a combination of cash and stock as deemed appropriate by the administrator, or in any other form of consideration set forth in the\nrestricted stock unit award agreement Additionally, dividend equivalents may be credited in respect of shares covered by a restricted\nstock unit award Except as otherwise provided in the applicable award agreement, restricted stock unit awards that have not vested will\nbe forfeited once the participant\u2019s continuous service ends for any reason\n\nAs of December 31, 2023, RSUs to receive 7,138,438 shares of iLearningEngines Common Stock were outstanding under the\n2020 Plan RSUs are granted under restricted stock unit award agreements adopted by the administrator\n\nChanges to Capital Structure In the event there is a specified type of change in iLearningEngines\u2019 capital structure, such as a\nrecapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split up, combination, repurchase, or exchange of\nshares, appropriate adjustments will be made to the number and class of shares that may be delivered under the 2020 Plan and/or\nnumber, class, and the exercise price of shares covered by each outstanding Award\n\n118\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 172 of 408\n\nCorporate Transaction The 2020 Plan provides that, in the event of a corporate transaction, Awards will be treated as the\nadministrator determines, and the administrator may take one or more of the following actions with respect to such Awards\n\ne arrange for the assumption, continuation, or substitution of a stock award by a surviving or acquiring corporation;\n\ne arrange for the assignment of any reacquisition or repurchase rights held by iLearningEngines to the surviving or acquiring\ncorporation;\n\ne accelerate the vesting of the stock award and provide for its termination if not exercised (if applicable) at or before the\neffective time of the qualifying transaction;\n\ne arrange for the lapse of any reacquisition or repurchase rights held by iLearningEngines;\n\n\u00ae upon written notice to a participant, terminate or cancel or arrange for the termination or cancellation of the stock award, to the\nextent not vested or not exercised before the effective time of the transaction; and\n\ne make a payment equal to the excess, if any, of (A) the value of the property the holder of the stock award would have\nreceived on exercise of the Award, over (B) any exercise price payable by such holder in connection with the exercise\n\nThe administrator is not obligated to treat all stock award or portions of stock awards in the same manner and is not obligated to\ntreat all participants in the same manner\n\nUnder the 2020 Plan, a corporate transaction is generally the consummation of (1) a sale of all or substantially all of\niLearningEngines\u2019 assets; (2) the sale or disposition of at least 50% of iLearningEngines\u2019 outstanding securities; (3) a merger or\nconsolidation in which iLearningEngines does not survive the transaction; or (4) a merger or consolidation in which iLearningEngines\ndoes survive the transaction but the shares of iLearningEngines\u2019 common stock outstanding immediately before such transaction are\nconverted or exchanged into other property by virtue of the transaction\n\nChange in Control In addition to the above, the administrator may provide, in an individual award agreement, that the Award will\nbe subject to additional acceleration of vesting and exercisability in the event of a change in control Under the 2020 Plan, a change in\ncontrol means the occurrence of any of the following events (i) a change in ownership of iLearningEngines, which occurs on the date\nthat any one person, or more than one person acting as a group, acquires ownership of the stock of iLearningEngines that constitutes\nmore than 50% of the total voting power of the stock of iLearningEngines, except that any changes in the ownership of the stock of\niLearningEngines as a result of a private financing of iLearningEngines that is approved by the iLearningEngines Board will not be\nconsidered a change in control; (ii) there is a consummated merger, consolidation or similar transaction involving the Company and\nimmediately after such merger, consolidation or similar transaction, the stockholders of the Company immediately prior do not own\neither (A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving entity\nin such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of\nthe surviving entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions of their\nownership immediately prior to such transaction; or (iii) there is consummated a sale, lease, exclusive license or other disposition of all\nor substantially all of the consolidated assets of the Company and its subsidiaries\n\nPlan Amendment or Termination iLearningEngines\u2019 Board has the authority to amend, alter, suspend, or terminate the 2020 Plan,\nprovided that such action does not impair the existing rights of any participant without such participant\u2019s written consent Certain\nmaterial amendments also require the approval of iLearningEngines stockholders No stock awards may be granted under the 2020 Plan\nwhile it is suspended or after it is terminated\n\nAt the Effective Time, outstanding iLearningEngines RSUs under the 2020 Plan were assumed by New iLearningEngines and\n\nconverted into restricted stock units covering shares of New iLearningEngines Common Stock The restricted stock units continue to be\ngoverned by the terms of the 2020 Plan No further awards shall be made under the 2020 Plan\n\n119\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 173 of 408\n\n2024 Equity Incentive Plan\n\nIn April 2024, our Board adopted, and our stockholders approved, the iLearningEngines 2024 Equity Incentive Plan (the \u201c2024\nPlan\u201d) The 2024 Plan became effective immediately upon the Closing A summary description of the material features of the 2024\nPlan is set forth below This summary is not a complete description of all provisions of the 2024 Plan and is qualified in its entirety by\nreference to the 2024 Plan, the form of which is attached as an exhibit to the registration statement of which this prospectus forms a\npart and incorporated by reference in its entirety\n\nThe purpose of the 2024 Plan is to secure and retain the services of employees, directors and consultants, to provide incentives for\nsuch persons to exert maximum efforts for our success and to provide a means by which such persons may be given an opportunity to\nbenefit from increases in value of New iLearningEngines Common Stock through the granting of awards thereunder We believe that\nthe equity based awards to be issued under the 2024 Plan will motivate award recipients to offer their maximum effort to New\niLearningEngines and help focus them on the creation of long term value consistent with the interests of our stockholders We believe\nthat grants of incentive awards are necessary to enable New iLearningEngines to attract and retain top talent\n\nThis section summarizes certain principal features of the 2024 Plan The summary is qualified in its entirety by reference to the\ncomplete text of the 2024 Plan\n\nEligibility New iLearningEngines\u2019 employees, consultants and directors, and employees and consultants of its affiliates, may be\neligible to receive awards under the 2024 Plan New iLearningEngines has approximately 550 employees and 5 non employee directors\n(as of May 29, 2024) who may be eligible to receive awards under the 2024 Plan\n\nAward Types The 2024 Plan provides for the grant of ISOs to employees and for the grant of NSOs, stock appreciation rights,\nrestricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors, and\nconsultants\n\nShare Reserve Initially, the maximum number of shares of New iLearningEngines Common Stock that may be issued under the\n2024 Plan after it becomes effective will not exceed a number of shares of New iLearningEngines Common Stock equal to the product\nof (i) 10%, multiplied by (ii) the total number of issued and outstanding shares of New iLearningEngines Common Stock determined as\nof immediately following the closing of the Business Combination (the \u201cShare Reserve\u201d) The number of shares of New\niLearningEngines Common Stock reserved for issuance under the 2024 Plan will automatically increase on January 1 of each year, for\na period of ten years, from January 1, 2025 continuing through January 1, 2034, by 5% of the total number of shares of New\niLearningEngines\u2019 capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be\ndetermined by the New iLearningEngines Board\n\nThe maximum number of shares that may be issued pursuant to the exercise of ISOs under the 2024 Plan is 300% of the number of\nshares of New iLearningEngines Common Stock initially reserved under the 2024 Plan Shares issued under the 2024 Plan may be\nauthorized but unissued or reacquired shares Shares subject to stock awards granted under the 2024 Plan that expire or terminate\nwithout being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for\nissuance under the 2024 Plan\n\nAdditionally, shares issued pursuant to stock awards under the 2024 Plan that are repurchased or forfeited, as well as shares that\n\nare reacquired as consideration for the exercise or purchase price of a stock award or to satisfy tax withholding obligations related to a\nstock award, will become available for future grant under the 2024 Plan\n\n120\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 174 of 408\n\nPlan Administration The New iLearningEngines Board, or a duly authorized committee thereof, will have the authority to\nadminister the 2024 Plan The New iLearningEngines Board may also delegate to one or more officers the authority to (i) designate\nemployees other than officers to receive specified stock awards; and (ii) determine the number of shares to be subject to such stock\nawards Subject to the terms of the 2024 Plan, the plan administrator has the authority to determine the terms of awards, including\nrecipients, the exercise price or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market\nvalue of a share, the vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any,\npayable upon exercise or settlement of the stock award and the terms and conditions of the award agreements for use under the 2024\nPlan The plan administrator has the power to modify outstanding awards under the 2024 Plan Subject to the terms of the 2024 Plan,\nthe plan administrator also has the authority to reprice any outstanding option or stock award, cancel and re grant any outstanding\noption or stock award in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a\nrepricing under generally accepted accounting principles, with the consent of any materially adversely affected participant\n\nStock Options ISOs and NSOs are granted under stock option agreements adopted by the plan administrator The plan\nadministrator determines the exercise price for stock options, within the terms and conditions of the 2024 Plan, provided that the\nexercise price of a stock option generally cannot be less than 100% of the fair market value of a share of New iLearningEngines\nCommon Stock on the date of grant (however, a stock option may be granted with an exercise or strike price lower than 100% of the\nfair market value on the date of grant of such award if such award is granted pursuant to an assumption of, or substitution for another\noption pursuant to a corporate transaction, as such term is defined in the 2024 Plan, and in a manner consistent with the provisions of\nSections 409A and, if applicable, 424(a) of the Code) Options granted under the 2024 Plan vest at the rate specified in the stock option\nagreement as determined by the plan administrator The plan administrator determines the term of stock options granted under the 2024\nPlan, up to a maximum of ten years Unless the terms of an optionholder\u2019s stock option agreement provide otherwise, if an\noptionholder\u2019s service relationship ceases for any reason other than disability, death or cause, the optionholder may generally exercise\nany vested options for a period of three months following the cessation of service The option term may be extended in the event that\nthe exercise of the option following such a termination of service is prohibited by applicable securities laws or New iLearningEngines\u2019\ninsider trading policy If an optionholder\u2019s service relationship ceases due to disability or death, or an optionholder dies within a certain\nperiod following cessation of service, the optionholder or a beneficiary may generally exercise any vested options for a period of\n12 months in the event of disability and 18 months in the event of death Options generally terminate immediately upon the termination\nof an optionholder\u2019s service for cause In no event may an option be exercised beyond the expiration of its term Acceptable\nconsideration for the purchase of New iLearningEngines Common Stock issued upon the exercise of a stock option will be determined\nby the plan administrator and may include (4) cash, check, bank draft, or money order; (ii) a broker assisted cashless exercise; (iii) the\ntender of shares of New iLearningEngines Common Stock previously owned by the optionholder, (iv) a net exercise of the option if it\nis an NSO; and (v) other legal consideration approved by the plan administrator and permissible under applicable law\n\nTax Limitations on ISOs The aggregate fair market value, determined at the time of grant of New iLearningEngines Common\nStock with respect to ISOs that are exercisable for the first time by an optionholder during any calendar year under all stock plans\nmaintained by New iLearningEngines may not exceed $100,000 Options or portions thereof that exceed such limit will generally be\ntreated as NSOs No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more\nthan 10% of New iLearningEngines\u2019 total combined voting power or that of any of New iLearningEngines\u2019 affiliates unless (i) the\noption exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant; and (ii) the option\nis not exercisable after the expiration of five years from the date of grant\n\nRestricted Stock Awards Restricted stock awards are granted under restricted stock award agreements adopted by the plan\nadministrator A restricted stock award may be awarded in consideration for cash, check, bank draft or money order, past services, or\nany other form of legal consideration that may be acceptable to the plan administrator and permissible under applicable law The plan\nadministrator determines the terms and conditions of restricted stock awards, including vesting and forfeiture terms Except as provided\notherwise in the applicable award agreement, if a participant\u2019s service relationship ends for any reason, New iLearningEngines may\nreceive through a forfeiture condition or a repurchase right any or all of the shares held by the participant under his or her restricted\nstock award that have not vested as of the date the participant terminates service\n\n121\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 175 of 408\n\nRestricted Stock Unit Awards Restricted stock units are granted under restricted stock unit award agreements adopted by the plan\nadministrator Restricted stock units may be granted in consideration for any form of legal consideration that may be acceptable to the\nplan administrator and permissible under applicable law A restricted stock unit may be settled by cash, delivery of stock, a combination\nof cash and stock as deemed appropriate by the plan administrator, or in any other form of consideration set forth in the restricted stock\nunit agreement Additionally, dividend equivalents may be credited in respect of shares covered by a restricted stock unit Except as\notherwise provided in the applicable award agreement, restricted stock units that have not vested will be forfeited once the participant\u2019s\ncontinuous service ends for any reason\n\nStock Appreciation Rights Stock appreciation rights are granted under stock appreciation grant agreements adopted by the plan\nadministrator The plan administrator determines the purchase price or strike price for a stock appreciation right, which generally\ncannot be less than 100% of the fair market value of New iLearningEngines Common Stock on the date of grant (however, a stock\nappreciation right may be granted with an exercise or strike price lower than 100% of the fair market value on the date of grant of such\naward if such award is granted pursuant to an assumption of or substitution for another option pursuant to a corporate transaction, as\nsuch term is defined in the 2024 Plan, and in a manner consistent with the provisions of Section 409A) A stock appreciation night\ngranted under the 2024 Plan vests at the rate specified in the stock appreciation right agreement as determined by the plan\nadministrator\n\nPerformance Awards The 2024 Plan permits the grant of performance based stock and cash awards The plan administrator may\nstructure awards so that the shares of New iLearningEngines Common Stock, cash, or other property will be issued or paid only\nfollowing the achievement of certain pre established performance goals during a designated performance period The performance\ncriteria that will be used to establish such performance goals may be based on any measure of performance selected by the plan\nadministrator The performance goals may be based on a company wide basis, with respect to one or more business units, divisions,\naffiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the\nperformance of one or more relevant indices Unless specified otherwise (i) in the award agreement at the time the award is granted; or\n(i) in such other document setting forth the performance goals at the time the goals are established, the plan administrator will\nappropriately make adjustments in the method of calculating the attainment of performance goals as follows (1) to exclude\nrestructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally\naccepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects\nof items that are \u201cunusual\u201d in nature or occur \u201cinfrequently\u201d as determined under generally accepted accounting principles; (6) to\nexclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by New iLearningEngines\nachieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (8) to\nexclude the effect of any change in the outstanding shares of New iLearningEngines Common Stock by reason of any stock dividend or\nsplit, stock repurchase, reorganization, recapitalization, merger, consolidation, spin off, combination or exchange of shares or other\nsimilar corporate change, or any distributions to stockholders other than regular cash dividends; (9) to exclude the effects of stock\nbased compensation and the award of bonuses under New iLearningEngines\u2019 bonus plans; (10) to exclude costs incurred in connection\nwith potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; and (11) to\nexclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting\nprinciples In addition, the plan administrator retains the discretion to reduce or eliminate the compensation or economic benefit due\nupon attainment of the performance goals Partial achievement of the specified criteria may result in the payment or vesting\ncorresponding to the degree of achievement as specified in the applicable award agreement or the written terms of a performance cash\naward The performance goals may differ from participant to participant and from award to award\n\nOther Stock Awards The plan administrator may grant other awards based in whole or in part by reference to New\niLearningEngines Common Stock The plan administrator will set the number of shares under the stock award and all other terms and\nconditions of such awards\n\nNon Employee Director Compensation Limit The aggregate value of all compensation granted or paid by New iLearningEngines\nto any individual for service as a non employee director with respect to any calendar year (such period, the \u201cannual period\u201d), including\nstock awards and cash fees paid by New iLearningEngines to such non employee director, will not exceed (i) $500,000 in total value;\nor (ii) in the event such non employee director is first appointed or elected to the board during such annual period, $750,000 in total\nvalue For purposes of these limitations, the value of any such stock awards is calculated based on the grant date fair value of such\nstock awards for financial reporting purposes\n\n122\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 176 of 408\n\nChanges to Capital Structure In the event there is a specified type of change in New iLearningEngines\u2019 capital structure, such as a\nmerger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large\nnonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in\ncorporate structure or any similar equity restructuring transaction, appropriate adjustments will be made to (i) the class(es) and\nmaximum number of shares of New iLearningEngines Common Stock subject to the 2024 Plan and the maximum number of shares by\nwhich the share reserve may annually increase; (ii) the class(es) and maximum number of shares that may be issued pursuant to the\nexercise of ISOs; and (iii) the class(es) and number of securities and exercise price, strike price or purchase price of common stock\nsubject to outstanding awards\n\nCorporate Transactions The following applies to stock awards under the 2024 Plan in the event of a corporate transaction, as\ndefined in the 2024 Plan, unless otherwise provided in a participant\u2019s stock award agreement or other written agreement with New\niLearningEngines or unless otherwise expressly provided by the plan administrator at the time of grant In the event of a corporate\ntransaction, any stock awards outstanding under the 2024 Plan may be assumed, continued or substituted by any surviving or acquiring\ncorporation (or its parent company), and any reacquisition or repurchase rights held by New iLearningEngines with respect to the stock\naward may be assigned to the successor (or its parent company) If the surviving or acquiring corporation (or its parent company) does\nnot assume, continue or substitute such stock awards, then with respect to any such stock awards that are held by participants whose\ncontinuous service has not terminated prior to the effective time of the transaction, or current participants (referred to as the \u201cCurrent\nParticipants\u201d), the vesting (and exercisability, if applicable) of such stock awards will be accelerated in full to a date prior to the\neffective time of the transaction (contingent upon the effectiveness of the transaction), and such stock awards will terminate if not\nexercised (if applicable) at or prior to the effective time of the transaction, and any reacquisition or repurchase rights held by New\niLearningEngines with respect to such stock awards will lapse (contingent upon the effectiveness of the transaction) With respect to\nperformance awards with multiple vesting levels depending on the performance level, unless otherwise provided by an award\nagreement or by the plan administrator, the award will accelerate at 100% of such target level if the performance awards are held by\nCurrent Participants and the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute such\nstock awards If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute such stock\nawards, then with respect to any such stock awards that are held by persons other than current participants, such awards will terminate\nif not exercised (if applicable) prior to the effective time of the transaction, except that any reacquisition or repurchase rights held by\nNew iLearningEngines with respect to such stock awards will not terminate and may continue to be exercised notwithstanding the\ntransaction The plan administrator is not obligated to treat all stock awards or portions of stock awards in the same manner and is not\nobligated to take the same actions with respect to all participants In the event a stock award will terminate if not exercised prior to the\neffective time of a transaction, the plan administrator may provide, in its sole discretion, that the holder of such stock award may not\nexercise such stock award but instead will receive a payment equal in value, at the effective time, to the excess (if any) of (i) the value\nof the property the participant would have received upon the exercise of the stock award over (ii) any exercise price payable by such\nholder in connection with such exercise\n\nChange in Control In the event of a change in control, as defined under the 2024 Plan, awards granted under the 2024 Plan will\nnot receive automatic acceleration of vesting and exercisability, although this treatment may be provided for in an award agreement\n\nPlan Amendment or Termination The New iLearningEngines Board will have the authority to amend, suspend, or terminate the\n2024 Plan, provided that such action does not materially impair the existing rights of any participant without such participant\u2019s written\nconsent No ISOs may be granted after the tenth anniversary of the date New iLearningEngines Board adopts the 2024 Plan\n\n2024 Employee Stock Purchase Plan\n\nIn April 2024, our Board adopted, and our stockholders approved the iLearningEngines 2024 Employee Stock Purchase Plan (the\n\u201cESPP\u201d) The ESPP became effective immediately upon the Closing A summary description of the material features of the ESPP is set\nforth below This summary is not a complete description of all provisions of the ESPP and is qualified in its entirety by reference to the\nESPP, the form of which is attached as an exhibit to the registration statement of which this prospectus forms a part and incorporated by\nreference in its entirety\n\nThe purpose of the ESPP is to provide eligible employees with an opportunity to increase their proprietary interest in the success of\nNew iLearningEngines by purchasing the New iLearningEngines Common Stock from New iLearningEngines on favorable terms and\nto pay for such purchases through payroll deductions We believe by providing eligible employees with an opportunity to increase their\nproprietary interest in the success of New iLearningEngines, the ESPP will motivate recipients to offer their maximum effort to New\niLearningEngines and help focus them on the creation of long term value consistent with the interests of our stockholders\n\fCase 8:24-cv-02900-DKC Document 99-2 Filed 09/18/25 Page 177 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 178 of 408\n\nThis section summarizes certain principal features of the ESPP The summary is qualified in its entirety by reference to the\ncomplete text of the ESPP\n\nShare Reserve Following the consummation of the Business Combination, the maximum number of shares of the New\niLearningEngines Common Stock that may be issued under the ESPP will not exceed the number of shares of New iLearningEngines\nCommon Stock equal to two percent (2%) of the issued and outstanding shares of New iLearningEngines Common Stock determined\nas of immediately following the Closing This number is referred to herein as the \u201cInitial Share Reserve\u201d, subject to adjustment for\nspecified changes in New iLearningEngines\u2019 capitalization The number of shares of New iLearningEngines Common Stock reserved\nfor issuance will automatically increase on January | of each calendar year, from January 1, 2025 through January 1, 2034 by 1% of the\ntotal number of shares of New iLearningEngines capital stock outstanding on December 31 of the preceding calendar year, provided,\n\nthat prior to the date of any such increase, the New iLearningEngines Board may determine that there will be no January 1\u00b0 increase in\nthe share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of shares\nof Common Stock than would otherwise occur. If purchase rights granted under the ESPP terminate without having been exercised, the\nshares of New iLearningEngines Common Stock not purchased under such purchase rights will again become available for issuance\nunder the ESPP.\n\nPlan Administration. The New iLearningEngines Board, or a duly authorized committee thereof, will have the authority to\nadminister the ESPP. The ESPP is implemented through a series of offerings under which eligible employees are granted purchase\nrights to purchase shares of New iLearningEngines Common Stock on specified dates during such offerings. Under the ESPP, the plan\nadministrator may specify offerings with durations of not more than 27 months, and may specify shorter purchase periods within each\noffering. Each offering will have one or more purchase dates on which shares of the New iLearningEngines Common Stock will be\npurchased for employees participating in the offering. An offering under the ESPP may be terminated under certain circumstances.\n\nPayroll Deductions. Generally, all regular employees, including executive officers, employed by New iLearningEngines or by any\nof New iLearningEngines\u2019 designated affiliates, will be eligible to participate in the ESPP and may contribute, normally through payroll\ndeductions, up to 15% of their earnings (as defined in the ESPP) for the purchase of New iLearningEngines Common Stock under the\nESPP. Unless otherwise determined by the plan administrator, New iLearningEngines Common Stock will be purchased for the\naccounts of employees participating in the ESPP at a price per share equal to and not less than the lesser of: (1) 85% of the fair market\nvalue of a share of New iLearningEngines Common Stock on the first trading date of an offering; or (ii) 85% of the fair market value of\na share of New iLearningEngines Common Stock on the date of purchase.\n\nLimitations. Employees may have to satisfy one or more of the following service requirements before participating in the ESPP, as\ndetermined by the plan administrator, including: (i) being customarily employed for more than 20 hours per week; (ii) being\ncustomarily employed for more than five months per calendar year; or (iii) continuous employment for a period of time (not to exceed\ntwo years). No employee may purchase shares under the ESPP at a rate in excess of $25,000 worth of New iLearningEngines Common\nStock based on the fair market value per share of the New iLearningEngines Common Stock at the beginning of an offering for each\nyear such a purchase right is outstanding. Finally, no employee will be eligible for the grant of any purchase rights under the ESPP if\nimmediately after such rights are granted, such employee has voting power over 5% or more of New iLearningEngines capital stock\nmeasured by vote or value pursuant to Section 424(d) of the Code.\n\n124\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 179 of 408\n\nChanges to Capital Structure In the event that there occurs a change in New iLearningEngines\u2019 capital structure through such\nactions as a stock split, merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property\nother than cash, large nonrecurring cash dividend, liquidating dividend, combination of shares, exchange of shares, change in corporate\nstructure or other similar equity restructuring transactions, the plan administrator will make appropriate adjustments to (i) the class(es)\nand maximum number of shares reserved under the ESPP; (ii) the class(es) and maximum number of shares by which the share reserve\nmay increase automatically each year; (iii) the class(es) and maximum number of shares and purchase price applicable to all\noutstanding offerings and purchase rights; and (iv) the class(es) and number of shares that are subject to purchase limits under ongoing\nofferings\n\nCorporate Transactions In the event of a corporate transaction, as defined in the ESPP, any then outstanding rights to purchase\nshares under the ESPP may be assumed, continued or substituted by any surviving or acquiring entity (or its parent company) If the\nsurviving or acquiring entity (or its parent company) elects not to assume, continue or substitute such purchase rights, then the\nparticipants\u2019 accumulated payroll contributions will be used to purchase shares of New iLearningEngines Common Stock within\nten business days prior to such corporate transaction, and such purchase rights will terminate immediately\n\nESPP Amendment or Termination The New iLearningEngines Board will have the authority to amend or terminate the ESPP,\nprovided that except in certain circumstances such amendment or termination may not materially impair any outstanding purchase\nrights without the holder\u2019s consent New iLearningEngines must obtain stockholder approval of any amendment to the ESPP to the\nextent required by applicable law or listing rules\n\nEmerging Growth Company Status\n\nAs an emerging growth company, we are exempt from certain requirements related to executive compensation, including the\nrequirements to hold a nonbinding advisory vote on executive compensation and to provide information relating to the ratio of total\ncompensation of our chief executive officer to the median of the annual total compensation of all of our employees, cach as required by\nthe Investor Protection and Securities Reform Act of 2010, which is part of the Dodd Frank Wall Street Reform and Consumer\nProtection Act, and is entitled to take advantage of certain other \u201cscaled\u201d disclosure rules, such as only being required to report the\ncompensation of three named executive officers rather than five\n\n125\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 180 of 408\n\nCERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS\n\nOther than the compensation arrangements for iLearningEngines\u2019 directors and executive officers, which are described in the\nsection titled \u201cExecutive Compensation,\u201d below is a description of transactions since January 1, 2021 to which iLearningEngines was a\nparty, in which\n\ne the amounts involved exceeded or will exceed $120,000; and\n\ne any of iLearningEngines\u2019 directors, executive officers or holders of more than 5% of iLearningEngines\u2019 capital stock, or any\nmember of the immediate family of, or person sharing the household with, the foregoing persons, had or will have a direct or\nindirect material interest\n\nARRW\u2019s Transactions and Agreements\nFounder Shares\n\nIn November 2020, the Sponsor purchased 5,750,000 Founder Shares for an aggregate price of $30,000 In December 2020,\nArrowroot effected a 5 for 4 stock split of Founder Shares As a result, the Sponsor held 7,187,500 Founder Shares In January 2021,\nthe Sponsor transferred 40,000 Founder Shares to each of Dixon Doll and Will Semple, ARRW\u2019s outside directors, and to Gaurav\nDhillon, one of ARRW\u2019s former directors The Sponsor holds 7,067,500 shares of Arrowroot Class B Common Stock, and four former\nARRW directors currently hold 160,000 shares of Arrowroot Class B Common Stock in the aggregate In March 2024, in connection\nwith the Business Combination, the Sponsor agreed to forfeit 400,000 Founder Shares to the Issuer upon the Closing Upon the\nClosing, the then outstanding Founder Shares converted into 6,627 500 shares of our Common Stock held by the Sponsor and 160,000\nshares of our Common stock held by ARRW\u2019s directors\n\nPrivate Placement Warrants\n\nSimultaneously with the closing of the ARRW IPO, the Sponsor purchased an aggregate of 8 250,000 Private Placement Warrants\nat a price of $1 00 per whole warrant, for an aggregate purchase price of $8 250,000 Each Private Placement Warrant entitles the\nholder to purchase one share of Common Stock at $11 50 per share, subject to adjustment The Private Placement Warrants are identical\nto the Public Warrants except that the Private Placement Warrants, so long as they are held by the Sponsor, the underwriters or their\npermitted transferees (i) will not be redeemable by us; (ii) may not (including the Common Stock issuable upon exercise of the Private\nPlacement Warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders thereof until May 16, 2024;\n(iii) may be exercised by the holders thereof on a cashless basis; and (iv) will be entitled to registration rights\n\nPromissory Notes\n\nOn December 21, 2020, the Sponsor issued an unsecured promissory note to Arrowroot (the \u201cIPO Promissory Note\u2019), pursuant to\nwhich Arrowroot was able to borrow up to an aggregate principal amount of $300,000 This promissory note was non interest bearing\nand was payable on the earlier of (i) July 31, 2021 or Gi) the consummation of the ARRW IPO As of the Closing Date, there were no\namounts outstanding under this IPO Promissory Note\n\nOn December 29, 2021, Arrowroot issued the First Promissory Note, pursuant to which Arrowroot may borrow up to an aggregate\nprincipal amount of $1 500,000, of which $750,000 was funded by the Sponsor upon execution of the First Promissory Note, an\nadditional $200,000 drawn down on March 17, 2022 and the remaining $550,000 was drawn down on April 21, 2022 Following this\ndraw down, the full $1,500,000 available under the First Promissory Note was outstanding The First Promissory Note does not bear\ninterest As of the Closing Date, there was $1 500,000 outstanding under this Second Promissory Note\n\nOn February 23, 2023, Arrowroot issued an unsecured promissory note in the principal amount of $500,000 in favor of the\n\nSponsor, which was funded in full by the Sponsor upon execution of the Second Promissory Note The Second Promissory Note does\nnot bear interest As of the Closing Date, there was $500,000 outstanding under this Second Promissory Note\n\n126\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 181 of 408\n\nIn connection with the Extension, on March 6, 2023, Arrowroot issued an unsecured promissory note in the principal amount of up\nto $1,760,000 to the Sponsor The Third Promissory Note does not bear interest and matures on the Note Maturity Date As of the\nClosing Date, there was $1,120,000 outstanding under this Third Promissory Note\n\nOn June 13, 2023, Arrowroot issued an unsecured promissory note in the principal amount of $2,000,000 to the Sponsor, of which\n$700,000 was funded by the Sponsor upon execution On September 27, 2023, Arrowroot drew down an additional amount of $500,000\npursuant to the terms of the Fourth Promissory Note, after which $1,200,000 was outstanding under the Note The Fourth Promissory\nNote bore interest at 15% per annum and matured on the Note Maturity Date As of the Closing Date, there was $1 250,000 outstanding\nunder this Fourth Promissory Note\n\nNotwithstanding the original terms the Promissory Notes, ARRW and Legacy iLearningEngines agreed, pursuant to the Merger\nAgreement, that if the Closing occurred, the Sponsor would have the option for the principal and interest outstanding under the\nPromissory Notes to be repaid in cash or convert into common stock of the Surviving Corporation (as defined in the Merger\nAgreement) at a price per share equal to $10 00 per share at the Closing; provided, however, that to the extent the Acquiror Transaction\nExpenses (as defined in the Merger Agreement) exceed $30,000,000, then the Promissory Notes will be settled by the conversion of an\namount equal to the lesser of (i) the principal and interest outstanding under the Promissory Notes and (ii) the Excess Transaction\nExpenses (as defined in the Merger Agreement) into common stock of the Surviving Corporation at a price per share equal to $10 00\nper share On April 16, 2024, the Sponsor elected to convert a portion of the principal owed under the Promissory Notes into 460,384\nshares of our Common Stock\n\nConvertible Notes\n\nOn April 27, 2023, Legacy iLearningEngines entered into the Convertible Note Purchase Agreement, pursuant to which, among\nother things, Legacy iLearningEngines had the ability issue and sell to the Convertible Note Investors convertible notes due in October\n2025 with aggregate principal amount of up to $50,000,000, of which Legacy iLearningEngines issued and sold Convertible Notes with\naggregate principal amount of $17,400,000 Affiliates of the Sponsor purchased $9 900,000 of Convertible Notes, convertible into an\nestimated 2,838 916 shares of our Common Stock Immediately prior to the consummation of the Business Combination, each\nConvertible Note converted into shares of our Common Stock\n\nAdministrative Support Agreement\n\nARRW entered into an agreement, commencing on March 4, 2021, through the earlier of Arrowroot\u2019s consummation of a business\ncombination and its liquidation, to pay the Sponsor a total of $20,000 per month for office space and secretarial, and administrative\nsupport services\n\nSponsor Support Agreement\n\nOn April 27, 2023, ARRW entered into the Sponsor Support Agreement with the Sponsor, Dixon Doll, Will Semple and Legacy\niLearningEngines, pursuant to which each of the Sponsor and Messrs Doll and Semple agreed to (i) vote all shares of Arrowroot\nCommon Stock held by such person in favor of the Business Combination, (ii) discharge any Excess Transaction Expenses (as defined\nin the Merger Agreement) by payment in cash or elect, at the option of such person, to have Arrowroot discharge any Excess\nTransaction Expenses by payment in cash against a corresponding cancellation of shares of Arrowroot Common Stock held by such\nperson (or any combination thereof), (iii) loan all amounts contemplated by the proxy statement filed by Arrowroot on or about\nFebruary 13, 2023, pursuant to which the Arrowroot stockholders approved the extension of the deadline by which Arrowroot must\ncomplete its business combination to July 6, 2023, including any amounts required in connection with any additional extension of such\ndeadline, (iv) contribute the Sponsor Incentive Shares (as defined in the Merger Agreement), (v) waive any adjustment to the\nconversion ratio set forth in the governing documents of Arrowroot or any other anti dilution or similar protection with respect to the\nClass B Common Stock of Arrowroot, in each case, on the terms and subject to the conditions set forth in the Sponsor Support\nAgreement, and (vi) agree to be bound by any restrictions on transfer set forth in Arrowroot\u2019s by laws, in each case, on the terms and\nsubject to the conditions set forth therein\n\n127\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 182 of 408\n\nStockholder Support Agreement\n\nOn April 27, 2023, ARRW, Legacy iLearningEngines, and the stockholders of Legacy iLearningEngines holding sufficient shares\nof Legacy iLearningEngines Common Stock to meet the Requisite Approval entered into the Stockholder Support Agreement, pursuant\nto which, among other things, such stockholders of Legacy iLearningEngines agreed to (i) not transfer, arrange to transfer or announce\nany transfer of any Legacy iLearningEngines shares such stockholders hold or may acquire, other than transfers to other stockholders\nof Legacy iLearningEngines that are party to the Stockholder Support Agreement, transfers for estate planning purposes or pursuant to\nintestacy laws, transfers that are a distribution to partners, members or affiliates of such stockholder or transfers of Incentive Shares;\n(ii) approve and adopt the Merger Agreement, the ancillary agreements thereto and the transactions contemplated thereby, (iii) vote\nagainst or withhold consent with respect to any merger, purchase of all or substantially all of Legacy iLearningEngines\u2019 assets or other\nbusiness combination transactions other than the Business Combination, (iv) vote against or withhold consent any proposal, action or\nagreement that would impede or frustrate the Business Combination, result in a breach of any representation, warranty or covenant in\nthe Merger Agreement or result in a condition to the Business Combination being unfulfilled, (v) not commence or join any class ina\nclass action challenging the validity of the Business Combination or alleging a breach of fiduciary duty by any person in connection\nwith the Business Combination, and (vi) waive dissenters\u2019 rights, appraisal rights or similar rights under Delaware law\n\nLegacy iLearningEngines\u2019 Transactions and Agreements\nDirector Notes\n\nIn January 2019, Legacy iLearningEngines issued convertible promissory notes (the \u201cDirector Notes\u201d) in licu of compensation to\neach of Harish Chidambaran, Legacy iLearningEngines\u2019 President, Chief Executive Officer, a director, and a beneficial owner of more\nthan 5% of Legacy iLearningEngines\u2019 voting securities, and Preeta Chidambaran, Legacy iLearningEngines\u2019 director and a beneficial\nowner of more than 5% of Legacy iLearningEngines\u2019 voting securities The aggregate principal amount of the Director Notes issued to\nMr Chidambaran in 2019 was $360,000 The aggregate principal amount of the Director Notes issued to Dr Chidambaran in 2019 was\n$90,000 The Director Notes accrued interest at a rate of six percent (6%) per annum until the maturity date of January 1, 2020 and\nthereafter accrued interest at a rate of twelve percent (12%) per annum until converted into common stock of Legacy iLearningEngines\nor redeemed The principal and accrued interest on the Director Notes was convertible at a conversion rate of $0 10 per shares of\ncommon stock of Legacy iLearningEngines at the option of the holder after the maturity date As of December 31, 2020, the aggregate\nprincipal and accrued interest outstanding under Director Notes was $534,397 The Director Notes remained outstanding until\nAugust 12, 2021, at which time they were cancelled in exchange for an aggregate 39,883,388 shares of restricted stock issued pursuant\nto the Director Purchase Agreements (as defined below) described below At the time of their exchange, the aggregate principal and\naccrued interest outstanding under Director Notes was $573,576\n\nDirector Purchase Agreements\n\nIn August 2021, Legacy iLearningEngines entered into common stock purchase agreements (the \u201cDirector Purchase\nAgreements\u201d) with each of Preeta Chidambaran and Harish Chidambaran, pursuant to which Legacy iLearningEngines issued\nrestricted stock grants of 5,657,788 shares and 34,225,600 shares to Dr Chidambaran and Mr Chidambaran, respectively, in exchange\nfor the cancellation of Legacy iLearningEngines\u2019 debt in the amounts of $114,715 and $458,861 held by them, at purchase prices of\n$0 020276 and $0 013407, respectively\n\nThe restricted stock is subject to service based, annual vesting over ten years, starting on April 16, 2024, so long as the holder\nretains their status as a service provider with iLearningEngines through each such date\n\nExecutive Officer Receivable\n\nFrom time to time, Legacy iLearningEngines has had a receivable for Harish Chidambaran\u2019s and Balakrishnan Arackal\u2019s personal\nexpenses, which Mr Chidambaran and Mr Arackal periodically repaid As of December 31, 2023, there was an outstanding receivable\nin the amount of $149 315 for Mr Chidambaran and $315 516 for Mr Arackal During the prior three years, the largest aggregate\nbalance in any year within such period was $274,690 for Mr Chidambaran and $350,436 for Mr Arackal These arrangements have\nsince been terminated and all amounts outstanding under such arrangements are expected to be paid in full prior to Closing\n\n128\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 183 of 408\n\nConsulting Agreement\n\nIn January 2011, Legacy iLearningEngines entered into a consulting agreement with Preeta Chidambaran, a former director of\nLegacy iLearningEngines\u2019 and a beneficial owner of more than 5% of our voting securities (the \u201cChidambaran Consulting\nAgreement\u2019), pursuant to which Dr Chidambaran has previously been compensated for her consulting services No amounts were paid\nto Dr Chidambaran pursuant to the Chidambaran Consulting Agreement in the years ended December 31, 2023 and December 31,\n2022\n\nPromissory Note to MRB Capital LLC\n\nOn October 26, 2023, Legacy iLearningEngines issued an unsecured convertible promissory note with an aggregate principal\namount of $3,000,000 (the \u201cMRB Note\u201d) to MRB Capital LLC pursuant to the 2023 Convertible Note Purchase Agreement (as defined\nbelow) Matthew Barger, who became a director of the Company on April 16, 2024, is the Managing Member of MRB Capital LLC\nImmediately prior to the Closing, the MRB Note converted into 845,465 shares of New iLearningEngines Common Stock pursuant to\nits own terms\n\nCompensation Arrangements and Stock Option Grants for Executive Officers and Directors\n\nWe have employment arrangements with its named executive officers that, among other things, provide for certain Change in\nControl benefits, as well as severance benefits For a description of these agreements, see \u201ciLearningEngines Executive and Director\nCompensation \u201d\n\niLearningEngines has granted restricted stock unit awards to its executive officers and certain of its directors Fora description of\nthese equity awards, see \u201ciLearningEngines Executive and Director Compensation Employment Arrangements with Executive\nOfficers\u201d and \u201ciLearningEngines Executive and Director Compensation \u2014 Outstanding Equity Awards at December 31 2023\u201d\n\nIn March 2019 Legacy iLearningEngines entered into an employment agreement with Ramakrishnan Parameswaran,\niLearningEngines\u2019 Senior Vice President Technology and Products and the brother of Balakrishnan Arackal, iLearningEngines\u2019\nChief Business Officer Pursuant to his employment agreement, iLearningEngines paid Mr Parameswaran compensation totaling\n$1,096,000 for the year ended December 31, 2023, $1,096,000 for the year ended December 31, 2022 and $896,000 for the year ended\nDecember 31, 2021\n\nAmended and Restated Registration Rights Agreement\n\nOn the Closing Date, we, the Sponsor, the independent directors of ARRW, and certain former stockholders of Legacy\niLearningEngines and certain of their respective affiliates entered into an amended and restated registration rights agreement (the\n\u201cAmended and Restated Registration Rights Agreement\u2019) Pursuant to the Amended and Restated Registration Rights Agreement, we\nagreed to file a registration statement to register for resale, pursuant to Rule 415 under the Securities Act of 1933, as amended (the\n\u201cSecurities Act\u2019), certain of our securities that are held by the parties thereto (the \u201cRegistrable Securities\u201d) Pursuant to the Amended\nand Restated Registration Rights Agreement, subject to certain requirements and customary conditions, we also granted piggyback\nregistration rights and demand registration rights to the parties thereto, will pay certain expenses related to such registration and will\nindemnify the parties thereto against certain liabilities related to such registration The Amended and Restated Registration Rights\nAgreement will terminate with respect to any party thereto, on the date that such party no longer holds any Registrable Securities\n\n129\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 184 of 408\n\nIndemnification Agreements\n\nWe have entered into indemnification agreements with our executive officers and directors The indemnification agreements\nrequire us to indemnify our executive officers and directors to the fullest extent permitted by Delaware law\n\nWe also entered into an indemnification agreement with each of Preeta Chidambaran and Harish Chidambaran with respect to any\nliability on behalf of iLearningEngines related to certain taxes related to the issuance of the restricted stock described under\n\u201cDirector Purchase Agreements \u201d\n\nOur Certificate of Incorporation contains provisions limiting the liability of directors, and our Bylaws provide that we will\nindemnify each of its directors and officers to the fullest extent permitted under Delaware law Our Certificate of Incorporation and\nBylaws also provide the Board with discretion to indemnify our employees and other agents when determined appropriate by the\nBoard\n\nOur Related Person Transaction Policy\n\nOur Board has adopted a written related person transactions policy that sets forth our policies and procedures regarding the\nidentification, review, consideration and oversight of \u201crelated person transactions \u201d For purposes of this policy only, a \u201crelated person\ntransaction\u201d will be considered a transaction, arrangement or relationship (or any series of similar transactions, arrangements or\nrelationships) in which we or any of our subsidiaries are participants involving an amount that exceeds $120,000, in which any \u201crelated\nperson\u201d has a material interest\n\nTransactions involving compensation for services provided to us as an employee, consultant or director will not be considered\nrelated person transactions under this policy A related person is any executive officer, director, nominee to become a director or a\nholder of more than 5% of any class of our voting securities (including our Common Stock), including any of their immediate family\nmembers and affiliates, including entities owned or controlled by such persons\n\nUnder the policy, the related person in question or, in the case of transactions with an entity holding more than 5% of any class of\nour voting securities, an officer with knowledge of a proposed transaction, must present information regarding the proposed related\nperson transaction to our audit committee (or, where review by our audit committee would be inappropriate, to another independent\nbody of the Board) for review To identify related person transactions in advance, we will rely on information supplied by our executive\nofficers, directors and certain significant stockholders In considering related person transactions, our audit committee will take into\naccount the relevant available facts and circumstances, which may include, but are not limited to\n\ne the risks, costs, and benefits to us;\n\ne the impact on a director\u2019s independence in the event the related person is a director, immediate family member of a director or\nan entity with which a director is affiliated;\n\ne the terms of the transaction;\n\ne the availability of other sources for comparable services or products; and\n\ne the terms available to or from, as the case may be, unrelated third parties\n\nOur audit committee will approve only those transactions that it determines are fair and in our best interests All of the transactions\n\ndescribed above were entered into prior to the adoption of such policy\n\n130\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 185 of 408\n\nPRINCIPAL SECURITYHOLDERS\n\nThe following table sets forth information regarding the beneficial ownership of shares of Common Stock as of April 16, 2024,\nafter giving effect to the Closing, by\n\ne each person known by the Company to be the beneficial owner of more than 5% of our Common Stock;\ne each of the Company\u2019s executive officers and directors; and\ne all of the Company\u2019s executive officers and directors as a group\n\nBeneficial ownership is determined in accordance with SEC rules, which generally provides that a person has beneficial ownership\nof a security if he, she or it possesses sole or shared voting or investment power with respect to the security Under SEC rules,\nbeneficial ownership includes securities that the individual or entity has the right to acquire, such as through exercise of stock options\nor warrants, within 60 days and are deemed to be outstanding and beneficially owned by the persons holding those options or warrants\nfor the purpose of computing the number of shares beneficially owned and the percentage ownership of that person They are not,\nhowever, deemed to be outstanding and beneficially owned for the purpose of computing the percentage ownership of any other person\n\nThe beneficial ownership percentages set forth in the table below are based on 134,970,114 shares of New iLearningEngines\nCommon Stock issued and outstanding as of the Closing Date and other than as noted below, do not take into account the issuance of\nany shares of New iLearningEngines Common Stock upon the exercise of 14 374,975 public warrants, each exercisable for one share\nof New iLearningEngines Common Stock at a price of $11 50 per share (the \u201cPublic Warrants\u201d) to purchase an aggregate of 14 374,975\nshares of New iLearningEngines Common Stock, the 8 250,000 private warrants, each exercisable for one share of New\niLearningEngines Common Stock at a price of $11 50 per share to purchase an aggregate of 8 250,000 shares of New iLearningEngines\nCommon Stock or the unvested RSUs held by the individuals except as noted below Unless otherwise noted in the footnotes to the\nfollowing table, and subject to applicable community property laws, the persons and entities named in the table have sole voting and\ninvestment power with respect to their beneficially owned New iLearningEngines Common Stock\n\n131\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 186 of 408\n\nNumber of\nShares of\nNew Percentage of\niLearningEngines Outstanding\nCommon New\nStock iLearningEngines\nBeneficially Common\n\nName of Beneficial Owner\u2122 Owned Stock\nDirectors and Executive Officers\nPuthugramam \u201cHarish\u201d Chidambaran@ 96.764,327 71.7%\nS. Farhan Naqvi \u2014 *\nBalakrishnan Arackal ~ *\nDavid Samuels \u2014 *\nRamakrishnan Parameswaran ~ *\nMatthew Barger 845,465 *\nBruce Mehlman\u2122 1 323,291 *\nThomas Olivier 7,005,793 5 2%\nTan Davis *\nMichael Moe *\nAll executive officers and directors after the business combination as a group (10\nindividuals) 105 938.876 78 5%\nFive Percent Holder\nPreeta Chidambaran\u2122 96,764,327 71.7%\nArrowroot Acquisition LLC\u00ae 7,005,793 5.2%\n\n*\n\n1)\n\n2)\n\n3)\n\n4)\n\n5)\n\nLess than 1%\n\nUnless otherwise noted, the business address of each of the executive officers and directors of New iLearningEngines is c/o\niLearningEngines, Inc., 6701 Democracy Blvd, Bethesda, MD 20817.\n\nConsists of 77,964,895 shares, including 27,590,898 shares of restricted stock subject to time-based vesting, held by Mr.\nChidambaran, and 18,799,432 shares, including 4,561,014 shares of restricted stock subject to time-based vesting, held by Preeta\nChidambaran, Mr. Chidambaran\u2019s wife and a former director of Legacy iLearningEngines.\n\nConsists of 845,465 shares held by MRB Capital LLC. Mr. Barger is the Managing Member of MRB Capital LLC, and has sole\nvoting and investment discretion with respect to the shares held directly by MRB Capital LLC and may be deemed to have\nbeneficial ownership of the shares held by them.\n\nConsists of 1,323,291 shares held directly by Mr. Mehlman.\nConsists of 7,005,793 shares held directly by Arrowroot Acquisition LLC (the \u201cSponsor\u2019\u2019). Tom Olivier is a manager of the\nSponsor, and as such has voting and investment discretion with respect to the securities held by the Sponsor and may be deemed to\n\nhave beneficial ownership of the securities held directly by the Sponsor. Mr. Olivier disclaims beneficial ownership of these\nsecurities except to the extent of his pecuniary interest therein.\n\n132\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 187 of 408\n\nSELLING SECURITYHOLDERS\n\nThis prospectus also relates to the offer and sale, from time to time, by the Selling Securityholders of (4) up to 100,774,669 Resale\nSecurities consisting of up to (a) 8,089,532 2024 Convertible Note Shares issued in satisfaction of an aggregate of $29,414 500\n(equivalent to a per share price of $3 64) of the convertible notes payable to such investors, (b) 6,787 500 Founder Shares originally\nissued at a price of approximately $0 004 per share in a private placement to the Sponsor prior to ARRW\u2019s initial public offering, (c)\n82,091 Meteora Shares issued at a fair value price of $10 00 per share to certain investors pursuant to a non redemption agreement with\ncertain investors as consideration for the non exercise of redemption rights by such investors in connection with the shareholder\nmeetings preceding the Business Combination, (d) 3,763 378 Lender Shares issued at a fair value price of $10 00 per share to the\nLenders pursuant to the Second Omnibus Amendment, as consideration, in part, for the revision of amortization schedules under the\nWTI Loan Agreements prior to the Business Combination and, after the Business Combination, the repayment in full of all outstanding\nobligations under the WTI Loan Agreements, (ce) 460 384 Working Capital Shares issued to the Sponsor as consideration for the\nrepayment of $4,510,000 (equivalent to a per share price of $9 80), which represented part of the then outstanding obligations under\nunsecured promissory notes issued to ARRW, (f) 78,730 Unvested Shares issuable upon the vesting and settlement of Assumed RSUs,\n(g) 8 250,000 shares of Common Stock acquired by the Sponsor at a purchase price of $8 250,000 (equivalent to a per share price of\n$1 00) issuable upon exercise of the Private Placement Warrants at an exercise price of $11 50 per share of Common Stock, (h)\n\n1,508 370 Control Shares issued at a fair value price of $10 00 per share to certain directors and officers as merger consideration for\nsuch shares originally issued by Legacy iLearningEngines to such directors and officers as consideration for employment and services\nprovided to Legacy iLearningEngines prior to the Business Combination, (i) 511,073 shares of Common Stock that were issued at a\nprice of $5 87 per share pursuant to the BTIG Amendment in connection with the payment of certain Business Combination transaction\nexpenses, (j) 1,022,146 shares of Common Stock that were issued in lieu of payment of deferred underwriting commissions in an\naggregate amount of $6,000,000 at a price of $5 87 per share pursuant to the Fee Modification Agreement in connection with the\nClosing, and (k) 221,465 shares of Common Stock that were issued at a price of $5 87 per share pursuant to the Cooley Fee Agreement\nin connection with the payment of Business Combination transaction expenses; and (ii) up to 8 250,000 Private Placement Warrants\n\nAs used in this prospectus, the term \u201cSelling Securityholders\u201d includes the persons listed in the table below, together with any\nadditional Selling Securityholders listed in a subsequent amendment to this prospectus, and their pledgees, donces, transferees,\nassignees, successors, designees and others who later come to hold any of the Selling Securityholders\u2019 interests in the Common Stock\nor Private Placement Warrants other than through a public sale\n\nCertain of the Selling Securityholders listed below are subject to lock up provisions with respect to certain of the shares of\nCommon Stock that may be sold by it, from time to time, pursuant to the registration statement of which this prospectus forms a part\nSuch restrictions began at the Closing and end on the earliest to occur of (i) 365 days after the date of the Closing; (ii) the first day after\nthe date on which the closing price of the Common Stock equals or exceeds $12 00 per share (as adjusted for stock splits, stock\ndividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at least\n150 days after the date of the Closing; or (iti) the date on which we complete a liquidation, merger, capital stock exchange,\nreorganization or other similar transaction that results in all of our public shareholders having the right to exchange their Common\nStock for cash, securities or other property On April 25, 2024, we waived the lock up restrictions under the Bylaws, effective as of\nApril 29, 2024, with respect to @) the Convertible Note Shares and (ii) the Merger Shares held by former Legacy iLearningEngines\nstockholders that hold, individually, less than three percent (3%) of the Common Stock issued as consideration in connection with the\nBusiness Combination, which resulted in the release of approximately 19,367,095 shares of Common Stock held by these lock up\nparties, of which 13 906,097 became immediately available for trading As of the date of the filing of this prospectus, the lock up\nrestrictions are applicable only to Harish Chidambaran; Preeta Chidambaran; and the Sponsor\n\nExcept as set forth in the footnotes below, the following table sets forth, based on written representations from the Selling\nSecurityholders, certain information as of April 16, 2024, regarding the beneficial ownership of our Common Stock and Warrants by\nthe Selling Securityholders and the shares of Common Stock and Warrants being offered by the Selling Securityholders The applicable\npercentage ownership of Common Stock is based on approximately 134,970,114 shares of Common Stock outstanding as of April 16,\n2024 Information with respect to shares of Common Stock or Private Placement Warrants owned beneficially after the offering\nassumes the sale of all of the shares of Common Stock or Private Placement Warrants The Selling Securityholders may offer and sell\nsome, all or none of their shares of Common Stock or Private Placement Warrants, as applicable Unless otherwise indicated, the\nbusiness address of each of the following entities or individuals is c/o iLearningEngines, Inc , 6701 Democracy Blvd, Bethesda, MD\n20817\n\nWe have determined beneficial ownership in accordance with the rules of the SEC, which generally provide that a person has\nbeneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security or the right to\nacquire such power within 60 days Except as indicated by the footnotes below, we believe, based on the information furnished to us,\n\fthat the selling Se cirity holdees howe On DKS. an Soa eeersvith Filed eit 28. of age i Bahan? Warrants that\n\nthey beneficially own, subject to applicable community property laws Except as otherwise described below, based on the information\nprovided to us by the Selling Securityholders, no Selling Securityholders is a broker dealer or an affiliate of a broker dealer\n\n133\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nFiled 09/18/25 Page 189 of 408\n\nPlease see the section titled \u201cP/an of Distribution\u201d for further information regarding the Selling Securityholder\u2019s method of\n\ndistributing these shares\n\nShares of Common Stock\n\nWarrants to Purchase Common Stock\n\nNumber Number Number Number\nBeneficially Number\u2019 Beneficially Percent Beneficially Number Beneficially Percent\nOwned Registered Owned Owned Owned Registered Owned Owned\n\nName of Selling Prior to for Sale After After Prior to for Sale After After\nSecurityholder Offering Hereby Offering Offering Offering Hereby Offering Offering\nStage 1 Growth Fund,\n\nLLC Series 3NP, Class\n\nTo3 2,255,000 2,255,000\nAlan Hassenflu 1,100,000 1,100,000\nI Learnings Investment 2,\n\nLLC\u00ae 748962 748962\nShop Credit, LLC\u00ae 330,000 330,000 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nEric Stevens 275,000 275,000 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nKevin Marasco 206,250 206,250 \u2014 \u2014_\u2014 \u2014 \u2014 \u2014 _\u2014\nRobin Bradbury 192,500 192.500 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nFull Sender LLC\u00ae 165,137 165,137 a \u2014 a= \u2014 as es\nCharlie Farah 137,500 137,500 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nDan Price 137,500 137,500 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nEddie B. Allen 137,500 137,500 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nEdward Farah 137,500 137,500 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nElaine Ashourian 137,500 137,500 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nGary Coleman 137,500 137,500 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nMendel Melzer 137,500 137,500 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nPeter Cahall 137,500 137,500 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nTrinity Lane Capital\n\nLLC Series D\u00a9 137,500 137,500 _ \u2014 \u2014 = = se\nLittleBrady1, LLC\u00ae 117.012 117,012 \u2014 \u2014 a \u2014 a =\nRonald Slucker 89,375 89.375 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014\nChip Douglas (William P\n\nDouglas) 82,500 82,500 \u2014 \u2014_\u2014 \u2014 \u2014 \u2014 \u2014\nJR Gondeck 82,500 82,500 \u2014 \u2014 \u2014 \u2014 \u2014 _\nRudy Slucker 82,500 82,500 \u2014 \u2014_\u2014 \u2014 \u2014 \u2014 \u2014\nAtillio Cerqueira 68,750 68,750 \u2014 \u2014_\u2014 \u2014 \u2014 \u2014 \u2014\nBubba Ryan 68,750 68,750 \u2014 \u2014 \u2014 \u2014 \u2014 _\nMark Lowery 68,750 68,750 \u2014 \u2014_\u2014 \u2014 \u2014 \u2014 \u2014\nJames Weaver 55,000 55,000 \u2014 \u2014_\u2014 \u2014 \u2014 \u2014 \u2014\nJoshua W. Rogers 55,000 55,000 \u2014 \u2014_\u2014 \u2014 \u2014 \u2014 \u2014\nMichael Orr 55,000 55,000 \u2014 \u2014 \u2014 \u2014 \u2014 _\nZach Ashourian 68,750 68,750 \u2014 \u2014_\u2014 \u2014 \u2014 \u2014 \u2014\nLexy A Douglas\n\nIrrevocable Trust 41,250 41,250 \u2014 _ = \u2014 \u2014 =\nRyan R. Douglas\n\nIrrevocable Trust\u00ae 41,250 41,250 \u2014 \u2014 = a a =\nPaul Scott and Elizabeth\n\nScott, JTWOS\u00ae) 41 250 41 250\nArnold May 27 500 27 500\nAubrey Smoot 27 500 27 500\nAshley Ashourian 27 500 27 500\nAshourian Family\n\nFoundation\u201d 27,500 27.500 \u2014 \u2014 \u2014 \u2014 ae eu\nKristen Taylor Ashourian 27,500 27,500 \u2014 = \u2014 \u2014 \u2014= =\n\fCase 8:24-cv-02900-DKC,,_ jpocument 90-2 Filed 09/18/25 Page 190 of 408\n\nLaura Saoud\n\nJeffery Morris 27 500 27 500\nJohn F Hollway 27 500 27 500\nJoseph Gallo 27 500 27 500\nKevin Cook 27 500 27 500\n\nRobert D Mashal Living\nTrust dated June 16,\n\n20200) 27,500 27,500 \u2014 \u2014 \u2014 \u2014 \u2014\nYP Holdings LLC@) 24,750 24,750 \u2014 \u2014 \u2014 \u2014 \u2014\nLihua Zhang 756,488 193,046 563,442 # \u2014 \u2014 \u2014\nMilleon Holdings\n\nLLC@) 41,250 41,250 \u2014 \u2014 \u2014 \u2014 \u2014\nAlex Pitt@4 80,613 11,756\nDavid Epstein@) 1,612 806\nMonica Maliga?\u00ae 2,014 1,007\nNick Duffield@\u201d) 30 230 15,115\nPriya Pinto\u201c\u00ae) 40 307 3 359\nRobbie Edwards?\u201d 9,068 4,534\nRoger Duffield@\u201d) 70,536 35,268\nShafna Haque2)) 20,153 3,359\nTraci Maxey@) 7,052 3,526\nVenture Lending &\n\nLeasing IX, Inc.29) 2,191,506 2,191,506 \u2014 \u2014 \u2014 \u2014 \u2014\nWTI Fund X, Inc 2) 1,571,872 1,571,872\nArrowroot Acquisition\n\nLLc@\u00bb 7,087,884 7,087,884 8 250,000 8,250,000\nPeter Kuper 40,000 40,000\nDixon Doll 40,000 40,000\nGaurav Dhillon 40,000 40,000\nWill Semple 40,000 40,000\nMeteora Special\n\nOpportunity Fund I,\n\nLp@5) 10,975 10,975 \u2014 \u2014 \u2014 \u2014 \u2014\nMeteora Capital\n\nPartners, LP@5) 22,222 22,222 \u2014 \u2014 \u2014 \u2014 \u2014\nMeteora Select Trading\n\nOpportunities Master,\n\nLp@5) 48,894 48,894 \u2014 \u2014 \u2014 \u2014 \u2014\nBala Krishnan@ 3,043,980 3,043,980 \u2014 \u2014 _\u2014 _\u2014 _\u2014\nFarhan Naqvi?\u201d 1,360,760 1,360,760 \u2014 \u2014 \u2014 \u2014 \u2014\nRam Parameswaran@\u00ae) 322,459 322,459\nMRB Capital LLC@\u201d) 845,465 845,465\nBruce Mehlman 1,323 291 1,323 291\nHarish Chidambaran 77,964,895 50,373 997 27,590,898 20 4%\n\nPreeta Chidambaran 18,799,432 14,238,418 4,561,014 34%\nCantor Fitzgerald & Co\n30) 1,022,146 1,022,146\nCooley LLPSY 221,465 221,465 \u2014 \u2014 \u2014 \u2014 \u2014\nBTIG, LLC\u00ae\u201d) 511,073 511,073 \u2014 \u2014 \u2014 \u2014 \u2014\n\n* Less than one percent.\n\n1) David W. Baum, as Managing Member of Stage 1 Growth Fund, LLC Series 3NP, Class TO3, has voting and/or dispositive\npower over the holdings of such entity.\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 191 of 408\n\n\f(2)\n\n(3)\n\n(4)\n(5)\n\n(6)\n(7)\n\n(8)\n\n(9)\n\n(10)\n\n(11)\n\n(12)\n\n(13)\n\n(14)\n\n(15)\n\n(16)\n\n(17)\n\n(18)\n\n(19)\n\n(20)\n\nCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 192 of 408\n\nDavid Villmow, as Manager of I Learnings Investment 2, LLC, has voting and/or dispositive power over the holdings of such\nentity\n\nJames F Hartle, III, as Managing Member of Shop Credit, LLC, has voting and/or dispositive power over the holdings of such\nentity\n\nDavid Villmow, as Manager of Full Sender LLC, has voting and/or dispositive power over the holdings of such entity\n\nSalil S Pitroda, as Managing Member of Trinity Lane Capital LLC Series D, has voting and/or dispositive power over the\nholdings of such entity\n\nDavid Villmow, as Manager of LittleBrady1, LLC, has voting and/or dispositive power over the holdings of such entity\n\nJennifer P Douglas, as Trustee of Lexy A Douglas Irrevocable Trust, has voting and/or dispositive power over the holdings of\nsuch entity\n\nJennifer P Douglas, as Trustee of Ryan R Douglas Irrevocable Trust, has voting and/or dispositive power over the holdings of\nsuch entity\n\nConsists of shares held by Paul Scott and Elizabeth Scott as joint tenants with rights of survivorship\n\nEllen Ashourian, as Director of Ashourian Family Foundation, has voting and/or dispositive power over the holdings of such\nentity\n\nRobert D Mashal, as Trustee of the Robert D Mashal Living Trust dated June 16, 2020, has voting and/or dispositive power\nover the shares held by such entity\n\nMichael Yurkowsky, as Manager of YP Holdings LLC, has voting and/or dispositive power over the holdings of such entity\nMichael Polin, as Manager of Milleon Holdings LLC, has voting and/or dispositive power over the holdings of such entity\n\nConsists of 80,613 shares of Common Stock issuable pursuant to RSUs, 11,756 shares of Common Stock of which are issuable\npursuant to RSUs that remain unvested\n\nConsists of 1,612 shares of Common Stock issuable pursuant to RSUs, 806 shares of Common Stock of which are issuable\npursuant to RSUs that remain unvested\n\nConsists of 2,014 shares of Common Stock issuable pursuant to RSUs, 1,007 shares of Common Stock of which are issuable\npursuant to RSUs that remain unvested\n\nConsists of 30,230 shares of Common Stock issuable pursuant to RSUs, 15,115 shares of Common Stock of which are issuable\npursuant to RSUs that remain unvested\n\nConsists of 40,307 shares of Common Stock issuable pursuant to RSUs, 3 359 shares of Common Stock of which are issuable\npursuant to RSUs that remain unvested\n\nConsists of 9,068 shares of Common Stock issuable pursuant to RSUs, 4 534 shares of Common Stock of which are issuable\npursuant to RSUs that remain unvested\n\nConsists of 70,536 shares of Common Stock issuable pursuant to RSUs, 35 268 shares of Common Stock of which are issuable\npursuant to RSUs that remain unvested\n\n135\n\n\f21)\n\n(22)\n\n(23)\n\n(24)\n\n(25)\n\n(26)\n27)\n(28)\n\n(29)\n\n(30)\n\nGI)\n\n(32)\n\nCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 193 of 408\n\nConsists of 20,153 shares of Common Stock issuable pursuant to RSUs, 3 359 shares of Common Stock of which are issuable\npursuant to RSUs that remain unvested\n\nConsists of 7,052 shares of Common Stock issuable pursuant to RSUs, 3 526 shares of Common Stock of which are issuable\npursuant to RSUs that remain unvested\n\nThe business address of such persons is 104 La Mesa Drive, Suite 102, Portola Valley, CA 94028 Westech Investment Advisors\nLLC is the Managing Member of such persons David Wanek is the CEO of Westech Investment Advisors LLC, and Maurice\nWerdegar is its Chairman of the Board and also has the power to invest or vote these securities\n\nConsists of 460 384 Working Capital Shares and 6,627 500 Founder Shares Arrowroot Acquisition LLC is governed by two\nmanagers, Matthew Safaii and Thomas Olivier, and, as such, Matthew Safaii and Thomas Olivier have voting and investment\ndiscretion\n\nMeteora Capital, LLC is the Selling Securityholder\u2019s registered investment advisor The shares are controlled by Vikas Mittal,\nwho, as managing member of the Selling Securityholder, has voting and investment power over the reported securities The\naddress of the Selling Securityholder is 1200 N Federal Hwy, #200, Boca Raton FL 33432\n\nConsists of 3,043,980 shares issuable upon settlement of vested RSUs\nConsists of 1 360,760 shares issuable upon settlement of vested RSUs\nConsists of 322,459 shares issuable upon settlement of vested RSUs\n\nMatthew Barger, a member of our board of directors, is the Managing Member of MRB Capital LLC, and has sole voting and\ninvestment discretion with respect to the shares held directly by MRB Capital LLC\n\nCF&CO is a registered broker dealer and has a business address of CF&CO is 110 East 59th Street, New York, NY 10022 CF\nGroup Management, Inc (\u201cCFGM7\u201d) is the managing general partner of Cantor Fitzgerald, L P (\u201cCFLP\u201d) and directly or\nindirectly controls the managing general partner of Cantor Fitzgerald Securities (\u201cCFS\u201d), which indirectly is the majority owner\nof CF&CO Mr Howard Lutnick is Chairman and Chief Executive of CFGM and trustee of CFGM\u2019s sole stockholder CFLP,\nindirectly, holds a majority of the ownership interests in CFS, and therefore also indirectly holds a majority of the ownership\ninterests in CF&CO As such, each of CFLP, CFGM, CFS and Mr Lutnick may be deemed to have beneficial ownership of the\nsecurities held directly by CF&CO Each such entity or person disclaims any beneficial ownership of the reported shares other\nthan to the extent of any pecuniary interest they may have therein, directly or indirectly The foregoing should not be construed in\nand of itself as an admission by any of CFLP, CFGM, CFS or Mr Lutnick as to beneficial ownership of the securities\nbeneficially owned, directly, CF&CO The number of shares beneficially owned prior to this offering consist of common stock\nissued that was received as compensation for services provided during the Merger At the time the shares were acquired, CF&CO\nhad no agreement or understanding, directly or indirectly, with any person to distribute such securities\n\nThe business address of Cooley LLP is 55 Hudson Yards, New York, NY 10001 2157\n\nBTIG, LLC is a registered broker dealer and has a registered address of c/o 350 Bush Street, 9th Floor, San Francisco, California\n94104 BTIG, LLC has sole voting and dispositive power over the securities held The number of shares beneficially owned prior\nto this offering consist of common stock issued that was received as compensation for services provided during the Merger At\nthe time the shares were acquired, BTIG, LLC had no agreement or understanding, directly or indirectly, with any person to\ndistribute such securities\n\n136\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 194 of 408\n\nDESCRIPTION OF OUR SECURITIES\n\nThe following summary of the material terms of our securities is not intended to be a complete summary of the rights and\npreferences of such securities and is qualified by reference to our Certificate of Incorporation our Bylaws and the Warrants described\nherein which are exhibits to the registration statement of which this prospectus is a part We urge you to read each of our Certificate of\nIncorporation our Bylaws and the Warrants related documents described herein in their entirety for a complete description of the\nrights and preferences of our securities\n\nAuthorized and Outstanding Stock\n\nOur Certificate of Incorporation authorizes the issuance of 710,000,000 shares of our capital stock, consisting of (a)\n00,000,000 shares of Common Stock, having a par value per share of $0 0001, and (b) 10,000,000 shares of preferred stock, having a\npar value of $0 0001 per share As of April 16, 2024, there were approximately 134 970,114 shares of our Common Stock outstanding\nand no shares of preferred stock are outstanding\n\nVoting Power\n\nExcept as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the\nholders of shares of our Common Stock possess all voting power for the election of our directors and all other matters requiring\nstockholder action Holders of shares of our Common Stock are entitled to one vote for each share held on all matters to be voted on by\nstockholders\n\nDividends\n\nSubject to the rights of the holders of our preferred stock and any other provisions of our Certificate of Incorporation, as it may be\namended from time to time, holders of our Common Stock will be entitled to receive such dividends and other distributions in our cash,\nstock or property when, as and if declared thereon by the Board, in its discretion, from time to time out of our assets or funds legally\navailable therefor See\u201c Preferred Stock,\u201d below for more information regarding the dividend rights of the holders of our preferred\nstock\n\nLiquidation, Dissolution and Winding Up\n\nSubject to the rights of holders of our preferred stock, in the event of any liquidation, dissolution or winding up of our affairs,\nwhether voluntary or involuntary, after payment or provision for payment of our debts and any other payments required by law and\namounts payable upon shares of our preferred stock ranking senior to the shares of our Common Stock upon such dissolution,\nliquidation or winding up, if any, our remaining net assets will be distributed to the holders of our Common Stock and the holders of\nany other class or series of capital stock ranking equally with our Common Stock upon such dissolution, liquidation or winding up,\nequally on a per share basis\n\nPreemptive or Other Rights\n\nOur stockholders will have no preemptive or other subscription rights No sinking fund provisions will be applicable to our\nCommon Stock\n\nPreferred Stock\n\nThe Board has the authority to issue shares of preferred stock from time to time on terms it may determine, to divide shares of\npreferred stock into one or more series and to fix the designations, preferences, privileges, and restrictions of preferred stock, including\ndividend rights, conversion rights, voting rights, terms of redemption, liquidation preference, sinking fund terms and the number of\nshares constituting any series or the designation of any series to the fullest extent permitted by the DGCL The issuance of our preferred\nstock could have the effect of decreasing the trading price of our Common Stock, restricting dividends on our capital stock, diluting the\nvoting power of our Common Stock, impairing the liquidation rights of our capital stock, or delaying or preventing a change in control\nof the Company\n\n137\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 195 of 408\n\nFounder Shares\n\nThe Founder Shares are identical to the shares of our Common Stock, and holders of Founder Shares have the same stockholder\nrights as public stockholders, except that (i) the Founder Shares are subject to certain transfer restrictions, as described in more detail\nbelow and (ii) are entitled to registration rights The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any\nof the Founder Shares until the earlier to occur of (A) April 16, 2025, (B) if the last reported sale price of our Common Stock equals or\nexceeds $12 00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any\n20 trading days within any 30 trading day period commencing at least 150 days after April 16, 2024, or (C) the date on which we\ncomplete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our stockholders having the right\nto exchange their shares of Common Stock for cash, securities or other property\n\nRegistration Rights\n\nWe, the Sponsor, the independent directors of Arrowroot, and certain former stockholders of Legacy iLearningEngines and certain\nof their respective affiliates entered into an amended and restated registration rights agreement (the \u201cAmended and Restated\nRegistration Rights Agreement\u2019) Pursuant to the Amended and Restated Registration Rights Agreement, the Company agreed to file a\nregistration statement to register for resale, pursuant to Rule 415 under the Securities Act of 1933, as amended (the \u201cSecurities Act\u2019),\ncertain New iLearningEngines securities that are held by the parties thereto (the \u201cRegistrable Securities\u201d) Pursuant to the Amended\nand Restated Registration Rights Agreement, subject to certain requirements and customary conditions, the Company also grants\npiggyback registration rights and demand registration rights to the parties thereto, will pay certain expenses related to such registration\nand will indemnify the parties thereto against certain liabilities related to such registration The Amended and Restated Registration\nRights Agreement will terminate with respect to any party thereto, on the date that such party no longer holds any Registrable\nSecurities\n\nElection of Directors and Vacancies\n\nSubject to the rights of the holders of any one or more series of preferred stock to elect additional directors under specified\ncircumstances and the terms, the number of directors of the Board shall be fixed solely and exclusively by the Board, but shall initially\nconsist of seven directors, which shall be divided into three (3) classes, designated Class I, II and III, respectively The Board is\nauthorized to assign members of the Board already in office to such classes at the time the classification becomes effective\n\nUnder the Bylaws, at all meetings of stockholders called for the election of directors, a plurality of the votes properly cast will be\nsufficient to elect such directors to the Board\n\nExcept as the DGCL may otherwise require and subject to the rights, if any, of the holders of any one or more series of our\npreferred stock, in the interim between annual meetings of stockholders or special meetings of stockholders called for the election of\ndirectors and/or the removal of one or more directors and the filling of any vacancy in that connection, newly created directorships and\nany vacancies on the Board, including unfilled vacancies resulting from the removal of directors, may, unless the Board determines by\nresolution that any such vacancies or newly created directorships shall be filled by the stockholders and except as otherwise provided\nby applicable law, be filled only by the affirmative vote of a majority of the remaining directors then in office, although less than a\nquorum, or by the sole remaining director All directors will hold office until the expiration of their respective terms of office and until\ntheir successors will have been elected and qualified A director elected or appointed to fill a vacancy resulting from the death,\nresignation or removal of a director or a newly created directorship will serve for the remainder of the full term of the class of directors\nin which the new directorship was created or the vacancy occurred and until his or her successor will have been elected and qualified\n\nSubject to the rights, if any, of the holders of any one or more series of our preferred stock, any director may be removed from\noffice only for cause and only by the affirmative vote of the holders of not less than sixty six and two thirds percent (66 2/3%) of our\noutstanding capital stock then entitled to vote generally in the election of directors, voting together as a single class\n\nIn addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby\nempowered to exercise all such powers and do all such acts and things as may be exercised or done by us, subject, nevertheless, to the\nprovisions of the DGCL, the Certificate of Incorporation and the Bylaws; provided, however, that no bylaw so adopted will invalidate\nany prior act of the directors which would have been valid if such bylaw had not been adopted\n\n138\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 196 of 408\n\nQuorum; Voting\n\nThe holders of a majority of the voting power of the capital stock issued and outstanding and entitled to vote thereat, present in\nperson or represented by proxy, will constitute a quorum at all meetings of the stockholders for the transaction of business except as\notherwise required by law or provided by our Certificate of Incorporation If, however, such quorum will not be present or represented\nat any meeting of the stockholders, the chairperson or holders of a majority of the voting power present in person or represented by\nproxy, will have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a\nquorum will be present or represented At such adjourned meeting at which a quorum will be present or represented, any business may\nbe transacted which might have been transacted at the meeting as originally noticed If the adjournment is for more than thirty\n(30) days, a notice of the adjourned meeting will be given to each stockholder entitled to vote at such adjourned meeting If after the\nadjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix\nas the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for\ndetermination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each\nstockholder of record as of the record date so fixed for notice of such adjourned meeting The stockholders present at a duly called or\nconvened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal\nof enough stockholders to leave less than a quorum\n\nUnless a different or minimum vote is required by statute or by the applicable stock exchange rules, or by the Certificate of\nIncorporation or the Bylaws, in which case such different or minimum vote shall be the applicable vote on the matter, in all matters\nother than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person, by remote\ncommunication, if applicable, or represented by proxy at the meeting and voting affirmatively or negatively (excluding abstentions and\nbroker non votes) on such matter shall be the act of the stockholders Except as otherwise provided by statute, the Certificate of\nIncorporation or the Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote\ncommunication, if applicable, or represented by proxy at the meeting and entitled to vote in the election of directors Where a separate\nvote by a class or classes or series is required, except where otherwise provided by statute or by the Certificate of Incorporation or the\nBylaws or any applicable stock exchange rules, the holders of a majority of the voting power of the outstanding shares of such class or\nclasses or series, present in person, by remote communication, if applicable, or represented by proxy, shall constitute a quorum entitled\nto take action with respect to that vote on that matter Except where otherwise provided by statute or by the Certificate of Incorporation\nor the Bylaws or any applicable stock exchange rules, the affirmative vote of the holders of a majority (plurality, in the case of the\nelection of directors) of the voting power of the shares of such class or classes or series present in person, by remote communication, if\napplicable, or represented by proxy at the meeting and voting affirmatively or negatively (excluding abstention and broker non votes)\non such matter shall be the act of such class or classes or series\n\nCertain Anti Takeover Provisions of the Certificate of Incorporation and the Bylaws\n\nThe Certificate of Incorporation or the Bylaws contain provisions that may delay, defer or discourage another party from acquiring\ncontrol of us We expect that these provisions, which are summarized above, will discourage coercive takeover practices or inadequate\ntakeover bids These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with the\nBoard, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders However,\nthey also give the Board the power to discourage acquisitions that some stockholders may favor See\u201c Risk Factors,\u201d above for more\ninformation regarding certain anti takeover provisions\n\nAuthorized but Unissued Capital Stock\n\nDelaware law does not require stockholder approval for any issuance of authorized shares However, Nasdaq requires stockholder\napproval of certain issuances equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of\nour Common Stock Additional shares that may be issued in the future may be used for a variety of corporate purposes, including future\npublic offerings, to raise additional capital or to facilitate acquisitions\n\nOne of the effects of the existence of unissued and unreserved common stock may be to enable the Board to issue shares to persons\nfriendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of the Company\nby means of a merger, tender offer, proxy contest or otherwise and thereby protect the continuity of management and possibly deprive\nstockholders of opportunities to sell their shares of our Common Stock at prices higher than prevailing market prices\n\n139\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 197 of 408\n\nSpecial Meeting, Action by Written Consent and Advance Notice Requirements for Stockholder Proposals\n\nUnless otherwise required by law, and subject to the rights, if any, of the holders of any one or more series of our preferred stock,\nspecial meetings of our stockholders, for any purpose or purposes, may be called only by (a) the Chairperson of the Board, (b) the\nChief Executive Officer, or (c) the Board Unless otherwise required by law, written notice of a special meeting of stockholders, stating\nthe time, place and purpose or purposes thereof, shall be given to each stockholder entitled to vote at such meeting, not less than ten\n(10) or more than sixty (60) days before the date fixed for the meeting Business transacted at any special meeting of stockholders will\nbe limited to the purposes stated in the notice\n\nThe Bylaws also provide that unless otherwise restricted by the Certificate of Incorporation or the Bylaws, any action required or\npermitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if all members of the\nBoard or of such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or\nelectronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee\n\nIn addition, the Bylaws require advance notice procedures for stockholder proposals to be brought before an annual meeting of the\nstockholders, including the nomination of directors Stockholders at an annual meeting may only consider the proposals specified in the\nnotice of meeting or brought before the meeting by or at the direction of the Board, or by a stockholder of record on the record date for\nthe meeting, who is entitled to vote at the meeting and who has delivered a timely written notice in proper form to our secretary, of the\nstockholder\u2019s intention to bring such business before the meeting\n\nThese provisions could have the effect of delaying until the next stockholder meeting any stockholder actions, even if they are\nfavored by the holders of a majority of our outstanding voting securities\n\nAmendment to Certificate of Incorporation and Bylaws\n\nThe DGCL provides generally that the affirmative vote of a majority of the outstanding stock entitled to vote on amendments to a\ncorporation\u2019s certificate of incorporation or bylaws is required to approve such amendment, unless a corporation\u2019s certificate of\nincorporation or bylaws, as the case may be, requires a greater percentage\n\nThe Certificate of Incorporation will provide however, in addition to the votes required by law, that the following provisions\ntherein may be amended, altered, repealed or rescinded only by the affirmative vote of the holders of at least sixty six and two\nthirds percent (66 2/3%) of the voting power of all of the then outstanding shares of our capital stock entitled to thereon, voting\ntogether as a single class\n\ne the provisions regarding our management, the size of the Board, the election of directors to the Board, the removal of directors\nfrom the Board, the filling of vacancies, preferred stockholder election rights, and bylaw amendments;\n\ne the provisions regarding the limited liability of our directors;\n\ne the provisions regarding exclusive forums for certain actions; and\n\ne the provisions regarding amending the Certificate of Incorporation\n\nSubject to the Certificate of Incorporation, the Board is expressly empowered to adopt, amend or repeal the Bylaws The\nstockholders also shall have power to adopt, amend or repeal the Bylaws; provided, however, that, in addition to any vote of the holders\nof any class or series of our stock required by applicable law or by the Certificate of Incorporation (including any certificate of\ndesignation relating to any series of preferred stock, such action by stockholders shall require the affirmative vote of the holders of\n\nsixty six and two thirds percent (66 2/3%) of the voting power of all of the then outstanding shares of our capital stock entitled to vote\nthereon, voting together as a single class\n\n140\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 198 of 408\n\nLimitations on Liability and Indemnification of Officers and Directors\n\nThe Certificate of Incorporation limits the liability of our directors to the fullest extent permitted by law, and the Bylaws provide\nthat we will indemnify them and executive officers to the fullest extent permitted by such law We have entered into indemnification\nagreements, the form of which is attached hereto as Exhibit 10 25, with our directors and executive officers, and expect to continue to\nenter into indemnification agreements with our directors, executive officers and other employees as determined by the Board\n\nUnder the terms of such indemnification agreements, we are required to, among other things, indemnify cach of our directors and\nofficers for certain expenses, including attorneys\u2019 fees, judgments, fines and settlement amounts, to the fullest extent permitted by\napplicable law, tf the basis of the indemnitee\u2019s involvement was by reason of the fact that the indemnitee is or was a director, officer,\nemployee, agent or fiduciary of the Company or any of its subsidiaries or is or was serving at our request in an official capacity for\nanother entity The indemnification agreements also require us, if so requested, to advance within thirty (30) days of such request all\nreasonable fees, expenses, charges and other costs that any of our directors incurred, provided that such director will return any such\nadvance if it is ultimately determined that such director is not entitled to indemnification by us Any claims for indemnification by our\ndirectors and officers may reduce our available funds to satisfy successful third party claims against us and may reduce the amount of\nmoney available to us\n\nExclusive Forum of Certain Actions\n\nUnder the Certificate of Incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery\nof the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state\ncourt located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district\ncourt for the District of Delaware) and any appellate court therefrom shall be the sole and exclusive forum for the following claims or\ncauses of action under Delaware statutory or common law (A) any derivative claim or cause of action brought on our behalf; (B) any\nclaim or cause of action for breach of a fiduciary duty owed by any of our current or former directors, officers or other employees or\nstockholders, to us or our stockholders; (C) any claim or cause of action against us or any of our current or former directors, officers or\nother employees, arising out of or pursuant to any provision of the DGCL, the Certificate of Incorporation or the Bylaws; (D) any claim\nor cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws (as\neach may be amended from time to time, including any right, obligation, or remedy thereunder); (E) any claim or cause of action as to\nwhich the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and (F) any claim or cause of action against\nus or any of our current or former directors, officers or other employees, governed by the internal affairs doctrine or otherwise related\nto our internal affairs, in all cases to the fullest extent permitted by law and subject to the court having personal jurisdiction over the\nindispensable parties named as defendants Unless we consent in writing to the selection of an alternative forum, to the fullest extent\npermitted by applicable law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of\nany complaint asserting a cause of action arising under the Securities Act, including all causes of action asserted against any defendant\nnamed in such complaint Any person or entity holding, owning or otherwise acquiring any interest in any of our securities shall be\ndeemed to have notice of and consented to the provisions of the Certificate of Incorporation\n\nWarrants\nPublic Warrants\n\nEach whole Public Warrant entitles the registered holder to purchase one share of our Common Stock at a price of $11 50 per\nshare, subject to adjustment as discussed below, at any time commencing after May 16, 2024 Pursuant to the warrant agreement, a\nPublic Warrant holder may exercise its Public Warrants only for a whole number of shares of our Common Stock This means that only\n\na whole Public Warrant may be exercised at any given time by a Public Warrant holder The Public Warrants will expire April 16, 2029,\nat 5 00 pm, New York City time, or earlier upon redemption or liquidation\n\n141\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 199 of 408\n\nWe will not be obligated to deliver any shares of our Common Stock pursuant to the exercise of a Public Warrant and will have no\nobligation to settle such Public Warrant exercise unless a registration statement under the Securities Act with respect to the shares of\nour Common Stock underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to our\nsatisfaction of obligations described below with respect to registration No Public Warrant will be exercisable and we will not be\nobligated to issue shares of our Common Stock upon exercise of a Public Warrant unless our Common Stock issuable upon such Public\nWarrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the\nregistered holder of the Public Warrants In the event that the conditions in the two immediately preceding sentences are not satisfied\nwith respect to a Public Warrant, the holder of such Public Warrant will not be entitled to exercise such Public Warrant and such Public\nWarrant may have no value and expire worthless In no event will we be required to net cash settle any warrant In the event that a\nregistration statement is not effective for the exercised Public Warrants, the purchaser of an ARRW Unit containing such Public\nWarrant will have paid the full purchase price for the ARRW Unit solely for the share of our Common Stock underlying such ARRW\nUnit\n\nARRW has agreed that as soon as practicable, but in no event later than May 7, 2024, it will use its best efforts to file with the SEC\na registration statement for the registration under the Securities Act of our Common Stock issuable upon exercise of the Public\nWarrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of our\nCommon Stock until the Public Warrants expire or are redeemed, as specified in the warrant agreement We cannot assure you that we\nwill be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the\nregistration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or\nthe SEC issues a stop order If a registration statement covering the shares of our Common Stock issuable upon exercise of the Public\nWarrants is not effective by July 12, 2024, Public Warrant holders may, until such time as there is an effective registration statement\nand during any period when we have failed to maintain an effective registration statement, exercise warrants on a \u201ccashless basis\u201d in\naccordance with Section 3(a)(9) of the Securities Act or another exemption Notwithstanding the above, if our Common Stock is at the\ntime of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a \u201ccovered security\u201d\nunder Section 18(b)(1) of the Securities Act, we may, at its option, require holders of Public Warrants who exercise their warrants to do\nso on a \u201ccashless basis\u201d in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, it will not be required to\nfile or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify\nthe shares under applicable blue sky laws to the extent an exemption is not available\n\nRedemption of Public Warrants when the price per share of New iLearningEngines Common Stock equals or exceeds $18 00\nOnce the Public Warrants become exercisable, we may call the Public Warrants for redemption for cash\n\ne inwhole and not in part;\n\ne@ ata price of $0 01 per Public Warrant;\n\ne upon not less than 30 days\u2019 prior written notice of redemption (the \u201c30 day redemption period\u201d) to each Public Warrant holder;\nand\n\ne if, and only if, the reported closing price of our Common Stock equals or exceeds $18 00 per share (as adjusted for stock\nsplits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading day\nperiod ending three business days before we send the notice of redemption to the Public Warrant holders\n\nIf and when the Public Warrants become redeemable by us for cash, we may exercise its redemption right even if it is unable to\nregister or qualify the underlying securities for sale under all applicable state securities laws We will use commercially reasonable\nefforts to register or qualify such shares of our Common Stock under the blue sky laws of the state of residence in those states in which\nthe Public Warrants were sold\n\n142\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 200 of 408\n\nWe have established the last of the redemption criteria discussed above to prevent a redemption call unless there is at the time of\nthe call a significant premium to the Public Warrant exercise price If the foregoing conditions are satisfied and we issue a notice of\nredemption of the Public Warrants, each Public Warrant holder will be entitled to exercise its Public Warrant prior to the scheduled\nredemption date However, the price of our Common Stock may fall below the $18 00 redemption trigger price (as adjusted for stock\nsplits, stock dividends, reorganizations, recapitalizations and the like) as well as the $11 50 (for whole shares) warrant exercise price\nafter the redemption notice is issued\n\nIf we call the Public Warrants for redemption as described above, we will have the option to require any holder that wishes to\nexercise its Public Warrant to do so on a \u201ccashless basis \u201d In determining whether to require all holders to exercise their Public\nWarrants on a \u201ccashless basis,\u201d we will consider, among other factors, its cash position, the number of Public Warrants that are\noutstanding and the dilutive effect on its stockholders of issuing the maximum number of shares of our Common Stock issuable upon\nthe exercise of the Public Warrants If we take advantage of this option, all holders of Public Warrants would pay the exercise price by\nsurrendering their Public Warrants for that number of shares of our Common Stock equal to the quotient obtained by dividing (x) the\nproduct of the number of shares of our Common Stock underlying the Public Warrants, multiplied by the excess of the \u201cfair market\nvalue\u201d of our Common Stock (defined below) over the exercise price of the Public Warrants by (y) the fair market value The \u201cfair\nmarket value\u201d means the average closing price of our Common Stock for the 10 trading days ending on the third trading day prior to\nthe date on which the notice of redemption is sent to the holders of Public Warrants If we take advantage of this option, the notice of\nredemption will contain the information necessary to calculate the number of shares of our Common Stock to be received upon exercise\nof the Public Warrants, including the \u201cfair market value\u201d in such case Requiring a cashless exercise in this manner will reduce the\nnumber of shares to be issued and thereby lessen the dilutive effect of a Public Warrant redemption\n\nRedemption Procedures\n\nA holder of a Public Warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not\nhave the right to exercise such Public Warrant, to the extent that after giving effect to such exercise, such person (together with such\nperson\u2019s affiliates), to the warrant agent\u2019s actual knowledge, would beneficially own in excess of 4 9% or 9 8% (as specified by the\nholder) of our Common Stock outstanding immediately after giving effect to such exercise\n\nAnti Dilution Adjustments\n\nIf the number of outstanding shares of our Common Stock is increased by a capitalization or share dividend payable in our\nCommon Stock, or by a split up of shares of Common Stock or other similar event, then, on the effective date of such stock dividend,\nsplit up or similar event, the number of shares of our Common Stock issuable on exercise of each whole Public Warrant will be\nincreased in proportion to such increase in the outstanding ordinary stock A rights offering to holders of our Common Stock entitling\nholders to purchase shares of our Common Stock at a price less than the fair market value will be deemed a stock dividend of a number\nof shares of our Common Stock equal to the product of (1) the number of shares of our Common Stock actually sold in such rights\noffering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for our\nCommon Stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of our Common Stock paid in such rights\noffering and divided by (y) the fair market value For these purposes, (a) if the rights offering is for securities convertible into or\nexercisable for our Common Stock, in determining the price payable for our Common Stock, there will be taken into account any\nconsideration received for such rights, as well as any additional amount payable upon exercise or conversion and (b) fair market value\nmeans the volume weighted average price of our Common Stock as reported during the ten (10) trading day period ending on\nthe trading day prior to the first date on which the shares of our Common Stock trade on the applicable exchange or in the applicable\nmarket, regular way, without the right to receive such rights\n\nIn addition, if we, at any time while the Public Warrants are outstanding and unexpired, pay a dividend or make a distribution in\ncash, securities or other assets to the holders of shares of our Common Stock on account of such shares (or other securities into which\nthe Public Warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, then the warrant exercise\nprice will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value\nof any securities or other assets paid on each share of our Common Stock in respect of such event\n\n143\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 201 of 408\n\nIf the number of outstanding shares of our Common Stock is decreased by a consolidation, combination, reverse stock split or\nreclassification of shares of our Common Stock or other similar event, then, on the effective date of such consolidation, combination,\nreverse stock split, reclassification or similar event, the number of shares of our Common Stock issuable on exercise of each Public\nWarrant will be decreased in proportion to such decrease in outstanding shares of our Common Stock\n\nWhenever the number of shares of our Common Stock purchasable upon the exercise of the Public Warrants is adjusted, as\ndescribed above, the Public Warrant exercise price will be adjusted by multiplying the Public Warrant exercise price immediately prior\nto such adjustment by a fraction (x) the numerator of which will be the number of shares of our Common Stock purchasable upon the\nexercise of the Public Warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of\nour Common Stock so purchasable immediately thereafter\n\nIn case of any reclassification or reorganization of the outstanding shares of our Common Stock (other than those described above\nor that solely affects the par value of such shares of our Common Stock), or in the case of any merger or consolidation of the Company\nwith or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not\nresult in any reclassification or reorganization of the outstanding shares of our Common Stock), or in the case of any sale or\nconveyance to another corporation or entity of our assets or property as an entirety or substantially as an entirety in connection with\nwhich we are dissolved, the holders of the Public Warrants will thereafter have the right to purchase and receive, upon the basis and\nupon the terms and conditions specified in the Public Warrants and in lieu of our Common Stock immediately theretofore purchasable\nand receivable upon the exercise of the rights represented thereby, the kind and amount of shares of our Common Stock or other\nsecurities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a\ndissolution following any such sale or transfer, that the holder of the Public Warrants would have received if such holder had exercised\ntheir Public Warrants immediately prior to such event However, if less than 70% of the consideration receivable by the holders of our\nCommon Stock in such a transaction is payable in the form of our Common Stock in the successor entity that is listed for trading ona\nnational securities exchange or is quoted in an established over the counter market, or is to be so listed for trading or quoted\nimmediately following such event, and if the registered holder of the Public Warrant properly exercises the Public Warrant within\n30 days following public disclosure of such transaction, the Public Warrant exercise price will be reduced as specified in the warrant\nagreement based on the Black Scholes value (as defined in the warrant agreement) of the Public Warrant The purpose of such exercise\nprice reduction is to provide additional value to holders of the Public Warrants when an extraordinary transaction occurs during the\nexercise period of the Public Warrants pursuant to which the holders of the warrants otherwise do not receive the full potential value of\nthe Public Warrants in order to determine and realize the option value component of the Public Warrant This formula is to compensate\nthe Public Warrant holder for the loss of the option value portion of the Public Warrant due to the requirement that the Public Warrant\nholder exercise the Public Warrant within 30 days of the event The Black Scholes model is an accepted pricing model for estimating\nfair market value where no quoted market price for an instrument is available\n\nOther Terms\n\nThe Public Warrants are issued in registered form under a warrant agreement between Continental Stock Transfer & Trust\nCompany, as warrant agent, and ARRW The warrant agreement provides that the terms of the Public Warrants may be amended\nwithout the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of\nat least a majority of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered\nholders of Public Warrants\n\nThe Public Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of\nthe warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated,\naccompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to\nus, for the number of Public Warrants being exercised The Public Warrant holders do not have the rights or privileges of holders of\nCommon Stock and any voting rights until they exercise their Public Warrants and receive our Common Stock After the issuance of\nour Common Stock upon exercise of the Public Warrants, each holder will be entitled to one vote for each share held of record on all\nmatters to be voted on by stockholders\n\n144\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 202 of 408\n\nNo fractional shares will be issued upon exercise of the Public Warrants If, upon exercise of the Public Warrants, a holder would\nbe entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of our\nCommon Stock to be issued to the warrant holder\n\nPrivate Placement Warrants\n\nExcept as described below, the Private Placement Warrants have terms and provisions that are identical to those of the Public\nWarrants The Private Placement Warrants (including our Common Stock issuable upon exercise of the Private Placement Warrants)\nwill not be transferable, assignable or salable until May 16, 2024 (except pursuant to limited exceptions, to our officers and directors\nand other persons or entities affiliated with the initial purchasers of the Private Placement Warrants) In addition, holders of our Private\nPlacement Warrants are entitled to certain registration rights, which nights are described above under\u201c Registration Rights\u201d, and the\nPrivate Placement Warrants will not be redeemable by us so long as they are held by Sponsor or its permitted transferees The Sponsor,\nor its permitted transferees, has the option to exercise the Private Placement Warrants on a cashless basis If the Private Placement\nWarrants are held by holders other than Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by us\nin all redemption scenarios and exercisable by the holders on the same basis as the warrants included in the units that sold in ARRW\u2019s\ninitial public offering Any amendment to the terms of the Private Placement Warrants or any provision of the Warrant Agreement with\nrespect to the Private Placement Warrants will require a vote of holders of at least 50% of the number of the then outstanding Private\nPlacement Warrants\n\nIf holders of the Private Placement Warrants elect to exercise them on a cashless basis, they would pay the exercise price by\nsurrendering his, her or tts warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the\nproduct of the number of shares of Common Stock underlying the warrants, multiplied by the excess of the \u201cfair market value\u201d (defined\nbelow) over the exercise price of the warrants by (y) the fair market value For these purposes, the \u201cfair market value\u201d means the\naverage reported closing price of the Common Stock for the 10 trading days ending on the third trading day prior to the date on which\nthe notice of warrant exercise is sent to the warrant agent\nTransfer Agent and Warrant Agent\n\nThe transfer agent for New iLearningEngines Common Stock and warrant agent for New iLearningEngines Public Warrants and\nPrivate Placement Warrants is Continental Stock Transfer & Trust Company\n\nListing\n\nArrowroot has applied to list the shares of New iLearningEngines Common Stock and the New iLearningEngines Public Warrants\non the Nasdaq Capital Market under the symbol \u201cAILE\u201d and \u201cAILEW,\u201d respectively\n\nOur Transfer Agent and Warrant Agent\n\nThe transfer agent for our Common Stock and the warrant agent for our Warrants is Continental Stock Transfer & Trust Company\nContinental Stock Transfer & Trust Company\u2019s address is One State Street Plaza, 30 Floor New York, New York 10004\n\nExchange Listing\n\nOur Common Stock and Public Warrants are listed on Nasdaq Capital Market under the symbols \u201cAILE\u201d and \u201cAILEW,\u201d\nrespectively\n\n145\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 203 of 408\n\nMATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES\n\nThe following discussion is a summary of material U S federal income tax considerations generally applicable to the purchase,\nownership and disposition of our Common Stock to which this prospectus relates (including our Common Stock issuable upon exercise\nof the Private Placement and Public Warrants) and the purchase, exercise, disposition and lapse of the Private Placement Warrants For\npurposes of this discussion, the Private Placement Warrants are referred to herein as our \u201cWarrants,\u201d and the Common Stock and the\nPrivate Placement Warrants are collectively referred to herein as our \u201csecurities\u201d All prospective holders of our securities should\nconsult their tax advisors with respect to the U S federal, state, local, and non U 8 tax consequences of the purchase, ownership,\nexercise, disposition and lapse, as applicable, of our securities\n\nThis discussion is not a complete analysis of all potential U S federal income tax consequences relating to the purchase,\nownership, exercise, disposition, and lapse, as applicable, of our securities This summary is based upon current provisions of the\nInternal Revenue Code of 1986, as amended (the \u201cCode\u201d), existing U S Treasury Regulations promulgated thereunder, published\nadministrative pronouncements, and rulings of the U S Internal Revenue Service (the \u201cIRS\u201d), and judicial decisions, all as in effect as\nof the date of this prospectus These authorities are subject to change and differing interpretation, possibly with retroactive effect Any\nchange or differing interpretation could alter the tax consequences to holders described in this discussion There can be no assurance\nthat a court or the IRS will not challenge one or more of the tax consequences described herein, and we have not obtained, nor do we\nintend to obtain, a ruling with respect to the U S federal income tax consequences to a holder of the purchase, ownership, exercise,\ndisposition, or lapse, as applicable, of our securities We assume in this discussion that a holder holds our securities as a \u201ccapital asset\u201d\nwithin the meaning of Section 1221 of the Code (generally, property held for investment) This discussion does not address all aspects\nof US federal income taxation that may be relevant to a particular holder in light of that holder\u2019s individual circumstances, nor does it\naddress the special tax accounting rules under Section 451(b) of the Code, any alternative minimum, Medicare contribution, estate or\ngift tax consequences, any aspects of U S state or local or non U \u00a7 taxes, or any other U S federal tax laws This discussion also does\nnot address consequences relevant to holders subject to special tax rules, such as holders that own, or are deemed to own, more than 5%\nof our capital stock (except to the extent specifically set forth below), corporations that accumulate earnings to avoid U S federal\nincome tax, tax exempt organizations, governmental organizations, banks, financial institutions, investment funds, insurance\ncompanies, brokers, dealers or traders in securities, commodities or currencies, regulated investment companies or real estate\ninvestment trusts, persons that have a \u201cfunctional currency\u201d other than the U \u00a7 dollar, tax qualified retirement plans, holders who hold\nor receive our securities pursuant to the exercise of employee stock options or otherwise as compensation, holders holding our\nsecurities as part of a hedge, straddle, or other risk reduction strategy, conversion transaction or other integrated investment, holders\ndeemed to sell our securities under the constructive sale provisions of the Code, passive foreign investment companies, controlled\nforeign corporations, and certain former U S citizens or long term residents\n\nIn addition, this discussion does not address the tax treatment of partnerships (or entities or arrangements that are treated as\npartnerships for U S federal income tax purposes) or persons that hold our securities through such partnerships If a partnership,\nincluding any entity or arrangement treated as a partnership for U S federal income tax purposes, holds our securities, the U S federal\nincome tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the\npartnership Such partners and partnerships should consult their tax advisors regarding the tax consequences of the purchase,\nownership, exercise, disposition and lapse, as applicable, of our securities\n\nFor purposes of this discussion, a\u201c\u201cU S Holder\u201d means a beneficial owner of our securities (other than a partnership or an entity or\narrangement treated as a partnership for U S federal income tax purposes) that is, for U S federal income tax purposes\n\ne anindividual who is a citizen or resident of the United States;\n\n@ acorporation, or an entity treated as a corporation for U 8 federal income tax purposes, created or organized in the United\nStates or under the laws of the United States or of any state thereof or the District of Columbia;\n\n\u00ae anestate, the income of which is subject to U S federal income tax regardless of its source; or\ne atrustif(a)aUS court can exercise primary supervision over the trust\u2019s administration and one or more U S_ persons have\n\nthe authority to control all of the trust\u2019s substantial decisions or (b) the trust has a valid election in effect under applicable U \u00a7\nTreasury Regulations to be treated as a U S person\n\n146\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 204 of 408\n\nFor purposes of this discussion, a\u201cnon U \u00a7 Holder\u201d is a beneficial owner of our securities that is neither a U S Holder nora\npartnership or an entity or arrangement treated as a partnership for U S federal income tax purposes\n\nTax Considerations Applicable to US Holders\nTaxation of Distributions\n\nIf we pay distributions or make constructive distributions (other than certain distributions of our stock or rights to acquire our\nstock) to U S Holders of shares of our Common Stock, such distributions generally will constitute dividends for U S federal income\ntax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U S federal income tax\nprinciples Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that will be\napplied against and reduce (but not below zero) the U S Holder\u2019s adjusted tax basis in our Common Stock Any remaining excess will\nbe treated as gain realized on the sale or other disposition of the Common Stock and will be treated as described under \u201cJax\nConsiderations Applicable to US Holders \u2014 Gain or Loss on Sale Taxable Exchange or Other Taxable Disposition of Common\nStock\u201d below\n\nDividends we pay toa U S_ Holder that is a taxable corporation will generally qualify for the dividends received deduction if the\nrequisite holding period is satisfied With certain exceptions (including dividends treated as investment income for purposes of\ninvestment interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non\ncorporate U \u00a7 Holder will generally constitute \u201cqualified dividends\u201d that will be subject to tax at the maximum tax rate accorded to\nlong term capital gains If the holding period requirements are not satisfied, a corporation may not be able to qualify for the dividends\nreceived deduction and would have taxable income equal to the entire dividend amount, and non corporate holders may be subject to\ntax on such dividend at ordinary income tax rates instead of the preferential rates that apply to qualified dividend income\n\nGain or Loss on Sale, Taxable Exchange, or Other Taxable Disposition of Common Stock\n\nAUS Holder generally will recognize gain or loss on the sale, taxable exchange, or other taxable disposition of our Common\nStock Any such gain or loss will be capital gain or loss and will be long term capital gain or loss if the U S Holder\u2019s holding period\nfor the Common Stock so disposed of exceeds one year The amount of gain or loss recognized will generally be equal to the difference\nbetween (1) the sum of the amount of cash and the fair market value of any property received in such disposition and (2) the US\nHolder\u2019s adjusted tax basis in its Common Stock so disposed of AU S Holder\u2019s adjusted tax basis in its Common Stock will generally\nequal the U S Holder\u2019s acquisition cost for such Common Stock (or, in the case of Common Stock received upon exercise of a\nWarrant, the U S Holder\u2019s initial basis for such Common Stock, as discussed below), less any prior distributions treated as a return of\ncapital Long term capital gains recognized by non corporate U S Holders are generally eligible for reduced rates of tax If the US\nHolder\u2019s holding period for the Common Stock so disposed of is one year or less, any gain on a sale or other taxable disposition of the\nshares would be subject to short term capital gain treatment and would be taxed at ordinary income tax rates The deductibility of\ncapital losses is subject to limitations\n\nExercise of a Warrant\n\nExcept as discussed below with respect to the cashless exercise of a Warrant, a U S Holder generally will not recognize taxable\ngain or loss upon exercise of a Warrant for cash The US Holder\u2019s initial tax basis in the share of our Common Stock received upon\nexercise of the Warrant will generally be an amount equal to the sum of the U S Holder\u2019s acquisition cost of the Warrant and the\nexercise price of such Warrant It is unclear whether a U S Holder\u2019s holding period for the Common Stock received upon exercise of\nthe Warrant would commence on the date of exercise of the Warrant or the day following the date of exercise of the Warrant; however,\nin either case the holding period will not include the period during which the U S Holder held the Warrant\n\nIn certain circumstances, the Warrants may be exercised on a cashless basis The U S federal income tax treatment of an exercise\nof a warrant on a cashless basis is not clear and could differ from the consequences described above It is possible that a cashless\nexercise could be a taxable event US holders are urged to consult their tax advisors as to the consequences of an exercise of a Warrant\nona cashless basis, including with respect to their holding period and tax basis in the Common Stock recetved upon exercise of the\nWarrant\n\nSale, Exchange, Redemption or Expiration of a Warrant\n\nUpon a sale, exchange (other than by exercise), redemption, or expiration of a Warrant, a U S Holder will recognize taxable gain\nor loss in an amount equal to the difference between (1) the amount realized upon such disposition or expiration and (2) the U \u00a7\n\f. Case 8:24-cv-02900-DK Document 90- Filed 09/18/2 Page 205 of 408\n\nHolder\u2019s adjusted tax Baas in the Warrant A Ks Holder's Mea Pa basis in its Warrants oa generally equal fe US Holder\u2019s\nacquisition cost, increased by the amount of any constructive distributions included in income by such U S Holder (as described below\nunder \u201cZax Considerations Applicable to US Holders Possible Constructive Distributions\u201d) Such gain or loss generally will be\n\ntreated as long term capital gain or loss if the Warrant is held by the U S Holder for more than one year at the time of such disposition\nor expiration\n\nIf a Warrant is allowed to lapse unexercised, aU S Holder will generally recognize a capital loss equal to such holder\u2019s adjusted\ntax basis in the Warrant Any such loss generally will be a capital loss and will be long term capital loss if the Warrant is held for more\nthan one year Because the term of the Warrants is more than one year, a U S Holder\u2019s capital loss will be treated as a long term capital\nloss The deductibility of capital losses is subject to certain limitations\n\n147\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 206 of 408\n\nPossible Constructive Distributions\n\nThe terms of each Warrant provide for an adjustment to the number of shares of Common Stock for which the Warrant may be\nexercised or to the exercise price of the Warrant in certain events, as discussed in the section titled \u201cDescription of our Securities\nWarrants\u201d An adjustment which has the effect of preventing dilution generally should not be a taxable event Nevertheless, a U S\nHolder of Warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases the\nholder\u2019s proportionate interest in our assets or earnings and profits (e g , through an increase in the number of shares of Common Stock\nthat would be obtained upon exercise or an adjustment to the exercise price of the Warrant) as a result of a distribution of cash to the\nholders of shares of our Common Stock which is taxable to such holders as a distribution Such constructive distribution would be\nsubject to tax as described above under \u201c7ax Considerations Applicable to US Holders Taxation of Distributions\u201d in the same\nmanner as if such U S Holder received a cash distribution from us on Common Stock equal to the fair market value of such increased\ninterest\n\nUnder current law, we are required to report the amount of any constructive distributions on our website or to the IRS and to\ncertain U.S. Holders of the Warrants that are not exempt from information reporting. The IRS has proposed U.S. Treasury Regulations\naddressing the amount and timing of constructive distributions, obligations of withholding agents, and filing and notice obligations of\nissuers, effective for constructive distributions occurring on or after such U.S. Treasury Regulations are adopted in final form. If\nadopted as proposed, the U.S. Treasury Regulations generally would provide that (i) the amount of a constructive distribution is the\nexcess of the fair market value of the right to acquire our Common Stock immediately after the conversion rate adjustment over the fair\nmarket value of the right to acquire our Common Stock without such adjustment, (ii) the constructive distribution occurs at the earlier\nof the date of such adjustment under the terms of the Warrants and the date of the actual distribution of cash or property that results in\nthe constructive distribution, (iii) subject to certain limited exceptions, a withholding agent is required to impose any applicable\nwithholding on constructive distributions and, if there is no associated cash payment, may set off its withholding obligations against\npayments on our securities or sales proceeds received by, or other funds or assets of, the applicable U.S. Holder, and (iv) we will\ncontinue to be required to report the amount of any constructive distributions on our website or to the IRS and to all holders (including\nholders that would otherwise be exempt from information reporting). The final U.S. Treasury Regulations will be effective for\ndistributions occurring on or after the date of adoption, but U.S. Holders of the Warrants and withholding agents may rely on them prior\nto that date under certain circumstances.\n\nUS Holders should consult their tax advisors regarding the tax consequences of any constructive distribution on the Warrants in\ntheir particular circumstances\n\nInformation Reporting and Backup Withholding\n\nIn general, information reporting requirements may apply to distributions paid to a U.S. Holder and to the proceeds of the sale or\nother disposition of our shares of Common Stock and Warrants, unless the U.S. Holder is an exempt recipient. Backup withholding\nmay apply to such payments if the U.S. Holder fails to provide a taxpayer identification number (or furnishes an incorrect taxpayer\nidentification number) or a certification of exempt status or has been notified by the IRS that it is subject to backup withholding (and\nsuch notification has not been withdrawn).\n\nBackup withholding is not an additional tax Any amounts withheld under the backup withholding rules will be allowed as a credit\nagainst aU S Holder\u2019s U \u00a7 federal income tax liability and may entitle such holder to a refund, provided the required information is\ntimely furnished to the IRS Taxpayers should consult their tax advisors regarding their qualification for an exemption from backup\nwithholding and the procedures for obtaining such an exemption\n\nTax Considerations Applicable to Non-U.S. Holders\nTaxation of Distributions\n\nIn general, any distributions (including constructive distributions) we make to a non-U.S. Holder of shares on our Common Stock,\nto the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will\nconstitute dividends for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the non-U.S.\nHolder\u2019s conduct of a trade or business within the United States or, if an applicable tax treaty so requires, are not attributable to a U.S.\npermanent establishment or fixed base maintained by the non-U.S. Holder, we will be required to withhold tax from the gross amount\nof the dividend at a rate of 30%, unless such non-U.S. Holder is eligible for a reduced rate of withholding tax under an applicable\nincome tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-\n8BEN-E, as applicable). In the case of any constructive distribution (as described below under \u201cTax Considerations Applicable to Non-\nUS. Holders \u2014 Possible Constructive Distributions\u201d), it is possible that this tax would be withheld from any amount owed to a non-\nU.S. Holder by the applicable withholding agent, including cash distributions on other property or sale proceeds from the Warrants or\nother property subsequently paid or credited to such holder. Any distribution not constituting a dividend will be treated first as reducing\n\fGY 0F200- D ogument 90-2 Filed 09/18/25 of 40\n\n(but not below Case B54 \u00e9 con) Ys Holder\u2019s a MSG sted Ob tax basis in its shares of our Common Stock and, a e Oot Pouch istribution\nexceeds the non U S Holder\u2019s adjusted tax basis, as gain realized from the sale or other disposition of the Common Stock, which will\nbe treated as described under \u201cZax Considerations Applicable to Non US Holders Gain on Sale Taxable Exchange or Other\nTaxable Disposition of Common Stock and Warrants\u201d below In addition, if we determine that we are likely to be classified as a \u201cUnited\nStates real property holding corporation\u201d (see the section titled \u201cJax Considerations Applicable to Non US Holders Gain on Sale\nExchange or Other Taxable Disposition of Common Stock and Warrants\u201d below), we will withhold 15% of any distribution that\nexceeds our current and accumulated earnings and profits\n\nDividends we pay to a non-US. Holder that are effectively connected with such non-U.S. Holder\u2019s conduct of a trade or business\nwithin the United States (and, if a tax treaty applies. are attributable to a U.S. permanent establishment or fixed base maintained by the\nnon-U.S. Holder) will generally not be subject to U.S. withholding tax, provided such non-U.S. Holder complies with certain\ncertification and disclosure requirements (generally by providing an IRS Form W-8ECT). Instead, such dividends generally will be\nsubject to U.S. federal income tax, net of certain deductions, at the same individual or corporate rates applicable to U.S. Holders. If the\nnon-U.S. Holder is a corporation, dividends that are effectively connected income may also be subject to a \u201cbranch profits tax\u201d at a rate\nof 30% (or such lower rate as may be specified by an applicable income tax treaty).\n\n148\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 208 of 408\n\nExercise of a Warrant\n\nThe U \u00a7 federal income tax treatment of a non U S Holder\u2019s exercise of a Warrant will generally correspond to the U S federal\nincome tax treatment of the exercise of a Warrant by aU S_ Holder, as described under \u201cTax Considerations Applicable to U S Holders\nExercise of a Warrant\u2019 above, although to the extent a cashless exercise results in a taxable exchange, the tax consequences to the\nnon U \u00a7 Holder would be the same as those described below in \u201cTax Considerations Applicable to Non US Holders Gain on Sale\n\nExchange or Other Taxable Disposition of Common Stock and Warrants \u201d\n\nGain on Sale, Exchange or Other Taxable Disposition of Common Stock and Warrants\n\nAnon US Holder generally will not be subject to U S federal income or withholding tax in respect of gain recognized on a sale,\ntaxable exchange or other taxable disposition of our Common Stock or Warrants or an expiration or redemption of our Warrants, unless\n\ne the gain is effectively connected with the conduct of a trade or business by the non U \u00a7 Holder within the United States (and,\nif an applicable tax treaty so requires, is attributable to aU S permanent establishment or fixed base maintained by the non\nUS Holder);\n\ne the non US Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition\nand certain other conditions are met; or\n\ne we are or have been a \u201cUnited States real property holding corporation\u201d for U 8 federal income tax purposes at any time\nduring the shorter of the five year period ending on the date of disposition or the period that the non U S Holder held our\nCommon Stock or Warrants and, in the case where shares of our Common Stock are regularly traded on an established\nsecurities market, (i) the non U S Holder is disposing of our Common Stock and has owned, directly or constructively, more\nthan 5% of our Common Stock at any time within the shorter of the five year period preceding the disposition or such Non\nUS Holder\u2019s holding period for the shares of our Common Stock or (ii) in the case where our Warrants are regularly traded\non an established securities market, the non U S$ Holder is disposing of our Warrants and has owned, directly or\nconstructively, more than 5% of our Warrants at any time within the shorter of the five year period preceding the disposition\nor such Non U \u00a7 Holder\u2019s holding period for the Warrants There can be no assurance that our Common Stock or Warrants\nwill be treated as regularly traded or not regularly traded on an established securities market for this purpose\n\nGain described in the first bullet point above will be subject to tax at generally applicable U S federal income tax rates as if the\nnon US Holder were aU 8 resident Any gains described in the first bullet point above of anon US Holder that is a foreign\ncorporation may also be subject to an additional \u201cbranch profits tax\u201d at a 30% rate (or lower applicable treaty rate) Gain described in\nthe second bullet point above will generally be subject to a flat 30% U S federal income tax Non U \u00a7 Holders are urged to consult\ntheir tax advisors regarding possible eligibility for benefits under income tax treaties\n\nIf the third bullet point above applies to anon U S Holder and applicable exceptions are not available, gain recognized by such\nholder on the sale, exchange or other disposition of our Common Stock or Warrants, as applicable, will be subject to tax at generally\napplicable U S federal income tax rates In addition, a buyer of our Common Stock or Warrants from such holder may be required to\nwithhold U \u00a7 income tax at a rate of 15% of the amount realized upon such disposition We will be classified as a United States real\nproperty holding corporation if the fair market value of our \u201cUnited States real property interests\u201d equals or exceeds 50% of the sum of\nthe fair market value of our worldwide real property interests plus our other assets used or held for use in a trade or business, as\ndetermined for U S federal income tax purposes We do not believe we currently are or will become a United States real property\nholding corporation, however there can be no assurance in this regard Non U S Holders are urged to consult their tax advisors\nregarding the application of these rules\n\n149\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 209 of 408\n\nPossible Constructive Distributions\n\nThe terms of each Warrant provide for an adjustment to the number of shares of Common Stock for which the Warrant may be\nexercised or to the exercise price of the Warrant in certain events, as discussed in the section titled \u201cDescription of our Securities\nWarrants\u201d An adjustment which has the effect of preventing dilution generally should not be a taxable event Nevertheless, a non U S\nHolder of Warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases the\nholder\u2019s proportionate interest in our assets or earnings and profits (e g , through an increase in the number of shares of Common Stock\nthat would be obtained upon exercise or an adjustment to the exercise price of the Warrant) as a result of a distribution of cash to the\nholders of shares of our Common Stock which is taxable to such holders as a distribution Anon U 8S Holder would be subject to U S\nfederal income tax withholding as described above under \u201cNon US Holders Taxation of Distributions\u201d under that section in the\nsame mamner as if such non U S Holder received a cash distribution from us on Common Stock equal to the fair market value of such\nincreased interest\n\nForeign Account Tax Compliance Act\n\nProvisions of the Code and U \u00a7 Treasury Regulations and administrative guidance promulgated thereunder commonly referred as\nthe \u201cForeign Account Tax Compliance Act\u201d (\u201cFATCA\u201d) generally impose withholding at a rate of 30% in certain circumstances on\ndividends (including constructive dividends) in respect of our securities which are held by or through certain foreign financial\ninstitutions (including investment funds), unless any such institution (1) enters into, and complies with, an agreement with the IRS to\nreport, on an annual basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain\nUS persons and by certain non U S entities that are wholly or partially owned by U S persons and to withhold on certain payments,\nor (2) if required under an intergovernmental agreement between the United States and an applicable foreign country, reports such\ninformation to its local tax authority, which will exchange such information with the U S authorities An intergovernmental agreement\nbetween the United States and an applicable foreign country may modify these requirements Accordingly, the entity through which our\nsecurities are held will affect the determination of whether such withholding is required Similarly, dividends in respect of our securities\nheld by an investor that is a non financial non U S entity that does not qualify under certain exceptions will generally be subject to\nwithholding at a rate of 30%, unless such entity either (1) certifies to us or the applicable withholding agent that such entity does not\nhave any \u201csubstantial United States owners\u201d or (2) provides certain information regarding the entity\u2019s \u201csubstantial United States\nowners,\u201d which will in turn be provided to the U S Department of Treasury Withholding under FATCA was scheduled to apply to\npayments of gross proceeds from the sale or other disposition of property that produces U S source interest or dividends, however, the\nIRS released proposed U S Treasury Regulations that, if finalized in their proposed form, would eliminate the obligation to withhold\non such gross proceeds Although these proposed U S$ Treasury Regulations are not final, taxpayers generally may rely on them until\nfinal U S Treasury Regulations are issued Prospective investors should consult their tax advisors regarding the possible implications\nof FATCA on their investment in our securities\n\nInformation Reporting and Backup Withholding\n\nInformation returns will be filed with the IRS in connection with payments of distributions and the proceeds from a sale or other\ndisposition of our Common Stock and Warrants Anon U S Holder may have to comply with certification procedures to establish that\nit is not a United States person in order to avoid information reporting and backup withholding requirements The certification\nprocedures required to claim a reduced rate of withholding under a treaty generally will satisfy the certification requirements necessary\nto avoid the backup withholding as well Backup withholding is not an additional tax The amount of any backup withholding from a\npayment toa non US Holder will be allowed as a credit against such holder\u2019s U 8 federal income tax liability and may entitle such\nholder to a refund, provided that the required information is timely furnished to the IRS\n\n150\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 210 of 408\n\nSECURITIES ACT RESTRICTIONS ON RESALE OF OUR SECURITIES\nRule 144\n\nPursuant to Rule 144 under the Securities Act (\u201cRule 144\u201d), a person who has beneficially owned restricted shares of our Common\nStock or restricted Warrants for at least six months would be entitled to sell their securities provided that (4) such person is not deemed\nto have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the\nExchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section\n13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale\n\nPersons who have beneficially owned restricted shares of our Common Stock or restricted Warrants for at least six months but who\nare our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by\nwhich such person would be entitled to sell within any three month period only a number of securities that does not exceed the greater\nof\n\ne 1% of the total number of shares of our Common Stock or Warrants then outstanding, as applicable; or\n\ne the average weekly reported trading volume of our Common Stock or our Warrants, as applicable, during the four calendar\nweeks preceding the filing of a notice on Form 144 with respect to the sale\n\nSales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability\nof current public information about the Company\n\nRestrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies\n\nRule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related\nshell companies) or issuers that have been at any time previously a shell company However, Rule 144 also includes an important\nexception to this prohibition if the following conditions are met\n\ne the issuer of the securities that was formerly a shell company has ceased to be a shell company;\n\ne the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;\n\ne the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the\n\npreceding 12 months (or such shorter period that the issuer was required to file such reports and materials) other than Form 8\n\nK reports; and\n\ne at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its\nstatus as an entity that is not a shell company\n\nWe are no longer a shell company and, as a result, once the conditions set forth in the exceptions listed above are satisfied, Rule\n144 will become available for the resale of shares of common stock\n\n151\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 211 of 408\n\nPLAN OF DISTRIBUTION\n\nWe are registering the issuance by us of an aggregate of up to 22,624,975 shares of Common Stock, consisting of up to (a)\n8,250,000 shares of Common Stock that are issuable upon the exercise of the equivalent number of Private Placement Warrants and (b)\n14,374 975 shares of Common Stock that are issuable upon the exercise of the equivalent number of Public Warrants\n\nWe are also registering the resale by the Selling Securityholders or their permitted transferees from time to time of (i) up to\n100,774,669 Resale Securities consisting of up to (a) 8,089 532 2024 Convertible Note Shares issued in satisfaction of an aggregate of\n$29,414 500 (equivalent to a per share price of $3 64) of the convertible notes payable to such investors, (b) 6,787,500 Founder Shares\noriginally issued at a price of approximately $0 004 per share in a private placement to the Sponsor prior to ARRW\u2019s initial public\noffering, (c) 82,091 Meteora Shares issued at a fair value price of $10 00 per share to certain investors pursuant to a non redemption\nagreement with certain investors as consideration for the non exercise of redemption rights by such investors in connection with the\nshareholder meetings preceding the Business Combination, (d) 3,763 378 Lender Shares issued at a fair value price of $10 00 per share\nto the Lenders pursuant to the Second Omnibus Amendment, as consideration, in part, for the revision of amortization schedules under\nthe WTI Loan Agreements prior to the Business Combination and, after the Business Combination, the repayment in full of all\noutstanding obligations under the WTI Loan Agreements, (ec) 460,384 Working Capital Shares issued to the Sponsor as consideration\nfor the repayment of $4 510,000 (equivalent to a per share price of $9 80), which represented part of the then outstanding obligations\nunder unsecured promissory notes issued to ARRW, (f) 78,730 Unvested Shares issuable upon the vesting and settlement of Assumed\nRSUs, (g) 8 250,000 shares of Common Stock acquired by the Sponsor at a purchase price of $8,250,000 (equivalent to a per share\nprice of $1 00) issuable upon exercise of the Private Placement Warrants at an exercise price of $11 50 per share of Common Stock, (h)\n\n1,508 370 Control Shares issued at a fair value price of $10 00 per share to certain directors and officers as merger consideration for\nsuch shares originally issued by Legacy iLearningEngines to such directors and officers as consideration for employment and services\nprovided to Legacy iLearningEngines prior to the Business Combination, (i) 511,073 shares of Common Stock that were issued at a\nprice of $5 87 per share pursuant to the BTIG Amendment in connection with the payment of certain Business Combination transaction\nexpenses, (j) 1,022,146 shares of Common Stock that were issued in lieu of payment of deferred underwriting commissions in an\naggregate amount of $6,000,000 at a price of $5 87 per share pursuant to the Fee Modification Agreement in connection with the\nClosing, and (k) 221,465 shares of Common Stock that were issued at a price of $5 87 per share pursuant to the Cooley Fee Agreement\nin connection with the payment of Business Combination transaction expenses; and (ii) up to 8 250,000 Private Placement Warrants\n\nWe are required to pay all fees and expenses incident to the registration of the securities to be offered and sold pursuant to this\nprospectus The Selling Securityholders will bear all commissions and discounts, if any, attributable to their sale of securities\n\nWe will not receive any of the proceeds from the sale of the securities by the Selling Securityholders We will receive proceeds\nfrom Warrants exercised in the event that such Warrants are exercised for cash The aggregate proceeds to the Selling Securityholders\nwill be the purchase price of the securities less any discounts and commissions borne by the Selling Securityholders\n\nThe shares of Common Stock beneficially owned by the Selling Securityholders covered by this prospectus may be offered and\nsold from time to time by the Selling Securityholders The term \u201cSelling Securityholders\u201d includes donees, pledgees, transferees or\nother successors in interest selling securities received after the date of this prospectus from a Selling Securityholders as a gift, pledge,\npartnership distribution or other transfer The Selling Securityholders will act independently of us in making decisions with respect to\nthe timing, manner and size of each sale Such sales may be made on one or more exchanges or in the over the counter market or\notherwise, at prices and under terms then prevailing or at prices related to the then current market price or in negotiated transactions\nThe Selling Securityholders may sell their securities by one or more of, or a combination of, the following methods\n\ne@ purchases by a broker dealer as principal and resale by such broker dealer for its own account pursuant to this prospectus;\ne ordinary brokerage transactions and transactions in which the broker solicits purchasers;\n\ne block trades in which the broker dealer so engaged will attempt to sell the shares as agent but may position and resell a portion\nof the block as principal to facilitate the transaction;\n\n@ anover the counter distribution in accordance with the rules of Nasdaq;\n\n152\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 212 of 408\n\ne through trading plans entered into by a Selling Securityholder pursuant to Rule 10b5 1 under the Exchange Act, that are in\nplace at the time of an offering pursuant to this prospectus and any applicable prospectus supplement hereto that provide for\nperiodic sales of their securities on the basis of parameters described in such trading plans;\n\ne short sales;\n\ne distribution to employees, members, limited partners or securityholders of the Selling Securityholders;\n\ne through the writing or settlement of options or other hedging transaction, whether through an options exchange or otherwise;\ne by pledge to secured debts and other obligations;\n\ne delayed delivery arrangements;\n\ne to or through underwriters or broker dealers;\n\ne in\u201cat the market\u201d offerings, as defined in Rule 415 under the Securities Act, at negotiated prices, at prices prevailing at the\ntime of sale or at prices related to such prevailing market prices, including sales made directly on a national securities\nexchange or sales made through a market maker other than on an exchange or other similar offerings through sales agents;\n\n@ inprivately negotiated transactions;\n\n\u00ae in options transactions;\n\ne through a combination of any of the above methods of sale; or\ne any other method permitted pursuant to applicable law\n\nIn addition, any securities that qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this\nprospectus\n\nWe will file a post effective amendment to the registration statement of which this prospectus is a part to include any material\ninformation with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such\ninformation in the registration statement To the extent required, this prospectus may be amended or supplemented from time to time to\ndescribe a specific plan of distribution In connection with distributions of the securities or otherwise, the Selling Securityholders may\nenter into hedging transactions with broker dealers or other financial institutions In connection with such transactions, broker dealers\nor other financial institutions may engage in short sales of the securities in the course of hedging the positions they assume with selling\nsecurityholder The Selling Securityholders may also sell the securities short and redeliver the securities to close out such short\npositions The Selling Securityholders may also enter into option or other transactions with broker dealers or other financial institutions\nwhich require the delivery to such broker dealer or other financial institution of securities offered by this prospectus, which securities\nsuch broker dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such\ntransaction) The Selling Securityholder may also pledge securities to a broker dealer or other financial institution, and, upon a default,\nsuch broker dealer or other financial institution, may effect sales of the pledged securities pursuant to this prospectus (as supplemented\nor amended to reflect such transaction)\n\nIn effecting sales, broker dealers or agents engaged by the Selling Securityholder may arrange for other broker dealers to\nparticipate Broker dealers or agents may receive commissions, discounts or concessions from the Selling Securityholders in amounts\nto be negotiated immediately prior to the sale\n\nIn offering the securities covered by this prospectus, the Selling Securityholder and any broker dealers who execute sales for the\nSelling Securityholders may be deemed to be \u201cunderwriters\u201d within the meaning of the Securities Act in connection with such sales\nAny profits realized by Selling Securityholder and the compensation of any broker dealer may be deemed to be underwriting discounts\nand commissions\n\n153\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 213 of 408\n\nIn order to comply with the securities laws of certain states, if applicable, the securities must be sold in such jurisdictions only\nthrough registered or licensed brokers or dealers In addition, in certain states the securities may not be sold unless they have been\nregistered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and\nis complied with\n\nWe have advised the Selling Securityholders that the anti manipulation rules of Regulation M under the Exchange Act may apply\nto sales of securities in the market and to the activities of the Selling Securityholders and their affiliates In addition, we will make\ncopies of this prospectus available to the Selling Securityholders for the purpose of satisfying the prospectus delivery requirements of\nthe Securities Act The Selling Securityholders may indemnify any broker dealer that participates in transactions involving the sale of\nthe securities against certain liabilities, including liabilities arising under the Securities Act\n\nAt the time a particular offer of securities is made, if required, a prospectus supplement will be distributed that will set forth the\nnumber of securities being offered and the terms of the offering, including the name of any underwriter, dealer or agent, the purchase\nprice paid by any underwriter, any discount, commission and other item constituting compensation, any discount, commission or\nconcession allowed or reallowed or paid to any dealer, and the proposed selling price to the public\n\nA holder of Warrants may exercise their Warrants in accordance with the Warrant on or before the expiration date set forth therein\nby surrendering, at the office of the Warrant Agent, Continental Stock Transfer & Trust Company, the certificate evidencing such\nWarrant, with the form of election to purchase set forth thereon, properly completed and duly executed, accompanied by full payment\nof the exercise price and any and all applicable taxes due in connection with the exercise of the Warrant, subject to any applicable\nprovisions relating to cashless exercises in accordance with the Warrant\n\nWe have agreed to indemnify the Selling Securityholders against certain liabilities, including liabilities under the Securities Act\nand state securities laws, relating to the registration of the Warrants or shares offered by this prospectus\n\nPursuant to the Amended and Restated Registration Rights Agreement, we have agreed to keep the registration statement of which\nthis prospectus constitutes a part effective until such time as (A) a registration statement with respect to the sale of such securities shall\nhave become effective under the Securities Act and such securities have been sold, transferred, disposed of or exchanged in accordance\nwith such registration statement; (B) such securities have been otherwise transferred, new certificates or book entry provisions for such\nsecurities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution\nof such securities shall not require registration under the Securities Act; (C) such securities have ceased to be outstanding; (D) such\nsecurities may be sold without registration pursuant to Rule 144 promulgated under the Securities Act (or any successor rule\npromulgated thereafter by the SEC) without limitation as to volume and manner of sale or other public information requirements; or (E)\nsuch securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities\ntransaction\n\nLock up Provisions\n\nOn April 16, 2024, the Company adopted the Bylaws The Bylaws contain lock up provisions that broadly prohibit the sale,\npledge, transfer or otherwise disposition of Common Stock until the earlier to occur of (i) one year after completion of the Business\nCombination, (ii) the last trading day when the closing price of the Common Stock equals or exceeds $12 00 per share (as adjusted for\nstock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day\nperiod commencing at least 150 days after the Business Combination and (iii) upon the consummation of a change of control, subject to\ncertain customary exceptions The lock up provisions were applicable to holders of shares of Common Stock that were issued (i) as\nMerger Shares; (ii) to directors, officers and employees of the Company and other individuals upon the settlement or exercise of\nAdjusted RSUs (as defined in the Merger Agreement) or Adjusted Restricted Stock (as defined in the Merger Agreement); and (iii) the\nConvertible Note Shares On April 25, 2024, the Board waived the lock up restrictions under the Bylaws, effective as of April 29, 2024,\nwith respect to (i) the Convertible Note Shares and (ii) the Merger Shares held by former Legacy iLearningEngines stockholders that\nhold, individually, less than three percent (3%) of the Common Stock issued as consideration in connection with the Business\nCombination, which resulted in the release of approximately 19,367,095 shares of Common Stock held by these lock up parties, of\nwhich 13,906,097 became immediately available for trading Upon the closing of the Business Combination and the listing of the\nCompany\u2019s shares on Nasdaq, due in part to the Company's limited public float, there were significant fluctuations in the price of the\nCompany\u2019s Common Stock and the Common Stock was relatively illiquid By waiving the lock up restrictions, the Board sought to\ncreate greater liquidity for the Company's Common Stock The lock up restrictions were waived for all selling stockholders except\nHarish Chidambaran, Preeta Chidambaran and the Sponsor The Board may, in its sole discretion, determine to waive the lock up\nobligations, amend to shorten the lock up period, or repeal the lock up obligations set forth in the Bylaws\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 214 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 215 of 408\n\nLEGAL MATTERS\nThe validity of the securities offered hereby will be passed upon for us by Cooley LLP\nEXPERTS\n\nThe consolidated financial statements of iLearningEngines, Inc as of December 31, 2023 and 2022 and for the years ended\nDecember 31, 2023, 2022 and 2021, and for the years then ended, have been included in this Prospectus and Registration Statement in\nreliance upon the report of Marcum LLP (\u201cMarcum\u2019\u2019), independent registered public accounting firm, appearing elsewhere herein, and\nupon the authority of said firm as experts in accounting and auditing\n\nThe consolidated financial statements of Arrowroot Acquisition Corp as of December 31, 2023 and 2022, and for the years then\nended, appearing in this Prospectus and Registration Statement have been audited by WithumSmith+Brown, PC (\u201cWithum\u2019),\nindependent registered public accounting firm, as set forth in their report thereon (which includes an explanatory paragraph relating to\nArrowroot Acquisition Corp \u2019s ability to continue as a going concern), appearing elsewhere in this Prospectus and Registration\nStatement, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing\n\n155\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 216 of 408\n\nCHANGE IN REGISTRANT\u2019S CERTIFYING ACCOUNTANT\n\nOn April 16, 2024, the Board approved the engagement of Marcum LLP (\u201cMarcum\u201d) as our independent registered public\naccounting firm to audit the Company\u2019s consolidated financial statements for the year ending December 31, 2024 Marcum previously\nserved as the independent registered public accounting firm of Legacy iLearningEngines prior to the Business Combination\n\nAccordingly, WithumSmith+Brown, PC (\u201cWithum\u201d), ARRW\u2019s independent registered public accounting firm prior to the Business\nCombination, was informed on April 16, 2024 that it would be dismissed and replaced by Marcum as our independent registered public\naccounting firm\n\nWithum\u2019s report on our consolidated balance sheets as of December 31, 2023 and 2022, the related consolidated statements of\noperations, stockholders\u2019 equity and cash flows for the years ended December 31, 2023 and 2022 and the related notes to the financial\nstatements (collectively, the \u201cfinancial statements\u201d) did not contain any adverse opinion or disclaimer of opinion, nor were they\nqualified or modified as to uncertainty, audit scope or accounting principles, except for the substantial doubt about our ability to\ncontinue as a going concern\n\nDuring the period from November 5, 2020 (inception) through December 31, 2023 and the subsequent interim period through\nApril 16, 2024, there were no (i) disagreements with Withum on any matter of accounting principles or practices, financial statement\ndisclosures or audited scope or procedures, which disagreements if not resolved to Withum\u2019s satisfaction would have caused Withum to\nmake reference to the subject matter of the disagreement in connection with its report or (ii) reportable events as defined in Item 304(a)\n(1)(v) of Regulation S K under the Exchange Act\n\nDuring the period from November 5, 2020 (inception) through December 31, 2023, and the interim period through April 16, 2024,\nwe did not consult Marcum with respect to either (i) the application of accounting principles to a specified transaction, either completed\nor proposed; or the type of audit opinion that might be rendered on our financial statements, and no written report or oral advice was\nprovided to us by Marcum that Marcum concluded was an important factor considered by us in reaching a decision as to the\naccounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is\ndescribed in Item 304(a)(1)(iv) of Regulation S K under the Exchange Act and the related instructions to Item 304 of Regulation S K\nunder the Exchange Act, or a reportable event, as that term is defined in Item 304(a)(1)(v) of Regulation S K under the Exchange Act\n\nWe have provided Withum with a copy of the disclosures we made in response to Item 4 01 of our Current Report on Form 8 K\nfiled on April 22, 2024 and have requested that Withum furnish us with a letter addressed to the SEC stating whether it agrees with the\nstatements made by us in response to Item 4 01 of Current Report on Form 8 K and, if not, stating the respects in which it does not\nagree A letter from Withum is attached hereto as Exhibit 16 1 of this prospectus\n\n156\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 217 of 408\n\nWHERE YOU CAN FIND MORE INFORMATION\n\nWe have filed with the SEC a registration statement on Form S 1 under the Securities Act, with respect to the securities being\noffered by this prospectus This prospectus, which constitutes part of the registration statement, does not contain all of the information\nin the registration statement and its exhibits For further information with respect to us and the securities offered by this prospectus, we\nrefer you to the registration statement and its exhibits Statements contained in this prospectus as to the contents of any contract or any\nother document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other\ndocument filed as an exhibit to the registration statement Each of these statements is qualified in all respects by this reference You can\nread our SEC filings, including the registration statement, over the internet at the SEC\u2019s website at www sec gov\n\nWe are subject to the information reporting requirements of the Exchange Act, and we file reports, proxy statements, and other\ninformation with the SEC These reports, proxy statements, and other information will be available for review at the SEC\u2019s website at\nwww sec gov We also maintain a website at www ilearningengines com Through our website, we make available, free of charge, the\nfollowing documents as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC, including our\nAnnual Reports on Form 10 K; our proxy statements for our annual and special stockholder meetings; our Quarterly Reports on Form\n10 Q; our Current Reports on Form 8 K; Forms 3, 4, and 5 and Schedules 13D with respect to our securities filed on behalf of our\ndirectors and our executive officers; and amendments to those documents The information contained on, or that may be accessed\nthrough, our website is not a part of, and is not incorporated into, this prospectus\n\n157\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 218 of 408\n\nUNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION\n\nDefined terms included below and not otherwise defined herein have the same meaning as terms defined and included elsewhere in this\nForm S 1\n\nIntroduction\n\nAs previously announced on April 27, 2023, Arrowroot, Merger Sub, and Legacy iLearningEngines entered into the Merger\nAgreement, pursuant to which Merger Sub was to be merged with and into iLearningEngines, whereupon the separate corporate\nexistence of Merger Sub would ceased and iLearningEngines, renamed as iLearningEngines Holdings, Inc , would become the\nsurviving company and continue in existence as a wholly owned subsidiary of Arrowroot, on the terms and subject to the conditions set\nforth therein The Business Combination closed on April 16, 2024\n\nUpon the Closing, Arrowroot has been renamed as \u201ciLearningEngines, Inc \u201d (\u201cNew iLearningEngines\u201d) New iLearningEngines is\nproviding the following unaudited pro forma condensed combined financial information to aid in the analysis of the financial aspects of\nthe Business Combination and other events contemplated by the Merger Agreement The following unaudited pro forma condensed\ncombined financial information has been prepared in accordance with Article 11 of Regulation S X as amended by the final rule,\nRelease No 33 10786 Amendments to Financial Disclosures about Acquired and Disposed Businesses\n\niLearningEngines was incorporated in Delaware on November 17, 2010 The Company offers an AI Learning and Engagement\nplatform focused on automation of learning and enabling organizations to drive mission critical outcomes at scale The Company\u2019s\ncloud based platform is being deployed globally into some of the most demanding vertical markets including healthcare, education,\ninsurance, retail, oil & gas/energy, manufacturing and the government\n\nArrowroot was a blank check company incorporated in Delaware on November 5, 2020 The Company was formed for the purpose of\neffecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or\nmore businesses On March 4, 2021, the Company consummated its initial public offering of 28,750,000 Units, including\n\n3,750,000 units as a result of the underwriter\u2019s full exercise of their over allotment option at an offering price of $10 00 per unit and a\nprivate placement with sponsor, Arrowroot Acquisition LLC, of 8 250,000 private placement warrants at a price of $1 00 per warrant\nThe net proceeds from Units together with certain of the proceeds from the Private Placement, $287 5 million in the aggregate, were\nplaced in a trust account established for the benefit of the Company\u2019s public stockholders and the underwriter of the initial public\noffering with Continental Stock Transfer & Trust Company acting as trustee On February 28, 2023, Arrowroot held a special meeting\nof its stockholders regarding the Extension, at which Arrowroot stockholders approved the Extension Approximately 85% of the\nPublic Shares in the Trust were redeemed in connection with the Extension leaving approximately $45 0 million in the Trust Account\nafter the satisfaction of such redemptions\n\nOn February 2, 2024, the Company held a special meeting of stockholders (the \u201cExtension Special Meeting\u201d) to approve an\namendment to Arrowroot\u2019s amended and restated certificate of incorporation, as amended (the \u201cCharter Amendment\u201d), to extend the\nTermination Date from February 4, 2024 to March 6, 2024 (the \u201cInitial Subsequent Charter Extension Date\u201d) and to allow the\nCompany, without another stockholder vote, to elect to extend the Termination Date to consummate an initial business combination on\na monthly basis up to five times by an additional one month each time after the Initial Subsequent Charter Extension Date (the Initial\nSubsequent Charter Extension Date, as further extended by the Company, the \u201cSubsequent Extension Date\u201d), by resolution of the\nCompany\u2019s board of directors, if requested by the Sponsor, and upon five days\u2019 advance notice prior to the applicable Termination\nDate, until August 6, 2024, unless the closing of an initial business combination shall have occurred prior thereto (the \u201cSubsequent\nExtension Proposal\u201d)\n\nIn connection with the vote to approve the Charter Amendment, the holders of 3,428,783 shares of Class A common stock properly\nexercised their right to redeem their shares (and did not withdraw their redemption) for cash at a redemption price of approximately\n$10 59 per share, for an aggregate redemption amount of $36,309,429 After the satisfaction of such redemptions, the balance in the\nCompany\u2019s Trust Account was approximately $10 8 million\n\n158\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 219 of 408\n\nMerger Sub was a newly formed, wholly owned, direct subsidiary of Arrowroot that was formed for the purposes of consummating the\nBusiness Combination on April 27, 2023 Merger Sub has no material assets and did not operate any businesses Accordingly, no\nfinancial statements of Merger Sub have been included in this Form S 1\n\nThe following unaudited pro forma condensed combined balance sheet as of March 31, 2024 assumes that the Business Combination\noccurred on March 31, 2024 The unaudited pro forma condensed combined statement of operations for the three months ended\nMarch 31, 2024 present pro forma effect to the Business Combination as if it had been completed on January 1, 2023\n\nThe unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not\nnecessarily reflect what New iLearningEngines financial condition or results of operations would have been had the acquisition\noccurred on the dates indicated Further, the unaudited pro forma condensed combined financial information also may not be useful in\npredicting the future financial condition and results of operations of New iLearningEngines The actual financial position and results of\noperations may differ significantly from the pro forma amounts reflected herein due to a variety of factors The unaudited pro forma\nadjustments represent management\u2019s estimates based on information available as of the date of these unaudited pro forma condensed\ncombined financial statements and are subject to change as additional information becomes available and analyses are performed The\nassumptions and estimates underlying the pro forma adjustments are described in the accompanying notes\n\nThe historical financial information of iLearningEngines was derived from the unaudited consolidated financial statements as of and\nfor the three months ended March 31, 2024 included elsewhere in this Form S 1 The historical financial information of Arrowroot was\nderived from the unaudited consolidated financial statements as of and for the three months ended March 31, 2024 included in\nArrowroot\u2019s Form 10 Q incorporated into this Form \u00a7 1 by reference The unaudited pro forma condensed combined financial\ninformation is based on and should be read in conjunction with the audited financial statements of each of iLearningEngines and\nArrowroot and the notes thereto, as well as the disclosures contained in the sections titled \u201cManagement s Discussion and Analysis of\nFinancial Condition and Results of Operations\u201d and other financial information included elsewhere in this Form S 1\n\nDescription of the Business Combination\nMerger Agreement\n\nOn April 27, 2023, Arrowroot entered into the Merger Agreement with the Merger Sub and iLearningEngines The Merger Agreement\nprovided that, among other things and upon the terms and subject to the conditions thereof, the following transactions will occur\n(together with the other transactions) contemplated by the Merger Agreement At the Closing on April 16, 2024, (1) Merger Sub merged\nwith and into iLearningEngines, the separate corporate existence of Merger Sub ceased and iLearningEngines is the surviving\ncorporation and a wholly owned subsidiary of Arrowroot, (ii) iLearningEngines changed its name to \u201ciLearningEngines Holdings, Inc \u201d\nand (iii) Arrowroot changed its name to \u201ciLearningEngines, Inc \u201d\n\nUpon the Closing, subject to the terms and conditions of the Merger Agreement, each share of the iLearningEngines Common Stock,\neach share of iLearningEngines Restricted Stock, each iLearningEngines RSU and each iLearningEngines Warrant has been converted\ninto the right to receive a portion of the Merger consideration as set forth in the Merger Agreement\n\nOther Agreements Related to the Merger Agreement\n2023 Convertible Note Purchase Agreements\n\nOn April 27, 2023, Legacy iLearningEngines entered into a convertible note purchase agreement (the \u201c2023 Convertible Note Purchase\nAgreement\u201d), with certain investors (collectively, with all investors who may become party to the 2023 Convertible Note Purchase\nAgreement thereafter, the \u201c2023 Convertible Note Investors\u201d), pursuant to which, among other things, Legacy iLearningEngines issued\nand sold to the 2023 Convertible Note Investors convertible notes due in October 2025 (\u201c2023 Convertible Notes\u201d) with aggregate\nprincipal amount of $17,400,000, including to affiliates of the Sponsor Each 2023 Convertible Note accrued interest at a rate of (i)\n15% per annum until the aggregate accrued interest thereunder equals 25% of the principal amount of such note, and (ii) 8% per annum\nthereafter Immediately prior to the consummation of the Business Combination, each 2023 Convertible Note automatically converted\ninto 4 971,076 shares of Legacy iLearningEngines thereby entitling the holder thereof to receive, in connection with the consummation\nof the Business Combination, a number of shares New iLearningEngines Common Stock (rounded down to the nearest whole share)\nequal to (i) 2 75, multiplied by the outstanding principal under such 2023 Convertible Note, plus all accrued and unpaid interest\nthereon, divided by (ii) $10 00 A description of the 2023 Convertible Notes is included in the Proxy Statement/Prospectus in the\nsection entitled \u201cCertain Arrowroot Relationships and Related Party Transactions Promissory Notes\u201d beginning on page 126 of the\nProxy Statement/Prospectus, which is incorporated herein by reference\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 220 of 408\n\n159\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 221 of 408\n\n2024 Convertible Note Purchase Agreements\n\nOn March 21, 2024, Legacy iLearningEngines entered into the 2024 Convertible Note Purchase Agreement with an investor (the\n\u201cMarch Investor\u2019) pursuant to which, among other things, Legacy iLearningEngines issued and sold a 2024 Convertible Note to the\nMarch Investor with an aggregate principal amount of $700,000 On April 16, 2024, Legacy iLearningEngines entered into the 2024\nConvertible Note Purchase Agreement, with certain investors (collectively, the \u201cApril Investors\u201d and, together with the March Investor,\nthe \u201c2024 Convertible Note Investors\u201d), pursuant to which, among other things, Legacy iLearningEngines issued and sold to the 2024\nConvertible Note Investors convertible notes due in October 2026, (\u201c2024 Convertible Notes\u201d) with an aggregate principal amount of\n$29,414 500 (including the initial $700,000 note) Each 2024 Convertible Note accrued interest at a rate of (i) 15% per annum until the\naggregate accrued interest thereunder equals 25% of the principal amount of such note, and (ii) 8% per annum thereafter Immediately\nprior to the consummation of the Business Combination, each 2024 Convertible Note automatically converted into 8,089 532 shares of\nLegacy iLearningEngines thereby entitling the holder thereof to receive, in connection with the consummation of the Business\nCombination, a number of shares New iLearningEngines Common Stock (rounded down to the nearest whole share) equal to (i) 2 75,\nmultiplied by the outstanding principal under such Convertible Note, plus all accrued and unpaid interest thereon, divided by (ii)\n\n$10 00 The price per share at which the Principal (as defined in the 2024 Convertible Note Purchase Agreement), together with\naccrued but unpaid interest, on each 2024 Convertible Note converts into Incentive Shares (as defined in the 2024 Convertible Note\nPurchase Agreement) is referred to as the \u201cConversion Price\u201d herein\n\nIn the event that the VWAP (as defined in the 2024 Convertible Note Purchase Agreement) of the New iLearningEngines Common\nStock over the ten (10) trading days immediate preceding November 30, 2024 (the \u201cReference Date\u201d) is below the Conversion Price,\nthen the 2024 Convertible Note shall be converted into shares of New iLearningEngines Common Stock, together with a make whole\npayment equal to a number of additional Incentive Shares (rounded down to the nearest whole share) equal to (i) the Conversion Price,\ndivided by the Reference Price (as defined below), minus (ii) one (1) \u201cReference Price\u201d means the greater of (1) the VWAP of the New\niLearningEngines Common Stock over the ten (10) trading days immediately preceding the Reference Date and (ii) $1 00\nNotwithstanding the foregoing, the maximum number of shares issuable pursuant to the 2024 Convertible Notes shall not exceed\n10,000,000 Incentive Shares\n\nIn connection with the issuance of the 2024 Convertible Notes, on March 21, 2024, (i) Legacy iLearningEngines entered into a joinder\nto the Amended and Restated Registration Rights Agreement with each of the 2024 Convertible Note Investors, and (ii) the 2024\nConvertible Note Investors entered into subordination agreements in favor of any holder of senior debt, a form of which is attached\nhereto as Exhibit 10 31 and incorporated herein by reference\n\nA description of the 2024 Convertible Notes is included in Supplement No 3 under the heading \u201cRecent Developments 2024\nConvertible Notes\u201d, which is incorporated herein by reference\n\nSponsor Notes\n\nIn connection with the Closing, on April 16, 2024, the Sponsor elected to convert a portion of the principal owed into 460 384 shares A\ndescription of the Promissory Notes is included in the Proxy Statement/Prospectus in the section entitled \u201cCertain Arrowroot\nRelationships and Related Party Transactions Promissory Notes\u201d beginning on page 126 of the Proxy Statement/Prospectus, which\nis incorporated herein by reference\n\nThe securities issued in connection with the conversion of the Convertible Sponsor Notes and the 2024 Convertible Notes have not\n\nbeen registered under the Securities Act in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act\nand/or Rule 506(c) promulgated thereunder\n\n160\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 222 of 408\n\nForward Purchase Agreement\n\nOn April 26, 2023, the Company and Polar entered into the Forward Purchase Agreement, dated April 26, 2023 (the \u201c2023 Forward\nPurchase Agreement\u2019), pursuant to which the Company agreed to purchase in the aggregate, on the date that is one year after the\nClosing (the \u201cMaturity Date\u201d), subject to certain FPA Acceleration Events up to 2,500,000 shares of common stock then held by Polar\n\nsubject to certain conditions and purchase limits set forth in the 2023 Forward Purchase Agreement). On April 9, 2024, the Company\nand Polar entered into a letter agreement (\u201cLetter Agreement\u201d) to the 2023 Forward Purchase Agreement (as amended, the \u201cForward\nPurchase Agreement\u2019), pursuant to which the Company and Polar agreed to remove any obligations for Polar to purchase, and for the\nCompany to pay any prepayment amount relating to, the Private Shares (as defined in the 2023 Forward Purchase Agreement) in\nexchange for the Company\u2019s payment of approximately $0.2 million to Polar thereby reducing the aggregate number of shares of\nCommon Stock the Company could be required to purchase from Polar from 2,500,000 shares to 445,000 shares. Pursuant to the\nForward Purchase Agreement, at the Closing, (i) the Company paid approximately $10.67 per share (the \u201cFPA Redemption Price\u201d), or\n$4.7 million in the aggregate (the \u201cPrepayment Amount\u201d), in cash to Polar as a prepayment for the purchase of 445,000 shares of the\nCommon Stock of the Company held by Polar (the \u201cForward Purchase Shares\u201d), and (ii) Polar waived its redemption rights in\nconnection with the Business Combination. To date, Polar has received approximately $5.0 million in cash, consisting of $4.7 million\nof the Prepayment Amount and $0.2 pursuant to the Letter Agreement. The forward purchase will settle one year from the Closing, i.e.\nApril 16, 2025 (the \u201cMaturity Date\u201d), provided that the Maturity Date may be accelerated if the shares of the Common Stock of the\nCompany trade below $2.00 per share for 10 out of 30 days or the shares are delisted by Nasdaq. At the settlement of the Forward\nPurchase Agreement, if the per share price of the shares of the Common Stock has appreciated to a value in excess of the FPA\nRedemption Price upon settlement, then the Company and its stockholders would benefit from an opportunity to repurchase shares of\nthe Common Stock at a price less than the current trading price should Polar not exercise its right to termination all or a portion of the\nForward Purchase Agreement early. If the Forward Purchase Agreement is not terminated, then, on the Maturity Date, the Company\nwould be required to pay to Polar an amount in cash equal to $0.60 per share for each non-terminated Forward Purchase Shares, up to a\ntotal of $267,000 upon settlement of the forward purchase, which would take the price per share paid by the Company pursuant to the\nForward Purchase Agreement to $11.27 per share.\n\nThe transaction increased the liquidity available for trading in the Company\u2019s Common Stock because Polar agreed not to redeem the\nshares in connection with the completion of the Business Combination. If and to the extent that the per share price of the shares of the\nCompany\u2019s Common Stock does not increase in excess of the FPA Redemption Price upon settlement, then the cost of the arrangement\nfor the Company will be limited to the aggregate repayment amount. Polar may terminate the Forward Purchase Agreement with\nrespect to some or all of the Forward Purchase Shares prior to the Maturity Date, in which case, Polar will make a payment equal to the\nnumber of such terminated shares multiplied by the FPA Redemption Price. On the Maturity Date, if Polar has not terminated the\nForward Purchase Agreement in full, then the Company may be required to make a cash payment to Polar equal to the number of\nForward Purchase Shares (less any shares terminated prior to the Maturity Date) multiplied by $0.60. Among the reasons that the\nCompany entered into the Forward Purchase Agreement was to increase the liquidity available for trading in shares of the Company\u2019s\nCommon Stock at the Closing, potentially increase the amount of working capital available to the Company following the Closing,\nreduce the number of redemptions in connection with the Business Combination to help ensure that, following completion of the\nBusiness Combination, the Company\u2019s stockholder base would continue to comply with Nasdaq listing standards, including with\nrespect to the minimum number of round lot holders and aggregate market value of publicly held shares. See \u201cRisk Factors \u2014 We may\nbe required to repurchase up to 445,000 shares of Common Stock from the investors with whom we entered into the Forward Purchase\nAgreement in connection with the closing of the Business Combination, which would reduce the amount of cash available to us to fund\nour business.\u201d and \u201cRisk Factors \u2014 Other events may result in Polar having no payment obligations to the Company at settlement under\nthe Forward Purchase Agreement.\u201d for a discussion of the risks related to the Forward Purchase Agreement.\n\nThe description of the Forward Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the\nfull text of the Forward Purchase Agreement, a copy of which is filed as Exhibit 10.40 and 10.41 to the registration statement of which\nthis prospectus forms a part and are incorporated herein by reference.\n\nNon Redemption Agreement\n\nOn February 2, 2024, the Company entered into the Non-Redemption Agreement with Meteora to not redeem its shares of the\nCompany\u2019s Class A Common Stock at the Extension Special Meeting. Pursuant to the Non-Redemption Agreement, Meteora agreed\nnot to request redemption of 410,456 shares of Class A Common Stock in connection with the Extension Special Meeting. In\nconsideration of Meteora entering into the Non-Redemption Agreement, immediately following the closing of the Company\u2019s initial\nbusiness combination, Arrowroot agreed to forfeit 82,091 shares of Class B Common Stock, or 41,046 shares of Class B Common\nStock in the event the initial business combination was consummated in February 2024. Pursuant to the terms of the Non-Redemption\nAgreement, Arrowroot forfeited, and the Company issued, 82,091 shares of Common Stock to Meteora promptly following the\nconsummation of the Business Combination.\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 223 of 408\n\nDeferred Underwriting Fee\n\nOn March 27, 2024, Arrowroot and Cantor entered into the Fee Reduction Agreement, pursuant to which Cantor has agreed to forfeit\n$4.1 million of the deferred underwriting fees payable, resulting in a remainder of $6.0 million of deferred underwriting fees payable\n\nthe \u201cReduced Deferred Fee\u201d) by Arrowroot to Cantor subject to the Closing. The Reduced Deferred Fee shall be payable to Cantor in\nthe form of shares of New iLearningEngines Common Stock in an amount of shares equal to the greater of (i) $6.0 million, divided by\n$10.00 and (ii) the quotient obtained by dividing (x) $6.0 million by (y) the VWAP (as defined in the Fee Reduction Agreement) of\nNew iLearningEngines Common Stock over the seven (7) trading days immediately prior to the initial filing of the Resale Registration\nStatement (as defined in the Fee Reduction Agreement). Under the Fee Reduction Agreement, the combined company will be subject\nto, among others, certain obligations with respect to the filing of the resale registration statement and maintaining the continued\neffectiveness of the resale registration statement, and a failure of the combined company to discharge such obligations may result in the\nability of Cantor to require the combined company to pay the Reduced Deferred Fee in cash. The Fee Reduction Agreement only\napplies to the consummation of the Business Combination with iLearningEngines and no other potential business combinations that\nmay be contemplated or consummated by Arrowroot. In the event that Arrowroot does not consummate the Business Combination with\niLearningEngines, the original deferred fee shall become due and payable by Arrowroot to Cantor as originally set forth in the\nUnderwriting Agreement, upon the consummation of a business combination. The form of Fee Reduction Agreement is attached to this\nForm S-1 as Exhibit 10.35 and the terms of such agreement are incorporated herein by reference.\n\n161\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 224 of 408\n\nMizuho Fee Agreement\n\nOn June 5, 2020, Mizuho and iLearningEngines entered into the Mizuho Engagement Letter pursuant to which iLearningEngines\nengaged Mizuho as a financial advisor in connection with the Business Combination On March 27, 2024, the Company and Mizuho\namended the Mizuho Engagement Letter (the \u201cAmended Mizuho Engagement Letter\u2019), to provide that, in lieu of payment in cash of\nthe full amount of any advisory fees or other fees or expenses owed under the Mizuho Engagement Letter, the iLearningEngines shall\npay (or cause the combined company to pay) Mizuho the $7 5 million Mizuho Fee in cash or New iLearningEngines Shares, at the sole\ndiscretion of the combined company To date, the Company has paid approximately $1 1 million in cash to Mizuho If\niLearningEngines elects to pay the Mizuho Fee in New iLearningEngines Shares, then prior to the issuance of such shares,\niLearningEngines has agreed to register such shares on Form 8 3 or Form \u00a7 1 or any similar long form registration statement that may\nbe available at such time and to list such shares on the principal national securities exchange on which the New iLearningEngines\nShares are then listed and traded The form of the Amended Mizuho Engagement Letter is attached to this Form \u00a7 1 as Exhibit 10 36\nand the terms of such agreement are incorporated herein by reference\n\nBTIG Fee Agreement\n\nOn July 25, 2023, BTIG and Arrowroot entered into the BTIG Engagement Letter pursuant to which Arrowroot engaged BTIG as a\nfinancial advisor in connection with the Business Combination On March 27, 2024, the BTIG and Arrowroot amended the BTIG\nEngagement Letter (the \u201cBTIG Amendment\u201d), to provide that, in lieu of payment in cash of the full amount of any advisory fees or\nother fees and expenses owed under the BTIG Engagement Letter, Arrowroot will pay to BTIG $3 0 million in advisory fees (the\n\u201cBTIG Advisory Fee\u201d) and BTIG Expenses The BTIG Expenses will be paid in cash upon the consummation of the Business\nCombination The BTIG Advisory Fee will be payable to BTIG in the form of shares of New iLearningEngines Common Stock in an\namount of shares equal to the greater of (i) $3 0 million, divided by $10 00 and (ii) the quotient obtained by dividing (x) $3 0 million\nby (y) the VWAP (as defined in the BTIG Amendment) of New iLearningEngines Common Stock over the seven (7) trading days\nimmediately prior to the initial filing of the Resale Registration Statement (as defined in the BTIG Amendment) Under the BTIG\nAmendment, the combined company will be subject to, among others, certain obligations with respect to the filing of the resale\nregistration statement and maintaining the continued effectiveness of the resale registration statement, and a failure of the combined\ncompany to discharge such obligations may result in the ability of BTIG to require the combined company to pay the BTIG Advisory\nFee incash The form of the BTIG Amendment is attached to this Form \u00a7 1 as Exhibit 10 37 and the terms of such agreement are\nincorporated herein by reference\n\nCooley Fee Agreement\n\nOn October 20, 2020, Cooley and Arrowroot entered into the Cooley Engagement Letter pursuant to which Arrowroot engaged Cooley\nas a law firm in connection with the Business Combination On March 27, 2024, Cooley and Arrowroot amended the Cooley\nEngagement Letter (the \u201cFirst Cooley Amendment\u201d), to provide that, Arrowroot will pay to Cooley $2 0 million in law fees (the\n\u201cCooley Deferred Law Fee\u201d) in the form of a certain number of shares (the \u201cCooley Fee Shares\u201d) The Cooley Fee Shares will be\nissued in the form of shares of New iLearningEngines Common Stock in an amount of shares equal to the greater of (i) $2 0 million,\ndivided by $10 00 and (ii) the quotient obtained by dividing (x) $2 0 million by (y) the VWAP (as defined in the Cooley Amendment)\nof New iLearningEngines Common Stock over the seven (7) trading days immediately prior to the initial filing of the Resale\nRegistration Statement (as defined in the Cooley Amendment) On May 31, 2024, the parties amended the First Cooley Amendment\n(the \u201cSecond Cooley Amendment\u201d) to change the Cooley Deferred Law Fee from $2 0 million to $1 3 million Under the Cooley\nAmendment, the combined company will be subject to, among others, certain obligations with respect to the filing of the resale\nregistration statement and maintaining the continued effectiveness of the resale registration statement The form of the First Cooley\nAmendment is attached to this Form \u00a7 1 as Exhibit 10 38 and the terms of such agreement are incorporated herein by reference, and the\nSecond Cooley Amendment is attached to this Form \u00a7 1 as Exhibit 10 39 and the terms of such agreement are incorporated herein by\nreference\n\n162\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 225 of 408\n\nAccounting Treatment of the Business Combination\n\nThe Business Combination is being accounted for as a reverse recapitalization in accordance with GAAP as iLearningEngines has been\ndetermined to be the accounting acquirer Under this method of accounting, while Arrowroot is the legal acquirer, it is treated as the\n\u201cacquired\u201d company for financial reporting purposes Accordingly, the Business Combination is treated as the equivalent of\niLearningEngines issuing stock for the net assets of Arrowroot, accompanied by a recapitalization The net assets of Arrowroot are\nstated at historical cost, with no goodwill or other intangible assets recorded Operations prior to the Business Combination are those of\niLearningEngines\n\niLearningEngines has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances\n\ne The acquirer usually is the combining entity whose owners as a group retain or receive the largest portion of the voting rights\nin the combined entity iLearningEngines holds majority voting interest (i e , 50% or more voting interest):\n\ne The acquirer usually is the combining entity whose owners have the ability to elect or appoint or to remove a majority of the\nmembers of the governing body of the combined entity iLearningEngines\u2019 existing directors and individuals designated by, or\nrepresenting. iLearningEngines\u2019 existing stockholders will constitute at least three of the potential seven members of the initial\nNew iLearningEngines Board following the consummation of the Business Combination, whereas one member will be\ndesignated by Arrowroot and the remainder to be mutually agreed by iLearningEngines and Arrowroot, indicating\niLearningEngines\u2019 existing directors and individuals will have more influence on the board of directors than Arrowroot:\n\ne The acquirer usually is the combining entity whose former management dominates the management of the combined entity\nThe representatives of iLearningEngines in the board of directors dominates the management of the combined entity:\n\ne The acquirer usually is the combining entity whose relative size (measured in, for example, assets, revenues, or earnings), is\nsignificantly larger than that of the other combining entity or entities iLearningEngines is larger than Arrowroot based on\nbalance sheet composition as of March 31, 2024 as well as revenues and operating income Therefore, management\ndetermined that iLearningEngines\u2019 relative size and scope of business is larger than Arrowroot: and\n\ne@ New iLearningEngines will continue to operate under the iLearningEngines tradename and the headquarters of New\niLearningEngines will be iLearningEngines\u2019 existing headquarters and the business combination was initiated by\niLearningEngines\n\nOther factors were considered, including the purpose and intent of the Business Combination, noting that the preponderance of\nevidence as described above is indicative that iLearningEngines is the accounting acquirer in the Business Combination\n\nThe following summarizes the pro forma shares of common stock of the Post Combination Company outstanding immediately after the\nClosing of the Business Combination\n\nNo of\n\nShares %\nFormer iLearningEngines equity holders 109,684,738 81.3%\nFormer Arrowroot Class A common stockholders 638,977 0.5%\nConvertible Notes 11,551,784 8.6%\nWTI Term Loan Modification\u00ae 4.419.998 3.3%\nSponsor affiliates and certain current and former Arrowroot directors) 8.674.617 6.3%\nTotal shares of New iLearningEngines Common Stock outstanding at Closing 134,970,114 100.0%\n\n1) Excludes Convertible Notes held by affiliates of the Sponsor.\n\n2) Excludes 8,250,000 Private Warrants held by the Sponsor and includes 2,838,916 shares from conversion of Convertible Notes\nfrom Arrowroot Capital and 460,384 shares from conversion of Arrowroot Promissory Notes.\n\n3) Includes 1,019,999 shares subject to cancellation. If the Company repays the Term Loans on or before (i) April 15, 2024, then 90%\nof the Loan Restructuring Shares will be cancelled, (ii) May 1, 2024, then 80% of the Loan Restructuring Shares will be cancelled,\nand (iii) July 1, 2024, then 50% of the Loan Restructuring Shares will be cancelled.\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 226 of 408\n\nThe following unaudited pro forma condensed combined balance sheet as of March 31, 2024, the income statements for the three\nmonths ended March 31, 2024 and for the year ended December 31, 2023 are based on the historical financial statements of\niLearningEngines and Arrowroot The unaudited pro forma adjustments are based on information currently available, and assumptions\nand estimates underlying the unaudited pro forma adjustments are described in the accompanying notes Actual results may differ\nmaterially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information\n\n163\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nFiled 09/18/25\n\nPage 227 of 408\n\nUNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET\n\nASSETS\nCurrent assets\nCash\n\nAccounts receivable\nContract asset\nPrepaid expenses\nPrepaid income tax\nTotal Current assets\nNon current assets\nCash and investments held in trust account\n\nReceivable from Technology Partner\nOther assets\nDeferred tax assets\nDeferred transaction costs\nTotal Non current assets\nTotal Assets\n\nLIABILITIES\n\nCurrent liabilities\nTrade accounts payable\nAccrued expenses\n\nCurrent portion of long-term debt, net\n\nAs of March 31, 2024\n(Dollars in Thousands)\nAs of As of\nMarch 31, March 31,\n2024 2024\nArrowroot\nAcquisition Transaction\niLearningEngines Corp. Accounting\nInc. (Historical) (Historical) Adjustments\n$ 815 $ 27 $ 5 907\n(11,459)\n(4 992)\n(500)\n28,715\n82 904\n297\n93 61\n- 17 -\n84.109 105 17,671\n- 10.788 (5,907)\n(4,881)\n14,880 - -\n672 - 41\n5,248 - -\n6.882 (6,882)\n27.682 10,788 (17,629)\n$ 111,791 \u00a7$ 10,893 \u00a7$ 42\n$ 7,044 \u00a7$ - \u00a7$ (6,897)\n3,850 5,482 9,651\n(34)\n53\n26,026 - -\n\n164\n\nBmoope\n\nAs of\nMarch 31,\n2024\n\nPro Forma\n\nCombined\n\n$ 18 513\n\n82 904\n297\n\n154\n\n17\n101,885\n\n14.880\n\n26,026\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 228 of 408\n\nUNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET\n\nAs of March 31, 2024\n(Dollars in Thousands)\nAs of As of As of\nMarch 31, March 31, March 31,\n2024 2024 2024\nArrowroot\nAcquisition Transaction\niLearningEngines Corp. Accounting Pro Forma\nInc. (Historical) (Historical) Adjustments Combined\nContract liability 1,447 1,447\nPayroll taxes payable 3,037 3,037\nLoan restructuring 2.813 2,813\nOther current liabilities 139 139\nExcise tax payable 2,473 2,473\nPromissory note related party 2,230 (2230) e\nForward purchase agreement liability 1,500 (1233) ec 267\nConvertible promissory note related party - 2.780 (2.780) f -\nTotal Current liabilities 44.356 14.465 (3,470) 55,351\nNon Current liabilities\nConvertible notes 37,712 - (37,012) d -\n(700) m\nWarrant liability 26,988 4.073 (2.588) g 1,485\n(26.988) nm\nPayable to Technology Partner 49.789 - - 49.789\nOther non-current liabilities 63 - - 63\nDeferred underwriting fee payable - 6.000 10,719 b 16,719\nTotal Non Current liabilities 114,552 10.073 (56 569) 68,056\nTotal Liabilities 158,908 24,538 (60,039) 123,407\nCommitments and Contingencies\nClass A common stock subject to possible redemption, $\n0.0001 par value - 10,788 (5,907) h -\n(4.881) o\nTotal Commitments and Contingencies - 10,788 (10,788) -\nEQUITY\nShareholder's (deficit) equity -\nCommon Shares: $ 0.0001 par value 10 - 1 i 13\n\n165\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nFiled 09/18/25\n\nPage 229 of 408\n\nUNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET\n\nClass B common stock, $ 0 0001 par value\n\nAdditional paid in capital\n\nPrepaid Forward Purchase Agreement\nAccumulated deficit\n\nTotal Shareholder's (deficit) equity\nTotal Equity\nTotal Liability and Equity\n\nSee accompanying notes to unaudited pro forma condensed combined financial information.\n\nAs of March 31, 2024\n(Dollars in Thousands)\nAs of As of\nMarch 31, March 31,\n2024 2024\nArrowroot\nAcquisition Transaction\niLearningEngines Corp. Accounting\nInc. (Historical) (Historical) Adjustments\n1\n1\n1 (1)\n36 384 411 (28,409)\n2,280\n2,230\n17,400\n2.588\n5,907\n(24,845)\n(1)\n26,381\n29,414\n26,988\n(4,745)\n(83 511) (24,845) (3,364)\n34\n933\n19,612\n24,845\n(26,381)\n(47,117) (24.433) 70,869\n(47,117) (24,433) 70,869\n$ 111,791 \u00a7 10,893 $ 42\nSS\n\nAs of\nMarch 31,\n2024\nPro Forma\nCombined\nk\nm\ni\nb 96.728\nf\ne\nd\ns\nh\nj\nk\n1\nm\nn\nc (4.745)\nb (92,677)\ne\nc\nd\nj\n1\n(681)\n(681)\n$ 122,726\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25\n\nPage 230 of 408\n\nUNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATION\nFor the three months ended March 31, 2024\n\n(Dollars in Thousands)\nFor the For the\nFor the Period Period\nPeriod ended ended ended\nMarch 31, March 31, March 31,\n2024 2024 2024\nArrowroot\nAcquisition Transaction\niLearningEngines Corp. Accounting Pro Forma\nInc. (Historical) (Historical) Adjustments Combined\nRevenue $ 124,935 $ $ $ 124,935\nCost of revenue 38,714 - - 38,714\nGross profit 86,221 - - 86,221\nOperating expenses\nSelling. general. and administrative expenses 41,223 1,545 (60) aa 43,251\n543. bb\nResearch and development expenses 37,099 37,099\nTotal Operating expenses 78,322 1,545 483 80,350\nOperating income (loss) 7,899 (1,545) (483) 5,871\nInterest expense (1,986) (34) 34 ee (625)\n1,361 dd\nChange in fair value of warrant liability (15,118) (2,263) 1.438 ff (825)\n15,118 = gg\nChange in fair value of convertible notes (5,465) 5.465 hh\nLoss on extinguishment (10,041) (10,041)\nForeign exchange loss (2) (2)\nReduction of Deferred Underwriting Fee 185 185\nInterest earned on cash and investments held in Trust\nAccount 233 (233) iti\nNon redemption consideration - (763) 763 +kk -\nNet loss before income tax expense (24,713) (4,187) 23,463 (5,437)\nIncome tax (expense) benefit (1,222) (49) (153) oj (1.424)\nNet loss $ (25,935) $ (4,236) $ 23,310 $ (6,861)\nNet loss per common share - basic and diluted $ (0.27) - $ (0.05)\nWeighted average common shares outstanding - basic and\ndiluted 95,782,605 - 133,950,115\nNet loss per share, Class A common stock - basic and\ndiluted $ (0.44) -\nWeighted average shares outstanding of Class A common\nstock - basic and diluted 2,373,472 -\nNet loss per share, Class B common stock - basic and\ndiluted $ (0.44) -\nWeighted average shares outstanding of Class B common\nstock - basic and diluted 7,187,500 -\n\nSee accompanying notes to unaudited pro forma condensed combined financial information.\n\n167\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nFiled 09/18/25\n\nPage 231 of 408\n\nUNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATION\nFor the year ended December 31, 2023\n\n(Dollars in Thousands)\nFor the\nFor the Year ended\nYear ended December\nDecember 31, 31;\n2023 2023\nArrowroot\nAcquisition Transaction\niLearningEngines Corp. Accounting\nInc. (Historical) (Historical) Adjustments\nRevenue $ 420,582 $ $\nCost of revenue 132,154 - -\nGross profit 288,428 - -\nOperating expenses\nSelling. general. and administrative expenses 140,897 5.488 240)\n33,588\n1,124\nResearch and development expenses 128.544\nTotal Operating expenses 269,441 5,488 34,472\nOperating income (loss) 18,987 (5,488) (34,472)\nInterest expense (6,274) (89) 89\n4,612\nChange in fair value of warrant liability (771) (1.700) 1,080\n771\nChange in fair value of convertible notes (14,147) 14,147\nChange in fair value of forward purchase agreement (1.500) 986\nInterest earned on cash and investments held in Trust\nAccount 3,493 (3.493)\nOther income (45) - -\nNet loss before income tax (expense) benefit (2,250) (5,284) (16,280)\nIncome tax (expense) benefit (2,157) (565) 2,187\n53\nNet loss $ (4,407) $ (5,849) $ (14,040)\nNet loss per common share - basic and diluted $ (0.05) -\nWeighted average common shares outstanding - basic and\ndiluted 95,782,605 -\nNet loss per share, Class A common stock - basic and\ndiluted $ (0.37) -\nWeighted average shares outstanding of Class A common\nstock - basic and diluted 8,574,195 -\nNet loss per share, Class B common stock - basic and\ndiluted $ (0.37) -\nWeighted average shares outstanding of Class B common\nstock - basic and diluted 7,187,500 -\n\nSee accompanying notes to unaudited pro forma condensed combined financial information.\n\n168\n\naa\nbb\nce\n\nFor the\nYear ended\nDecember\n31,\n2023\n\nPro Forma\n\nCombined\n\n$ 420,582\n132,154\n\n288,428\n\n180,857\n\n128.544\n\n309.401\n\n(20,973)\n(1.662)\n\n(620)\n\n(514)\n\n(45)\n(23,814)\n(481)\n\n$_ 24295)\n$ (0.18)\n\n133,950.115\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 232 of 408\n\nAmended Disclosure Regarding Notes to Unaudited Pro Forma Condensed Combined Financial Information\nNote 1 Basis of Presentation\n\nThe Business Combination is being accounted for as a reverse recapitalization in accordance with GAAP as iLearningEngines has been\ndetermined to be the accounting acquirer, primarily due to the fact that iLearningEngines will control New iLearningEngines Under\nthis method of accounting, while Arrowroot is the legal acquirer, it is treated as the \u201cacquired\u201d company for financial reporting\npurposes Accordingly. the Business Combination is treated as the equivalent of iLearningEngines issuing stock for the net assets of\nArrowroot, accompanied by a recapitalization The net assets of Arrowroot are stated at historical cost, with no goodwill or other\nintangible assets recorded Operations prior to the Business Combination are those of iLearningEngines\n\nThe following unaudited pro forma condensed combined balance sheet as of March 31, 2024, assumes that the Business Combination\noccurred on March 31, 2024 The unaudited pro forma condensed combined statement of operations for the three months ended March\n31, 2024 and the audited pro forma condensed combined statement of operations year ended December 31, 2023 present pro forma\neffect to the Business Combination as if it had been completed on January 1, 2023\n\nThe unaudited pro forma condensed combined balance sheet as of March 31, 2024 and unaudited pro forma condensed combined\nstatement of operations for the three months ended March 31, 2024 and for the year ended December 31, 2023 have been prepared\nusing. and should be read in conjunction with, the following\n\ne iLearningEngines\u2019 unaudited condensed consolidated balance sheet as of March 31, 2024 and the related notes as of March 31,\n2024, included elsewhere in this Form S 1\n\ne Arrowroot\u2019s unaudited condensed consolidated balance sheet as of March 31, 2024 and the related notes as of March 31, 2024.\nincorporated by reference elsewhere in this Form \u00a7 1, refer to the Arrowroot\u2019s 10 Q filed on May 16, 2024\n\ne iLearningEngines\u2019 unaudited condensed consolidated statement of operations for the three months ended March 31. 2024 and\naudited consolidated statement of operations for the year ended December 31, 2023 and the related notes, included elsewhere\nin this Form \u00a7 1\n\ne Arrowroot\u2019s unaudited condensed statement of operations for the three months ended March 31, 2024 and audited\nconsolidated statement of operations for the year ended December 31, 2023 and the related notes, incorporated by reference\nelsewhere in this Form S 1, refer to the Arrowroot\u2019s 10 K filed on April 1, 2024\n\nManagement has made significant estimates and assumptions in its determination of the pro forma adjustments As the unaudited pro\nforma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded\nmay differ materially from the information presented\n\nThe unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating\nefficiencies, tax savings or cost savings that may be associated with the Business Combination\n\nThe unaudited condensed pro forma adjustments. which are described in the accompanying notes, may be revised as additional\ninformation becomes available and is evaluated Therefore, it is likely that the actual adjustments will differ from the pro forma\nadjustments, and it is possible the difference may be material New iLearningEngines believes that its assumptions and methodologies\nprovide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to\nmanagement at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the\nunaudited pro forma condensed combined financial information\n\nThe pro forma above reflect the basis the minimum cash condition has been waived as of the Closing Date\n\n169\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 233 of 408\n\nNote 2 Accounting Policies\n\nUpon consummation of the Business Combination, management will perform a comprehensive review of the two entities\u2019 accounting\npolicies As a result of the review, management may identify differences between the accounting policies of the two entities which,\nwhen conformed, could have a material impact on the financial statements of New iLearningEngines Based on its initial analysis,\nmanagement did not identify any differences that would have a material impact on the unaudited pro forma condensed combined\nfinancial information As a result, the unaudited pro forma condensed combined financial information does not assume any differences\nin accounting policies\n\nNote 3 Adjustments to Unaudited Pro Forma Condensed Combined Financial Information\n\nThe unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business\nCombination and has been prepared for informational purposes only\n\nThe following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of\nRegulation S X as amended by the final rule, Release No 33 10786 \u201cAmendments to Financial Disclosures about Acquired and\nDisposed Businesses \u201d Release No 33 10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict\nthe accounting for the transaction (\u201cTransaction Accounting Adjustments\u201d) and present the reasonably estimable synergies and other\ntransaction effects that have occurred or are reasonably expected to occur (\u201cManagement\u2019s Adjustments\u201d) New iLearningEngines has\nelected not to present Management\u2019s Adjustments and will only be presenting Transaction Accounting Adjustments in the following\nunaudited pro forma condensed combined financial information\n\nThe pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had New\niLearningEngines filed consolidated income tax return during the periods presented\n\nThe adjustments included in the unaudited pro forma condensed combined balance sheet as of March 31, 2024, are as follows\n\n(a) Reflects the reclassification of $5 9 million of cash and cash equivalents held in the Trust Account at the balance sheet date\nthat becomes available to fund the Business Combination\n\n(b) Represents incurred and estimated transaction costs inclusive of advisory, banking, printing, legal and accounting fees as\nfollows (1) $11 5 million net cash paid at Closing, (2) settlement of $6 9 million deferred transaction cost at Closing, (3)\nsettlement of $6 9 million accounts payable paid at Closing, (4) $9 6 million net accrued expenses consisting of $11 4 million\nnew transaction costs not paid at Closing, $1 7 million historical accrued transaction costs paid, (5) $28 4 million equity\nissuance costs, (6) $3 3 million transaction costs were expensed, (7) $10 7 million in fee equitization payable and (8) $0 1\nmillion in other assets related to transaction cost refunds by iLearningEngines\n\n(c) Represents changes due to Polar\u2019s Forward Purchase Agreement as follows (1) $5 0 million of cash prepayment amount to\nPolar consisting of (a) $4 7 million to prepay the forward purchase agreement and (b) $0 2 million to amend the forward\npurchase agreement, (2) recognition of $0 1 million from 1% excise tax liability, and (3) consisting of (a) $4 7 million to\nprepay the forward purchase agreement and (b) $0 2 million to amend the forward purchase agreement consisting of (a)\nelimination of $1 5 million historic prepaid forward purchase liability recorded by ARRW and (b) recognition of $0 3 million\nrelated to the derivative liability\n\n(d) Represents conversion of the 2023 Convertible Notes to 4,971,076 shares of New iLearningEngines Common Stock and a\nreversal of change in fair value of Convertible Notes of $19 6 million Total outstanding principal amount of $17 4 million,\nmultiplied by 2 75, and estimated accrued interest expense of $1 9 million at Closing are convertible into New\niLearningEngines Common Stock at $10 00 per share\n\n170\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 234 of 408\n\n(e) Represents conversion of Arrowroot\u2019s $0 5 million Second Promissory Note, $1 3 million Fourth Promissory Note, and an\nadditional $0 5 million Third Promissory Note, and, into New iLearningEngines Common Stock at $10 00 per share\nNotwithstanding the original terms the Promissory Notes, Arrowroot and iLearningEngines have agreed to settle the\nPromissory Notes (including those in adjustment (g) through a combination of 460,384 shares of New iLearningEngines\nCommon Stock issued at close and a $0 5 million cash payment\n\n(f) Represents (1) conversion of Arrowroot\u2019s $1 5 million First Promissory Note and $1 3 million Third Promissory Note draw\ninto New iLearningEngines Common Stock at $10 00 per share and (2) accrued expense of $0 5 million deferred payment of\npromissory notes Notwithstanding the original terms the Promissory Notes, Arrowroot and iLearningEngines have agreed to\nsettle the Promissory Notes (including those in adjustment (g) through a combination of 460 384 shares of New\niLearningEngines Common Stock issued at close and a $0 5 million cash payment\n\n(g) Represents the reclassification of Arrowroot\u2019s Public Warrants from liability to equity classification upon Closing\n(h) Represents the reclassification of Arrowroot Class A Common Stock subject to a redemption to permanent equity\n\n(i) Represents the reclassification of Arrowroot Class B Common Stock to New iLearningEngines Common Stock in conjunction\nwith the Business Combination\n\n(j) Reflects the reclassification of Arrowroot historical accumulated deficit to additional paid in capital in connection with the\nconsummation of the Business Combination\n\n(k) Reflects the conversion of shares of iLearningEngines Common Stock of 95,782,605, shares of iLearningEngines Restricted\nStock of 40 243,678, iLearningEngines RSUs of 7,138,438, and In2vate, LLC\u2019s deferred consideration of 34,030 shares\niLearningEngines Common Stock to New iLearningEngines Common Stock at a conversion rate of 0 80615 The New\niLearningEngines Common Stock is issued to the shareholders in accordance with the Merger Consideration upon the Closing\nof the Business Combination\n\n(1) Reflects the balance sheet adjustment of the stock based compensation charge related to 360,290 shares of iLearningEngines\nRestricted Stock and 7,401,061 iLearningEngines RSUs that are vested upon the Closing of the Business Combination The\nshares of New iLearningEngines Common Stock related to those RSUs will be issued at a subsequent date\n\n(m) Represents the issuance and conversion of the 2024 Convertible Notes to 8,089 532 shares of New iLearningEngines Common\nStock Total outstanding principal amount at transaction date was $29 4 million multiplied by 2 75 at Closing to determine\nnumber of New iLearningEngines Common Stock at $10 00 per share\n\n(n) Represents the amendment to the Venture Lending & Leasing [X, Inc loan documents and settlement of the warrant liability\nand loan restricting shares in New iLearningEngines Common Stock\n\n(0) Reflects the public shares redemption of 460,144 of Arrowroot for aggregate redemption payments of $4 9 million allocated to\nNew iLearningEngines Common Stock and additional paid in capital using par value of $0 0001 per share at a redemption\n\nprice of $10 61 per share\n\nThe pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the three months\nended March 31, 2024 and for the year ended December 31, 2023, are as follows\n\n(aa) Reflects the elimination of the Arrowroot administrative service fee paid to the Sponsor that will cease upon the close of the\nbusiness combination\n\n171\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 235 of 408\n\n(bb) Reflects incremental stock based compensation expense related to shares of iLearningEngines Restricted Stock and\niLearningEngines RSUs 32,151,912 shares of iLearningEngines Restricted Stock issued to the founders will vest over ten\nyears starting the Closing Date, 360,290 shares of iLearningEngines Restricted Stock issued to a former employee are vested\nat the Closing Date, 1 200,000 units of New iLearningEngines RSUs, and 7,138,438 units of iLearningEngines RSUs are\nvested over four years with one year cliff starting the employee employment date, of which 7,040,771 and 97,667 units will\nbe vested and unvested as of the Closing Date, respectively The compensation charge is reflected as if the shares of\nrestricted stock and RSUs were vested as of January 1, 2023, the date the Business Combination occurred for purposes of\nthe unaudited pro forma condensed combined statement of operations $26 4 million is expensed as a day one expense for\nshares vested upon the Closing Date, $0 5 million and $7 2 million is expensed for the shares vested over the pro forma\nperiod for three months ended March 31, 2024 and year ended December 31, 2023, respectively\n\n(cc) Reflects the total transaction costs incurred and recorded as an expense in relation to the Business Combination Transaction\ncosts are reflected as if incurred on January 1, 2023, the date the Business Combination occurred for the purposes of the\nunaudited pro forma condensed combined statement of operations Refer to balance sheet adjustment (b)\n\n(dd) Represents an adjustment to eliminate interest expense after giving effect to the extinguishment of term loan at closing as if\nit had occurred on January 1, 2023 Refer to balance sheet adjustment (n)\n\n(ec) Reflects the elimination of interest expense accrued on Promissory Notes converted to New iLearningEngines Common\nStock at Closing Refer to balance sheet adjustment (ec)\n\n(ff) Reflects the elimination of change in fair value of warrant liability related to Arrowroot\u2019s Public Warrants, which are\nreclassified to equity from liability classification upon Closing Refer to balance sheet adjustment (g) Arrowroot\u2019s Private\nWarrants will stay liability classified\n\n(gg) Reflects the elimination of change in fair value of warrant liability related to 1LearningEngines\u2019 Warrants, which are\nexchanged for New iLearningEngines Common Stock\n\n(hh) Reflects the elimination of change in fair value of Convertible Notes that are converted into New iLearningEngines\nCommon Stock upon Closing Refer to balance sheet adjustment (d)\n\nGi) Reflects the elimination of interest income on the cash and investments held in Trust Account\n\n(jj) Reflects the estimated income tax impact related to the pro forma adjustments based upon a blended statutory rate\nManagement is analyzing the tax accounting impacts of the transaction and adjustments in the pro forma only represent\nestimates which are subject to change\n\n(kk) Reflects the elimination of Arrowroot\u2019s historic non redemption consideration loss\n\n(ll) Reflects the (1) $0 2 million to amend the forward purchase agreement, (2) recognition of $0 1 million from 1% excise tax\nliability, and (3) $1 2 million reduction in forward purchase liability consisting of (a) elimination of $1 5 million prepaid\nforward purchase liability from exercise of the agreement and (b) recognition of $0 3 million related to the derivative\nliability Refer to balance sheet adjustment (c)\n\nNote 4 Pro Forma Loss per Share\n\nRepresents the net loss per share calculated using the shares issued in connection with the Business Combination, assuming the shares\nwere outstanding since January 1, 2023 As the Business Combination and related transactions are being reflected as if they had\noccurred as of January 1, 2023, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes\nthat the shares issuable relating to the Business Combination have been outstanding for the three months ended March 31, 2024 and for\nthe year ended December 31, 2023\n\nThree\nmonths Year ended\nended December\nMarch 31, 31,\n\n(in thousands, except share and per share data) 2024 2023\n\n\fPro forma net loss (6,861) $ (24,295)\nWeighted average shares outstanding, basic and diluted MG) 133,950,115 133,950,115\nNet loss per share attributable to common stockholders, basic and diluted $ (005) $ (0 18)\n\n(1) As the outstanding 14 374,975 shares of Public Warrants and 8 250,000 shares of Private Warrants are out of the money and\nincluding them would have an anti dilutive effect under the treasury stock method, they were excluded from the computation of\ndiluted loss per share\n\n(2) 32,151 912 shares of restricted stock and 6 954,620 RSUs will be outstanding for New iLearningEngines at Closing are excluded\nfrom the calculations as their inclusion would be anti dilutive\n\n(3) Exclude 1,019,999 shares subject to cancellation If the Company repays the Term Loans on or before (i) April 15, 2024, then 90%\nof the Loan Restructuring Shares will be cancelled, (ii) May 1, 2024, then 80% of the Loan Restructuring Shares will be cancelled,\nand (iii) July 1, 2024, then 50% of the Loan Restructuring Shares will be cancelled\n\n172\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 237 of 408\n\nINDEX TO FINANCIAL STATEMENTS\n\nARROWROOT ACQUISITION CORP\n\nUNAUDITED FINANCIAL STATEMENTS OF ILEARNINGENGINES, INC. (FORMERLY KNOWN AS\n\nARROWROOT ACQUISITION CORP.):\n\nCondensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023\n\nUnaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31,2024 and 2023\n\nUnaudited Condensed Consolidated Statements of Changes in Stockholders\u2019 Deficit for the Three Months Ended March\n31, 2024 and 2023\n\nUnaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023\n\nNotes to Unaudited Condensed Consolidated Financial Statements\n\nAUDITED FINANCIAL STATEMENTS OF ARROWROOT ACQUISITION CORP.:\n\nReport of Independent Registered Public Accounting Firm\n\nConsolidated Balance Sheets as of December 31. 2023 and 2022\n\nConsolidated Statements of Operations for the years ended December 31, 2023 and 2022\n\nConsolidated Statements of Changes in Stockholders\u2019 Deficit for the years ended December 31. 2023 and 2022\n\nConsolidated Statements of Cash Flows for the years ended December 31. 2023 and 2022\nNotes to Consolidated Financial Statements\n\nILEARNINGENGINES INC.\n\nUNAUDITED FINANCIAL STATEMENTS OF ILEARNINGENGINES HOLDINGS, INC. (FORMERLY\nKNOWN AS ILEARNINGENGINES INC.):\nCondensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023\n\nCondensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31. 2024 and 2023\nCondensed Consolidated Statements of Changes in Shareholders\u2019 Deficit (Unaudited) for the three months ended March\n\n31. 2024, and 2023\n\nCondensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31. 2024 and 2023\nNotes to Condensed Consolidated Financial Statements (Unaudited)\n\nAUDITED FINANCIAL STATEMENTS OF ILEARNINGENGINES, INC.:\n\nReport of Independent Registered Public Accounting Firm\n\nConsolidated Balance Sheets as of December 31. 2023 and 2022\n\nConsolidated Statements of Operations for the years ended December 31, 2023. 2022 and 2021\n\nConsolidated Statements of Changes in Shareholders\u2019 Deficit for the years ended December 31. 2023, 2022 and 2021\n\nConsolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021\nNotes to Consolidated Financial Statements\n\nPage\n\nF-2\nF-3\n\nF-4\nF-5\nF-6\n\nPage\n\nF-29\nF-30\nF-31\nF-32\nF-33\nF-34\n\nPage\n\nF-57\nF-58\n\nF-59\nF-60\nF-61\n\nPage\n\nF-76\nF-77\nF-78\nF-79\nF-80\nF-81\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 238 of 408\n\nILEARNINGENGINES INC\n(FORMERLY KNOWN AS ARROWROOT ACQUTISITION CORP )\nCONDENSED CONSOLIDATED BALANCE SHEETS\n\nMarch 31, December 31,\n\n2024 2023\nASSETS (unaudited)\nCurrent assets\nCash $ 26,757 $ 145,669\nPrepaid expenses 60,750 48.319\nPrepaid income tax 16,795 65,585\nTotal Current Assets 104,302 259,573\nCash and investments held in Trust Account 10,788,134 46,744,889\nTOTAL ASSETS $ 10,892,436 $ 47,004,462\nLIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND\nSTOCKHOLDERS\u2019 DEFICIT\nCurrent liabilities\nAccounts payable and accrued expenses $ 5,481,646 $ 4,099,162\nExcise tax payable 2,472,591 2,472,591\nPromissory note \u2014 related party 2,230,000 2,180,000\nForward purchase agreement liability 1,500,000 1,500,000\nConvertible promissory notes \u2014 related party 2.780.000 2,620,000\nTotal Current Liabilities 14,464,237 12,871,753\nDeferred underwriting fee payable 6,000,000 10,062,500\nWarrant liabilities 4,072,500 1,810,000\nTotal Liabilities 24,536,737 24,744,253\nCommitments and Contingencies\nClass A common stock subject to possible redemption, $0.0001 par value; 1,017,030 and 4,445,813\nshares issued and outstanding at approximately $10.61 and $10.51 per share redemption value as of\nMarch 31, 2024 and December 31, 2023, respectively 10,788,134 46,744,889\nStockholders\u2019 Deficit\nPreferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding as of\nMarch 31, 2024 and December 31, 2023 \u2014 \u2014\nClass A common stock, $0.0001 par value: 200,000,000 shares authorized, none issued and\noutstanding (excluding 1,017,030 and 4,445,813 subject to possible redemption), respectively, as of\nMarch 31, 2024 and December 31, 2023 \u2014 \u2014\nClass B common stock, $0.0001 par value; 20,000,000 shares authorized; 7,187.500 shares issued and\noutstanding as of March 31, 2024 and December 31, 2023 719 719\nAdditional paid-in capital 410,772 \u2014\nAccumulated deficit (24,843.926) (24.485,399)\nTotal Stockholders\u2019 Deficit (24,432,435) (24,484,680)\nTOTAL LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE\nREDEMPTION AND STOCKHOLDERS\u2019 DEFICIT $ 10,892,436 $ 47,004,462\n\nThe accompanying notes are an integral part of the unaudited condensed consolidated financial statements\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP)\nCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS\n(UNAUDITED)\n\nGeneral and administrative expenses\nLoss from operations\n\nOther (loss) income:\nChange in fair value of warrant liabilities\nGain from forgiveness of deferred underwriting commissions\nNon-redemption consideration\nInterest Expense - Promissory Note\nInterest earned on cash and investments held in Trust Account\n\nTotal other (loss) income, net\n\nLoss before provision for income taxes\nProvision for income taxes\n\nNet loss\n\nWeighted average shares outstanding. Class A common stock\nBasic and diluted net loss per share, Class A common stock\nWeighted average shares outstanding. Class B common stock\n\nBasic and diluted net loss per share, Class B common stock\n\nFiled 09/18/25\n\nPage 239 of 408\n\nFor The Three Months\nEnded\nMarch 31,\n\n2023\n\n1,545,279 $ 828.626\n\n(828,626)\n\n(2,610,000)\n\n(1,238,744)\n(455,948)\n\n$ (4,236,183) $ (1,694,692)\n\n21.188.697\n\n$ (0.06)\n\n7,187,500\n\n(0.44) $ (0.06)\n\nThe accompanying notes are an integral part of the unaudited condensed consolidated financial statements.\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 240 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP)\nCONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS\u2019 DEFICIT\n(UNAUDITED)\n\nFOR THE THREE MONTHS ENDED MARCH 31, 2024\n\nClass A Class B Additional Total\nCommon Stock Common Stock Paid in Accumulated Stockholders\u2019\nShares Amount Shares Amount Capital Deficit Deficit\n\nBalance \u2014 January 1, 2024\n\n(audited) \u2014 $ _\u2014 7,187,500 $ 719 \u00a7$ \u2014 \u00a7 (24,485,399) $ (24,484,680)\nAccretion of Class A\n\ncommon stock subject to\n\npossible redemption \u2014 \u2014 \u2014 \u2014 (352,674) \u2014 (352,674)\nReduction of Deferred\n\nUnderwriting Fee \u2014 \u2014 \u2014 \u2014 \u2014 3,877,656 3,877,656\nConsideration for non-\n\nredemption agreement \u2014 \u2014 \u2014 \u2014 763,446 \u2014 763,446\nNet loss \u2014_ \u2014 \u2014 \u2014 \u2014 (4.236.183) (4.236.183)\nBalance \u2014 March 31, 2024\n\n(unaudited) $ 7,187,500 $ 719 $ 410,772 $ (24,843,926) $ (24,432,435)\n\nFOR THE THREE MONTHS ENDED MARCH 31, 2023\n\nClass B Additional Total\nClass A Common Stock Common Stock Paid-in Accumulated Stockholders\u2019\nShares Amount Shares Amount Capital Deficit Deficit\n\nBalance \u2014 January 1, 2023\n\n(audited) \u2014 \u00a7$ \u2014 7,187,500 $ 719 $ \u2014 \u00a7$ (12,477,730) $ (12,477,011)\nAccretion of Class A\n\ncommon Stock Subject to\n\nRedemption \u2014 _ _ \u2014 \u2014 (2,355,234) (2,355,234)\nNet loss ws \u2014 \u2014 \u2014_ \u2014 (1,694,692) (1,694,692)\nBalance March 31, 2023\n\n(unaudited) \u2014 \u00a7 \u2014 7,187,500 $ 719 $ \u2014 \u00a7$ (16,527,656) $ (16,526,937)\n\nee\n\nThe accompanying notes are an integral part of the unaudited condensed consolidated financial statements.\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25\n\nILEARNINGENGINES, INC\n\n(FORMERLY KNOWN AS ARROWROOT ACQUTISITION CORP )\nCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS\n\n(UNAUDITED)\n\nCash Flows from Operating Activities:\nNet loss\nAdjustments to reconcile net loss to net cash used in operating activities:\nReduction of Deferred Underwriting Fee\nNon-redemption consideration\nInterest earned on investments held in Trust Account\nChange in fair value of warrant liabilities\nChanges in operating assets and liabilities:\nPrepaid expenses\nPrepaid income taxes\nAccrued expenses\nIncome tax payable\n\nNet cash used in operating activities\n\nCash Flows from Investing Activities:\n\nInvestment of cash in Trust Account\n\nCash withdrawn from Trust Account for payment of franchise tax obligations\nCash withdrawn from Trust Account in connection with redemptions\n\nNet cash provided by investing activities\n\nCash Flows from Financing Activities:\n\nProceeds from promissory note - related party\n\nProceeds from non-convertible promissory note \u2014 related party\nProceeds from convertible promissory note \u2014 related party\nRedemption of common stock\n\nNet cash used in financing activities\n\nNet Change in Cash\nCash Beginning of the period\n\nCash \u2014 End of the period\n\nNon Cash investing and financing activities\nReduction of deferred underwriting fees\n\nNon-redemption consideration\n\nSupplementary cash flow information:\nCash paid for income taxes\n\nPage 241 of 408\n\nFor the Three Months\nEnded\nMarch 31,\n\n2024\n\n2023\n\n$ (4,236,183) $ (1,694,692)\n\n(184,844) \u2014\n763,446 \u2014\n(232.724) (2,199,882)\n2.262.500 2,610,000\n(12.431) (67,799)\n48,790 \u2014\n1,382,484 438,394\n\n= 455,948\n(208,962) (458,031)\n(160,000) (640,000)\n40,050 40,050\n36,309,429 247,259,068\n36,189,479 246,659,118\n50,000 \u2014\n\n\u2014 1,140,000\n\n160,000 \u2014\n(36,309,429) (247 259,068)\n(36,099,429) (246,119,068)\n(118,912) 82,019\n145,669 145,980\n\n$ 26,757 227,999\nSSE es\n$ 3,877,656 $ \u2014\nEe\n$ 763.446 $ \u2014\n$ 367,000\n\nThe accompanying notes are an integral part of the unaudited condensed consolidated financial statements.\n\nF-5\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 242 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nNOTE 1 DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS\n\niLearningEngines, Inc formerly known as Arrowroot Acquisition Corp (the \u201cCompany\u201d) is a blank check company incorporated in\nDelaware on November 5, 2020 The Company was formed for the purpose of effecting a merger, capital stock exchange, asset\nacquisition, stock purchase, reorganization or similar business combination with one or more businesses (the \u201cBusiness Combination\u2019)\n\nThe Company is not limited to a particular industry or sector for purposes of consummating a Business Combination The Company is\nan early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and\nemerging growth companies\n\nAs of March 31, 2024, the Company had not commenced any operations All activity through March 31, 2024 relates to the Company\u2019s\nformation, the initial public offering (\u201cInitial Public Offering\u201d), which is described below, and identifying a target company for a\nBusiness Combination, including activities in connection with the Business Combination (as defined and discussed below) The\nCompany will not generate any operating revenues until after the completion of a Business Combination, at the earliest The Company\ngenerates non operating income in the form of interest income from the cash held in the Trust Account (as defined below)\n\nFinancing\n\nThe registration statement for the Company\u2019s Initial Public Offering was declared effective on March 1, 2021 On March 4, 2021, the\nCompany consummated the Initial Public Offering of 28,750,000 units (the \u201cUnits\u201d and, with respect to the Class A common stock\nincluded in the Units sold, the \u201cPublic Shares\u201d), which includes the full exercise by the underwriter of its over allotment option in the\namount of 3,750,000 Units, at $10 00 per Unit, generating gross proceeds of $287 500,000\n\nSimultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 8,250,000 warrants (the \u201cPrivate\nPlacement Warrants\u201d) at a price of $1 00 per Private Placement Warrant in a private placement to Arrowroot Acquisition LLC (the\n\u201cSponsor\u2019), generating gross proceeds of $8 250,000\n\nTransaction costs amounted to $16 392,714, consisting of $5,750,000 in cash underwriting fees, net of reimbursements, $10,062 500 of\ndeferred underwriting fees and $580 214 of other offering costs\n\nTrust Account\n\nFollowing the closing of the Initial Public Offering on March 4, 2021, an amount of $287,500,000 ($10 00 per Unit) from the net\nproceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust\naccount (the \u201cTrust Account\u201d), located in the United States and has been invested only in U S government securities, within the\nmeaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the \u201cInvestment Company Act\u201d), with a\nmaturity of 185 days or less or in any open ended investment company that holds itself out as a money market fund selected by the\nCompany meeting the conditions of Rule 2a 7 of the Investment Company Act, as determined by the Company, until the earlier of (i)\nthe completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below\n\nF 6\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 243 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nOperations Prior to Business Combination with iLearningEngines Holdings Inc\n\nOn February 28, 2023, the Company\u2019s stockholders held a special meeting (the \u201cSpecial Meeting\u201d) and approved and adopted an\namendment to its Amended and Restated Certificate of Incorporation (the \u201cCertificate of Incorporation\u201d) to extend the period of time\nfor which the Company is required to consummate a Business Combination from March 4, 2023 (the \u201cOriginal Termination Date\u201d) to\nJuly 6, 2023 (the \u201cCharter Extension Date\u201d) and to allow the Company, without another stockholder vote, to elect to extend the date\n(the \u201cTermination Date\u201d) to consummate an initial business combination on a monthly basis for up to seven times by an additional one\nmonth each time after the Charter Extension Date, by resolution of the Company\u2019s board of directors (the \u201cBoard\u201d) if requested by the\nArrowroot Acquisition LLC (the \u201cSponsor\u2019), and upon five days\u2019 advance notice prior to the applicable Termination Date, until\nFebruary 4, 2024 (each, an \u201cAdditional Charter Extension Date\u201d) for a total of up to eleven months after the Original Termination Date,\nunless the closing of an initial Business Combination shall have occurred prior thereto (the \u201cExtension\u201d, such extension deadline, the\n\u201cExtension Date\u201d, and such proposal, the \u201cExtension Proposal\u201d) In connection with the Extension, shareholders holding 24 304,187\nshares of the Company\u2019s Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the\nCompany\u2019s Trust Account at a redemption price of approximately $10 17 per share As a result, following the Special Meeting,\napproximately $247 259,068 in cash was removed from the Trust Account to pay such holders\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note, which Extension Funds\nwere deposited into the Company\u2019s Trust Account for its public stockholders, on January 5, 2024 This deposit enables the Company to\nextend the date by which it must complete its initial business combination from January 6, 2024 to February 6, 2024 (the \u201cSeventh\nExtension\u201d) The Seventh Extension is the final of seven one month extensions permitted under the Company\u2019s Certificate of\nIncorporation and provides the Company with additional time to complete its initial business combination\n\nOn January 8, 2024, the Company received a notice (the \u201cAnnual Meeting Notice\u201d) from the Listing Qualifications Department of The\nNasdaq Stock Market LLC (\u201cNasdaq\u201d) stating that the Company failed to hold an annual meeting of stockholders within 12 months\nafter its fiscal year ended December 31, 2022, as required by Nasdaq Listing Rule 5620(a) In accordance with Nasdaq Listing Rule\n5810(c)(2)(G), the Company had 45 calendar days (or until February 22, 2024) to submit a plan to regain compliance and, if Nasdaq\naccepts the plan, Nasdaq may grant the Company up to 180 calendar days from its fiscal year end, or until June 28, 2024, to regain\ncompliance The Company submitted a plan to regain compliance on February 22, 2024 While the compliance plan was pending, the\nCompany\u2019s securities continued to trade on Nasdaq In connection with the closing of the Business Combination, Arrowroot\nAcquisition Corp (NASDAQ ARRW) changed its name to \u201ciLearningEngines, Inc \u201d and is listed on the NASDAQ under the new\nticker symbol \u201cAILE\u201d\n\nOn February 2, 2024, the Company held a special meeting of stockholders (the \u201cExtension Special Meeting\u201d) to approve an\namendment to the Company\u2019s Certificate of Incorporation, as amended, (the \u201cCharter Amendment\u201d), to extend the Termination Date\nfrom February 4, 2024 to March 6, 2024 (the \u201cInitial Subsequent Charter Extension Date\u201d) and to allow the Company, without another\nstockholder vote, to elect to extend the Termination Date to consummate an initial business combination on a monthly basis up to five\ntimes by an additional one month each time after the Initial Subsequent Charter Extension Date (the Initial Subsequent Charter\nExtension Date, as further extended by the Company, the \u201cSubsequent Extension Date\u201d), by resolution of the Board, if requested by the\nSponsor, and upon five days\u2019 advance notice prior to the applicable Termination Date, until August 6, 2024, unless the closing of an\ninitial business combination shall have occurred prior thereto (the \u201cSubsequent Extension Proposal\u201d) The stockholders of the Company\napproved the Subsequent Extension Proposal at the Extension Special Meeting and on February 2, 2024, the Company filed the Charter\nAmendment with the Delaware Secretary of State\n\nOn February 2, 2024, the Company entered into a Non Redemption Agreement (the \u201cNon Redemption Agreement\u201d) with a certain\npublic stockholder of the Company (the \u201cPublic Stockholder\u2019) eligible to redeem its shares of the Company\u2019s Class A common stock at\nthe Company\u2019s Extension Special Meeting Pursuant to the Non Redemption Agreement, the Public Stockholder agreed not to request\nredemption of 410,456 shares of Class A Common Stock (the \u201cNon Redeemed Shares\u201d) in connection with the Extension Special\nMeeting In consideration of the Public Stockholder entering into the Non Redemption Agreement, immediately following the closing\nof Arrowroot\u2019s initial business combination, the Sponsor agreed to forfeit 82,091 shares of Class B common stock (the \u201cClass B\nCommon Stock\u201d), or 41,046 shares of Class B Common Stock in the event the initial business combination is consummated in February\n2024, (\u201cForfeited Shares\u201d) Pursuant to the terms of the Non Redemption Agreement, Arrowroot agreed to issue to the Public\nStockholder and the Public Stockholder agreed to acquire from Arrowroot, a number of newly issued shares of common stock promptly\n\fCase 8:24-cv-02900-DKC. Document 90-2 Filed 09/18/25 Page. cot 408\n\nfollowing the consummation of Arrowroot's initial business combination As a result, the Company reco per share or\n$763,446 as an expense with a corresponding charge to additional paid in capital to recognize the fair value of the shares transferred\n\nIn connection with the vote to approve the Charter Amendment, the holders of 3,428,783 shares of Class A common stock properly\n\nexercised their right to redeem their shares (and did not withdraw their redemption) for cash at a redemption price of approximately\n$10 59 per share, for an aggregate redemption amount of $36 309,429 After the satisfaction of such redemptions, the balance in the\nCompany\u2019s Trust Account was approximately $10 77 million\n\nF7\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 245 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nBusiness Combination\n\nOn April 27, 2023, the Company (formerly known as Arrowroot Acquisition Corp ) entered into an Agreement and Plan of Merger and\nReorganization (the \u201cMerger Agreement\u201d) with ARAC Merger Sub, Inc , a Delaware corporation and a wholly owned subsidiary of\nArrowroot Acquisition Corp (\u201cMerger Sub\u201d), and iLearningEngines Inc , a Delaware corporation (\u201cLegacy iLearningEngines\u201d)\n\nThe Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, the following\ntransactions will occur (together with the other transactions contemplated by the Merger Agreement\n\n(i) atthe closing of the Business Combination (the \u201cClosing\u201d), in accordance with the Delaware General Corporation Law, as\namended (\u201c\u201cDGCL\u201d), Merger Sub will merge with and into Legacy iLearningEngines, the separate corporate existence of\nMerger Sub will cease and Legacy iLearningEngines will be the surviving corporation (the \u201cSurviving Corporation\u2019) and a\nwholly owned subsidiary of the Company (the \u201cMerger\u201d); and\n\n(ii) as a result of the Merger, among other things, the outstanding shares of common stock of iLearningEngines (other than shares\nsubject to Legacy Legacy iLearningEngines equity awards, treasury shares and dissenting shares) will be cancelled in\nexchange for the right to receive a number of shares of common stock of the Surviving Corporation equal to (x) the sum of (i)\nthe Base Purchase Price (as defined below), minus (ii) the dollar value of the Company Incentive Amount (as defined\nbelow), plus (iii) the aggregate exercise price of the Company Warrants (as defined in the Merger Agreement) that are issued\nand outstanding immediately prior to the Effective Time, minus (iv) the aggregate amount of Note Balance (as defined in the\nMerger Agreement) divided by (y) $10 00 The \u201cBase Purchase Price\u201d means an amount equal to $1 285,000,000 The\n\u201cCompany Incentive Amount\u201d means (x) the number of shares of the Company Class A Common Stock issuable to Legacy\niLearningEngines securityholders (excluding, for the avoidance of doubt, the holders of Company Convertible Notes) at the\nClosing which Legacy iLearningEngines and the Company agree, at least two (2) business days prior to the Closing, to issue\nto certain private placement investors and non redeeming stockholders (which amount will equal 82 03125% of all such\nshares issued to such investors and non redeeming stockholders, with the remainder being contributed by the\nSponsor), multiplied by (y) $10 00\n\nThe Board of Directors of the Company (the \u201cBoard\u201d) has (i) approved and declared advisable the Merger Agreement and the Business\nCombination and (ii) resolved to recommend approval of the Merger Agreement and related matters by the stockholders of the\nCompany\n\nThe Merger Agreement is subject to the satisfaction or waiver of certain customary closing conditions, including, among others, (i)\napproval of the Business Combination and related agreements and transactions by the respective shareholders of the Company and\nLegacy iLearningEngines, (ii) effectiveness of the registration statement on Form \u00a7S 4 to be filed by the Company in connection with\nthe Business Combination, (iii) expiration or termination of the waiting period under the Hart Scott Rodino Antitrust Improvements\nAct, (iv) the absence of any injunction, order, statute, rule, or regulation enjoining or prohibiting the consummation of the Merger, (v)\nthat the Company have at least $5,000,001 of net tangible assets upon Closing and (vi) receipt of approval for listing on Nasdaq the\nshares of common stock of the Surviving Corporation to be issued in connection with the Merger\n\nOther conditions to the Company\u2019s obligations to consummate the Merger include, among others, that as of the Closing, (i) Legacy\niLearningEngines shall have performed all covenants in all material respects and (11) no Company Material Adverse Effect (as defined\nin the Merger Agreement) shall have occurred between the date of the Merger Agreement and Closing\n\nOther conditions to Legacy iLearningEngines\u2019 obligations to consummate the Merger include, among others, that as of the Closing, (i)\nthe Company shall have performed all covenants in all material respects (ii) no Acquiror Material Adverse Effect (as defined in the\nMerger Agreement) shall have occurred between the date of the Merger Agreement and Closing and (iii) the amount of cash available\nin the Trust Account into which substantially all of the proceeds of the Company\u2019s initial public offering and private placement of its\nwarrants have been deposited for the benefit of its public shareholders, together with the proceeds of certain private placement\ninvestments in the Company or Legacy iLearningEngines prior to closing and subject to the deductions and conditions set forth in the\nMerger Agreement, including deductions for certain the Company transaction expenses, is at least equal to or greater than\n$100,000,000\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 246 of 408\n\nF 8\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 247 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nThe Merger Agreement contains additional covenants, including, among others, providing for (i) the parties to conduct their respective\nbusinesses in the ordinary course through the Closing, (ii) the parties to not solicit, initiate any negotiations or enter into any\nagreements for certain alternative transactions, (111) Legacy iLearningEngines to prepare and deliver to the Company certain audited\nand unaudited condensed consolidated financial statements of Legacy iLearningEngines, (iv) the Company to prepare and file a\nregistration statement on Form 8 4 and take certain other actions to obtain the requisite approval of the Company\u2019s stockholders of\ncertain proposals regarding the Business Combination and (v) the parties to use reasonable best efforts to obtain necessary approvals\nfrom governmental agencies\n\nOn April 16, 2024, Arrowroot Acquisition Corp (now known as iLearningEngines, Inc ), a Delaware corporation that is our\npredecessor, consummated the previously announced Business Combination pursuant to that certain Agreement and Plan of Merger and\nReorganization, dated as of April 27, 2023, by and among Arrowroot Acquisition Corp , ARAC Merger Sub, Inc (\u201cMerger Sub\u201d), and\nLegacy iLearningEngines Merger Sub merged with and into Legacy iLearningEngines with the separate corporate existence of Merger\nSub ceasing and Legacy iLearningEngines surviving the merger as a wholly owned subsidiary of the Company In connection with the\nclosing of the Business Combination, Arrowroot Acquisition Corp changed its name to iLearningEngines, Inc See the Form 8 K, filed\nwith the SEC on April 22, 2024, for additional information\n\nLiquidity and Going Concern\n\nOn December 29, 2021, the Company issued an unsecured convertible promissory note (the \u201cFirst Promissory Note\u201d) with the Sponsor\npursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount of $1,500,000 Upon issuance,\n$750,000 was drawn down on the note with an additional $200,000 drawn down on March 17, 2022 On April 21, 2022, the Company\ndrew down the remaining $550,000 pursuant to the terms of the First Promissory Note Following this drawdown, the full $1 500,000\navailable under the First Promissory Note was outstanding There are no remaining funds available under the First Promissory Note for\nfuture drawdowns As of March 31, 2024 and December 31, 2023, $1,500,000 were outstanding under this First Promissory Note\n\nThe First Promissory Note is subject to the Sponsor\u2019s approval and does not bear interest The principal balance of the note will be\npayable on the earliest to occur of (i) the date on which the Company consummates its initial Business Combination or (ii) the date that\nthe winding up of the Company is effective (such date, the \u201cMaturity Date\u201d) In the event the Company consummates its initial\nBusiness Combination, the Sponsor has the option on the Maturity Date to convert all or any portion of the principal outstanding under\nthe First Promissory Note into that number of warrants (\u201cWorking Capital Warrants\u201d) equal to the portion of the principal amount of\nthe First Promissory Note being converted divided by $1 00, rounded up to the nearest whole number The terms of the Working\nCapital Warrants, if any, would be identical to the terms of the private placement warrants issued by the Company at the time of its\ninitial public offering, as described in the prospectus for the initial public offering dated March 1, 2021 and filed with the SEC,\nincluding the transfer restrictions applicable thereto The First Promissory Note is subject to customary events of default, the\noccurrence of certain of which automatically triggers the unpaid principal balance of the First Promissory Note and all other sums\npayable with regard to the First Promissory Note becoming immediately due and payable\n\nOn February 23, 2023, the Company issued an unsecured promissory note in the principal amount of $500,000 in favor of the Sponsor\n(the \u201cSecond Promissory Note\u201d), which was funded in full by the Sponsor upon execution of the Second Promissory Note The Second\nPromissory Note is not convertible into Working Capital Warrants or any other security pursuant to its terms As of March 31, 2024 and\nDecember 31, 2023, the Company had $500,000 outstanding balance under this Second Promissory Note\n\nF 9\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 248 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nIn connection with the approval by the Company\u2019s stockholders of the Extension Date at the Special Meeting, the Sponsor issued to the\nCompany an unsecured promissory note that matures upon the Company closing its initial Business Combination (the \u201cThird\nPromissory Note\u201d) Following the Extension Proposal being approved, the Sponsor funded $640,000 of the Third Promissory Note\nPursuant to the terms of the Third Promissory Note, on each Additional Charter Extension Date, the Sponsor must fund the lesser of (a)\n$160,000 or (b) $0 04 for each public share that is not redeemed in connection with the Special Meeting for an aggregate deposit of up\nto the lesser of (x) $1,120,000 or (y) $0 28 for each public share that is not redeemed in connection with the Special Meeting (if all\nseven additional monthly extensions are exercised) As of March 31, 2024 and December 31, 2023, the Company had $480,000 and\n$1,600,000 outstanding balance under this Third Promissory Note, respectively Additionally, on January 5, 2024, the Company drew\ndown an additional $160,000 pursuant to the Third Promissory Note If the Company completes an initial Business Combination, the\nCompany will, at the option of the Sponsor, repay the amounts loaned under the Third Promissory Note or convert a portion or all of\nthe amounts loaned under such promissory note into warrants, which warrants will be identical to the private placement warrants issued\nin connection with the Company\u2019s initial public offering If the Company does not complete an initial Business Combination by the\nSubsequent Charter Extension Date, such promissory note will be repaid only from funds held outside of the Trust Account or will be\nforfeited, eliminated or otherwise forgiven\n\nOn June 13, 2023, the Company issued an unsecured promissory note (the \u201cFourth Promissory Note\u201d and together with the First\nPromissory Note, the Second Promissory Note and the Third Promissory Note, the \u201cPromissory Notes\u201d) in the principal amount of\n$2,000,000 to the Sponsor The Fourth Promissory Note bears interest at 15% per annum and matures upon closing of the Company\u2019s\ninitial Business Combination In the event that the Company does not consummate an initial Business Combination, the Fourth\nPromissory Note will be repaid only from funds held outside of the Trust Account or will be forfeited, eliminated or otherwise forgiven\nThe Fourth Promissory Note may be further drawn down from time to time prior to the Maturity Date upon request by the Company\nsubject to the Sponsor\u2019s approval The Fourth Promissory Note is subject to customary events of default, the occurrence of certain of\nwhich automatically triggers the unpaid principal balance of the Fourth Promissory Note and all other sums payable with regard to the\nFourth Promissory Note becoming immediately due and payable As of March 31, 2024 and December 31, 2023, the Company had a\n$750,000 and $1,200,000 principal outstanding under this Fourth Promissory Note, respectively An additional $50,000 was drawn on\nthe Fourth Promissory Note on March 11, 2024\n\nNotwithstanding the original terms of the Promissory Notes, the Company and Legacy iLearningEngines agreed, pursuant to the\nMerger Agreement, that if the Closing occurs, the Sponsor will have the option for the principal and interest outstanding under the\nPromissory Notes to be repaid in cash or convert into common stock of the Surviving Corporation at a price per share equal to $10 00\nper share at the Closing; provided, however, that to the extent the Acquiror Transaction Expenses (as defined in the Merger Agreement)\nexceed $30,000,000 then the Promissory Notes will be settled by the conversion of an amount equal to the lesser of (i) the principal and\ninterest outstanding under the Promissory Notes and (ii) the Excess Transaction Expenses (as defined in the Merger Agreement) into\ncommon stock of the Surviving Corporation at a price per share equal to $10 00 per share\n\nAs of March 31, 2024, the Company had $26,757 of cash held outside its Trust Account for use as working capital, $10,788,134 in cash\nheld in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith\nand working capital deficit of $14,359 935 As of March 31, 2024, $215 214 of the deposit in the Trust Account represented interest\nincome, which is available to pay the Company\u2019s tax obligations For the three months ended March 31, 2024, the Company withdrew\nan aggregate amount of $40,050 to pay income and franchise taxes and $36,309,429 in connection with redemption In order to finance\ntransaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company\u2019s\nofficers and directors may, but are not obligated to, provide the Company working capital loans, as defined below\n\nIn connection with the Company\u2019s assessment of going concern considerations in accordance with Financial Accounting Standards\nBoard (\u201cFASB\u201d) Accounting Standards Update (\u201cASU\u201d) 2014 15, \u201cDisclosures of Uncertainties about an Entity\u2019s Ability to Continue\nas a Going Concern,\u201d management has determined that as a result of the closing of the business combination, there are no conditions or\nevents that raise substantial doubt about the Company\u2019s ability to continue as a going concern, as such the going concern has been\nalleviated\n\nF 10\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 249 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nNOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\nBasis of Presentation\n\nThe accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting\nprinciples generally accepted in the United States of America (\u201cGAAP\u201d) for interim financial information and in accordance with the\ninstructions to Form 10 Q and Article 8 of Regulation S X of the SEC Certain information or footnote disclosures normally included\nin financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the\nSEC for interim financial reporting Accordingly, they do not include all the information and footnotes necessary for a complete\npresentation of financial position, results of operations, or cash flows In the opinion of management, the accompanying unaudited\ncondensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a\nfair presentation of the financial position, operating results and cash flows for the periods presented\n\nThe accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company\u2019s Annual\nReport on Form 10 K for the year ended December 31, 2023, as filed with the SEC on April 1, 2024 The interim results for the three\nmonths ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024\n\nPrinciples of Consolidation\n\nThe accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned\nsubsidiary All significant intercompany balances and transactions have been eliminated in consolidation\n\nEmerging Growth Company\n\nThe Company is an \u201cemerging growth company,\u201d as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our\nBusiness Startups Act of 2012 (the \u201cJOBS Act\u201d), and it may take advantage of certain exemptions from various reporting requirements\nthat are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required\nto comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes Oxley Act,\nreduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the\nrequirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute\npayments not previously approved\n\nFurther, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised\nfinancial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared\neffective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised\nfinancial accounting standards The JOBS Act provides that a company can elect to opt out of the extended transition period and\ncomply with the requirements that apply to non emerging growth companies but any such election to opt out is irrevocable The\nCompany has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has\ndifferent application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or\nrevised standard at the time private companies adopt the new or revised standard This may make comparison of the Company\u2019s\nunaudited condensed consolidated financial statements with another public company which is neither an emerging growth company nor\nan emerging growth company which has opted out of using the extended transition period difficult or impossible because of the\npotential differences in accounting standards used\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 250 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nUse of Estimates\n\nThe preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires the Company\u2019s\nmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent\nassets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and\nexpenses during the reporting periods\n\nMaking estimates requires management to exercise significant judgment It is at least reasonably possible that the estimate of the effect\nof a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements,\nwhich management considered in formulating its estimate, could change in the near term due to one or more future confirming events\nOne of the more significant accounting estimates included in these unaudited condensed consolidated financial statements is the\ndetermination of the fair value of the warrant liabilities Such estimates may be subject to change as more current information becomes\navailable and accordingly, the actual results could differ significantly from those estimates\n\nCash and Cash Equivalents\n\nThe Company considers all short term investments with an original maturity of three months or less when purchased to be cash\nequivalents The Company did not have any cash equivalents as March 31, 2024 and December 31, 2023\n\nCash and Investments Held in Trust Account\n\nPrior to the Special Meeting, the Company\u2019s portfolio of cash and investments held in Trust Account was comprised solely of U S\ngovernment securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or\nless, or investments in money market funds that invest in U S government securities, or a combination thereof The Company\u2019s\ninvestments held in the Trust Account were classified as trading securities Trading securities are presented on the unaudited condensed\nconsolidated balance sheets at fair value at the end of each reporting period Gains and losses resulting from the change in fair value of\nthese investments are included in interest earned on cash and investments held in Trust Account in the accompanying unaudited\ncondensed consolidated statements of operations The estimated fair values of investments held in the Trust Account are determined\nusing available market information In connection with the Special Meeting, the Company liquidated its portfolio of investments held\nin the Trust Account and converted it into cash held in the Trust Account\n\nOffering Costs\n\nOffering costs consisted of legal, accounting, underwriting fees and other costs incurred through the unaudited condensed consolidated\nbalance sheet date that are directly related to the Initial Public Offering Offering costs associated with warrant liabilities were expensed\nas incurred in the unaudited condensed consolidated statements of operations Offering costs associated with the Class A common stock\nissued were initially charged to temporary equity and then accreted to Class A common stock subject to possible redemption upon the\ncompletion of the Initial Public Offering Offering costs amounted to $16 392,714, of which $760,022 was allocated to the warrant\nliabilities and charged to the unaudited condensed consolidated statements of operations\n\nF 12\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 251 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUTISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nClass A Common Stock Subject to Possible Redemption\n\nThe Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting\nStandards Codification (\u201cASC\u201d) Topic 480, \u201cDistinguishing Liabilities from Equity \u201d Shares of Class A common stock subject to\nmandatory redemption are classified as a liability instrument and are measured at redemption value Conditionally redeemable common\nstock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption\nupon the occurrence of uncertain events not solely within the Company\u2019s control) is classified as temporary equity At all other times,\ncommon stock is classified as stockholders\u2019 deficit The Company\u2019s Class A common stock features certain redemption rights that are\nconsidered to be outside of the Company\u2019s control and subject to occurrence of uncertain future events Accordingly, Class A common\nstock subject to possible redemption is presented as temporary equity, outside of the stockholders\u2019 deficit section of the Company\u2019s\nunaudited condensed consolidated balance sheets\n\nThe Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable\ncommon stock to equal the redemption value at the end of each reporting period This method would view the end of the reporting\nperiod as if it were also the redemption date for the security Increases or decreases in the carrying amount of redeemable common\nstock are affected by charges against additional paid in capital and accumulated deficit\n\nAs of March 31, 2024 and December 31, 2023, the Class A common stock subject to possible redemption reflected in the unaudited\ncondensed consolidated balance sheets is reconciled in the following table\n\nGross proceeds $ 287 500,000\nLess\n\nProceeds allocated to Public Warrants (13,081,250)\n\nClass A common stock issuance costs (15,632,692)\nPlus\n\nRemeasurement of carrying value to redemption value 31,531,449\nClass A common stock subject to possible redemption at December 31, 2022 290,317,507\nLess:\n\nRedemption (247,259,068)\nPlus:\n\nRemeasurement of carrying value to redemption value 3.686.450\nClass A common stock subject to possible redemption at December 31, 2023 $ 46,744,889\nLess\n\nRedemption (36 309,429)\nPlus\n\nRemeasurement of carrying value to redemption value 352,674\nClass A common stock subject to possible redemption at March 31, 2024 $ 10,788,134\nWarrant Liabilities\n\nThe Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the\nwarrant\u2019s specific terms and applicable authoritative guidance in FASB ASC 480, \u201cDistinguishing Liabilities from Equity\u201d (\u201cASC\n480\u201d), and ASC 815, \u201cDerivatives and Hedging\u201d (\u201cASC 815\u201d). The assessment considers whether the warrants are freestanding\nfinancial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of\nthe requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company\u2019s own common\nstock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted\nat the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.\n\nFor issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a\ncomponent of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for\nequity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet\ndate thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited\n\fcondensed consented cious SOO DKS. punoctta fe ar Publfe Soe te Smpany aid SOF 5 bot Fats, including\n\na full exercise by the underwriter of their over allotment option in the amount of 3,750,000 Units, at a price of $10 00 per Unit Each\nUnit consists of one share of Class A common stock and one half of one redeemable warrant (\u201cPublic Warrant\u201d) The Public Warrants\nfor periods where no observable traded price was available were valued using a Monte Carlo simulation The Private Placement\nWarrants are valued using a modified Black Scholes Option Pricing Model For periods subsequent to the detachment of the Public\nWarrants from the Units, the close price of the Public Warrant price was used as the fair value of the Public Warrants as of each relevant\ndate (see Note 9)\n\nF 13\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 253 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUTISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nIncome Taxes\n\nThe Company accounts for income taxes under ASC 740, \u201cIncome Taxes \u201d ASC 740 requires the recognition of deferred tax assets and\nliabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and\nliabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards ASC 740 additionally requires\na valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized As\nof March 31, 2024 and December 31, 2023, the Company\u2019s deferred tax asset had a full valuation allowance recorded against it\n\nASC 740 270 25 2 requires that an annual effective tax rate be determined, and such annual effective rate applied to year to date\nincome in interim periods under ASC 740 270 30 5 The Company\u2019s effective tax rate was 1 17% and (562 16%) for the three months\nended March 31, 2024 and 2023. respectively The effective tax rate differs from the statutory tax rate of 21% for the three months\nended March 31, 2024 and 2023. due to changes in fair value in warrant liability, the fair value in convertible promissory notes and the\nvaluation allowance on the deferred tax assets\n\nASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise\u2019s financial statements and prescribes\na recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or\nexpected to be taken in a tax return For those benefits to be recognized. a tax position must be more likely than not to be sustained\nupon examination by taxing authorities ASC 740 also provides guidance on derecognition, classification, interest and penalties,\naccounting in interim period, disclosure and transition\n\nThe Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense There were no\nunrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2024 and December 31, 2023 The\nCompany is currently not aware of any issues under review that could result in significant payments, accruals or material deviation\nfrom its position\n\nThe Company has identified the United States as its only \u201cmajor\u201d tax jurisdiction The Company is subject to income taxation by major\ntaxing authorities since inception These examinations may include questioning the timing and amount of deductions, the nexus of\nincome among various tax jurisdictions and compliance with federal and state tax laws The Company\u2019s management does not expect\nthat the total amount of unrecognized tax benefits will materially change over the next twelve months\n\nNet Loss per Common Share\n\nThe Company complies with accounting and disclosure requirements of FASB ASC Topic 260, \u201cEarnings Per Share\u201d The Company\nhas two classes of common stock, which are referred to as Class A common stock and Class B common stock Income and losses are\nshared pro rata between the two classes of common stock Net income per common stock is computed by dividing net loss by the\nweighted average number of common stock outstanding for the period Accretion associated with the redeemable shares of Class A\ncommon stock is excluded from loss per common share as the redemption value approximates fair value\n\nThe Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 22,625,000\nshares of Class A common stock in the calculation of diluted loss per share, since the exercise of the warrants are contingent upon the\noccurrence of future events and the inclusion of such warrants would be anti dilutive As of March 31, 2024 and 2023, the Company\ndid not have any dilutive securities or other contracts that could, potentially. be exercised or converted into common stock and then\nshare in the earnings of the Company As a result, diluted net loss per common share is the same as basic net loss per common share for\nthe periods presented\n\nThe following table reflects the calculation of basic and diluted net loss per common share (in dollars, except per share amounts)\n\nFor the Three Months Ended March 31,\n2024 2023\nClass A Class B Class A Class B\n\nBasic net loss per common stock\nNumerator:\n\fAllocation o ast oo Mate 900-DKC Document 90-4, od Pg Qe eR Be ge 434.08, 308 (429,254)\n\n,051,615) 3,184 568\nDenominator\nBasic weighted average shares outstanding 2,373,472 7,187 500 21,188,697 7,187,500\nBasic net loss per common share $ (044) \u00a7$ (044) \u00a7$ (006) $ (0 06)\n\nF 14\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 255 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nConcentration of Credit Risk\n\nThe Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured\nlimit of $250,000 Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company\u2019s\nfinancial condition, results of operations, and cash flows\n\nFair Value of Financial Instruments\n\nThe fair value of the Company\u2019s assets and liabilities, which qualify as financial instruments under ASC Topic 820, \u201cFair Value\nMeasurement,\u201d approximates the carrying amounts represented in the accompanying unaudited condensed consolidated balance sheets,\nprimarily due to their short term nature, other than the warrant liabilities (see Note 9)\n\nRecent Accounting Standards\n\nIn August 2020, the FASB issued ASU 2020 06, \u201cDebt Debt with Conversion and Other Options (Subtopic 470 20) and Derivatives\nand Hedging Contracts in Entity\u2019s Own Equity (Subtopic 815 40)\u201d (*-ASU 2020 06\u201d), to simplify accounting for certain financial\ninstruments ASU 2020 06 eliminates the current models that require separation of beneficial conversion and cash conversion features\nfrom convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in\nan entity\u2019s own equity The new standard also introduces additional disclosures for convertible debt and freestanding instruments that\nare indexed to and settled in an entity\u2019s own equity ASU 2020 06 amends the diluted earnings per share guidance, including the\nrequirement to use the if converted method for all convertible instruments As a smaller reporting company, ASU 2020 06 is effective\n\nanuary 1, 2024 for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis,\nwith early adoption permitted beginning on January 1, 2021 The Company has adopted ASU 2020 06 The adoption of ASU 2020 06\ndid not have an impact on the Company\u2019s financial position, results of operations or cash flows\n\nManagement does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would\nhave a material effect on the Company\u2019s unaudited condensed consolidated financial statements\n\nNOTE 3 INITIAL PUBLIC OFFERING\n\nPursuant to the Initial Public Offering, the Company sold 28,750,000 Units, including a full exercise by the underwriters of their over\nallotment option in the amount of 3,750,000 Units, at a price of $10 00 per Unit Each Unit consists of one share of Class A common\nstock and one half of one Public Warrant Each whole Public Warrant entitles the holder to purchase one share of Class A common\nstock at a price of $11 50 per share, subject to adjustment (see Note 8)\n\nNOTE 4 PRIVATE PLACEMENT\n\nSimultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 8 250,000 Private Placement\nWarrants, at a price of $1 00 per warrant, or $8 250,000 in the aggregate Each Private Placement Warrant is exercisable to purchase\none share of Class A common stock at an exercise price of $11 50 per share, subject to adjustment (see Note 8) A portion of the\nproceeds from the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account If\nthe Company did not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private\nPlacement Warrants held in the Trust Account would be used to fund the redemption of the Public Shares (subject to the requirements\nof applicable law), and the Private Placement Warrants would expire worthless\n\nF 15\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 256 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nNOTE 5 RELATED PARTY TRANSACTIONS\nFounder Shares\n\nIn November 2020, the Sponsor purchased 5,750,000 shares (the \u201cFounder Shares\u201d) of the Company\u2019s Class B common stock for an\naggregate price of $30,000 Subsequently, in December 2020 the Company effectuated a 5 for 4 stock split, pursuant to which an\nadditional 1,437,500 shares of Class B common stock were issued, resulting in an aggregate of 7,187,500 Founder Shares issued and\noutstanding The Founder Shares included an aggregate of up to 937 500 Founder Shares subject to forfeiture to the extent that the\nunderwriters\u2019 over allotment was not exercised in full or in part, so that the number of Founder Shares would equal, on an as converted\nbasis, approximately 20% of the Company\u2019s issued and outstanding common stock after the Initial Public Offering In January 2021,\nthe Sponsor transferred 40,000 founder shares to each of three Director nominees, none of which are subject to forfeiture in the event\nthat the underwriters\u2019 over allotment option was not exercised in full As a result of the underwriters\u2019 election to fully exercise their\nover allotment option March 4, 2021, no Founder Shares are currently subject to forfeiture\n\nThe transfer of the Founders Shares to the Company\u2019s director nominees is in the scope of FASB ASC Topic 718, \u201cCompensation\nStock Compensation\u201d (\u201cASC 718\u201d) Under ASC 718, stock based compensation associated with equity classified awards is measured\nat fair value upon the grant date The Founder Shares were effectively transferred subject to a performance condition (i e , the\noccurrence of a Business Combination) Compensation expense related to the Founder Shares is recognized only when the performance\ncondition is probable of occurrence under the applicable accounting literature in this circumstance Stock based compensation would\nbe recognized at the date a Business Combination is considered probable (i e , upon consummation of a Business Combination) in an\namount equal to the number of Founders Shares times the grant date fair value per share (unless subsequently modified)\n\nThe Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur\nof (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported\nsale price of the Class A common stock equals or exceeds $12 00 per share (as adjusted for stock splits, stock capitalizations,\nreorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at least 150 days\nafter a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other\nsimilar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash,\nsecurities or other property\n\nAdministrative Support Agreement\n\nThe Company entered into an agreement, commencing on March 4, 2021, through the earlier of the Company\u2019s consummation of a\nBusiness Combination and its liquidation, to pay the Sponsor a total of $20,000 per month for office space, secretarial, and\nadministrative support services For the three months ended March 31, 2024, the Company incurred $60,000 in fees for these services\nFor the three months ended March 31, 2023, the Company incurred and paid $60,000 in fees for these services There were $60,000\nand $0 of fees outstanding for these services as of March 31, 2024 and December 31, 2023\n\nPromissory Notes Related Parties\n\nOn December 21, 2020, the Sponsor issued an unsecured promissory note to the Company (the \u201cIPO Promissory Note\u201d), pursuant to\nwhich the Company could borrow up to an aggregate principal amount of $300,000 The IPO Promissory Note was non interest bearing\nand payable on the earlier of (@) July 31, 2021, or Gi) the consummation of the Initial Public Offering The outstanding balance under\nthe IPO Promissory Note of $149 992 was repaid at the closing of the Initial Public Offering on March 4, 2021 No future borrowings\nare permitted\n\nRelated Party Loans\n\nIn order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of\nthe Company\u2019s officers and directors may, but are not obligated to, loan the Company funds as may be required (\u201cWorking Capital\nLoans\u201d) Upon completion of the Business Combination, the Company would repay the Working Capital Loans out of the proceeds of\nthe Trust Account released to the Company Otherwise, the Working Capital Loans would be repaid only out of funds held outside the\n\fe 8:24- EY 02900-DKC Docum ent SOF the Eiled 9h Pee. a pha 1 Fir of 40\n\nTrust Account 1 ia tie event that a Business Combination \u2018had not close mpany cou roceeds held outside the\nTrust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working\nCapital Loans Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written\nagreements exist with respect to such loans The Working Capital Loans would either be repaid upon consummation of a Business\nCombination, without interest, or, at the lender\u2019s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into\nwarrants of the post Business Combination entity at a price of $1 00 per warrant The warrants would be identical to the Private\nPlacement Warrants\n\nF 16\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 258 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nThe Company has determined that bifurcation of a single derivative that comprises all of the fair value of the conversion feature (ie ,\nderivative instrument) is necessary under ASC 815 15 25 7 through 25 10 Asa result, the derivative value was deemed to be de\nminimis at the issuance date and at each subsequent reporting date resulting in no change in the value of the derivative The derivative\nwill continue to be monitored and measured at each reporting period until the notes are settled\n\nOn December 29, 2021, the Company issued its First Promissory Note with the Sponsor pursuant to which the Sponsor agreed to loan\nthe Company up to an aggregate principal amount of $1 500,000 The note was issued in connection with advances the Sponsor may\nmake in the future, to the Company for working capital expenses Upon issuance, $750,000 was drawn down on the note with an\nadditional $200,000 drawn down on March 17, 2022 On April 21, 2022, the Company drew down the remaining $550,000 pursuant to\nthe terms of the First Promissory Note Following this drawdown, the full $1 500,000 available under the First Promissory Note was\noutstanding There are no remaining funds available under the First Promissory Note for future drawdowns\n\nOn February 23, 2023, the Company issued an unsecured promissory note in the principal amount of $500,000 in favor of the Sponsor\n(the \u201cSecond Promissory Note\u201d), which was funded in full by the Sponsor upon execution of the Second Promissory Note The Second\nPromissory Note is not convertible into Working Capital Warrants or any other security pursuant to its terms As of March 31, 2024 and\nDecember 31, 2023, the Company had $500,000 outstanding balance under this Second Promissory Note, respectively\n\nIn connection with the approval by the Company\u2019s stockholders of the Extension Date at the Special Meeting, the Sponsor issued to the\nCompany an unsecured promissory note that matures upon the Company closing its initial Business Combination (the \u201cThird\nPromissory Note\u201d) Following the Extension Proposal being approved, the Sponsor funded $640,000 of the Third Promissory Note\nPursuant to the terms of the Third Promissory Note, on each Additional Charter Extension Date, the Sponsor must fund the lesser of (a)\n$160,000 or (b) $0 04 for each public share that is not redeemed in connection with the Special Meeting for an aggregate deposit of up\nto the lesser of (x) $1,120,000 or (y) $0 28 for each public share that is not redeemed in connection with the Special Meeting (if all\nseven additional monthly extensions are exercised) As of March 31, 2024 and December 31, 2023, the Company had a $1,600,000\noutstanding balance under this Third Promissory Note Additionally, on January 5, 2024, the Company drew down an additional\n$160,000 pursuant to the Third Promissory Note Upon completion of the Business Combination, the Company would, at the option of\nthe Sponsor, repay the amounts loaned under the Third Promissory Note or convert a portion or all of the amounts loaned under such\npromissory note into warrants, which warrants will be identical to the private placement warrants issued in connection with the\nCompany\u2019s initial public offering If the Company had not completed an initial Business Combination by the Subsequent Charter\nExtension Date, such promissory note would be repaid only from funds held outside of the Trust Account or will be forfeited,\neliminated or otherwise forgiven\n\nOn June 13, 2023, the Company issued an unsecured promissory note in the principal amount of $2,000,000 in favor of the Sponsor\n(the \u201cFourth Promissory Note\u201d and together with the First Promissory Note, the Second Promissory Note and the Third Promissory\nNote, the \u201cPromissory Notes\u201d), of which $700,000 was funded by the Sponsor upon execution of the Note On September 27, 2023, the\nCompany drew down an additional amount of $500,000 pursuant to the terms of the Fourth Promissory Note, after which $1,200,000\nwas outstanding under the Note An additional $50,000 was drawn on the Fourth Promissory Note on March 11, 2024 There remains\n$750,000 available under the Note for future drawdowns The Fourth Promissory Note bears interest at 15% per annum and matures\nupon closing of the Company\u2019s initial business combination or the date that the winding up of the Company is effective (such date, the\n\u201cMaturity Date\u201d) The Fourth Promissory Note is not convertible into Working Capital Warrants or any other security In the event that\nthe Company had not consummated an initial business combination, the Fourth Promissory Note would be repaid only from funds held\noutside of the Trust Account established in connection with the Company\u2019s initial public offering or will be forfeited, eliminated or\notherwise forgiven The Fourth Promissory Note may be further drawn down from time to time prior to the Maturity Date upon request\nby the Company subject to the Sponsor\u2019s approval The Fourth Promissory Note is subject to customary events of default, the\noccurrence of certain of which automatically triggers the unpaid principal balance of the Fourth Promissory Note and all other sums\npayable with regard to the Fourth Promissory Note becoming immediately due and payable As of March 31, 2024 and December 31,\n2023, the Company had a $480,000 and $1,200,000 outstanding balance under this Fourth Promissory Note As of March 31, 2024 and\nDecember 31, 2023, the Company incurred $33,736 and $89,408 of interest expense, respectively, which is included in Accrued\nExpenses on the balance sheet An additional $50,000 was drawn on the Fourth Promissory Note on March 11, 2024\n\nNotwithstanding the original terms the Promissory Notes, the Company and Legacy iLearningEngines agreed, pursuant to the Merger\nAgreement, that if the Closing occurs, the Sponsor will have the option for the principal and interest outstanding under the Promissory\n\fNotes to be eo? in Bonet oe Gon foes \u2018the Ot Oe coped Oot 8/e8 per ae 288 ib 85 per share at\n\nthe Closing; provided, however, that to the extent the Acquiror Transaction Expenses (as defined in the Merger Agreement) exceed\n$30,000,000, then the Promissory Notes will be settled by the conversion of an amount equal to the lesser of (i) the principal and\ninterest outstanding under the Promissory Notes and (ii) the Excess Transaction Expenses (as defined in the Merger Agreement) into\ncommon stock of the Surviving Corporation at a price per share equal to $10 00 per share\n\nThe Board approved a draw of an aggregate of $160,000 (the \u201cFirst Extension Funds\u201d) pursuant to the Third Promissory Note, between\nthe Company and Arrowroot Acquisition LLC (the \u201cLender\u2019), which First Extension Funds were deposited into the Company\u2019s Trust\nAccount on July 6, 2023 This deposit enabled the Company to extend the date by which it must complete its initial business\ncombination from July 6, 2023 to August 6, 2023 (the \u201cFirst Extension\u201d) The First Extension was the first of seven one month\nextensions permitted under the Company\u2019s Certificate of Incorporation and provides the Company with additional time to complete its\ninitial business combination\n\nF 17\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 260 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nThe Board approved a draw of an aggregate of $160,000 (the \u201cSecond Extension Funds\u201d) pursuant to the Third Promissory Note,\nwhich Second Extension Funds were deposited into the Company\u2019s Trust Account on August 4, 2023. This deposit enables the\nCompany to extend the date by which it must complete its initial business combination from August 6, 2023 to September 6, 2023 (the\n\u201cSecond Extension\u201d). The Second Extension is the second of seven one-month extensions permitted under the Company\u2019s Certificate\nof Incorporation and provides the Company with additional time to complete its initial business combination.\n\nThe Board approved a draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cThird Extension Funds\u201d), which\nThird Extension Funds were deposited into the Company\u2019s Trust Account on September 6, 2023. This deposit enables the Company to\nextend the date by which it must complete its initial business combination from September 6, 2023 to October 6, 2023 (the \u201cThird\nExtension\u201d). The Third Extension is the third of seven one-month extensions permitted under the Company\u2019s Certificate of\nIncorporation and provides the Company with additional time to complete its initial business combination.\n\nThe Board approved a draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cFourth Extension Funds\u201d), which\nFourth Extension Funds were deposited into the Company\u2019s Trust Account on October 4, 2023. This deposit enables the Company to\nextend the date by which it must complete its initial business combination from October 6, 2023 to November 6, 2023 (the \u201cFourth\nExtension\u2019). The Fourth Extension is the fourth of seven one-month extensions permitted under the Company\u2019s Certificate of\nIncorporation and provides the Company with additional time to complete its initial business combination.\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cFifth Extension\nFunds\u201d), which Fifth Extension Funds were deposited into the Company\u2019s Trust Account for its public stockholders on November 2,\n2023 This deposit enables the Company to extend the date by which it must complete its initial business combination from November\n6, 2023 to December 6, 2023 (the \u201cFifth Extension\u201d) The Fifth Extension is the fifth of seven one month extensions permitted under\nthe Company\u2019s Certificate of Incorporation and provides the Company with additional time to complete its initial business\ncombination\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cSixth Extension\nFunds\u201d), which Sixth Extension Funds were deposited into the Company\u2019s Trust Account for its public stockholders on December 2,\n2023. This deposit enables the Company to extend the date by which it must complete its initial business combination from December\n6, 2023 to January 6, 2024 (the \u201cSixth Extension\u201d). The Sixth Extension is the sixth of seven one-month extensions permitted under the\nCompany\u2019s Certificate of Incorporation and provides the Company with additional time to complete its initial business combination.\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cSeventh\nExtension Funds\u201d), which Seventh Extension Funds were deposited into the Company\u2019s Trust Account for its public stockholders on\nJanuary 5, 2024. This deposit enables the Company to extend the date by which it must complete its initial business combination from\nJanuary 6, 2024 to February 6, 2024 (the \u201cSeventh Extension\u201d). The Seventh Extension is the final of seven one-month extensions\npermitted under the Company\u2019s Certificate of Incorporation and provides the Company with additional time to complete its initial\nbusiness combination. The Note does not bear interest and matures upon closing of the Company\u2019s initial business combination.\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cEighth Extension\nFunds\u201d), which Eighth Extension Funds were deposited into the Company\u2019s Trust Account for its public stockholders on February 5,\n2024. This deposit enables the Company to extend the date by which it must complete its initial business combination from February 6,\n2024 to March 6, 2024 (the \u201cEighth Extension\u201d). The Eighth Extension is the first of an additional five one-month extensions permitted\nunder the Company\u2019s Certificate of Incorporation and provides the Company with additional time to complete its initial business\ncombination. The Note does not bear interest and matures upon closing of the Company\u2019s initial business combination.\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cNinth Extension\nFunds\u201d), which Ninth Extension Funds were deposited into the Company\u2019s Trust Account for its public stockholders on March 5, 2024\nThis deposit enables the Company to extend the date by which it must complete its initial business combination from March 6, 2024 to\nApril 6, 2024 (the \u201cNinth Extension\u201d) The Ninth Extension is the second of an additional five one month extensions permitted under\nthe Company\u2019s Certificate of Incorporation and provides the Company with additional time to complete its initial business\ncombination The Note does not bear interest and matures upon closing of the Company\u2019s initial business combination\n\nThe Third Promissory Note does not bear interest and matures upon closing of the Company\u2019s initial business combination. In the event\nthat the Company had not consummated an initial business combination, the Third Promissory Note would be repaid only from funds\nremaining outside of the Company\u2019s Trust Account, if any, or will be forfeited, eliminated, or otherwise forgiven. Up to $1,760,000 of\n\fthe total prinesptSencaiat oF the Thee Be ry nee gue ot Cea, in t. get Sia oH the rage oP FN Age er into warrants\n\nof the Company at a price of $1 00 per warrant, which warrants will be identical to the private placement warrants issued to the Lender\nat the time of the initial public offering of the Company\n\nIn the event that the Company had not consummated an initial business combination, the Note would be repaid only from funds\nremaining outside of the Company\u2019s Trust Account, if any, or will be forfeited, eliminated, or otherwise forgiven. Up to $1,760,000 of\nthe total principal amount of the Note may be converted, in whole or in part, at the option of the Lender into warrants of the Company\nat a price of $1.00 per warrant, which warrants will be identical to the private placement warrants issued to the Lender at the time of the\ninitial public offering of the Company.\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 262 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nPursuant to the terms of the Merger Agreement by and among Arrowroot Acquisition Corp., ARAC Merger Sub, Inc. and Legacy\niLearningEngines, at closing Arrowroot Acquisition LLC elected to settle $500,000 of the Acquiror Transaction Expenses (as defined in\nthe Agreement) in cash and convert the balance of the Acquiror Transaction Expenses into shares of common stock of the New\niLearningEngines (\u201cNew iLearningEngines Common Stock\u201d).\n\nForward Purchase Agreement\n\nOn April 26, 2023, the Company and Polar Multi-Strategy Master Fund, a Cayman Islands exempted company (\u201cPolar\u201d) entered into\nan agreement (\u201cForward Purchase Agreement\u201d), pursuant to which, among other things, the Company agreed to purchase up to\n2,500,000 shares from Polar at $10.77 per share (the \u201cInitial Price\u201d), which is $10.17 (the \u201cRedemption Price\u201d, plus $0.60). In\nexchange for the Company\u2019s purchase of the shares, Polar agreed to waive redemption rights on the shares that Polar owns in\nconnection with the Business Combination.\n\nThe Forward Purchase Agreement provides that at the closing of the Business Combination, the Company will pre-pay Polar for the\nforward purchase an amount equal to the sum of (x) the number of Class A Ordinary Shares owned by Polar on the day prior to the\nclosing of a business combination multiplied by the Redemption Price (the \u201cPolar Shares\u201d) and (y) the proceeds from Polar\u2019s purchase\nof a number of Class A Ordinary Shares of up to 2,500,000 shares less the Polar Shares (the \u201cPrepayment Amount\u201d).\n\nThe scheduled maturity date of the forward transaction is one year from the closing of the Business Combination (the \u201cMaturity Date\u201d),\nexcept that the Maturity Date may be accelerated if the shares trade under $2 00 for 10 out of 30 days or the shares are delisted by\nNasdaq Polar has the right to early terminate the transaction (in whole or in part) before the Maturity Date by delivering notice to the\nCompany If Polar terminates the Forward Purchase Agreement with respect to some or all of the shares prior to the Maturity Date,\nPolar will return an amount to the Company equal to the number of terminated shares multiplied by the Redemption Price The\nCompany can terminate the Forward Purchase Agreement prior to the redemption deadline if the Company pays Polar a $300,000\nbreak up fee On the Maturity Date, the Company may be required to make a cash payment to Polar if Polar has not terminated the\nForward Purchase Agreement in full equal to the number of shares (less any shares terminated prior to the Maturity Date) multiplied by\n$0 60\n\nUpon closing of the Business Combination, the Company agreed to pay $246,000 and shares of iLearningEngines have been issued as\nrepayment for the Forward Purchase Agreement.\n\nNOTE 6. COMMITMENTS AND CONTINGENCIES\nRisks and Uncertainties\n\nManagement continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that\nthe virus could have a negative effect on the Company\u2019s financial position, results of its operations and/or search for a target company,\nthe specific impact is not readily determinable as of the date of these unaudited condensed consolidated financial statements. Although\na number of vaccines for COVID-19 have been developed and are in the process of being deployed in certain countries, including the\nUnited States, the timing for widespread vaccination is uncertain, and these vaccines may be less effective against new mutated strains\nof the virus. The impact of this coronavirus continues to evolve and is affecting the economies of many nations, individual companies\nand markets in general and may continue to last for an extended period of time. The unaudited condensed consolidated financial\nstatements do not include any adjustments that might result from the outcome of this uncertainty.\n\nIn February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this\naction, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus.\nFurther, the impact of this action and related sanctions on the world economy is not determinable as of the date of these unaudited\ncondensed consolidated financial statements. The specific impact on the Company\u2019s financial condition, results of operations, and cash\nflows is also not determinable as of the date of these unaudited condensed consolidated financial statements.\n\nOn August 16, 2022, the Inflation Reduction Act of 2022 (the \u201cIR Act\u201d) was signed into federal law. The IR Act provides for, among\nother things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and\ncertain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is\nimposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is\ngenerally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the\nexcise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market\n\fCase 8:24-cv-02900-DKC Document 90-2 _ Filed 09/18/25 Page 263 of 4\n\n8\nvalue of stock repurchases during the same taxable year In addition, certain exceptions apply to the excise tax The U g Department of\nthe Treasury (the \u201cTreasury\u201d) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or\navoidance of the excise tax\n\nAny redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote\nor otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in\ncomnection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair\nmarket value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the\nstructure of a Business Combination, (iii) the nature and amount of any \u201cPIPE\u201d or other equity issuances in connection with a Business\nCombination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business\nCombination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be\npayable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been\ndetermined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the\nCompany\u2019s ability to complete a Business Combination.\n\nF 19\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 264 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nRegistration Rights\n\nPursuant to a registration rights agreement entered into on March 4, 2021, the holders of the Founder Shares, Private Placement\nWarrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon\nthe exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon\nconversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to\nor on the effective date of the Initial Public Offering, requiring the Company to register such securities for resale The holders of these\nsecurities are entitled to make up to three demands, excluding short form demands, that the Company register such securities In\naddition, the holders have certain \u201cpiggyback\u201d registration rights with respect to registration statements filed subsequent to the\ncompletion of a Business Combination The registration rights agreement does not contain liquidated damages or other cash settlement\nprovisions resulting from delays in registering the Company\u2019s securities The Company will bear the expenses incurred in connection\nwith the filing of any such registration statements\n\nUnderwriting Agreement\n\nThe underwriters are entitled to a deferred fee of $0 35 per Unit, or $10,062 500 in the aggregate The deferred fee will become payable\nto the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business\nCombination, subject to the terms of the underwriting agreement\n\nOn March 27, 2024, the Company signed a fee reduction agreement with Cantor Fitzgerald in which the underwriters forfeited 40.37%\nof the deferred underwriting commissions resulting in a reduction of $4,062,500 with a remaining $6,000,000 that is deferred and\npayable upon the business combination. The reduction of the $4,062,500 resulted in a gain from forgiveness of deferred underwriting\ncommissions of $184,844 recorded as reduction of underwriting fee payable on the income statement and $3,877,656 was recorded to\naccumulated deficit.\n\nMerger Agreement\n\nAs described in greater detail in Note 1, on April 27, 2023, the Company entered into the Merger Agreement.\n\nThe Merger\n\nThe Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, the following\ntransactions will occur (together with the other transactions contemplated by the Merger Agreement)\n\ni) At the Closing, in accordance with the DGCL, Merger Sub will merge with and into Legacy iLearningEngines, the separate\ncorporate existence of Merger Sub will cease and Legacy iLearningEngines will be the surviving corporation and a wholly\nowned subsidiary of the Company; and\n\nii) asa result of the Merger, among other things, the outstanding shares of common stock of iLearningEngines (other than shares\nsubject to Legacy iLearningEngines equity awards, treasury shares and dissenting shares) will be cancelled in exchange for\nthe right to receive a number of shares of common stock of the Surviving Corporation equal to (x) the sum of (i) the Base\nPurchase Price (as defined below), minus (ii) the dollar value of the Company Incentive Amount (as defined below), plus (iii)\nthe aggregate exercise price of the Company Warrants (as defined in the Merger Agreement) that are issued and outstanding\nimmediately prior to the Effective Time, minus (iv) the aggregate amount of Note Balance (as defined in the Company\nConvertible Notes (as defined in the Merger Agreement)) divided by (y) $10.00. The \u201cBase Purchase Price\u201d means an amount\nequal to $1,285,000,000. The \u201cCompany Incentive Amount\u201d means (x) the number of shares of the Company Class A\nCommon Stock issuable to Legacy iLearningEngines securityholders (excluding, for the avoidance of doubt, the holders of\nCompany Convertible Notes) at the Closing which Legacy iLearningEngines and the Company agree, at least two (2)\nbusiness days prior to the Closing, to issue to certain private placement investors and non-redeeming stockholders (which\namount will equal 82.03125% of all such shares issued to such investors and non-redeeming stockholders, with the remainder\nbeing contributed by the Sponsor), multiplied by (vy) $10.00.\n\nThe Board has (i) approved and declared advisable the Merger Agreement and the Business Combination and (ii) resolved to\nrecommend approval of the Merger Agreement and related matters by the stockholders of the Company The consummation of the\nBusiness Combination is subject to certain conditions as further described in the Merger Agreement\n\fCase 8-24-Cv-02900-DKC Document 90-2 Filed 09/18/25 Page 265 of 408\n\nSponsor Support Agreemen\n\nOn April 27, 2023, concurrently with the execution of the Merger Agreement, the Company and Legacy iLearningEngines entered into\nan agreement (the \u201cSponsor Support Agreement\u201d), pursuant to which, among other things, in connection with the Closing, the Sponsor\nagreed to (i) vote all its shares of the Company common stock in favor of the Business Combination, (ii) discharge any Excess\nTransaction Expenses (as defined in the Merger Agreement) by payment in cash or elect, at the option of Sponsor, to have the Company\ndischarge any Excess Transaction Expenses by payment in cash against a corresponding cancellation of shares of the Company\ncommon stock held by Sponsor (or any combination thereof), (iii) loan all amounts contemplated by the proxy statement filed by the\nCompany on or about February 13, 2023, pursuant to which the Company stockholders approved the extension of the deadline by\nwhich the Company must complete its Business Combination to July 6, 2023, including any amounts required in connection with any\nadditional extension of such deadline, (iv) contribute the Sponsor Incentive Shares (as defined in the Merger Agreement), (v) waive any\nadjustment to the conversion ratio set forth in the governing documents of the Company or any other anti-dilution or similar protection\nwith respect to the Class B common stock of the Company, in each case, on the terms and subject to the conditions set forth in the\nSponsor Support Agreement, and (vi) agree to be bound by any restrictions on transfer set forth in the Company\u2019s bylaws, in each case,\non the terms and subject to the conditions set forth therein.\n\nF-20\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 266 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nThe scheduled maturity date of the forward transaction is one year from the Closing of the Business Combination (the \u201cMaturity\nDate\u201d), except that the Maturity Date may be accelerated if the shares trade under $2 00 for 10 out of 30 days or the shares are delisted\nby Nasdaq Polar has the right to early terminate the transaction (in whole or in part) before the Maturity Date by delivering notice to\nthe Company If Polar terminates the Forward Purchase Agreement with respect to some or all of the shares prior to the Maturity Date,\nPolar will return an amount to the Company equal to the number of terminated shares multiplied by the Redemption Price the\nCompany can terminate the Forward Purchase Agreement prior to the redemption deadline if the Company pays Polar a $300,000\nbreak up fee On the Maturity Date, the Company may be required to make a cash payment to Polar if Polar has not terminated the\nForward Purchase Agreement in full equal to the number of shares (less any shares terminated prior to the Maturity Date) multiplied by\n$0 60\n\nAs of March 31, 2024 and December 31, 2023, the value of the Forward Purchase Agreement was $1,500,000 Upon closing of the\nBusiness Combination, the Company agreed to pay $246,000, and shares of New iLearningEngines Common Stock have been issued\nas repayment for the Forward Purchase Agreement\n\nBTIG Fee Agreement\n\nOn July 25, 2023, BTIG, LLC (\u201c\u201cBTIG\u201d) and the Company entered into a letter agreement (the \u201cBTIG Engagement Letter\u201d) pursuant to\nwhich the Company engaged BTIG as a financial advisor in connection with the Business Combination\n\nOn March 27, 2024, the Company and BTIG amended the BTIG Engagement Letter (the \u201cBTIG Amendment\u201d), pursuant to which, in\nlieu of payment in cash of the full amount of any advisory fees or other fees and expenses owed under the BTIG Engagement Letter,\nthe Company agreed to issue shares of New iLearningEngines Common Stock in an aggregate amount of approximately $3 million\nalong with approximately $53,000 of expenses\n\nThe number of BTIG Fee Shares to be so issued, transferred and delivered to BTIG in satisfaction of the Success Fee shall be equal to\nthe greater of (a) the dollar amount of the Success Fee (less any portion of the Success Fee previously paid in cash, if any) divided by\n$10 00 and (b) the quotient obtained by dividing (x) the dollar amount of the Success Fee (less any portion of the Success Fee\npreviously paid in cash, tf any) by (y) the VWAP (as defined herein) of the New Common Stock over the seven (7) Trading Days\nimmediately preceding the Initial Filing Date\n\nGoodwin Agreement\n\nOn March 25, 2024, Goodwin Proctor LLP (\u201cGoodwin\u201d) and the Company entered into an agreement pursuant to which the Company\nwill pay $2,000,000 upon closing of the Business Combination and another $1,000,000 as a deferred payment before July 31, 2024 As\nof March 31, 2024 and December 31, 2023, the Company accrued $2,718,385 and $1,907,277, respectively\n\nCooley Fee Agreement\n\nOn October 20, 2020, Cooley LLP and Arrowroot entered into a letter agreement (the \u201cCooley Engagement Letter\u201d) pursuant to which\nArrowroot engaged Cooley as a law firm in connection with the Business Combination On March 27, 2024, Cooley and Arrowroot\namended the Cooley Engagement Letter (the \u201cCooley Amendment\u201d), to provide that, Arrowroot will pay to Cooley $2,000,000 in legal\nfees (the \u201cCooley Deferred Law Fee\u201d) in the form of a certain number of shares (the \u201cCooley Fee Shares\u201d) The Cooley Fee Shares will\nbe issued in the form of shares of New iLearningEngines Common Stock (as defined below) in an amount of shares equal to the greater\nof (i) $2,000,000, divided by $10 00 and (ii) the quotient obtained by dividing (x) $2,000,000 by (y) the VWAP (as defined in the\nCooley Amendment) of New iLearningEngines Common Stock over the seven (7) trading days immediately prior to the initial filing of\nthe Resale Registration Statement (as defined in the Cooley Amendment) Under the Cooley Amendment, the combined company will\nbe subject to, among others, certain obligations with respect to the filing of the resale registration statement and maintaining the\ncontinued effectiveness of the resale registration statement As of March 31, 2024 and December 31, 2023, the Company accrued\n\n$1 205,451 and $1,187,272, respectively\n\nF 21\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 267 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nNOTE 7 STOCKHOLDERS\u2019 DEFICIT\n\nPreferred Stock |The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0 0001 per share with\nsuch designation, rights and preferences as may be determined from time to time by the Company\u2019s board of directors As of March 31,\n2024 and December 31, 2023, there were no shares of preferred stock issued or outstanding\n\nClass A Common Stock |The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of\n\n$0 0001 per share Holders of Class A common stock are entitled to one vote for each share As of March 31, 2024 and December 31,\n2023, there were 1,017,030 and 4,445,813 shares of Class A common stock issued and outstanding, respectively, which are subject to\npossible redemption and presented as temporary equity\n\nClass B Common Stock |The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of\n$0 0001 per share Holders of Class B common stock are entitled to one vote for each share As of March 31, 2024 and December 31,\n2023, there were 7,187,500 shares of common stock issued and outstanding\n\nHolders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to\na vote of the Company\u2019s stockholders except as otherwise required by law\n\nThe shares of Class B common stock will automatically convert into Class A common stock upon the consummation of a Business\nCombination, or earlier at the option of the holder, on a one for one basis, subject to adjustment In the case that additional shares of\nClass A common stock or equity linked securities are issued or deemed issued in connection with the initial Business Combination, the\nnumber of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as\nconverted basis, 20% of the total number of shares of Class A common stock outstanding after such conversion, including the total\nnumber of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity linked\nsecurities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business\nCombination, excluding any shares of Class A common stock or equity linked securities or rights exercisable for or convertible into\nshares of Class A common stock issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants\nissued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder\nShares will never occur on a less than one for one basis\n\nNOTE 8 WARRANT LIABILITIES\n\nAs of March 31, 2024 and December 31, 2023, there were 14 375,000 Public Warrants outstanding Only whole warrants\n\nare exercisable No fractional warrants will be issued upon separation of the units and only whole warrants will trade The Public\nWarrants will become exercisable on the later of 30 days after the completion of the initial Business Combination or 12 months from\nthe closing of the initial public offering and will expire five years after the completion of the initial Business Combination or earlier\nupon redemption or the Company\u2019s liquidation\n\nThe Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have\nno obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares\nof Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company\nsatisfying its obligations with respect to registration No warrant will be exercisable, and the Company will not be obligated to issue\nshares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been\nregistered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants\n\nF 22\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 268 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nThe Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business\nCombination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities\nAct, of the Class A common stock issuable upon exercise of the warrants The Company will use its best efforts to cause the same to\nbecome effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the\nexpiration of the warrants in accordance with the provisions of the warrant agreement If a registration statement covering the shares of\nClass A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of a\nBusiness Combination, warrant holders may, until such time as there is an effective registration statement and during any period when\nthe Company will have failed to maintain an effective registration statement, exercise warrants on a \u201ccashless basis\u201d in accordance with\nSection 3(a)(9) of the Securities Act or another exemption Notwithstanding the above, if the Company\u2019s Class A common stock is at\nthe time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a \u201ccovered\nsecurity\u201d under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise\ntheir warrants to do so on a \u201ccashless basis\u201d in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so\nelect, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will\nuse its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available\n\nOnce the warrants become exercisable, the Company may call the warrants for redemption for cash\ne inwhole and not in part;\ne@ ata price of $0 01 per warrant;\n@ upon not less than 30 days\u2019 prior written notice of redemption to each warrant holder; and\n\ne if, and only if, the closing price of the common stock equals or exceeds $18 00 per share (as adjusted stock splits, stock\ncapitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading day period\ncommencing after the warrants become exercisable and ending three business days before the Company sends to the notice of\nredemption to the warrant holders\n\nIf and when the warrants become redeemable by the Company for cash, the Company may exercise its redemption right even if it is\nunable to register or qualify the underlying securities for sale under all applicable state securities laws\n\nIf the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder\nthat wishes to exercise the Public Warrants to do so on a \u201ccashless basis,\u201d as described in the warrant agreement The exercise price and\nnumber of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in\nthe event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation However, except as\ndescribed below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price\nAdditionally, in no event will the Company be required to net cash settle the Public Warrants If the Company is unable to complete a\nBusiness Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of\nPublic Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the\nCompany\u2019s assets held outside of the Trust Account with respect to such Public Warrants Accordingly, the Public Warrants may expire\nworthless\n\nIn addition, if (x) the Company issues additional shares of Class A common stock or equity linked securities for capital raising\npurposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9 20\nper share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company\u2019s\nboard of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares\nheld by the Sponsor or such affiliates, as applicable, prior to such issuance) (the \u201cNewly Issued Price\u201d), (y) the aggregate gross\nproceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of\nthe Company\u2019s initial Business Combination on the date of the consummation of such initial Business Combination (net of\nredemptions), and (z) the volume weighted average trading price of the Company\u2019s Class A common stock during the 20 trading day\nperiod starting on the trading day after the day on which the Company consummates its initial Business Combination (such price, the\n\u201cMarket Value\u201d) is below $9 20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115%\n\fof the higher & ASS iaiket Walac. Sid the Nes Newly Issued Brice ont te the Ff 00 File S 091: Bee on the tigg age AO Bas above will be\n\nadjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price\n\nAs of March 31, 2024 and December 31, 2023, there were 8 250,000 Private Placement Warrants outstanding Private Placement\nWarrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement\nWarrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable,\nassignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions Additionally,\nthe Private Placement Warrants will be exercisable on a cashless basis and be non redeemable, except as described above, so long as\nthey are held by the initial purchasers or their permitted transferees If the Private Placement Warrants are held by someone other than\nthe initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable\nby such holders on the same basis as the Public Warrants\n\nF 23\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 270 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nNOTE 9 FAIR VALUE MEASUREMENTS\n\nThe fair value of the Company\u2019s financial assets and liabilities reflects management\u2019s estimate of amounts that the Company would\nhave received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction\nbetween market participants at the measurement date In connection with measuring the fair value of its assets and liabilities, the\nCompany secks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of\nunobservable inputs (internal assumptions about how market participants would price assets and liabilities) The following fair value\nhierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the\nassets and liabilities\n\nLevel 1 Quoted prices in active markets for identical assets or liabilities An active market for an asset or liability is a market in\nwhich transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on\nan ongoing basis\n\nLevel 2 Observable inputs other than Level 1 inputs Examples of Level 2 inputs include quoted prices in active markets for\nsimilar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active\n\nLevel 3 Unobservable inputs based on assessment of the assumptions that market participants would use in pricing the asset or\nliability\n\nAs of March 31, 2024, assets held in the Trust Account were comprised of $10,788,134 in cash As of December 31, 2023, assets held\nin the Trust Account were comprised of $46,744,889 in cash During the three months ended March 31, 2024, the Company withdrew\nan amount of $40,050 in interest income from the Trust Account to pay franchise and income taxes and $36 309,429 in connection with\nredemptions\n\nThe following table presents information about the Company\u2019s assets and liabilities that are measured at fair value on a recurring basis\nas of March 31, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to\n\ndetermine such fair value\n\nMarch 31, December 31,\n\nDescription Level 2024 2023\nAssets:\n\nCash and investments held in Trust Account 1 $ 10,788,134 $ 46,744,889\nLiabilities:\n\nWarrant Liabilities \u2014 Public Warrants 1 $ 2,587,500 $ 1,150,000\nWarrant Liabilities \u2014 Private Placement Warrants 3 $ 1,485,000 $ 660,000\nForward Purchase Agreement 3 $ 1,500,000 $ 1,500,000\n\nThe Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the\naccompanying unaudited condensed consolidated balance sheets. The warrant liabilities are measured at fair value at inception and ona\nrecurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the unaudited condensed\nconsolidated statements of operations.\n\nThe Private Placement Warrants are valued using a modified Black Scholes Option Pricing Model, which is considered to be a Level 3\nfair value measurement. The modified Black Scholes model\u2019s primary unobservable input utilized in determining the fair value of the\nPrivate Placement Warrants is the expected volatility of the common stock. The expected volatility as of the initial public offering date\nwas derived from observable public warrant pricing on comparable \u201cblank-check\u2019 companies without an identified target. The expected\nvolatility as of subsequent valuation dates was implied from the Company\u2019s own Public Warrant pricing. A Monte Carlo simulation\nmethodology was used in estimating the fair value of the public warrants for periods where no observable traded price was available,\nusing the same expected volatility as was used in measuring the fair value of the Private Placement Warrants. For periods subsequent\nto the detachment of the warrants from the Units, the close price of the Public Warrants was used as the fair value of the Public\n\fe -24-cv-0\u00a2900-DKC Docum nt 90-2 iled Q9/18/25 thet Ee Ge of 408\n\nCa\nWarrants as of as relevant date The measurement of the Public Warrants after the detachment o ic Warrants from the Units\nis classified as Level 1 due to the use of an observable market quote in an active market\n\nF 24\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 272 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUTISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nThe Forward Purchase Agreement is measured at 2 500,000 shares at a price of $0 60 per share This is considered to be a Level 3 fair\nvalue measurement as the price is based on a contractual amount which is not based on an observable input that reflects quoted prices\n\nThe key inputs into the modified Black Scholes model for the Level 3 Warrants were as follows\n\nMarch 31, December 31,\n\nInput 2024 2023\nMarket price of public shares $ 10.85 $ 10.47\nRisk-free rate 4.21% 3.81%\nDividend yield 0.00% 0.00%\nExercise price $ 11.50 $ 11.50\nVolatility 0.0% 0.0%\nTerm to expiration (years) 0.04 0.25\n\nThe following tables present the changes in the fair value of Level 3 warrant liabilities:\n\nPrivate\nPlacement\nFair value as of January 1, 2024 $ 660,000\nChange in fair value 825,000\nFair value as of March 31. 2024 $ 1,485,000\n\nPrivate\nPlacement\nWarrants\n\n\u201d\n&\nOo\n>\noS\no\n\nFair value as of January 1, 2023\nChange in fair value 950.000\n\nFair value as of March 31, 2023 $ 990.000\n\nTransfers to/from Levels 1, 2 or 3 are recognized at the end of the reporting period in which a change in valuation technique or\nmethodology occurs. There were no transfers from a Level 3 measurement to a Level 1 during the period ended March 31, 2024 and\nDecember 31, 2023.\n\nThere was no change in the fair value of the Forward Purchase Agreement as of March 31, 2024 and December 31, 2023.\n\nNOTE 10. SUBSEQUENT EVENTS\n\nThe Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited\n\ncondensed consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events,\nother than below, that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.\n\nF-25\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 273 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nOn April 16, 2024 (the \u201cClosing Date\u201d), as contemplated in the Merger Agreement the Company consummated the merger transactions\ncontemplated by the Merger Agreement, following the approval by Arrowroot\u2019s stockholders at a special meeting of stockholders held\non April 1, 2024 (the \u201cARRW Stockholder Meeting\u201d), whereby Merger Sub merged with and into Legacy iLearningEngines with the\nseparate corporate existence of Merger Sub ceasing (the \u201cMerger\u201d and, together with the other transactions contemplated by the Merger\nAgreement, the \u201cBusiness Combination\u201d)\n\nThe Business Combination is being accounted for as a reverse recapitalization, in accordance with U S GAAP Under this method of\naccounting, although the Company issued shares for outstanding equity interests of Legacy iLearningEngines in the business\ncombination, Arrowroot is treated as the \u201cacquired\u201d company for financial reporting purposes Accordingly, the Business Combination\nis treated as the equivalent of the Company issuing stock for the net assets of Arrowroot, accompanied by a recapitalization The net\nassets of Arrowroot is stated at historical cost, with no goodwill or other intangible assets recorded Operations prior to the business\ncombination will be those of the Company\n\nIn connection with the closing of the business combination, Arrowroot Acquisition Corp (NASDAQ ARRW) changed its name to\n\u201cjLearningEngines, Inc \u201d and is listed on the NASDAQ under the new ticker symbol \u201cAILE\u201d\n\nAs a result of the Merger and upon the Closing, among other things, (1) each share of Legacy iLearningEngines Common Stock issued\nand outstanding as of immediately prior to the Closing was exchanged for the right to receive the number of shares of common stock,\npar value $0 0001 per share, of New iLearningEngines equal to the exchange ratio of 0 8061480 (the \u201cExchange Ratio\u201d) for an\naggregate of 77 242,379 shares of New iLearningEngines Common Stock; (2) each share of Legacy iLearningEngines Common Stock\nheld in the treasury of Legacy iLearningEngines was cancelled without any conversion thereof and no payment or distribution was or\nwill be made with respect thereto; (3) each Vested RSU was cancelled and converted into the right to receive, subject to settlement and\ndelivery in accordance with the Legacy iLearningEngines equity incentive plan, a number of New iLearningEngines Common Stock\nequal to the Exchange Ratio, for an aggregate of 5,675,890 shares of New iLearningEngines Common Stock; (4) each Unvested RSU\nwas cancelled and converted into the right to receive a number of restricted stock units issued by the New iLearningEngines equal to\nthe Exchange Ratio (\u201cNew iLearningEngines Converted RSU Award\u201d), with each New iLearningEngines Converted RSU Award\nsubject to the same terms and conditions as were applicable to the original Legacy iLearningEngines restricted stock unit award, for an\naggregate of 78,730 shares of New iLearningEngines Common Stock subject to New iLearningEngines RSU Awards; (5) each share of\nvested Legacy iLearmingEngines restricted stock was converted into the right to receive a number of shares of New iLearningEngines\nCommon Stock equal to the Exchange Ratio, for an aggregate of 290,447 shares of New iLearningEngines Common Stock; (6) each\nshare of unvested Legacy iLearningEngines restricted stock was converted into the right to receive a number of restricted shares of\nNew iLearningEngines Common Stock (\u201cNew iLeammingEngines Converted Restricted Stock\u201d) equal to the Exchange Ratio, with\nsubstantially the same terms and conditions as were applicable to such unvested Legacy iLearningEngines restricted stock immediately\nprior to the Effective Time, which shares will be restricted subject to vesting on the books and records of Legacy iLearningEngines, for\nan aggregate of 32,151,912 shares of New iLearningEngines Converted Restricted Stock; and (7) each Convertible Note (as defined\nbelow) was converted into the right to receive a number of shares of New iLearningEngines Common Stock equal to the Note Balance\n(as defined in the Convertible Notes), divided by $10 00, for an aggregate of 13,060,608 shares of New iLearningEngines Common\nStock\n\nIn connection with the ARRW Stockholder Meeting (and related postponements) and the Business Combination, the holders of an\naggregate of 460,114 shares of Arrowroot\u2019s Class A common stock, par value $0 0001 per share (the \u201cClass A Common Stock\u201d),\nexercised their right to redeem their shares for cash at a redemption price of approximately $10 36 per share, for an aggregate\nredemption amount of approximately $4 8 million Upon the Closing, the Company received approximately $52 7 million in gross\nproceeds, comprising approximately $5 9 million from the Arrowroot trust account, approximately $17 4 million from the 2023\nConvertible Notes (as defined below) and approximately $29 4 million from the 2024 Convertible Notes (as defined below)\n\nF 26\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 274 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\nOn April 16, 2024, upon the filing of New iLearningEngines\u2019 Amended and Restated Certificate of Incorporation (the \u201cCertificate of\nIncorporation\u201d), each outstanding share of Arrowroot\u2019s Class A Common Stock and Class B common stock, par value $0 0001 per\nshare (the \u201cClass B Common Stock\u201d) was redesignated into one validly issued, fully paid and non assessable share of New\niLearningEngines Common Stock In addition, at the Closing, Arrowroot instructed its transfer agent to separate its public units into\ntheir component securities, and, as a result, Arrowroot\u2019s public units no longer trade as a separate security and were delisted from The\nNasdaq Stock Market LLC (\u201cNasdaq\u201d)\n\nAfter giving effect to the Business Combination and the conversion of each Convertible Note, there (i) were 134,970,114 issued and\noutstanding shares of New iLearningEngines Common Stock, consisting of the following (a) 77 242,379 shares issued to holders of\nLegacy iLearningEngines common stock immediately prior to the Effective Time; (b) 32,442 359 shares issued to holders of Legacy\niLearningEngines restricted stock awards immediately prior to the Effective Time; (c) 13,060,608 shares issued to the holders of\nconvertible notes immediately prior to the Effective Time; (d) 556,886 shares held by former Arrowroot Class A Common\nStockholders; (\u00a2) 6,705,409 shares held by former Arrowroot Class B Common Stockholders; (f) an aggregate of 4,419,998 shares\nissued to Venture Lending & Leasing IX, Inc (\u201cVenture Lending\u201d) and WTI Fund X, Inc (\u201cWTI Fund X\u201d and together with Venture\nLending, the \u201cLenders\u201d) pursuant to the Second Omnibus Amendment to Loan Documents with In2vate, LL C and the Lenders; (g) an\naggregate of 82,091 shares issued to certain investors pursuant to a non redemption agreement with certain investors; and (h) an\naggregate of 460 384 shares issued to the Sponsor; and (ii) warrants to purchase 22,624,975 shares of New iLearningEngines Common\nStock, consisting of 14,374 975 public warrants, each exercisable for one share of New iLearningEngines Common Stock at a price of\n$11 50 per share, and 8,250,000 private warrants, each exercisable for one share of New iLearningEngines Common Stock at a price of\n$11 50 per share\n\nThe Company negotiated concessions on accounts payable to other third party vendors in several forms The form of concessions\ninclude (1) providing a discount to the total amount payable, (2) the option to settle certain payables in common stock, and (3) entering\ninto a deferred payment agreement for certain payables The concessions became effective on the Closing Date\n\n2023 Convertible Notes\n\nPrior to the Closing, on April 27, 2023, Legacy iLearningEngines entered into a convertible note purchase agreement (the \u201c2023\nConvertible Note Purchase Agreement\u201d), with certain investors (collectively, with all investors who may become party to the 2023\nConvertible Note Purchase Agreement thereafter, the \u201c2023 Convertible Note Investors\u201d), pursuant to which, among other things,\nLegacy iLearningEngines issued and sold to the 2023 Convertible Note Investors convertible notes due in October 2025 (\u201c2023\nConvertible Notes\u201d) with aggregate principal amount of $17,400,000, including to affiliates of the Sponsor Each 2023 Convertible\nNote accrued interest at a rate of (i) 15% per annum until the aggregate accrued interest thereunder equals 25% of the principal amount\nof such note, and (ii) 8% per annum thereafter Immediately prior to the consummation of the Business Combination, each 2023\nConvertible Note automatically converted into 4,971,076 shares of Legacy iLearningEngines thereby entitling the holder thereof to\nreceive, in connection with the consummation of the Business Combination, a number of shares New iLearningEngines Common Stock\n(rounded down to the nearest whole share) equal to (1) 2 75, multiplied by the outstanding principal under such 2023 Convertible Note,\nplus all accrued and unpaid interest thereon, divided by (ii) $10 00 A description of the 2023 Convertible Notes is included in the\nProxy Statement/Prospectus in the section entitled \u201cCertain Arrowroot Relationships and Related Party Transactions Promissory\nNotes\u201d beginning on page 126 of the Proxy Statement/Prospectus, which is incorporated herein by reference\n\nF 27\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 275 of 408\n\nILEARNINGENGINES, INC\n(FORMERLY KNOWN AS ARROWROOT ACQUISITION CORP )\nNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS\nMARCH 31, 2024\n\n2024 Convertible Notes\n\nIn addition, on March 21, 2024, Legacy iLearningEngines entered into the 2024 convertible note purchase agreement (the \u201c2024\nConvertible Note Purchase Agreement\u201d) with an investor (the \u201cMarch Investor\u201d), pursuant to which, among other things, Legacy\niLearningEngines issued and sold a 2024 Convertible Note to the March Investor with an aggregate principal amount of $700,000 On\nApril 16, 2024, Legacy iLearningEngines entered into the 2024 Convertible Note Purchase Agreement with certain investors\n(collectively, the \u201cApril Investors\u201d and, together with the March Investor, the \u201c2024 Convertible Note Investors\u201d), pursuant to which,\namong other things, Legacy iLearningEngines issued and sold to the April Investors convertible notes due in October 2026 (\u201c2024\nConvertible Notes\u201d) with an aggregate principal amount of $28,714,500 Each 2024 Convertible Note accrued interest at a rate of (i)\n15% per annum until the aggregate accrued interest thereunder equals 25% of the principal amount of such note, and (ii) 8% per annum\nthereafter Immediately prior to the consummation of the Business Combination, each 2024 Convertible Note automatically converted\ninto shares of Legacy iLearningEngines thereby entitling the holder thereof to receive, in connection with the consummation of the\nBusiness Combination, a number of shares New iLearningEngines Common Stock (rounded down to the nearest whole share) equal to\n(i) 2 75, multiplied by the outstanding principal under such Convertible Note, plus all accrued and unpaid interest thereon, divided by\n(ii) $10 00 The price per share at which the Principal (as defined in the 2024 Convertible Notes), together with accrued but unpaid\ninterest, on each 2024 Convertible Note converts into Incentive Shares (as defined in the 2024 Convertible Note Purchase Agreement)\nis referred to as the \u201cConversion Price\u201d herein\n\nRevolving Loan Agreement\n\nOn April 17, 2024 (the \u201cLoan Closing Date\u201d), Legacy iLearningEngines entered into a Loan and Security Agreement (the \u201cRevolving\nLoan Agreement\u201d), by and among Legacy iLearningEngines as borrower (\u201cBorrower\u201d), the lenders party thereto (the \u201cLenders\u201d) and\nEast West Bank, as administrative agent and collateral agent for the Lenders (\u201cAgent\u201d) The Revolving Loan Agreement provides for\n(i) a revolving credit facility in an aggregate principal amount of up to $40 0 million and (ii) an uncommitted accordion facility\nallowing the Borrower to increase the revolving commitments by an additional principal amount of $20 0 at Borrower\u2019s option and\nupon Agent\u2019s approval (collectively, the \u201cRevolving Loans\u201d) Borrower drew $40 0 million in Revolving Loans on the Loan Closing\nDate, which was used (x) to repay in full Borrower\u2019s existing indebtedness under the (i) Loan and Security Agreement, dated as of\nDecember 30, 2020, between Legacy iLearningEngines and Venture Lending & Leasing IX, Inc , (ii) Loan and Security Agreement,\ndated as of October 21, 2021, between Legacy iLearningEngines, and Venture Lending & Leasing IX, Inc and WTI Fund X, Inc and\n(ii) Loan and Security Agreement, dated as of October 31, 2023, between Legacy iLearningEngines and WTI Fund X, Inc (the \u201cWTI\nLoan Agreements\u201d) and which will be used for (y) for general corporate purposes\n\nThe obligations under the Revolving Loan Agreement are secured by a perfected security interest in substantially all of the Borrower\u2019s\nassets except for certain customary excluded property pursuant to the terms of the Revolving Loan Agreement On the Loan Closing\nDate, the Company and In2Vate, L L C , an Oklahoma limited liability company (the \u201cGuarantors\u201d) and wholly owned subsidiary of\nLegacy iLearningEngines entered into a Guaranty and Suretyship Agreement (the \u201cGuaranty\u201d) with the Agent, pursuant to which the\nGuarantors provided a guaranty of Borrower\u2019s obligations under the Revolving Loan Agreement and provided a security interest in\nsubstantially all of the Guarantors\u2019 assets except for certain customary excluded property pursuant to the terms of the Guaranty\n\nThe interest rate applicable to the Revolving Loans is Adjusted Term SOFR (with an interest period of 1 or 3 months at the Borrower\u2019s\noption) plus 3 50% per annum, subject to an Adjusted Term SOFR floor of 4 00%\n\nF 28\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 276 of 408\n\nREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n\nTo the Stockholders and the Board of Directors of\nArrowroot Acquisition Corp\n\nOpinion on the Consolidated Financial Statements\n\nWe have audited the accompanying consolidated balance sheets of Arrowroot Acquisition Corp (the \u201cCompany\u201d) as of December 31,\n2023 and 2022, the related consolidated statements of operations, changes in stockholders\u2019 deficit, and cash flows for the years then\nended, and the related notes (collectively referred to as the \u201cconsolidated financial statements\u201d) In our opinion, the consolidated\nfinancial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022,\nand the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted\nin the United States of America\n\nGoing Concern\n\nThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern\nAs discussed in Note 1 to the consolidated financial statements, if the Company is unable to raise additional funds to alleviate liquidity\nneeds and complete a business combination by August 6, 2024 then the Company will cease all operations except for the purpose of\nliquidating The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the\nCompany\u2019s ability to continue as a going concern Management's plans in regard to these matters are also described in Note 1 The\nconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty\n\nBasis for Opinion\n\nThese consolidated financial statements are the responsibility of the Company\u2019s management Our responsibility is to express an\nopinion on the Company's consolidated financial statements based on our audits We are a public accounting firm registered with the\nPublic Company Accounting Oversight Board (United States) (\u201cPCAOB\u201d) and are required to be independent with respect to the\nCompany in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange\nCommission and the PCAOB\n\nWe conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audits\nto obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to\nerror or fraud The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial\nreporting As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the\npurpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting Accordingly, we\nexpress no such opinion\n\nOur audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,\nwhether due to error or fraud, and performing procedures that respond to those risks Such procedures included examining, on a test\nbasis, evidence regarding the amounts and disclosures in the consolidated financial statements Our audits also included evaluating the\naccounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the\nconsolidated financial statements We believe that our audits provide a reasonable basis for our opinion\n\nWe have served as the Company's auditor since 2020\ns/ WithumSmith+Brown, PC\nNew York, New York\n\nApril 1, 2024\nPCAOB Number 100\n\nF 29\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25\n\nARROWROOT ACQUISITION CORP\nCONSOLIDATED BALANCE SHEETS\n\nASSETS\nCurrent assets\nCash\nPrepaid expenses\nPrepaid income tax\nTotal Current Assets\n\nCash and investments held in Trust Account\nTOTAL ASSETS\n\nLIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION\nAND STOCKHOLDERS\u2019 DEFICIT\nCurrent liabilities\nAccounts payable and accrued expenses\nIncome tax payable\nExcise tax payable\nPromissory note \u2014 related party\nForward purchase agreement liability\nConvertible promissory notes \u2014 related party\nTotal Current Liabilities\n\nDeferred underwriting fee payable\nWarrant liabilities\nTotal Liabilities\n\nCommitments and Contingencies\n\nClass A common stock subject to possible redemption, $0.0001 par value; 4,445,813 and 28,750,000\nshares issued and outstanding at approximately $10.51 and $10.10 per share redemption value as\nof December 31, 2023 and 2022, respectively\n\nStockholders\u2019 Deficit\n\nPreferred stock, $0.0001 par value; 1,000,000 shares authorized: none issued or outstanding as of\nDecember 31, 2023 and 2022\n\nClass A common stock, $0.0001 par value: 200,000,000 shares authorized, none issued and\noutstanding (excluding 4,445,813 and 28,750,000 subject to possible redemption), respectively, as\nof December 31, 2023 and 2022\n\nClass B common stock, $0.0001 par value; 20,000,000 shares authorized: 7,187,500 shares issued\nand outstanding as of December 31, 2023 and 2022\n\nAccumulated deficit\nTotal Stockholders\u2019 Deficit\n\nTOTAL LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE\nREDEMPTION AND STOCKHOLDERS\u2019 DEFICIT\n\nPage 277 of 408\n\nDecember 31, December 31,\n2023 2022\n\n145.669 145.980\n\n48.319 76.350\n\n65.585 \u2014\n\n259,573 222,330\n\n46.744.889 290.737.917\n\n$ 47,004,462\n\n$ 290,960,247\n\n4,099,162 1,063,841\n\u2014 383.410\n2,472,591 =\n2.180.000 =\n1,500,000 =\n2.620.000 1,500,000\n12,871,753 2,947,251\n10,062 500 10,062,500\n1,810,000 110,000\n24,744,253 13,119,751\n46,744,889 290,317,507\n719 719\n(24,485,399) (12.477,730)\n(24,484,680) (12,477,011)\n\n$ 47,004,462 $ 290,960,247\nSS\n\nThe accompanying notes are an integral part of the consolidated financial statements\n\nF 30\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25\n\nARROWROOT ACQUISITION CORP\nCONSOLIDATED STATEMENTS OF OPERATIONS\n\nGeneral and administrative expenses\nLoss from operations\n\nOther income (expense)\nChange in fair value of warrant liabilities\nForward purchase agreement\nInterest expense promissory note\nInterest earned on cash and investments held in Trust Account\n\nTotal other income (expense), net\n\nLoss) income before provision for income taxes\nProvision for income taxes\nNet (loss) income\nWeighted average shares outstanding, Class A common stock\nBasic and diluted net (loss) income per share, Class A common stock\n\nWeighted average shares outstanding, Class B common stock\n\nBasic and diluted net (loss) income per share, Class B common stock\n\nPage 278 of 408\n\nYear Ended Year Ended\nDecember 31, December 31,\n2023 2022\n$ 5.487.905 $ 1 555.038\n(5,487,905) (1,555,038)\n(1,700,000) 11,881,250\n(1 500,000)\n(89,408)\n3.492.690 3.945.497\n203.282 15.826.747\n(5,284,623) 14,271.709\n(564,005) (750.410)\n\n$ (5,848,628)\n\n8,574,195\n\n$ (0 37)\n7,187,500\n\n$ (0.37)\n\nThe accompanying notes are an integral part of the consolidated financial statements\n\nF 31\n\n$ 13,521,299\n\n28.750.000\n\n$ 0 38\n7.187.500\n\n$ 0.38\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 279 of 408\n\nARROWROOT ACQUISITION CORP\nCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS\u2019 DEFICIT\nFOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022\n\nClass A Class B Additional Total\nCommon Stock Common Stock Paid-in Accumulated Stockholders\u2019\nShares Amount Shares Amount Capital Deficit Deficit\nBalance \u2014 January 1, 2022 \u2014 \u00a7$ \u2014 7,187,500 $ 719 $ \u2014 \u00a7$ (23,181,522) $ (23,180,803)\nAccretion of Class A common\nstock subject to possible\nredemption \u2014 \u2014 \u2014 \u2014 \u2014 (2,817,507) (2,817,507)\nNet income = \u2014 \u2014 \u2014 \u2014 13,521,299 13,521,299\nBalance December 31, 2022 7,187,500 719 (12,477,730) (12,477,011)\nAccretion of Class A common\nstock subject to possible\nredemption (3,686,450) (3.686.450)\nExcise tax payable attributable to\nredemption of common stock (2.472.591) (2,472 591)\nNet loss \u2014 \u2014 \u2014 \u2014 \u2014 (5.848.628) (5,848,628)\nBalance \u2014 December 31, 2023 \u2014 \u00a7$ \u2014 7,187,500 $ 719 $ \u2014 \u00a7 (24,485,399) $ (24,484,680)\nCO ee\n\nThe accompanying notes are an integral part of the consolidated financial statements\n\nF'32\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nFiled 09/18/25\n\nARROWROOT ACQUISITION CORP\nCONSOLIDATED STATEMENTS OF CASH FLOWS\n\nCash Flows from Operating Activities:\nNet (loss) income\n\nAdjustments to reconcile net (loss) income to net cash used in operating activities:\n\nInterest earned on cash and investments held in Trust Account\nChange in fair value of warrant liabilities\nForward purchase agreement\nChanges in operating assets and liabilities:\n\nPrepaid expenses\n\nPrepaid income tax\n\nAccrued expenses\n\nIncome tax payable\n\nNet cash used in operating activities\n\nCash Flows from Investing Activities:\n\nInvestment of cash into Trust Account\n\nCash withdrawn from Trust Account to pay franchise and income taxes\nCash withdrawn from Trust Account in connection with redemption\n\nNet cash provided by investing activities\n\nCash Flows from Financing Activities\nProceeds from promissory note related party\nProceeds from convertible promissory note related party\nRedemption of common stock\nNet cash (used in) provided by financing activities\n\nNet Change in Cash\nCash \u2014 Beginning of the year\n\nCash \u2014 End of the year\n\nSupplementary cash flow information:\nCash paid for income taxes\n\nNon-cash investing and financing activities:\nExcise tax payable attributable to redemption of common stock\n\nPage 280 of 408\n\nYear Ended Year Ended\nDecember 31, December 31,\n2023 2022\n$ (5,848,628) $ 13,521,299\n(3,492,690) 3.945.497)\n1,700,000 (11,881,250)\n1,500,000 \u2014_\n28.031 438.203\n(65,585) \u2014_\n3.035.321 (114,070)\n(383,410) 383.410\n(3,526,961) (1,597,905)\n(1,600,000) \u2014\n1.826.650 731,214\n247 259,068\n247,485,718 731,214\n2.180.000\n1.120.000 750.000\n(247,259,068) \u2014\n(243,959,068) 750,000\n(311) (116,691)\n145.980 262.671\n\n$ 145,669\n\n$ 1,013,000\n\n$ 2,472,591\n\nThe accompanying notes are an integral part of the consolidated financial statements.\n\nF-33\n\n$ 145,980\n\n|\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 281 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nNOTE 1 DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS\n\nArrowroot Acquisition Corp (the \u201cCompany\u201d) is a blank check company incorporated in Delaware on November 5, 2020 The\nCompany was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or\nsimilar business combination with one or more businesses (the \u201cBusiness Combination\u201d)\n\nThe Company is not limited to a particular industry or sector for purposes of consummating a Business Combination The Company is\nan early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and\nemerging growth companies\n\nAs of December 31, 2023, the Company had not commenced any operations All activity through December 31, 2023 relates to the\nCompany\u2019s formation, the initial public offering (\u201cInitial Public Offering\u201d), which is described below, and identifying a target company\nfor a Business Combination, including activities in connection with the Business Combination (as defined and discussed below) The\nCompany will not generate any operating revenues until after the completion of a Business Combination, at the earliest The Company\ngenerates non operating income in the form of interest income from the cash held in the Trust Account (as defined below)\n\nOn February 28, 2023, the Company\u2019s stockholders held a special meeting (the \u201cSpecial Meeting\u201d) and approved and adopted an\namendment to its Amended and Restated Certificate of Incorporation (the \u201cCertificate of Incorporation\u201d) to extend the period of time\nfor which the Company is required to consummate a Business Combination from March 4, 2023 (the \u201cOriginal Termination Date\u201d) to\nJuly 6, 2023 (the \u201cCharter Extension Date\u201d) and to allow the Company, without another stockholder vote, to elect to extend the\nTermination Date to consummate an initial Business Combination on a monthly basis for up to seven times by an additional one month\neach time after the Charter Extension Date, by resolution of the Board if requested by the Sponsor, and upon five days\u2019 advance notice\nprior to the applicable Termination Date, until February 4, 2024 (each, an \u201cAdditional Charter Extension Date\u201d) for a total of up to\neleven months after the Original Termination Date, unless the closing of an initial Business Combination shall have occurred prior\nthereto (the \u201cExtension\u201d, such extension deadline, the \u201cExtension Date\u201d, and such proposal, the \u201cExtension Proposal\u201d) In connection\nwith the Extension, shareholders holding 24 304,187 shares of the Company\u2019s Class A common stock exercised their right to redeem\nsuch shares for a pro rata portion of the funds in the Company\u2019s Trust Account at a redemption price of approximately $10 17 per share\nAs a result, following the Special Meeting, approximately $247 259,068 in cash was removed from the Trust Account to pay such\nholders\n\nOn February 2, 2024, the Company held a special meeting of stockholders (the \u201cExtension Special Meeting\u201d) to approve an\namendment to Arrowroot\u2019s amended and restated certificate of incorporation, as amended, (the \u201cCharter Amendment\u201d) to extend the\nTermination Date from February 4, 2024 to March 6, 2024 (the \u201cInitial Subsequent Charter Extension Date\u201d) and to allow the\nCompany, without another stockholder vote, to elect to extend the Termination Date to consummate an initial business combination on\na monthly basis up to five times by an additional one month each time after the Initial Subsequent Charter Extension Date (the Initial\nSubsequent Charter Extension Date, as further extended by Arrowroot, the \u201cSubsequent Extension Date\u201d), by resolution of the\nCompany\u2019s board of directors, if requested by the Sponsor, and upon five days\u2019 advance notice prior to the applicable Termination\nDate, until August 6, 2024, unless the closing of an initial business combination shall have occurred prior thereto (the \u201cSubsequent\nExtension Proposal\u201d) The stockholders of the Company approved the Subsequent Extension Proposal at the Extension Special Meeting\nand on February 2, 2024, the Company filed the Charter Amendment with the Delaware Secretary of State\n\nIn connection with the vote to approve the Charter Amendment, the holders of 3,428,783 shares of Class A common stock properly\n\nexercised their right to redeem their shares (and did not withdraw their redemption) for cash at a redemption price of approximately\n$10 59 per share, for an aggregate redemption amount of $36 309,429 After the satisfaction of such redemptions, the balance in the\nCompany\u2019s Trust Account was approximately $10 77 million\n\nThe registration statement for the Company\u2019s Initial Public Offering was declared effective on March 1, 2021 On March 4, 2021, the\nCompany consummated the Initial Public Offering of 28,750,000 units (the \u201cUnits\u201d and, with respect to the Class A common stock\nincluded in the Units sold, the \u201cPublic Shares\u201d), which includes the full exercise by the underwriter of its over allotment option in the\namount of 3,750,000 Units, at $10 00 per Unit, generating gross proceeds of $287 500,000\n\nSimultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 8,250,000 warrants (the \u201cPrivate\nPlacement Warrants\u201d) at a price of $1 00 per Private Placement Warrant in a private placement to Arrowroot Acquisition LLC (the\n\fCase 8:24-Cv-02900:DKC, oop ocument 90-2 Filed 09/18/25 Page 282 of 408\n\n\u201cSponsor\u2019), generating gross proceeds of\n\nTransaction costs amounted to $16 392,714, consisting of $5,750,000 in cash underwriting fees, net of reimbursements, $10,062 500 of\ndeferred underwriting fees and $580 214 of other offering costs\n\nFollowing the closing of the Initial Public Offering on March 4, 2021, an amount of $287,500,000 ($10 00 per Unit) from the net\nproceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust\naccount (the \u201cTrust Account\u201d), located in the United States and has been invested only in U S government securities, within the\nmeaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the \u201cInvestment Company Act\u201d), with a\nmaturity of 185 days or less or in any open ended investment company that holds itself out as a money market fund selected by the\nCompany meeting the conditions of Rule 2a 7 of the Investment Company Act, as determined by the Company, until the earlier of (i)\nthe completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below\n\nF 34\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 283 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nThe Company\u2019s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public\nOffering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally\ntoward consummating a Business Combination There is no assurance that the Company will be able to complete a Business\nCombination successfully The Company must complete one or more initial Business Combinations with one or more operating\nbusinesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding any deferred\nunderwriting fees and taxes payable on the interest earned on the Trust Account) The Company will only complete a Business\nCombination if the post transaction company owns or acquires 50% or more of the outstanding voting securities of the target or\notherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company\nunder the Investment Company Act\n\nThe Company will provide the holders of the outstanding Public Shares (the \u201cPublic Stockholders\u201d) with the opportunity to redeem all\nor a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting\ncalled to approve the Business Combination or (ii) by means of a tender offer The decision as to whether the Company will seek\nstockholder approval of a Business Combination or conduct a tender offer will be made by the Company The Public Stockholders will\nbe entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10 00 per Public\nShare, plus any pro rata interest then in the Trust Account, net of taxes payable) There will be no redemption rights upon the\ncompletion of a Business Combination with respect to the Company\u2019s warrants\n\nThe Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 following\nany related redemptions and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the\nBusiness Combination If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company\ndoes not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Certificate of Incorporation,\nconduct the redemptions pursuant to the tender offer rules of the U S Securities and Exchange Commission (\u201cSEC\u201d) and file tender\noffer documents with the SEC prior to completing a Business Combination If, however, stockholder approval of the transaction is\nrequired by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business\nor other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not\npursuant to the tender offer rules If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor\nhas agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering\nin favor of approving a Business Combination Additionally, each Public Stockholder may elect to redeem their Public Shares without\nvoting, and if they do vote, irrespective of whether they vote for or against the proposed transaction\n\nNotwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct\nredemptions pursuant to the tender offer rules, the Certificate of Incorporation provides that a Public Stockholder, together with any\naffiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a \u201cgroup\u201d (as defined under\nSection 13 of the Securities Exchange Act of 1934, as amended (the \u201cExchange Act\u201d)), will be restricted from redeeming its shares\nwith respect to more than an aggregate of 15% of the Public Shares, without the prior consent of the Company\n\nThe Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and Public Shares held by it in connection\nwith the completion of a Business Combination, (b) to waive its liquidation rights with respect to the Founder Shares if the Company\nfails to complete a Business Combination by the Subsequent Charter Extension Date and (c) not to propose an amendment to the\nCertificate of Incorporation (i) to modify the substance or timing of the Company\u2019s obligation to allow redemptions in connection with\na Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the\nCombination Period (as defined below) or (ii) with respect to any other provision relating to stockholders\u2019 rights or pre Business\nCombination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in\nconjunction with any such amendment However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such\nPublic Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business\nCombination within the Combination Period\n\nF 35\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 284 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nThe Company has until the Subsequent Charter Extension Date to complete a Business Combination (the \u201cCombination Period\u201d) If the\nCompany has not completed a Business Combination within the Combination Period, the Company will (i) cease all operations except\nfor the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public\nShares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest\nearned on the funds held in the Trust Account and not previously released to pay taxes (less up to $100,000 of interest to pay\ndissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public\nStockholders\u2019 rights as stockholders (including the right to receive further liquidating distributions, if any), and (ii) as promptly as\nreasonably possible following such redemption, subject to the approval of the Company\u2019s remaining stockholders and the Company\u2019s\nboard of directors, dissolve and liquidate, subject in each case to the Company\u2019s obligations under Delaware law to provide for claims\nof creditors and the requirements of other applicable law There will be no redemption rights or liquidating distributions with respect to\nthe Company\u2019s warrants, which will expire worthless if the Company fails to complete a Business Combination within the\nCombination Period\n\nIn order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any\nclaims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company\nhas discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10 00\nper Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust\nAccount, if less than $10 00 per public Share due to reductions in the value of the trust assets, less taxes payable, provided that such\nliability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to\nmonies held in the Trust Account nor will it apply to any claims under the Company\u2019s indemnity of the underwriter of the Initial Public\nOffering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the \u201cSecurities Act\u201d) Moreover,\nin the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the\nextent of any liability for such third party claims The Company will seek to reduce the possibility that the Sponsor will have to\nindemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the\nCompany\u2019s independent registered public accounting firm), prospective target businesses and other entities with which the Company\ndoes business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the\nTrust Account\n\nProposed Business Combination\n\nOn April 27, 2023, the Company entered into an Agreement and Plan of Merger (the \u201cMerger Agreement\u201d) with ARAC Merger Sub,\nInc , a Delaware corporation and a wholly owned subsidiary of the Company (\u201cMerger Sub\u201d), and iLearningEngines, Inc , a Delaware\ncorporation (\u201ciLearningEngines\u201d)\n\nThe Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, the following\ntransactions will occur (together with the other transactions contemplated by the Merger Agreement (the \u201cBusiness Combination\u201d)\n\n(i) atthe closing of the Business Combination (the \u201cClosing\u201d), in accordance with the Delaware General Corporation Law, as\namended (\u201c\u201cDGCL\u201d), Merger Sub will merge with and into iLearningEngines, the separate corporate existence of Merger Sub\nwill cease and iLearningEngines will be the surviving corporation (the \u201cSurviving Corporation\u201d) and a wholly owned\nsubsidiary of the Company (the \u201cMerger\u201d); and\n\n(ii) as a result of the Merger, among other things, the outstanding shares of common stock of iLearningEngines (other than shares\nsubject to iLearningEngines equity awards, treasury shares and dissenting shares) will be cancelled in exchange for the right to\nreceive a number of shares of common stock of the Surviving Corporation equal to (x) the sum of (i) the Base Purchase Price\n(as defined below), minus (ii) the dollar value of the Company Incentive Amount (as defined below), p/us (iii) the aggregate\nexercise price of the Company Warrants (as defined in the Merger Agreement) that are issued and outstanding immediately\nprior to the Effective Time, minus (iv) the aggregate amount of Note Balance (as defined in the Merger Agreement) divided by\n(y) $10 00 The \u201cBase Purchase Price\u201d means an amount equal to $1,285,000,000 The \u201cCompany Incentive Amount\u201d means\n(x) the number of shares of the Company Class A Common Stock issuable to iLearningEngines securityholders (excluding, for\nthe avoidance of doubt, the holders of Company Convertible Notes) at the Closing which iLearningEngines and the Company\nagree, at least two (2) business days prior to the Closing, to issue to certain private placement investors and non redeeming\n\fe 8:24-cv-02900-DK Do 90-2, Filed 09/18/25 Page 285 of 408\n\nstockhaaers \u2018ich amount oi equal 82 03 PUPA such shares issued to THe estore at non re W andng\nstockholders, with the remainder being contributed by the Sponsor), mu/tiplied by (y) $10 00\n\nThe Board of Directors of the Company (the \u201cBoard\u201d) has (i) approved and declared advisable the Merger Agreement and the Business\n\nCombination and (ii) resolved to recommend approval of the Merger Agreement and related matters by the stockholders of the\nCompany\n\nF 36\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 286 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nThe Merger Agreement is subject to the satisfaction or waiver of certain customary closing conditions, including, among others, (i)\napproval of the Business Combination and related agreements and transactions by the respective shareholders of the Company and\niLearningEngines, (ii) effectiveness of the registration statement on Form \u00a7 4 to be filed by the Company in connection with the\nBusiness Combination, (iii) expiration or termination of the waiting period under the Hart Scott Rodino Antitrust Improvements Act,\n(iv) the absence of any injunction, order, statute, rule, or regulation enjoining or prohibiting the consummation of the Merger, (v) that\nthe Company have at least $5,000,001 of net tangible assets upon Closing and (vi) receipt of approval for listing on Nasdaq the shares\nof common stock of the Surviving Corporation to be issued in connection with the Merger\n\nOther conditions to the Company\u2019s obligations to consummate the Merger include, among others, that as of the Closing, (i)\niLearningEngines shall have performed all covenants in all material respects and (11) no Company Material Adverse Effect (as defined\nin the Merger Agreement) shall have occurred between the date of the Merger Agreement and Closing\n\nOther conditions to iLearningEngines\u2019s obligations to consummate the Merger include, among others, that as of the Closing, (i) the\nCompany shall have performed all covenants in all material respects (ii) no Acquiror Material Adverse Effect (as defined in the Merger\nAgreement) shall have occurred between the date of the Merger Agreement and Closing and (iii) the amount of cash available in the\nTrust Account into which substantially all of the proceeds of the Company\u2019s initial public offering and private placement of its warrants\nhave been deposited for the benefit of its public shareholders, together with the proceeds of certain private placement investments in\nthe Company or iLearningEngines prior to closing and subject to the deductions and conditions set forth in the Merger Agreement,\nincluding deductions for certain the Company transaction expenses, is at least equal to or greater than $100,000,000\n\nThe Merger Agreement contains additional covenants, including, among others, providing for (i) the parties to conduct their respective\nbusinesses in the ordinary course through the Closing, (ii) the parties to not solicit, initiate any negotiations or enter into any\nagreements for certain alternative transactions, (iii) iLearningEngines to prepare and deliver to the Company certain audited and\nconsolidated financial statements of iLearningEngines, (iv) the Company to prepare and file a registration statement on Form S 4 and\ntake certain other actions to obtain the requisite approval of the Company\u2019s stockholders of certain proposals regarding the Business\nCombination and (v) the parties to use reasonable best efforts to obtain necessary approvals from governmental agencies\n\nLiquidity and Going Concern\n\nOn December 29, 2021, the Company issued an unsecured convertible promissory note (the \u201cFirst Promissory Note\u201d) with the Sponsor\npursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount of $1,500,000 Upon issuance,\n$750,000 was drawn down on the note with an additional $200,000 drawn down on March 17, 2022 On April 21, 2022, the Company\ndrew down the remaining $550,000 pursuant to the terms of the First Promissory Note Following this drawdown, the full $1 500,000\navailable under the First Promissory Note was outstanding There are no remaining funds available under the First Promissory Note for\nfuture drawdowns As of December 31, 2023 and 2022, $1 500,000 and $1,500,000 were outstanding under this First Promissory Note,\nrespectively\n\nThe First Promissory Note is subject to the Sponsor\u2019s approval and does not bear interest The principal balance of the note will be\npayable on the earliest to occur of (i) the date on which the Company consummates its initial Business Combination or (ii) the date that\nthe winding up of the Company is effective (such date, the \u201cMaturity Date\u201d) In the event the Company consummates its initial\nBusiness Combination, the Sponsor has the option on the Maturity Date to convert all or any portion of the principal outstanding under\nthe First Promissory Note into that number of warrants (\u201cWorking Capital Warrants\u201d) equal to the portion of the principal amount of\nthe First Promissory Note being converted divided by $1 00, rounded up to the nearest whole number The terms of the Working\nCapital Warrants, if any, would be identical to the terms of the private placement warrants issued by the Company at the time of its\ninitial public offering, as described in the prospectus for the initial public offering dated March 1, 2021 and filed with the SEC,\nincluding the transfer restrictions applicable thereto The First Promissory Note is subject to customary events of default, the\noccurrence of certain of which automatically triggers the unpaid principal balance of the First Promissory Note and all other sums\npayable with regard to the First Promissory Note becoming immediately due and payable\n\nOn February 23, 2023, the Company issued an unsecured promissory note in the principal amount of $500,000 in favor of the Sponsor\n(the \u201cSecond Promissory Note\u201d), which was funded in full by the Sponsor upon execution of the Second Promissory Note The Second\nPromissory Note is not convertible into Working Capital Warrants or any other security pursuant to its terms As of December 31, 2023,\nthe Company had $500,000 outstanding balance under this Second Promissory Note\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 287 of 408\n\nF 37\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 288 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nIn connection with the approval by the Company\u2019s stockholders of the Extension Date at the Special Meeting, the Sponsor issued to the\nCompany an unsecured promissory note that matures upon the Company closing its initial Business Combination (the \u201cThird\nPromissory Note\u201d) Following the Extension Proposal being approved, the Sponsor funded $640,000 of the Third Promissory Note\nPursuant to the terms of the Third Promissory Note, on each Additional Charter Extension Date, the Sponsor must fund the lesser of (a)\n$160,000 or (b) $0 04 for each public share that is not redeemed in connection with the Special Meeting for an aggregate deposit of up\nto the lesser of (x) $1,120,000 or (y) $0 28 for each public share that is not redeemed in connection with the Special Meeting (if all\nseven additional monthly extensions are exercised) As of December 31, 2023, the Company had $1,600,000 outstanding balance under\nthis Third Promissory Note Additionally, on January 5, 2024, the Company drew down an additional $160,000 pursuant to the Third\nPromissory Note If the Company completes an initial Business Combination, the Company will, at the option of the Sponsor, repay the\namounts loaned under the Third Promissory Note or convert a portion or all of the amounts loaned under such promissory note into\nwarrants, which warrants will be identical to the private placement warrants issued in connection with the Company\u2019s initial public\noffering If the Company does not complete an initial Business Combination by the Subsequent Charter Extension Date, such\npromissory note will be repaid only from funds held outside of the Trust Account or will be forfeited, eliminated or otherwise forgiven\n\nOn June 13, 2023, the Company issued an unsecured promissory note (the \u201cFourth Promissory Note\u201d and together with the First\nPromissory Note, the Second Promissory Note and the Third Promissory Note, the \u201cPromissory Notes\u201d) in the principal amount of\n$2,000,000 to the Sponsor The Fourth Promissory Note bears interest at 15% per annum and matures upon closing of the Company\u2019s\ninitial Business Combination In the event that the Company does not consummate an initial Business Combination, the Fourth\nPromissory Note will be repaid only from funds held outside of the Trust Account or will be forfeited, eliminated or otherwise forgiven\nThe Fourth Promissory Note may be further drawn down from time to time prior to the Maturity Date upon request by the Company\nsubject to the Sponsor\u2019s approval The Fourth Promissory Note is subject to customary events of default, the occurrence of certain of\nwhich automatically triggers the unpaid principal balance of the Fourth Promissory Note and all other sums payable with regard to the\nFourth Promissory Note becoming immediately due and payable As of December 31, 2023, the Company had a $1,200,000 principal\noutstanding under this Fourth Promissory Note An additional $50,000 was drawn on the Fourth Promissory Note on March 11, 2024\n\nNotwithstanding the original terms of the Promissory Notes, the Company and iLearningEngines have agreed, pursuant to the Merger\nAgreement, that if the Closing occurs, the Sponsor will have the option for the principal and interest outstanding under the Promissory\nNotes to be repaid in cash or convert into common stock of the Surviving Corporation at a price per share equal to $10 00 per share at\nthe Closing; provided, however, that to the extent the Acquiror Transaction Expenses (as defined in the Merger Agreement) exceed\n$30,000,000 then the Promissory Notes will be settled by the conversion of an amount equal to the lesser of (i) the principal and\ninterest outstanding under the Promissory Notes and (ii) the Excess Transaction Expenses (as defined in the Merger Agreement) into\ncommon stock of the Surviving Corporation at a price per share equal to $10 00 per share\n\nAs of December 31, 2023, the Company had $145,669 of cash held outside its Trust Account for use as working capital, $46,744,889 in\ncash held in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in connection\ntherewith and working capital deficit of $12,612,180 As of December 31, 2023, $686,759 of the deposit in the Trust Account\nrepresented interest income, which is available to pay the Company\u2019s tax obligations As of December 31, 2023, the Company\nwithdrew an aggregate amount of $1,826,650 to pay income and franchise taxes and $247,259,068 in connection with redemption In\norder to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of\nthe Company\u2019s officers and directors may, but are not obligated to, provide the Company working capital loans, as defined below\n\nF 38\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 289 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nManagement expects to incur significant costs in pursuit of its acquisition plans In order to fund working capital deficiencies or\nfinance transaction costs in connection with a Business Combination, the Sponsor, or certain of the Company\u2019s officers and directors or\ntheir affiliates may, but are not obligated to, loan the Company funds as may be required If the Company completes a Business\nCombination, 1t would repay such loaned amounts The Company will be using these funds for paying existing accounts payable,\nidentifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target\nbusinesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and\nconsummating the Business Combination\n\nIn connection with the Company\u2019s assessment of going concern considerations in accordance with Financial Accounting Standards\nBoard (\u201cFASB\u201d) Accounting Standards Update (\u201cASU\u201d) 2014 15, \u201cDisclosures of Uncertainties about an Entity\u2019s Ability to Continue\nas a Going Concern,\u201d management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs,\nobtain approval for an extension of the deadline or complete a Business Combination by the Extension Date, then the Company will\ncease all operations except for the purpose of liquidating The liquidity condition and date for mandatory liquidation and subsequent\ndissolution raise substantial doubt about the Company\u2019s ability to continue as a going concern No adjustments have been made to the\ncarrying amounts of assets or liabilities should the Company be required to liquidate after the Extension Date The Company intends to\ncomplete a Business Combination before the mandatory liquidation date or obtain approval for an extension\n\nNOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\nBasis of Presentation\n\nThe accompanying consolidated financial statements are presented in U S dollars and have been prepared in accordance with\naccounting principles generally accepted in the United States of America (\u201cU S GAAP\u201d) and pursuant to the accounting and disclosure\nrules and regulations of the SEC\n\nPrinciples of Consolidation\n\nThe accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary All\nsignificant intercompany balances and transactions have been eliminated in consolidation\n\nEmerging Growth Company\n\nThe Company is an \u201cemerging growth company,\u201d as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our\nBusiness Startups Act of 2012 (the \u201cJOBS Act\u201d), and it may take advantage of certain exemptions from various reporting requirements\nthat are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required\nto comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes Oxley Act,\nreduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the\nrequirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute\npayments not previously approved\n\nFurther, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised\nfinancial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared\neffective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised\nfinancial accounting standards The JOBS Act provides that a company can elect to opt out of the extended transition period and\ncomply with the requirements that apply to non emerging growth companies but any such election to opt out is irrevocable The\nCompany has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has\ndifferent application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or\nrevised standard at the time private companies adopt the new or revised standard This may make comparison of the Company\u2019s\nconsolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth\ncompany which has opted out of using the extended transition period difficult or impossible because of the potential differences in\naccounting standards used\n\fCase 8:24-cv-02900-DKC Document.9Q-2 Filed 09/18/25 Page 290 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 291 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nUse of Estimates\n\nThe preparation of the consolidated financial statements in conformity with U S GAAP requires the Company\u2019s management to make\nestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at\nthe date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods\n\nMaking estimates requires management to exercise significant judgment It is at least reasonably possible that the estimate of the effect\nof a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management\nconsidered in formulating its estimate, could change in the near term due to one or more future confirming events One of the more\nsignificant accounting estimates included in these consolidated financial statements is the determination of the fair value of the warrant\nliabilities Such estimates may be subject to change as more current information becomes available and accordingly, the actual results\ncould differ significantly from those estimates\n\nCash and Cash Equivalents\n\nThe Company considers all short term investments with an original maturity of three months or less when purchased to be cash\nequivalents The Company did not have any cash equivalents as December 31, 2023 and 2022\n\nCash and Investments Held in Trust Account\n\nPrior to the Special Meeting, the Company\u2019s portfolio of cash and investments held in Trust Account was comprised solely of U S\ngovernment securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or\nless, or investments in money market funds that invest in U S government securities, or a combination thereof The Company\u2019s\ninvestments held in the Trust Account were classified as trading securities Trading securities are presented on the consolidated balance\nsheets at fair value at the end of each reporting period Gains and losses resulting from the change in fair value of these investments are\nincluded in interest earned on cash and investments held in Trust Account in the accompanying consolidated statements of operations\nThe estimated fair values of investments held in the Trust Account are determined using available market information In connection\nwith the Special Meeting, the Company liquidated its portfolio of investments held in the Trust Account and converted it into cash held\nin the Trust Account\n\nOffering Costs\n\nOffering costs consisted of legal, accounting, underwriting fees and other costs incurred through the consolidated balance sheet date\nthat are directly related to the Initial Public Offering Offering costs associated with warrant liabilities were expensed as incurred in the\nconsolidated statements of operations Offering costs associated with the Class A common stock issued were initially charged to\ntemporary equity and then accreted to Class A common stock subject to possible redemption upon the completion of the Initial Public\nOffering Offering costs amounted to $16,392,714, of which $760,022 was allocated to the warrant liabilities and charged to the\nconsolidated statements of operations\n\nF 40\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 292 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nClass A Common Stock Subject to Possible Redemption\n\nThe Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting\nStandards Codification (\u201cASC\u201d) Topic 480, \u201cDistinguishing Liabilities from Equity \u201d Shares of Class A common stock subject to\nmandatory redemption are classified as a liability instrument and are measured at redemption value Conditionally redeemable common\nstock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption\nupon the occurrence of uncertain events not solely within the Company\u2019s control) is classified as temporary equity At all other times,\ncommon stock is classified as stockholders\u2019 deficit The Company\u2019s Class A common stock features certain redemption rights that are\nconsidered to be outside of the Company\u2019s control and subject to occurrence of uncertain future events Accordingly, Class A common\nstock subject to possible redemption is presented as temporary equity, outside of the stockholders\u2019 deficit section of the Company\u2019s\nconsolidated balance sheets\n\nThe Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable\ncommon stock to equal the redemption value at the end of each reporting period This method would view the end of the reporting\nperiod as if it were also the redemption date for the security Increases or decreases in the carrying amount of redeemable common\nstock are affected by charges against additional paid in capital and accumulated deficit\n\nAt December 31, 2023 and 2022, the Class A common stock subject to possible redemption reflected in the consolidated balance sheets\nis reconciled in the following table\n\nGross proceeds $ 287 500,000\nLess\n\nProceeds allocated to Public Warrants (13,081,250)\n\nClass A common stock issuance costs (15,632,692)\nPlus\n\nRemeasurement of carrying value to redemption value 31,531,449\nClass A common stock subject to possible redemption at December 31, 2022 290,317,507\nLess:\n\nRedemption (247,259,068)\nPlus:\n\nRemeasurement of carrying value to redemption value 3,686,450\nClass A common stock subject to possible redemption at December 31, 2023 $ 46,744,889\nWarrant Liabilities\n\nThe Company accounts for warrants as either equity classified or liability classified instruments based on an assessment of the\nwarrant\u2019s specific terms and applicable authoritative guidance in FASB ASC 480, \u201cDistinguishing Liabilities from Equity\u201d (\u201cASC\n480\"), and ASC 815, \u201cDerivatives and Hedging\u201d (\u201cASC 815\u201d) The assessment considers whether the warrants are freestanding\nfinancial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of\nthe requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company\u2019s own common\nstock, among other conditions for equity classification This assessment, which requires the use of professional judgment, is conducted\nat the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding\n\nF 41\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 293 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nFor issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a\ncomponent of additional paid in capital at the time of issuance For issued or modified warrants that do not meet all the criteria for\nequity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet\ndate thereafter Changes in the estimated fair value of the warrants are recognized as a non cash gain or loss on the consolidated\nstatements of operations Pursuant to the Initial Public Offering, the Company sold 28,750,000 Units, including a full exercise by the\nunderwriter of their over allotment option in the amount of 3,750,000 Units, at a price of $10 00 per Unit Each Unit consists of one\nshare of Class A common stock and one half of one redeemable warrant (\u201cPublic Warrant\u201d) The Public Warrants for periods where no\nobservable traded price was available were valued using a Monte Carlo simulation The Private Placement Warrants are valued using a\nmodified Black Scholes Option Pricing Model For periods subsequent to the detachment of the Public Warrants from the Units, the\nclose price of the Public Warrant price was used as the fair value of the Public Warrants as of each relevant date (see Note 10)\n\nIncome Taxes\n\nThe Company accounts for income taxes under ASC 740, \u201cIncome Taxes \u201d ASC 740 requires the recognition of deferred tax assets and\nliabilities for both the expected impact of differences between the consolidated financial statements and tax basis of assets and\nliabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards ASC 740 additionally requires\na valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized As\nof December 31, 2023 and 2022, the Company\u2019s deferred tax asset had a full valuation allowance recorded against it\n\nASC 740 270 25 2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date\nincome in interim periods under ASC 740 270 30 5 The Company\u2019s effective tax rate was (10 67)% and (5 20)% for the years ended\nDecember 31, 2023 and 2022, respectively The effective tax rate differs from the statutory tax rate of 21% for the years ended\nDecember 31, 2023 and 2022, due to changes in fair value in forward purchase agreement, and warrant liability, and the valuation\nallowance on the deferred tax assets\n\nASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise\u2019s financial statements and prescribes\na recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or\nexpected to be taken in a tax return For those benefits to be recognized, a tax position must be more likely than not to be sustained\nupon examination by taxing authorities ASC 740 also provides guidance on derecognition, classification, interest and penalties,\naccounting in interim period, disclosure and transition\n\nThe Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense There were no\nunrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2023 and 2022 The Company is\ncurrently not aware of any issues under review that could result in significant payments, accruals or material deviation from its\nposition\n\nThe Company has identified the United States as its only \u201cmajor\u201d tax jurisdiction The Company has been subject to income taxation\nby major taxing authorities since inception These examinations may include questioning the timing and amount of deductions, the\nnexus of income among various tax jurisdictions and compliance with federal and state tax laws The Company\u2019s management does not\nexpect that the total amount of unrecognized tax benefits will materially change over the next twelve months\n\nNet (Loss) Income per Common Share\n\nThe Company complies with accounting and disclosure requirements of FASB ASC Topic 260, \u201cEarnings Per Share\u201d The Company\nhas two classes of common stock, which are referred to as Class A common stock and Class B common stock Income and losses are\nshared pro rata between the two classes of common stock Net (loss) income per common stock is computed by dividing net (loss)\nincome by the weighted average number of common stock outstanding for the period Accretion associated with the redeemable shares\nof Class A common stock is excluded from (loss) income per common share as the redemption value approximates fair value\n\nThe Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 22,625,000\nshares of Class A common stock in the calculation of diluted income per share, since the exercise of the warrants are contingent upon\nthe occurrence of future events and the inclusion of such warrants would be anti dilutive As of December 31, 2023 and 2022, the\nCompany did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock\n\fand then sharejoae B28 evi gR S00, DEC Documen 90-2 Filed 09/18/25 page 294 of 408\n\nompany As a result, diluted net (loss) income per common $s the same as basic net (loss)\nincome per common share for the periods presented\n\nF 42\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 295 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nThe following table reflects the calculation of basic and diluted net (loss) income per common share (in dollars, except per share\namounts)\n\nYear Ended Year Ended\nDecember 31, 2023 December 31, 2022\nClass A Class B Class A Class B\n\nBasic and diluted net (loss) income per common stock\nNumerator\nAllocation of net (loss) income, as adjusted $ (3,181 592) $ (2,667,036) $ 10,817,039 $ 2,704,260\nDenominator\n\nBasic and diluted weighted average shares outstanding 8,574,195 7.187 500 28,750,000 7.187.500\nBasic and diluted net (loss) income per common share $ (037) $ (037) $ 038 $\u00a7$ 038\n\nConcentration of Credit Risk\n\nThe Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured\nlimit of $250,000 Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company\u2019s\nfinancial condition, results of operations. and cash flows\n\nFair Value of Financial Instruments\n\nThe fair value of the Company\u2019s assets and liabilities, which qualify as financial instruments under ASC Topic 820, \u201cFair Value\nMeasurement,\u201d approximates the carrying amounts represented in the accompanying consolidated balance sheets, primarily due to their\nshort term nature, other than the warrant liabilities (see Note 10)\n\nRecent Accounting Standards\n\nIn August 2020, the FASB issued ASU 2020 06, \u201cDebt Debt with Conversion and Other Options (Subtopic 470 20) and Derivatives\nand Hedging Contracts in Entity\u2019s Own Equity (Subtopic 815 40)\u201d (\u201cASU 2020 06\u201d), to simplify accounting for certain financial\ninstruments ASU 2020 06 eliminates the current models that require separation of beneficial conversion and cash conversion features\nfrom convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in\nan entity\u2019s own equity The new standard also introduces additional disclosures for convertible debt and freestanding instruments that\nare indexed to and settled in an entity\u2019s own equity ASU 2020 06 amends the diluted earnings per share guidance, including the\nrequirement to use the if converted method for all convertible instruments As a smaller reporting company, ASU 2020 06 is effective\n\nanuary 1, 2024 for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis,\nwith early adoption permitted beginning on January 1, 2021 The Company is currently assessing the impact, if any, that ASU 2020 06\nwould have on its financial position, results of operations or cash flows\n\nManagement does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would\nhave a material effect on the Company\u2019s consolidated financial statements\n\nNOTE 3 INITIAL PUBLIC OFFERING\n\nPursuant to the Initial Public Offering, the Company sold 28,750,000 Units, including a full exercise by the underwriters of their over\nallotment option in the amount of 3,750,000 Units, at a price of $10 00 per Unit Each Unit consists of one share of Class A common\nstock and one half of one Public Warrant Each whole Public Warrant entitles the holder to purchase one share of Class A common\nstock at a price of $11 50 per share, subject to adjustment (see Note 8)\n\nNOTE 4 PRIVATE PLACEMENT\n\nSimultaneously with the closing of the Initial Public Offering. the Sponsor purchased an aggregate of 8 250,000 Private Placement\nWarrants, at a price of $1 00 per warrant, or $8 250,000 in the aggregate Each Private Placement Warrant is exercisable to purchase\n\fase 8:24-cv-02900-DKC Document 20-2 Filed Oolis/2e Page 296 of 408\n\none share of Class A common stock at an exercise price of $11 50 pers ustment (see Note 8) A portion of the\nproceeds from the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account If\nthe Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private\nPlacement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of\napplicable law), and the Private Placement Warrants will expire worthless\n\nF 43\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 297 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nNOTE 5 RELATED PARTY TRANSACTIONS\nFounder Shares\n\nIn November 2020, the Sponsor purchased 5,750,000 shares (the \u201cFounder Shares\u201d) of the Company\u2019s Class B common stock for an\naggregate price of $30,000 Subsequently, in December 2020 the Company effectuated a 5 for 4 stock split, pursuant to which an\nadditional 1,437,500 shares of Class B common stock were issued, resulting in an aggregate of 7,187,500 Founder Shares issued and\noutstanding The Founder Shares included an aggregate of up to 937 500 Founder Shares subject to forfeiture to the extent that the\nunderwriters\u2019 over allotment was not exercised in full or in part, so that the number of Founder Shares would equal, on an as converted\nbasis, approximately 20% of the Company\u2019s issued and outstanding common stock after the Initial Public Offering In January 2021,\nthe Sponsor transferred 40,000 founder shares to each of three Director nominees, none of which are subject to forfeiture in the event\nthat the underwriters\u2019 over allotment option was not exercised in full As a result of the underwriters\u2019 election to fully exercise their\nover allotment option March 4, 2021, no Founder Shares are currently subject to forfeiture\n\nThe transfer of the Founders Shares to the Company\u2019s director nominees is in the scope of FASB ASC Topic 718, \u201cCompensation\nStock Compensation\u201d (\u201cASC 718\u201d) Under ASC 718, stock based compensation associated with equity classified awards is measured\nat fair value upon the grant date The Founder Shares were effectively transferred subject to a performance condition (i e , the\noccurrence of a Business Combination) Compensation expense related to the Founder Shares is recognized only when the performance\ncondition is probable of occurrence under the applicable accounting literature in this circumstance Stock based compensation would\nbe recognized at the date a Business Combination is considered probable (i e , upon consummation of a Business Combination) in an\namount equal to the number of Founders Shares times the grant date fair value per share (unless subsequently modified)\n\nThe Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur\nof (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported\nsale price of the Class A common stock equals or exceeds $12 00 per share (as adjusted for stock splits, stock capitalizations,\nreorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at least 150 days\nafter a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other\nsimilar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash,\nsecurities or other property\n\nAdministrative Support Agreement\n\nThe Company entered into an agreement, commencing on March 4, 2021, through the earlier of the Company\u2019s consummation of a\nBusiness Combination and its liquidation, to pay the Sponsor a total of $20,000 per month for office space, secretarial, and\nadministrative support services For the years ended December 31, 2023 and 2022, the Company incurred and paid $240,000 and\n$240,000 in fees for these services, respectively There were no amounts outstanding in fees for these services at December 31, 2023\nand 2022\n\nPromissory Notes Related Parties\n\nOn December 21, 2020, the Sponsor issued an unsecured promissory note to the Company (the \u201cIPO Promissory Note\u201d), pursuant to\nwhich the Company could borrow up to an aggregate principal amount of $300,000 The IPO Promissory Note was non interest bearing\nand payable on the earlier of (@) July 31, 2021, or Gi) the consummation of the Initial Public Offering The outstanding balance under\nthe IPO Promissory Note of $149 992 was repaid at the closing of the Initial Public Offering on March 4, 2021 No future borrowings\nare permitted\n\nRelated Party Loans\n\nIn order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of\nthe Company\u2019s officers and directors may, but are not obligated to, loan the Company funds as may be required (\u201cWorking Capital\nLoans\u201d) If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds\nof the Trust Account released to the Company Otherwise, the Working Capital Loans would be repaid only out of funds held outside\nthe Trust Account In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside\n\fCase 8:24-cw) Bote ale Veument oO Feld Filed 09/ 48/25 F Ys Ber \u2018S OF he Working\n\nthe Trust Account to repay the Working Capita ut no proceeds t ccount wou\n\nCapital Loans Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written\nagreements exist with respect to such loans The Working Capital Loans would either be repaid upon consummation of a Business\nCombination, without interest, or, at the lender\u2019s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into\nwarrants of the post Business Combination entity at a price of $1 00 per warrant The warrants would be identical to the Private\nPlacement Warrants\n\nF 44\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 299 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nThe Company has determined that bifurcation of a single derivative that comprises all of the fair value of the conversion feature (ie ,\nderivative instrument) is necessary under ASC 815 15 25 7 through 25 10 Asa result, the derivative value was deemed to be de\nminimis at the issuance date and at each subsequent reporting date resulting in no change in the value of the derivative The derivative\nwill continue to be monitored and measured at each reporting period until the notes are settled\n\nOn December 29, 2021, the Company issued its First Promissory Note with the Sponsor pursuant to which the Sponsor agreed to loan\nthe Company up to an aggregate principal amount of $1 500,000 The note was issued in connection with advances the Sponsor may\nmake in the future, to the Company for working capital expenses Upon issuance, $750,000 was drawn down on the note with an\nadditional $200,000 drawn down on March 17, 2022 On April 21, 2022, the Company drew down the remaining $550,000 pursuant to\nthe terms of the First Promissory Note Following this drawdown, the full $1 500,000 available under the First Promissory Note was\noutstanding There are no remaining funds available under the First Promissory Note for future drawdowns\n\nOn February 23, 2023, the Company issued an unsecured promissory note in the principal amount of $500,000 in favor of the Sponsor\n(the \u201cSecond Promissory Note\u201d), which was funded in full by the Sponsor upon execution of the Second Promissory Note The Second\nPromissory Note is not convertible into Working Capital Warrants or any other security pursuant to its terms As of December 31, 2023\nand 2022, the Company had $500,000 and $0 outstanding balance under this Second Promissory Note, respectively\n\nIn connection with the approval by the Company\u2019s stockholders of the Extension Date at the Special Meeting, the Sponsor issued to the\nCompany an unsecured promissory note that matures upon the Company closing its initial Business Combination (the \u201cThird\nPromissory Note\u201d) Following the Extension Proposal being approved, the Sponsor funded $640,000 of the Third Promissory Note\nPursuant to the terms of the Third Promissory Note, on each Additional Charter Extension Date, the Sponsor must fund the lesser of (a)\n$160,000 or (b) $0 04 for each public share that is not redeemed in connection with the Special Meeting for an aggregate deposit of up\nto the lesser of (x) $1,120,000 or (y) $0 28 for each public share that is not redeemed in connection with the Special Meeting (if all\nseven additional monthly extensions are exercised) As of December 31, 2023, the Company had a $1,600,000 outstanding balance\nunder this Third Promissory Note Additionally, on January 5, 2024, the Company drew down an additional $160,000 pursuant to the\nThird Promissory Note If the Company completes an initial Business Combination, the Company will, at the option of the Sponsor,\nrepay the amounts loaned under the Third Promissory Note or convert a portion or all of the amounts loaned under such promissory\nnote into warrants, which warrants will be identical to the private placement warrants issued in connection with the Company\u2019s initial\npublic offering If the Company does not complete an initial Business Combination by the Subsequent Charter Extension Date, such\npromissory note will be repaid only from funds held outside of the Trust Account or will be forfeited, eliminated or otherwise forgiven\n\nOn June 13, 2023, the Company issued an unsecured promissory note in the principal amount of $2,000,000 in favor of the Sponsor\n(the \u201cFourth Promissory Note\u201d and together with the First Promissory Note, the Second Promissory Note and the Third Promissory\nNote, the \u201cPromissory Notes\u201d), of which $700,000 was funded by the Sponsor upon execution of the Note On September 27, 2023, the\nCompany drew down an additional amount of $500,000 pursuant to the terms of the Fourth Promissory Note, after which $1,200,000\nwas outstanding under the Note An additional $50,000 was drawn on the Fourth Promissory Note on March 11, 2024 There remains\n$750,000 available under the Note for future drawdowns The Fourth Promissory Note bears interest at 15% per annum and matures\nupon closing of the Company\u2019s initial business combination or the date that the winding up of the Company is effective (such date, the\n\u201cMaturity Date\u201d) The Fourth Promissory Note is not convertible into Working Capital Warrants or any other security In the event that\nthe Company does not consummate an initial business combination, the Fourth Promissory Note will be repaid only from funds held\noutside of the Trust Account established in connection with the Company\u2019s initial public offering or will be forfeited, eliminated or\notherwise forgiven The Fourth Promissory Note may be further drawn down from time to time prior to the Maturity Date upon request\nby the Company subject to the Sponsor\u2019s approval The Fourth Promissory Note is subject to customary events of default, the\noccurrence of certain of which automatically triggers the unpaid principal balance of the Fourth Promissory Note and all other sums\npayable with regard to the Fourth Promissory Note becoming immediately due and payable As of December 31, 2023, the Company\nhad a $1,200,000 outstanding balance under this Fourth Promissory Note As of December 31, 2023, the Company incurred $89,408 of\ninterest expense, which is included in Accrued Expenses on the balance sheet An additional $50,000 was drawn on the Fourth\nPromissory Note on March 11, 2024\n\nF 45\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 300 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nNotwithstanding the original terms the Promissory Notes, the Company and iLearningEngines have agreed, pursuant to the Merger\nAgreement, that if the Closing occurs, the Sponsor will have the option for the principal and interest outstanding under the Promissory\nNotes to be repaid in cash or convert into common stock of the Surviving Corporation at a price per share equal to $10 00 per share at\nthe Closing; provided, however, that to the extent the Acquiror Transaction Expenses (as defined in the Merger Agreement) exceed\n$30,000,000, then the Promissory Notes will be settled by the conversion of an amount equal to the lesser of (i) the principal and\ninterest outstanding under the Promissory Notes and (ii) the Excess Transaction Expenses (as defined in the Merger Agreement) into\ncommon stock of the Surviving Corporation at a price per share equal to $10 00 per share\n\nThe Board approved a draw of an aggregate of $160,000 (the \u201cFirst Extension Funds\u201d) pursuant to the Third Promissory Note, between\nthe Company and Arrowroot Acquisition LLC (the \u201cLender\u2019), which First Extension Funds were deposited into the Company\u2019s Trust\nAccount on July 6, 2023 This deposit enabled the Company to extend the date by which it must complete its initial business\ncombination from July 6, 2023 to August 6, 2023 (the \u201cFirst Extension\u201d) The First Extension was the first of seven one month\nextensions permitted under the Company\u2019s Certificate of Incorporation and provides the Company with additional time to complete its\ninitial business combination\n\nThe Board approved a draw of an aggregate of $160,000 (the \u201cSecond Extension Funds\u201d) pursuant to the Third Promissory Note,\nwhich Second Extension Funds were deposited into the Company\u2019s Trust Account on August 4, 2023 This deposit enables the\nCompany to extend the date by which it must complete its initial business combination from August 6, 2023 to September 6, 2023 (the\n\u201cSecond Extension\u201d) The Second Extension is the second of seven one month extensions permitted under the Company\u2019s Certificate\nof Incorporation and provides the Company with additional time to complete its initial business combination\n\nThe Board approved a draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cThird Extension Funds\u201d), which\nThird Extension Funds were deposited into the Company\u2019s Trust Account on September 6, 2023 This deposit enables the Company to\nextend the date by which it must complete its initial business combination from September 6, 2023 to October 6, 2023 (the \u201cThird\nExtension\u201d) The Third Extension is the third of seven one month extensions permitted under the Company\u2019s Certificate of\nIncorporation and provides the Company with additional time to complete its initial business combination\n\nThe Board approved a draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cFourth Extension Funds\u201d), which\nFourth Extension Funds were deposited into the Company\u2019s Trust Account on October 4, 2023 This deposit enables the Company to\nextend the date by which it must complete its initial business combination from October 6, 2023 to November 6, 2023 (the \u201cFourth\nExtension\u201d) The Fourth Extension is the fourth of seven one month extensions permitted under the Company\u2019s Certificate of\nIncorporation and provides the Company with additional time to complete its initial business combination\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cFifth Extension\nFunds\u201d), which Fifth Extension Funds were deposited into the Company\u2019s Trust Account for its public stockholders on November 2,\n2023 This deposit enables the Company to extend the date by which it must complete its initial business combination from November\n6, 2023 to December 6, 2023 (the \u201cFifth Extension\u201d) The Fifth Extension is the fifth of seven one month extensions permitted under\nthe Company\u2019s Certificate of Incorporation and provides the Company with additional time to complete its initial business\ncombination\n\nF 46\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 301 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cSixth Extension\nFunds\u201d), which Sixth Extension Funds were deposited into the Company\u2019s Trust Account for its public stockholders on December 2,\n2023 This deposit enables the Company to extend the date by which it must complete its initial business combination from December\n6, 2023 to January 6, 2024 (the \u201cSixth Extension\u201d) The Sixth Extension is the sixth of seven one month extensions permitted under the\nCompany\u2019s Certificate of Incorporation and provides the Company with additional time to complete its initial business combination\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cSeventh\nExtension Funds\u201d), which Seventh Extension Funds were deposited into the Company\u2019s Trust Account for its public stockholders on\nanuary 5, 2024 This deposit enables the Company to extend the date by which it must complete its initial business combination from\nanuary 6, 2024 to February 6, 2024 (the \u201cSeventh Extension\u201d) The Seventh Extension is the final of seven one month extensions\npermitted under the Company\u2019s Certificate of Incorporation and provides the Company with additional time to complete its initial\nbusiness combination The Note does not bear interest and matures upon closing of the Company\u2019s initial business combination\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cEighth Extension\nFunds\u201d), which Eighth Extension Funds were deposited into the Company\u2019s Trust Account for its public stockholders on February 5,\n2024 This deposit enables the Company to extend the date by which it must complete its initial business combination from February 6,\n2024 to March 6, 2024 (the \u201cEighth Extension\u201d) The Eighth Extension is the first of an additional five one month extensions permitted\nunder the Company\u2019s Certificate of Incorporation and provides the Company with additional time to complete its initial business\ncombination The Note does not bear interest and matures upon closing of the Company\u2019s initial business combination\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note (the \u201cNinth Extension\nFunds\u201d), which Ninth Extension Funds were deposited into the Company\u2019s Trust Account for its public stockholders on March 5, 2024\nThis deposit enables the Company to extend the date by which it must complete its initial business combination from March 6, 2024 to\nApril 6, 2024 (the \u201cNinth Extension\u201d) The Ninth Extension is the second of an additional five one month extensions permitted under\nthe Company\u2019s Certificate of Incorporation and provides the Company with additional time to complete its initial business\ncombination The Note does not bear interest and matures upon closing of the Company\u2019s initial business combination\n\nThe Third Promissory Note does not bear interest and matures upon closing of the Company\u2019s initial business combination In the event\nthat the Company does not consummate an initial business combination, the Third Promissory Note will be repaid only from funds\nremaining outside of the Company\u2019s Trust Account, if any, or will be forfeited, eliminated, or otherwise forgiven Up to $1,760,000 of\nthe total principal amount of the Third Promissory Note may be converted, in whole or in part, at the option of the Lender into warrants\nof the Company at a price of $1 00 per warrant, which warrants will be identical to the private placement warrants issued to the Lender\nat the time of the initial public offering of the Company\n\nIn the event that the Company does not consummate an initial business combination, the Note will be repaid only from funds remaining\noutside of the Company\u2019s Trust Account, if any, or will be forfeited, eliminated, or otherwise forgiven Up to $1,760,000 of the total\nprincipal amount of the Note may be converted, in whole or in part, at the option of the Lender into warrants of the Company at a price\nof $1 00 per warrant, which warrants will be identical to the private placement warrants issued to the Lender at the time of the initial\npublic offering of the Company\n\nForward Purchase Agreement\n\nOn April 26, 2023, the Company and Polar Multi Strategy Master Fund, a Cayman Islands exempted company (\u201cPolar\u201d) entered into\nan agreement (\u201cForward Purchase Agreement\u201d), pursuant to which, among other things, the Company agreed to purchase up to\n2,500,000 shares from Polar at $10 77 per share (the \u201cInitial Price\u201d), which is $10 17 (the \u201cRedemption Price\u201d, plus $0 60) In\nexchange for the Company\u2019s purchase of the shares, Polar agreed to waive redemption rights on the shares that Polar owns in\nconnection with the Business Combination\n\nThe Forward Purchase Agreement provides that at the closing of the Business Combination, the Company will pre pay Polar for the\nforward purchase an amount equal to the sum of (x) the number of Class A Ordinary Shares owned by Polar on the day prior to the\nclosing of a business combination multiplied by the Redemption Price (the \u201cPolar Shares\u201d) and (y) the proceeds from Polar\u2019s purchase\nof a number of Class A Ordinary Shares of up to 2,500,000 shares less the Polar Shares (the \u201cPrepayment Amount\u201d)\n\fCase 8:24-cv-02900-DKC Document 20-2 Filed 09/18/25 age 302 f AQ8\n\nThe scheduled maturity transaction is one year from the closing of the Business Combination (the \u201cMaturity Date\u2019),\nexcept that the Maturity Date may be accelerated if the shares trade under $2 00 for 10 out of 30 days or the shares are delisted by\nNasdaq Polar has the right to early terminate the transaction (in whole or in part) before the Maturity Date by delivering notice to the\nCompany If Polar terminates the Forward Purchase Agreement with respect to some or all of the shares prior to the Maturity Date,\nPolar will return an amount to the Company equal to the number of terminated shares multiplied by the Redemption Price The\nCompany can terminate the Forward Purchase Agreement prior to the redemption deadline if the Company pays Polar a $300,000\nbreak up fee On the Maturity Date, the Company may be required to make a cash payment to Polar if Polar has not terminated the\nForward Purchase Agreement in full equal to the number of shares (less any shares terminated prior to the Maturity Date) multiplied by\n$0 60\n\nF 47\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 303 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nNOTE 6 COMMITMENTS AND CONTINGENCIES\nRisks and Uncertainties\n\nManagement continues to evaluate the impact of the COVID 19 pandemic and has concluded that while it is reasonably possible that\nthe virus could have a negative effect on the Company\u2019s financial position, results of its operations and/or search for a target company,\nthe specific impact is not readily determinable as of the date of these consolidated financial statements Although a number of vaccines\nfor COVID 19 have been developed and are in the process of being deployed in certain countries, including the United States, the\ntiming for widespread vaccination is uncertain, and these vaccines may be less effective against new mutated strains of the virus The\nimpact of this coronavirus continues to evolve and is affecting the economies of many nations, individual companies and markets in\ngeneral and may continue to last for an extended period of time The consolidated financial statements do not include any adjustments\nthat might result from the outcome of this uncertainty\n\nIn February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine As a result of this\naction, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus\nFurther, the impact of this action and related sanctions on the world economy is not determinable as of the date of these consolidated\nfinancial statements The specific impact on the Company\u2019s financial condition, results of operations, and cash flows is also not\ndeterminable as of the date of these consolidated financial statements\n\nOn August 16, 2022, the Inflation Reduction Act of 2022 (the \u201cIR Act\u201d) was signed into federal law The IR Act provides for, among\nother things, a new U \u00a7 federal 1% excise tax on certain repurchases of stock by publicly traded U S domestic corporations and\ncertain U S domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023 The excise tax is\nimposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased The amount of the excise tax is\ngenerally 1% of the fair market value of the shares repurchased at the time of the repurchase However, for purposes of calculating the\nexcise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market\nvalue of stock repurchases during the same taxable year In addition, certain exceptions apply to the excise tax The U S Department of\nthe Treasury (the \u201cTreasury\u201d) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or\navoidance of the excise tax\n\nAny redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote\nor otherwise, may be subject to the excise tax Whether and to what extent the Company would be subject to the excise tax in\ncomnection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair\nmarket value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the\nstructure of a Business Combination, (iii) the nature and amount of any \u201cPIPE\u201d or other equity issuances in connection with a Business\nCombination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business\nCombination) and (iv) the content of regulations and other guidance from the Treasury In addition, because the excise tax would be\npayable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been\ndetermined The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the\nCompany\u2019s ability to complete a Business Combination\n\nRegistration Rights\n\nPursuant to a registration rights agreement entered into on March 4, 2021, the holders of the Founder Shares, Private Placement\nWarrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon\nthe exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon\nconversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to\nor on the effective date of the Initial Public Offering, requiring the Company to register such securities for resale The holders of these\nsecurities are entitled to make up to three demands, excluding short form demands, that the Company register such securities In\naddition, the holders have certain \u201cpiggyback\u201d registration rights with respect to registration statements filed subsequent to the\ncompletion of a Business Combination The registration rights agreement does not contain liquidated damages or other cash settlement\nprovisions resulting from delays in registering the Company\u2019s securities The Company will bear the expenses incurred in connection\nwith the filing of any such registration statements\n\fase 8-24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 304 of 408\n\nC\nUnderwriting Agreemen\n\nThe underwriters are entitled to a deferred fee of $0 35 per Unit, or $10,062 500 in the aggregate The deferred fee will become payable\nto the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business\n\nCombination, subject to the terms of the underwriting agreement\n\nF 48\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 305 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nMerger Agreement\nAs described in greater detail in Note 1, on April 27, 2023, the Company entered into the Merger Agreement\n\nThe Merger\n\nThe Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, the following\ntransactions will occur (together with the other transactions contemplated by the Merger Agreement)\n\n(i) at the Closing, in accordance with the DGCL, Merger Sub will merge with and into iLearningEngines, the separate corporate\nexistence of Merger Sub will cease and iLearningEngines will be the surviving corporation and a wholly owned subsidiary of\nthe Company; and\n\n(ii) as aresult of the Merger, among other things, the outstanding shares of common stock of iLearningEngines (other than shares\nsubject to iLearningEngines equity awards, treasury shares and dissenting shares) will be cancelled in exchange for the right\nto receive a number of shares of common stock of the Surviving Corporation equal to (x) the sum of (i) the Base Purchase\nPrice (as defined below), minus (ii) the dollar value of the Company Incentive Amount (as defined below), p/us (iii) the\naggregate exercise price of the Company Warrants (as defined in the Merger Agreement) that are issued and outstanding\nimmediately prior to the Effective Time, minus (iv) the aggregate amount of Note Balance (as defined in the Company\nConvertible Notes (as defined in the Merger Agreement)) divided by (y) $10 00 The \u201cBase Purchase Price\u201d means an amount\nequal to $1 285,000,000 The \u201cCompany Incentive Amount\u201d means (x) the number of shares of the Company Class A\nCommon Stock issuable to iLearningEngines securityholders (excluding, for the avoidance of doubt, the holders of Company\nConvertible Notes) at the Closing which iLearningEngines and the Company agree, at least two (2) business days prior to the\nClosing, to issue to certain private placement investors and non redeeming stockholders (which amount will equal 82 03125%\nof all such shares issued to such investors and non redeeming stockholders, with the remainder being contributed by the\nSponsor), mu/tiplied by (y) $10 00\n\nThe Board has (i) approved and declared advisable the Merger Agreement and the Business Combination and (ii) resolved to\nrecommend approval of the Merger Agreement and related matters by the stockholders of the Company The consummation of the\nBusiness Combination is subject to certain conditions as further described in the Merger Agreement\n\nSponsor Support Agreement\n\nOn April 27, 2023, concurrently with the execution of the Merger Agreement, the Company and iLearningEngines entered into an\nagreement (the \u201cSponsor Support Agreement\u201d), pursuant to which, among other things, in connection with the Closing, the Sponsor\nagreed to (i) vote all its shares of the Company common stock in favor of the Business Combination, (ii) discharge any Excess\nTransaction Expenses (as defined in the Merger Agreement) by payment in cash or elect, at the option of Sponsor, to have the Company\ndischarge any Excess Transaction Expenses by payment in cash against a corresponding cancellation of shares of the Company\ncommon stock held by Sponsor (or any combination thereof), (iii) loan all amounts contemplated by the proxy statement filed by the\nCompany on or about February 13, 2023, pursuant to which the Company stockholders approved the extension of the deadline by\nwhich the Company must complete its Business Combination to July 6, 2023, including any amounts required in connection with any\nadditional extension of such deadline, (iv) contribute the Sponsor Incentive Shares (as defined in the Merger Agreement), (v) waive any\nadjustment to the conversion ratio set forth in the governing documents of the Company or any other anti dilution or similar protection\nwith respect to the Class B common stock of the Company, in each case, on the terms and subject to the conditions set forth in the\nSponsor Support Agreement, and (vi) agree to be bound by any restrictions on transfer set forth in the Company\u2019s bylaws, in each case,\non the terms and subject to the conditions set forth therein\n\nF 49\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 306 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nThe scheduled maturity date of the forward transaction is one year from the Closing of the Business Combination (the \u201cMaturity\nDate\u201d), except that the Maturity Date may be accelerated if the shares trade under $2 00 for 10 out of 30 days or the shares are delisted\nby Nasdaq Polar has the right to early terminate the transaction (in whole or in part) before the Maturity Date by delivering notice to\nthe Company If Polar terminates the Forward Purchase Agreement with respect to some or all of the shares prior to the Maturity Date,\nPolar will return an amount to the Company equal to the number of terminated shares multiplied by the Redemption Price the\nCompany can terminate the Forward Purchase Agreement prior to the redemption deadline if the Company pays Polar a $300,000\nbreak up fee On the Maturity Date, the Company may be required to make a cash payment to Polar if Polar has not terminated the\nForward Purchase Agreement in full equal to the number of shares (less any shares terminated prior to the Maturity Date) multiplied by\n$0 60\n\nAs of December 31, 2023, the value of the Forward Purchase Agreement was $1,500,000\nBTIG Fee Agreement\n\nOn July 25, 2023, BTIG, LLC (\u201c\u201cBTIG\u201d) and the Company entered into a letter agreement (the \u201cBTIG Engagement Letter\u201d) pursuant to\nwhich the Company engaged BTIG as a financial advisor in connection with the Business Combination\n\nNOTE 7 STOCKHOLDERS\u2019 DEFICIT\n\nPreferred Stock |The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0 0001 per share with\nsuch designation, rights and preferences as may be determined from time to time by the Company\u2019s board of directors As of December\n31, 2023 and 2022, there were no shares of preferred stock issued or outstanding\n\nClass A Common Stock |The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of\n$0 0001 per share Holders of Class A common stock are entitled to one vote for each share At December 31, 2023 and 2022, there\nwere 4,445,813 and 28,750,000 shares of Class A common stock issued and outstanding, respectively, which are subject to possible\nredemption and presented as temporary equity\n\nClass B Common Stock |The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of\n$0 0001 per share Holders of Class B common stock are entitled to one vote for each share As of December 31, 2023 and 2022, there\nwere 7,187 500 shares of common stock issued and outstanding\n\nHolders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to\na vote of the Company\u2019s stockholders except as otherwise required by law\n\nThe shares of Class B common stock will automatically convert into Class A common stock upon the consummation of a Business\nCombination, or earlier at the option of the holder, on a one for one basis, subject to adjustment In the case that additional shares of\nClass A common stock or equity linked securities are issued or deemed issued in connection with the initial Business Combination, the\nnumber of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as\nconverted basis, 20% of the total number of shares of Class A common stock outstanding after such conversion, including the total\nnumber of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity linked\nsecurities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business\nCombination, excluding any shares of Class A common stock or equity linked securities or rights exercisable for or convertible into\nshares of Class A common stock issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants\nissued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder\nShares will never occur on a less than one for one basis\n\nNOTE 8 WARRANT LIABILITIES\nAs of December 31, 2023 and 2022, there were 14,375,000 Public Warrants outstanding Only whole warrants are exercisable No\n\nfractional warrants will be issued upon separation of the units and only whole warrants will trade The Public Warrants will become\nexercisable on the later of 30 days after the completion of the initial Business Combination or 12 months from the closing of the initial\n\fe 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 307 of 408.\n\n_Ca\npublic offering aa will expire five years after the completion of the initial Business Combination or earhier upon redemption or the\nCompany\u2019s liquidation\n\nF 50\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 308 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nThe Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have\nno obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares\nof Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company\nsatisfying its obligations with respect to registration No warrant will be exercisable and the Company will not be obligated to issue\nshares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been\nregistered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants\n\nThe Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business\nCombination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities\nAct, of the Class A common stock issuable upon exercise of the warrants The Company will use its best efforts to cause the same to\nbecome effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the\nexpiration of the warrants in accordance with the provisions of the warrant agreement If a registration statement covering the shares of\nClass A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of a\nBusiness Combination, warrant holders may, until such time as there is an effective registration statement and during any period when\nthe Company will have failed to maintain an effective registration statement, exercise warrants on a \u201ccashless basis\u201d in accordance with\nSection 3(a)(9) of the Securities Act or another exemption Notwithstanding the above, if the Company\u2019s Class A common stock is at\nthe time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a \u201ccovered\nsecurity\u201d under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise\ntheir warrants to do so on a \u201ccashless basis\u201d in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so\nelect, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will\nuse its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available\n\nOnce the warrants become exercisable, the Company may call the warrants for redemption for cash\ne inwhole and not in part;\ne@ ata price of $0 01 per warrant;\n@ upon not less than 30 days\u2019 prior written notice of redemption to each warrant holder; and\n\ne if, and only if, the closing price of the common stock equals or exceeds $18 00 per share (as adjusted stock splits, stock\ncapitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading day period\ncommencing after the warrants become exercisable and ending three business days before the Company sends to the notice of\nredemption to the warrant holders\n\nIf and when the warrants become redeemable by the Company for cash, the Company may exercise its redemption right even if it is\nunable to register or qualify the underlying securities for sale under all applicable state securities laws\n\nIf the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder\nthat wishes to exercise the Public Warrants to do so on a \u201ccashless basis,\u201d as described in the warrant agreement The exercise price and\nnumber of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in\nthe event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation However, except as\ndescribed below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price\nAdditionally, in no event will the Company be required to net cash settle the Public Warrants If the Company is unable to complete a\nBusiness Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of\nPublic Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the\nCompany\u2019s assets held outside of the Trust Account with respect to such Public Warrants Accordingly, the Public Warrants may expire\nworthless\n\nF 51\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 309 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nIn addition, if (x) the Company issues additional shares of Class A common stock or equity linked securities for capital raising\npurposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9 20\nper share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company\u2019s\nboard of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares\nheld by the Sponsor or such affiliates, as applicable, prior to such issuance) (the \u201cNewly Issued Price\u201d), (y) the aggregate gross\nproceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of\nthe Company\u2019s initial Business Combination on the date of the consummation of such initial Business Combination (net of\nredemptions), and (z) the volume weighted average trading price of the Company\u2019s Class A common stock during the 20 trading day\nperiod starting on the trading day after the day on which the Company consummates its initial Business Combination (such price, the\n\u201cMarket Value\u201d) is below $9 20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115%\nof the higher of the Market Value and the Newly Issued Price and the $18 00 per share redemption trigger price described above will be\nadjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price\n\nAs of December 31, 2023 and 2022, there were 8.250.000 Private Placement Warrants outstanding Private Placement Warrants are\nidentical to the Public Warrants underlying the Units sold in the Initial Public Offering. except that the Private Placement Warrants and\nthe Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable. assignable or salable\nuntil 30 days after the completion of a Business Combination, subject to certain limited exceptions Additionally, the Private Placement\nWarrants will be exercisable on a cashless basis and be non redeemable, except as described above, so long as they are held by the\ninitial purchasers or their permitted transferees If the Private Placement Warrants are held by someone other than the initial purchasers\nor their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on\nthe same basis as the Public Warrants\n\nNOTE 9 INCOME TAXES\nThe Company did not have any significant deferred tax assets or liabilities as of December 31, 2023 and 2022\nThe Company\u2019s net deferred tax assets are as follows\n\nDecember 31, December 31,\n\n2023 2022\nDeferred tax assets\nNet operating loss carryforward $ \u2014 \u00a7$ \u2014\nStart-up/organization expenses 1,891,958 890,822\nTotal deferred tax assets 1,891,958 890.822\nValuation allowance (1,891,958) (890,822)\n\nDeferred tax assets, net of allowance $ $\nSS\n\nF-52\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 310 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n\nDECEMBER 31, 2023\nThe income tax provision consists of the following\nYear Ended Year Ended\nDecember 31, December 31,\n2023 2022\n\nFederal\n\nCurrent $ 564,005 $ 750.410\n\nDeferred (1,001,136) (244,686)\nState\n\nCurrent \u2014_\u2014 \u2014\n\nDeferred \u2014 \u2014\nChange in valuation allowance 1,001,136 244.686\nIncome tax provision $ 564,005 $ 750,410\n\nAs of December 31, 2023 and 2022, the Company has $0 and $177,640 of U.S. federal and state net operating loss carryovers available\n\nto offset future taxable income, respectively.\n\nIn assessing the realization of the deferred tax assets. management considers whether it is more likely than not that some portion of all\nof the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future\n\ntaxable income during the periods in which temporary differences representing net future deductible amounts become\n\ndeductible.\n\nManagement considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in\nmaking this assessment. After consideration of all of the information available, management believes that significant uncertainty exists\nwith respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the years ended\n\nDecember 31, 2023 and 2022, the change in the valuation allowance was $1,001,136 and $244,686, respectively.\n\nA reconciliation of the federal income tax rate to the Company\u2019s effective tax rate at December 31, 2023 and 2022 is as follows:\n\nDecember 31, December 31,\n2023 2022\n\nStatutory federal income tax rate 21 00% 21 00%\nState taxes, net of federal tax benefit 0 00% 0 00%\nChange in fair value of warrant liabilities (6 76)% (17 50)%\nChange in fair value of forward purchase agreement (5 96)% 0 00%\nTransaction costs allocable to warrant liabilities 0 00% 0 00%\nFranchise tax fines and penalties (0 01)% 0 00%\nChange in valuation allowance (18.94)% 1.70%\nIncome tax provision (10.67)% 5.20%\n\nSS\n\nThe Company files income tax returns in the U S_ federal jurisdiction in various state and local jurisdictions and is subject to\n\nexamination by the various taxing authorities\n\nF 53\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 311 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nNOTE 10 FAIR VALUE MEASUREMENTS\n\nThe fair value of the Company\u2019s financial assets and liabilities reflects management\u2019s estimate of amounts that the Company would\nhave received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction\nbetween market participants at the measurement date In connection with measuring the fair value of its assets and liabilities, the\nCompany secks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of\nunobservable inputs (internal assumptions about how market participants would price assets and liabilities) The following fair value\nhierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the\nassets and liabilities\n\nLevel 1 Quoted prices in active markets for identical assets or liabilities An active market for an asset or liability is a market\nin which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing\ninformation on an ongoing basis\n\nLevel 2 Observable inputs other than Level 1 inputs Examples of Level 2 inputs include quoted prices in active markets for\nsimilar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active\n\nLevel 3 Unobservable inputs based on assessment of the assumptions that market participants would use in pricing the asset\nor liability\n\nAt December 31, 2023, assets held in the Trust Account were comprised of $46,744,889 in cash At December 31, 2022, assets held in\nthe Trust Account were comprised of $279,107,161 in U S Treasury Bills and U S Treasury Notes and $11,338,046 in money market\nfunds which are invested primarily in U S Treasury Securities and $292,710 in cash During the year ended December 31, 2023, the\nCompany withdrew an amount of $1,826,650 in interest income from the Trust Account to pay franchise and income taxes and\n\n$247 259,068 in connection with redemptions\n\nThe following table presents information about the Company\u2019s assets and liabilities that are measured at fair value on a recurring basis\nat December 31, 2023 and 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such\n\nfair value\n\nDecember 31, December 31,\n\nDescription Level 2023 2022\nAssets:\n\nInvestments held in Trust Account 1 $ \u2014 $ 290,737,917\nLiabilities:\n\nWarrant Liabilities \u2014 Public Warrants 1 $ 1,150,000 $ 70,000\nWarrant Liabilities \u2014 Private Placement Warrants 3 $ 660,000 $ 40,000\nForward Purchase Agreement 3 $ 1,500,000 $ \u2014\n\nThe Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the\naccompanying consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with\nchanges in fair value presented within change in fair value of warrant liabilities in the consolidated statements of operations.\n\nThe Private Placement Warrants are valued using a modified Black Scholes Option Pricing Model, which is considered to be a Level 3\nfair value measurement. The modified Black Scholes model\u2019s primary unobservable input utilized in determining the fair value of the\nPrivate Placement Warrants is the expected volatility of the common stock. The expected volatility as of the initial public offering date\nwas derived from observable public warrant pricing on comparable \u201cblank-check\u2019 companies without an identified target. The expected\nvolatility as of subsequent valuation dates was implied from the Company\u2019s own Public Warrant pricing. A Monte Carlo simulation\nmethodology was used in estimating the fair value of the public warrants for periods where no observable traded price was available,\nusing the same expected volatility as was used in measuring the fair value of the Private Placement Warrants. For periods subsequent\nto the detachment of the warrants from the Units, the close price of the Public Warrants was used as the fair value of the Public\n\fe 8:24-cv-02900-DKC Docu nt.90-2 iled 99/18/25 tae +e of 408\n\nCa :\nWarrants as of as relevant date The measurement of the Public Warrants after the detachment o ic Warrants from the Units\nis classified as Level 1 due to the use of an observable market quote in an active market\n\nThe Forward Purchase Agreement is measured at 2 500,000 shares at a price of $0 60 per share This is considered to be a Level 3 fair\nvalue measurement as the price is based on a contractual amount which is not based on an observable input that reflects quoted prices\n\nF 54\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 313 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nThe key inputs into the modified Black Scholes model for the Level 3 Warrants were as follows\n\nDecember 31, December 31,\n\nInput 2023 2022\nMarket price of public shares $ 10.47 $ 10.04\nRisk-free rate 3.81% 3.94%\nDividend yield 0.00% 0.00%\nExercise price $ 11.50 $ 11.50\nVolatility 0.0% 0.0%\nTerm to expiration (years) 0.25 0.42\n\nThe following tables present the changes in the fair value of Level 3 warrant liabilities:\n\nPrivate\nPlacement\nFair value as of January 1, 2023 $ 40,000\nChange in fair value 620,000\nFair value as of December 31, 2023 $ 660.000\nPrivate\nPlacement\nFair value as of January 1, 2022 $ 4,372,500\nChange in fair value (4.332.500)\nFair value as of December 31, 2022 $ 40,000\n\nTransfers to/from Levels 1, 2 or 3 are recognized at the end of the reporting period in which a change in valuation technique or\nmethodology occurs. There were no transfers from a Level 3 measurement to a Level 1 during the years ended December 31, 2023 and\n2022.\n\nThere was no change in the fair value of the Forward Purchase Agreement as of December 31, 2023.\nNOTE 11. SUBSEQUENT EVENTS\n\nThe Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the\nconsolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events, other than\nbelow, that would have required adjustment or disclosure in the consolidated financial statements.\n\nThe Company approved an additional draw of an aggregate of $160,000 pursuant to the Third Promissory Note, which Extension Funds\nwere deposited into the Company\u2019s Trust Account for its public stockholders on January 5, 2024. This deposit enables the Company to\nextend the date by which it must complete its initial business combination from January 6, 2024 to February 6, 2024 (the \u201cSeventh\nExtension\u201d). The Seventh Extension is the final of seven one-month extensions permitted under the Company\u2019s Certificate of\nIncorporation and provides the Company with additional time to complete its initial business combination.\n\nOn January 8, 2024, the Company received a notice (the \u201cAnnual Meeting Notice\u201d) from the Listing Qualifications Department of The\nNasdaq Stock Market LLC (\u201cNasdaq\u201d) stating that the Company failed to hold an annual meeting of stockholders within 12 months\nafter its fiscal year ended December 31, 2022, as required by Nasdaq Listing Rule 5620(a). In accordance with Nasdaq Listing Rule\n5810(c)(2)(G), the Company had 45 calendar days (or until February 22, 2024) to submit a plan to regain compliance and, if Nasdaq\naccepts the plan, Nasdaq may grant the Company up to 180 calendar days from its fiscal year end, or until June 28, 2024, to regain\ncompliance. The Company submitted a plan to regain compliance on February 22, 2024. While the compliance plan is pending, the\nCompany\u2019s securities will continue to trade on Nasdaq.\n\fOn Februaty FHS Bee e oe Rog KG Documen OAs fe 2 09/18/25. FES te of 408\n\na special meeting of stockho xtension Special Mee ) to approve an\namendment to Arrowroot\u2019s amended and restated certificate of incorporation, as amended (the \u201cCharter Amendment\u201d), to extend the\nTermination Date from February 4, 2024 to March 6, 2024 (the \u201cInitial Subsequent Charter Extension Date\u201d) and to allow the\nCompany, without another stockholder vote, to elect to extend the Termination Date to consummate an initial business combination on\na monthly basis up to five times by an additional one month each time after the Initial Subsequent Charter Extension Date (the Initial\nSubsequent Charter Extension Date, as further extended by the Company, the \u201cSubsequent Extension Date\u201d), by resolution of the\nCompany\u2019s board of directors, if requested by the Sponsor, and upon five days\u2019 advance notice prior to the applicable Termination\nDate, until August 6, 2024, unless the closing of an initial business combination shall have occurred prior thereto (the \u201cSubsequent\nExtension Proposal\u201d)\n\nF 55\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 315 of 408\n\nARROWROOT ACQUISITION CORP\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\nDECEMBER 31, 2023\n\nIn connection with the vote to approve the Charter Amendment, the holders of 3,428,783 shares of Class A common stock properly\n\nexercised their right to redeem their shares (and did not withdraw their redemption) for cash at a redemption price of approximately\n$10 59 per share, for an aggregate redemption amount of $36 309,429 After the satisfaction of such redemptions, the balance in the\nCompany\u2019s Trust Account was approximately $10 77 million\n\nOn February 2, 2024, the Company entered into a Non Redemption Agreement (the \u201cNon Redemption Agreement\u201d) with a certain\npublic stockholder of Arrowroot (the \u201cPublic Stockholder\u2019) eligible to redeem its shares of the Company\u2019s Class A common stock (the\n\u201cClass A Common Stock\u201d) at the special meeting of stockholders held on February 2, 2024 (the \u201cExtension Special Meeting\u2019)\nPursuant to the Non Redemption Agreement, the Public Stockholder agreed not to request redemption of 410,456 shares of Class A\nCommon Stock (the \u201cNon Redeemed Shares\u201d) in connection with the Extension Special Meeting In consideration of the Public\nStockholder entering into the Non Redemption Agreement, immediately following the closing of the Company\u2019s initial business\ncombination, Arrowroot Acquisition LLC, a Delaware limited liability company (the \u201cSponsor\u201d) agreed to forfeit 82,091 shares of\nClass B common stock (the \u201cClass B Common Stock\u201d), or 41,046 shares of Class B Common Stock in the event the initial business\ncombination is consummated in February 2024 (\u201cForfeited Shares\u201d) Pursuant to the terms of the Non Redemption Agreement, the\nCompany agreed to issue to the Public Stockholder and the Public Stockholder agreed to acquire from the Company, a number of\nnewly issued shares of common stock promptly following the consummation of the Company\u2019s initial business combination\n\nOn March 5, 2024, the Company received a notice (the \u201cDeadline Notice\u201d) from the staff of the Listing Qualifications Department of\nNasdaq indicating that, unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the \u201cPanel\u201d) by March 12,\n2024, trading of the Company\u2019s securities on The Nasdaq Capital Market would be suspended at the opening of business on March 14,\n2024, due to the Company\u2019s non compliance with Nasdaq IM 5101 2, which requires that a special purpose acquisition company\ncomplete one or more business combinations within 36 months of the effectiveness of its IPO registration statement The Company\ntimely requested a hearing before the Panel to request sufficient time to complete the Company\u2019s previously disclosed proposed\nbusiness combination (the \u201cBusiness Combination\u201d) with iLearningEngines, Inc , a Delaware corporation (\u201ciLearningEngines\u201d) In\naddition, the Deadline Notice indicated that the Company should be prepared to address the concerns raised in the Annual Meeting\nNotice in its hearing before the Panel related to the Deadline Notice\n\nOn March 11, 2024, the Company drew down an additional amount of $50,000 pursuant to the Fourth Promissory Note, after which\n$1 250,000 was outstanding under the Fourth Promissory Note There remains $750,000 available under the Fourth Promissory Note\nfor future drawdowns\n\nOn March 12, 2024, the Company received notice from Nasdaq that the hearing will be held on May 7, 2024 The hearing request will\nresult in a stay of any suspension or delisting action pending the outcome of the hearing There can be no assurance that the Company\nwill be able to satisfy Nasdaq\u2019s continued listing requirements, regain compliance with Nasdaq IM 5101 2 or Nasdaq Listing Rule\n5620(a), and maintain compliance with other Nasdaq listing requirements\n\nIn connection with the Business Combination, the Sponsor has agreed to forfeit 400,000 Founder Shares upon the Closing In addition,\non March 27, 2024, pursuant to the terms of the Merger Agreement, the Company elected to convert approximately $5 million of\nAcquiror Transaction Expenses (as defined in the Merger Agreement) into shares of common stock of the Surviving Corporation (as\ndefined in the Merger Agreement)\n\nOn March 27, 2024, the Company and Cantor Fitzgerald & Co (\u201cCantor\u201d) entered into the Fee Reduction Agreement, pursuant to\nwhich Cantor agreed to forfeit $4,062 500 of deferred underwriting fees payable in connection with the IPO, resulting in a remainder of\n$6,000,000 of deferred underwriting fees payable by the Company to Cantor subject to the closing of the Business Combination (the\n\u201cReduced Deferred Fee\u201d) The Reduced Deferred Fee shall be payable to Cantor in the form of shares of New iLearningEngines\nCommon Stock issuable upon the filing with the SEC of a resale registration statement The number of shares of New\niLearningEngines Common Stock issuable to Cantor in satisfaction of the Reduced Deferred Fee will be equal to the greater of (1) the\nReduced Fee divided by $10 00 and (ii) the Reduced Fee divided by the VWAP (as defined in the Fee Reduction Agreement) over the\nseven (7) trading days preceding the date of filing of such resale registration statement Under the Fee Reduction Agreement, the\ncombined company will be subject to, among others, certain obligations with respect to the filing of the resale registration statement\nand maintaining the continued effectiveness of the resale registration statement, and a failure of the combined company to discharge\nsuch obligations may result in the ability of Cantor to require the combined company to pay the Reduced Deferred Fee in cash\n\fOn March 27 Saee orf $38 ihe oats Gendt eee te bo 2 ment [ieee efi Ane! Ce toes that, in lieu\n\nof payment in cash of the full amount of any advisory fees or other fees and expenses owed under the BTIG Engagement Letter, the\nCompany will pay to BTIG $3,000,000 in advisory fees (the \u201cBTIG Advisory Fee\u201d) and $400,000 in expenses (the \u201cBTIG Expenses\u201d)\nThe BTIG Expenses will be paid in cash upon the consummation of the Business Combination The BTIG Advisory Fee will be\npayable to BTIG in the form of shares of New iLearningEngines Common Stock in an amount of shares equal to the greater of (i)\n$3,000,000, divided by $10 00 and (ii) the quotient obtained by dividing (x) $3,000,000 by (y) the VWAP (as defined in the BTIG\nAmendment) of New iLearningEngines Common Stock over the seven (7) trading days immediately prior to the initial filing of the\nResale Registration Statement (as defined in the BTIG Amendment) Under the BTIG Amendment, the combined company will be\nsubject to, among others, certain obligations with respect to the filing of the resale registration statement and maintaining the continued\neffectiveness of the resale registration statement, and a failure of the combined company to discharge such obligations may result in the\nability of BTIG to require the combined company to pay the BTIG Advisory Fee in cash\n\nF 56\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nFiled 09/18/25\n\nILEARNINGENGINES, INC AND SUBSIDIARIES\nCONDENSED CONSOLIDATED BALANCE SHEETS\n\nAssets\n\nCurrent assets:\nCash\nRestricted cash\n\n(in thousands, except share amounts)\n\nAccounts receivable, net of provision for credit loss of $510 and $336, respectively\n\nContract asset\nPrepaid expenses\n\nTotal current assets\nReceivable from Technology Partner\nReceivable from related party\nOther assets\nDeferred tax assets, net\nDeferred transaction costs\n\nTotal assets\n\nLiabilities and shareholders\u2019 deficit\nCurrent liabilities\nTrade accounts payable\nAccrued expenses\nCurrent portion of long term debt, net\nContract liability\nPayroll taxes payable\nLoan restructuring share liability\nOther current liabilities\nTotal current liabilities\nConvertible notes\nWarrant liability\nLong-term debt, net\n\nSubordinated payable to Technology Partner\n\nOther non-current liabilities\nTotal liabilities\n\nShareholders\u2019 deficit\n\nCommon Shares $0 0001 par value 200,000,000 shares authorized 95,782,605 shares issued and\noutstanding at March 31, 2024 and December 31, 2023\n\nAdditional paid in capital\nAccumulated deficit\nTotal shareholders\u2019 deficit\n\nTotal liabilities and shareholders\u2019 deficit\n\nPage 317 of 408\n\nThe accompanying notes are an integral part of these condensed consolidated financial statements.\n\nF-57\n\nAs of\nMarch 31, December\n2024 31,\n(Unaudited) 2023\n$ 815 $ 4.763\n- 2,000\n82.904 73,498\n297 509\n93 62\n84,109 80.832\n14,880 13,602\n465\n672 729\n5 248 5.703\n6,882 3.990\n$ 111,791 $ 105,321\nee\n$ 7,044 $ 3.753\n3,850 2.982\n26,026 10,517\n1,447 2.765\n3,037 3,037\n2,813\n139 116\n44,356 23.170\n37,712 31,547\n26,988 11.870\n- 10.679\n49,789 49.163\n63 74\n158,908 126.503\n10 10\n36 384 36,384\n(83.511) (57,576)\n(47,117) (21.182)\n$ 111,791 $ 105,321\nI\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nILEARNINGENGINES, INC AND SUBSIDIARIES\n\nFiled 09/18/25\n\nPage 318 of 408\n\nCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)\n(In thousands, except share and per share amounts)\n\nRevenue\nCost of revenue\nGross profit\nOperating expenses:\nSelling, general, and administrative expenses\nResearch and development expenses\nTotal operating expenses\nOperating income\nOther expense\nInterest expense\nChange in fair value of warrant liability\nChange in fair value of convertible notes\nLoss on debt extinguishment\nOther expense\nForeign exchange loss\nTotal other expense\nNet (loss) income before income taxes\nIncome tax (expense) benefit\nNet (loss) income\n\nNet (loss) income per share \u2014 basic and diluted\n\nWeighted average common shares outstanding \u2014 basic\nWeighted average common shares outstanding \u2014 diluted\n\nThree Months Ended\nMarch 31,\n2024 2023\n\n$ 124,935 $ 93.980\n38,714 31,551\n86,221 62.429\n41,223 31,612\n37,099 28,582\n78,322 60.194\n7,899 2,235\n\n(1,986) (1,588)\n\n(15,118) (280)\n\n(5,465)\n(10,041)\n\n(60)\n\n(2) (8)\n\n(32,612) (1,936)\n(24,713) 299\n(1,222) 152\n$ (25,935) $ 451\n$ (0.27) $ 0.00\n95,782,605 95.782.605\n95,782,605 95.782.605\n\nThe accompanying notes are an integral part of these condensed consolidated financial statements.\n\nF-58\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nFiled 09/18/25\n\nILEARNINGENGINES, INC AND SUBSIDIARIES\nCONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS\u2019 DEFICIT (UNAUDITED)\n(in thousands, except share amounts)\n\nPage 319 of 408\n\nAdditional Total\nCommon Stock Paid-In Accumulated Shareholders\u2019\nShares Amount Capital Deficit Deficit\nBalances at December 31, 2023 95,782,605 $ 10 $ 36384 $ (57 576) $ (21,182)\nNet loss \u2014 \u2014 \u2014 (25.935) (25,935)\nBalances at March 31, 2024 95.782.605 $ 10 $ 36.384 $ (83.511) $ (47,117)\nee\nAdditional Total\nCommon Stock Paid-In Accumulated Shareholders\u2019\nShares Amount Capital Deficit Deficit\nBalances at December 31, 2022 95,782,605 $ 10 $ 36384 $ (53,169) $ (16.775)\nNet income \u2014 \u2014 \u2014 451 451\nBalances at March 31, 2023 95,782.605 $ 10 \u00a7$ 36,384 $\u00a7$ (52.718) $ (16,324)\nOe\n\nThe accompanying notes are an integral part of these condensed consolidated financial statements\n\nF 59\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 320 of 408\n\nILEARNINGENGINES, INC AND SUBSIDIARIES\nCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)\n\n(In thousands)\nThree Months Ended\nMarch 31,\n2024 2023\nCash flows used in operating activities:\nNet (loss) income $ (25,935) $ 451\nAdjustments to reconcile net (loss) income to net cash flows used in operating activities:\nDepreciation and amortization 54 26\nAmortization of debt issuance costs 631 531\nChange in deferred taxes 455 324\nAccretion of interest on subordinated payable to Technology Partner 626 417\nChange in fair value of warrant liability 15,118 280\nChange in fair value of convertible notes 5,465 -\nLoss on debt extinguishment 10,041 -\nProvision for current expected credit losses 174 -\nChanges in operating assets and liabilities:\nAccounts receivable (9,580) (8,104)\nReceivable from related party 465 130\nContract asset 212 5,880\nPrepaid expenses and other current assets (31) 6\nReceivable from Technology Partner (1,278) (2,405)\nTrade accounts payable 958 (19)\nAccrued expenses and other liabilities 429 (574)\nContract liability (1,318) 552\nPayroll taxes payable - 305\nDeferred transaction costs (96) =\nNet cash flows used in operating activities (3.610) (2.200)\nCash flows from investing activities:\nPurchases of property and equipment (9) -\nNet cash flow used in investing activities (9) -\nCash flows from financing activities:\nProceeds from term loans - 5,000\nRepayments of term loans (3,029) (2,063)\nProceeds from convertible note 700\nNet cash flows (used in) provided by financing activities (2,329) 2.937\nNet change in cash (5,948) 737\nCash, beginning of year 6,763 856\nCash, end of period $ 815 $ 1,593\nSupplemental disclosure of cash flow information\nCash paid during the period for interest $ 702 $ 670\nSupplemental disclosure of non cash investing and financing activities\nIssuance of warrant to purchase common shares $ $ 514\nTransaction costs capitalized which are included in trade accounts payable and accrued expenses $ 3,286 \u00a7$\n\nThe accompanying notes are an integral part of these condensed consolidated financial statements\n\nF 60\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 321 of 408\n\nILEARNINGENGINES, INC AND SUBSIDIARIES\nNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)\n\n1 Nature of the Business and Basis of Presentation\n\niLearningEngines, Inc (together with its subsidiaries, the \u201cCompany,\u201d or \u201cILE\u201d), a company headquartered in Maryland,\nUnited States of America, was incorporated in Delaware on November 17, 2010 The Company offers an Artificial Intelligence (\u201cAI\u201d)\nplatform focused on automation of learning and enabling organizations to drive mission critical outcomes at scale The AI Learning and\nEngagement platform has cloud based, mobile, offline and multimedia capabilities that can be used to deliver highly personalized\nlearning and engagement modules The Company has developed an in process learning platform that enables organizations to deliver\nlearning in the flow of day to day activities\n\nBasis of Presentation\n\nThe accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles\ngenerally accepted in the United States of America (\u201c\u201cU S GAAP\u201d) and the rules and regulations of the Securities and Exchange\nCommission (\u201cSEC\u201d) The condensed consolidated financial statements include the accounts of iLearningEngines, Inc and its wholly\nowned subsidiaries\n\nA description of the Company\u2019s significant accounting policies is included in the audited consolidated financial statements for the\nyear ended December 31, 2023 No changes to significant accounting policies have occurred since December 31, 2023, other than new\npolicy elections related to a debt amendment discussed in Note 5 Results of operations and cash flows for the interim periods presented\nherein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods These\nunaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial\nstatements and notes thereto, included in the Company\u2019s consolidated financial statements for the year ended December 31, 2023\n\nBusiness Combination\n\nOn April 27, 2023, the Company entered into an Agreement and Plan of Merger and Reorganization (the \u201cMerger Agreement\u201d)\nwith Arrowroot Acquisition Corp (NASDAQ ARRW) (\u201cArrowroot\u201d), a special purpose acquisition company (\u201cSPAC\u201d), and ARAC\nMerger Sub, Inc , a Delaware corporation and a direct, wholly owned subsidiary of Arrowroot (\u201cMerger Sub\u201d) Upon closing of the\nMerger Agreement and upon approval by the shareholders of Arrowroot, the combined company will be renamed to \u201ciLearningEngines,\nInc \u201d and will be listed on the NASDAQ under the new ticker symbol \u201cAILE \u201d Arrowroot has agreed to acquire all of the outstanding\nequity interests of the Company Completion of the \u201cSPAC Transaction\u201d described herein, is subject to certain customary regulatory\nconsents and approval by stockholders of Arrowroot and the Company\n\nThe merger with Arrowroot closed on April 16, 2024 Refer to Note 14 for additional discussion\n2 Summary of Significant Accounting Policies\nConcentration of Credit Risk and Major Sales Channels\n\nFinancial investments that potentially subject the Company to credit risk consist of cash The Company places its cash with\ncertain U S financial institutions At various times, the Company\u2019s cash deposits with any one financial institution may exceed the\namount insured by the Federal Deposit Insurance Corporation (the \u201cFDIC\u201d) The Company has not experienced any losses of such\namounts and management believes it is not exposed to any significant credit risk on its cash\n\nDuring the three months ended March 31, 2024, there were four customers, representing 16 7%, 13 5%, 11 3%, and 10 3%,\nrespectively, who individually accounted for 10% or more of the Company\u2019s revenue During the three months ended March 31, 2023,\nthere were four customers, representing 21 5%, 17 7%, 13 0% and 11 8%, respectively, who individually accounted for 10% or more of\nthe Company\u2019s revenue\n\nFair Value Option (\u201cFVO\u201d) Election\n\nThe Company has convertible notes (refer to Note 6) and debt (refer to Note 5) which are accounted under the \u201cfair value option\nelection\u201d discussed below\n\fCase \u00a7:24- cv 0290 -DKC 4 Fags 90-2 Filed 09/18/25 Regs Ree of 408\n\nUnder Financial Accounting Stan ccounting Stan ification (\u201cA 15, Derivative and\nHedging, (\u201cASC 815\u201d), a financial instrument containing embedded features and /or options may be required to be bifurcated from the\nfinancial instrument host and recognized as separate derivative asset or liability, with the bifurcated derivative asset or liability initially\nmeasured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each\nreporting period balance sheet date\n\nF 61\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 323 of 408\n\nAlternatively, FASB ASC Topic 825, Financial Instruments, (\u201cASC 825\u201d) provides for the \u201cfair value option\u201d (\u201cFVO\u201d) election\nIn this regard, ASC 825 10 15 4 provides for the FVO election (to the extent not otherwise prohibited by ASC 825 10 15 5) to be\nafforded to financial instruments, wherein the financial instrument is initially measured at estimated fair value as of the transaction\nissue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date, with changes in the\nestimated fair value recognized as other income or expense in the statement of operations\n\nThe estimated fair value adjustment of convertible notes, including the component related to interest expense. is presented in a\nsingle line item, \u201cChange in fair value of convertible notes\u201d, within the condensed consolidated statement of operations (as provided\nfor by ASC 825 10 50 30(b)) As further discussed in Note 5, there was no change in the fair value of the Amended Term Loans\nbetween the date of the amendment on March 27, 2024 and March 31, 2024\n\nFurther, as required by ASC 825 10 45 5, to the extent a portion of the fair value adjustment is attributed to a change in the\ninstrument specific credit risk, such portion would be recognized as a component of other comprehensive income (\u201cOCT\u201d), however\nthere have been no such adjustments with respect to the convertible notes or debt which are accounted for under the fair value option\n\nDeferred Transaction Costs\n\nThe Company has incurred direct and incremental transaction costs related to the merger with Arrowroot Transaction costs of\n$6 9 million and $4 0 million were deferred and capitalized to the \u201cDeferred transaction costs\u201d line item within the condensed\nconsolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively\n\nAfter consummation of the merger, these costs will be recorded to shareholders\u2019 deficit as a reduction of additional paid in capital\ngenerated as a result of the merger As of March 31, 2024, and December 31, 2023, $2 8 million and $1 1 million of unpaid transaction\ncosts are included within the \u201cTrade accounts payable\u201d line item, and $0 5 million and $1 6 million are included within the \u201cAccrued\nexpenses\u201d line item, within the condensed consolidated balance sheets, respectively\n\nAccounts Receivable and Provision for Credit Losses\n\nAccounts receivable are uncollateralized, noninterest bearing customer obligations due under normal trade terms and generally\nrequiring payment within 30 to 90 days of the invoice date Accounts receivable are stated at the amount billed to the customer, net of\nprovision for credit losses in accordance with ASC 326, Financial Instruments Credit Losses Payments of accounts receivable are\nallocated to the specific invoices identified on the customer\u2019s remittance advice, or, if unspecified, are applied to the earliest unpaid\ninvoice\n\nThe estimation of the provision for credit loss is based on an analysis of historical loss experience, current receivables aging. any\nknown or expected changes to the customers\u2019 ability to fulfill their payment obligations, and management\u2019s assessment of current\nconditions and estimated future conditions The general CECL reserve is measured on a collective (pool) basis when similar risk\ncharacteristics exist for multiple financial instruments The Company notes its account receivables do not similar risks, and the\nCompany measures the CECL reserve on an individual customer account basis\n\nAt the end of each reporting period, the provision for credit losses is reviewed relative to management\u2019s expected credit loss model\nand is adjusted as necessary The expense associated with the provision for expected credit losses is recognized in selling, general, and\nadministrative expenses in the consolidated statements of operations Accounts receivable write offs are recorded when management\nbelieves it is probable a receivable will not be recovered The provision for credit losses as of March 31, 2024 and December 31, 2023\nwere $0 5 million and $0 3 million, respectively\n\nThe following table shows the change in the Company\u2019s provision for credit losses recognized for receivables between December\n31, 2023 and March 31, 2024 (in thousands)\n\nBalance\nProvision for credit losses as of December 31, 2023 $ 336\nChange in provision for credit losses during the three months ended March 31, 2024 174\nProvision for credit losses as of March 31, 2024 $ 510\n\nF-62\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 324 of 408\n\nRevenue Recognition\nDisaggregation of Revenue\n\nThe Company disaggregates revenue into categories that depict the nature, amount, and timing of revenue and cash flows based\non differing economic risk profiles for each category In concluding such disaggregation, the Company evaluated the nature of the\nproducts and services, consumer markets, sales terms, and sales channels which have similar characteristics such that the level of\ndisaggregation provides an understanding of the Company\u2019s business activities and historical performance The level of disaggregation\nis evaluated annually and as appropriate for changes to the Company or its business, either from internal growth, acquisitions,\ndivestitures, or otherwise Revenue from implementation services and combined software license and maintenance is recognized over\nthe respective performance obligation period As such, there is no disaggregation of revenue by point in time as all of the Company\u2019s\nrevenue is recognized over time\n\nWith respect to the Company\u2019s disaggregation of revenue by customer geography, geography is primarily determined based on the\nlocation of the customer identified in the contract Under certain arrangements, the Company enters contracts with the Technology\nPartner (refer to Note 4 for additional information about the Company\u2019s contractual arrangements with the Technology Partner) though\nwhich the Technology Partner purchases and integrates the ILE platform into the Technology Partner\u2019s own software solution provided\nto one of the Technology Partmer\u2019s customers In this type of contractual arrangement, the Company identifies the Technology Parmer\nas its customer In contractual arrangements in which the Technology Partner is identified as the customer, the Technology Partner\u2019s\nend customer may or may not be known by the Company In cases in which the Technology Partner\u2019s customer is known to the\nCompany, the geography is determined based on the location of the Technology Partner\u2019s customer and conversely, in cases in which\nthe Technology Partner\u2019s customer is not known, the customer geography is determined based on the geography of the Technology\nPartner The following table presents this disaggregation of revenue by customer geography\n\nThree Months Ended\nMarch 31,\n2024 2023\n(In thousands)\nNorth America $ 54,317 $ 45,011\nIndia 51,873 34,795\nOther) 18,745 14,174\nTotal Revenues $ 124,935 $ 93,980\n1) Other includes customers in Middle East and Europe.\nThe following table presents to disaggregation of revenue by type of revenue:\nThree Months Ended\nMarch 31,\n2024 2023\n(In thousands)\nRevenue related to implementation services $ 5.200 $ 4.660\nCombined software license and maintenance revenues 119,735 89.320\nTotal Revenues $ 124,935 \u00a7$ 93.980\n\nContract asset\n\nContract asset balances represent amounts for which the Company has recognized revenue, pursuant to its revenue recognition\npolicy, for software licenses already delivered, implementation services, and maintenance services already performed but invoiced in\narrears. As of March 31, 2024 and December 31, 2023 contract assets were $0.3 million and $0.5 million, respectively.\n\nContract liability\n\nContract liability represents either customer advance payments or billings for which the revenue recognition criteria has not yet\nbeen met. Contract liability is primarily unearned revenue related to combined software and maintenance services. As of March 31,\n\f2024 and Deck Or # 5038 tie comers Giity Hagcu Was ons lion rile. 2 goaele 5 Page 325 of 408\n\nF 63\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 326 of 408\n\nRemaining performance obligations\n\nAs of March 31, 2024, the total remaining performance obligations under the Company\u2019s contracts with customers was\n$447 0 million, and the Company expects to recognize approximately 86% of the remaining performance obligations as revenue within\nthe next twelve months As of December 31, 2023, the total remaining performance obligations under the Company\u2019s contracts with\ncustomers was $409 6 million, and the Company recognized revenues on approximately 90% of these remaining performance\nobligations over the year ended December 31, 2023\n\nRecent Accounting Pronouncements Not Yet Adopted\n\nIn November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No 2023 07,\nSegment Reporting (Topic 280) Improvements to Reportable Segment Disclosures, which requires a public entity to disclose\nsignificant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures\nabout a reportable segment\u2019s profit or loss and assets that are currently required annually Additionally, it requires a public entity to\ndisclose the title and position of the Chief Operating Decision Maker (CODM) The ASU does not change how a public entity identifies\nits operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments The new standard\nis effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15,\n2024, with early adoption permitted A public entity should apply the amendments in this ASU retrospectively to all prior periods\npresented in the financial statements The Company is still evaluating the impact of this standard on its condensed consolidated\nfinancial statements\n\nIn December 2023, the FASB issued ASU No 2023 09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures,\nwhich focuses on the rate reconciliation and income taxes paid ASU No 2023 09 requires a public business entity (PBE) to disclose,\non an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with\ncertain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold In\naddition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign\nand by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received For PBEs, the new standard is\neffective for annual periods beginning after December 15, 2024, with early adoption permitted An entity may apply the amendments in\nthis ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the\npre ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all\nperiod presented The Company is still evaluating the impact of this standard on its condensed consolidated financial statements\n\n3 Accrued Expenses\n\nThe following table presents the components of accrued expenses as of March 31, 2024 and December 31, 2023\n\nAs of\nMarch 31, December 31,\n2024 2023\n(In thousands)\nAccrued income taxes $ 2.495 $ 1,742\nOther accrued expenses) 1.355 1,240\nTotal $ 3.850 $ 2,982\n\n1) Other Accrued Expense includes accrued professional service fees, accrued interest, accrued compensation and benefits, and other\ncurrent liabilities.\n\n4. Technology Partner\n\nIn 2019, the Company entered a Master Agreement (\u201cMA\u201d) with the Technology Partner, which allows for quarterly netting of\namounts collected by the Technology Partner from end-users, against the cost of the Technology Partner\u2019s services rendered and\nbillable to the Company. The MA has an initial term of five years with an automatic renewal for five additional years.\n\nOn January 1, 2021, the Company amended the interest rate with the Technology Partner which changed from a 12-month LIBOR\nrate plus 2.0% to a fixed rate of 3.99% through December 31, 2023. On January 5, 2024, the Company amended the interest rate with\nthe Technology Partner to a fixed rate of 5.99% through December 31, 2024. The Company is not required to repay any outstanding\n\fCase 8:24-cv-Q2900-DKC Document90-2 Filed 09/1 8/2 ON AhAge 827 OF A08 | condensed\n\nbalance or accried interest until the tenth anniversary of the effective date of termination o\nconsolidated financial statements, the MA has not been terminated\n\nF 64\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 328 of 408\n\nThe following table summarizes the expenses charged to Company by the Technology Partner that are presented within \u201cCost of\nrevenue\u201d, \u201cSelling. general and administrative expenses\u201d, and \u201cResearch and development expenses\u201d on the condensed consolidated\nstatements of operations for the three months ended March, 31 2024 and 2023\n\nThree Months Ended\nMarch 31,\n2024 2023\n(In thousands)\nCost of revenue $ 38,673 \u00a7$ 31,541\nSelling. general and administrative expense 37,063 29,533\nResearch and development expense 37,048 28,581\n\n$ 112,784 $ 89.655\nSs\n\nSubordinated Payable to the Technology Partner\n\nOn December 30, 2020, the Company and the Technology Partner entered into a subordination agreement whereby the payable to\nthe Technology Partner became subordinated to the 2020 and 2021 Term Loans (refer to Note 5).\n\nThe following table presents a reconciliation of the change in subordinated payable to the Technology Partner between December\n31, 2023 and March 31, 2024 (in thousands):\n\nSubordinated\npayable to\nTechnology\nPartner\n\nBalance as of December 31, 2023 $ 49.163\nAccrued interest 626\n\nBalance as of March 31, 2024 $ 49.789\n\nInterest expense related to the subordinated payable to the Technology Partner was $0 6 million for the three months ended March\n31, 2024\n\nNet Receivable from Technology Partner\n\nSubsequent to the execution of the subordination agreement, the Company and the Technology Partner resumed quarterly netting\nof collections and the cost of services provided with the same interest rate terms defined above\n\nThe following table presents a reconciliation of the changes in the net receivable from Technology Partner between December 31,\n2023 and March 31, 2024 (in thousands)\n\nNet\nReceivable\nfrom\nTechnology\nPartner\nBalance of receivable from Technology Partner as of December 31, 2023 $ 13,602\nCollections by Technology Partner 113,732\nCost of services provided by Technology Partner (112,784)\nNet cash transfers between Company and Technology Partner 330\nBalance of receivable from Technology Partner as of March 31, 2024 $ 14,880\nee\n\nF-65\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 329 of 408\n\n5 Debt\n\nThe following table presents the components of the Company\u2019s debt as of March 31, 2024 and December 31, 2023\n\nDecember\nMarch 31, 31,\n2024 2023\n\n(In thousands)\n2020 Term Loans $ - \u00a7$ 2.697\n2021 Term Loans - 12,299\n2023 Term Loans - 10.000\nAmended Term Loans 26.026\n\n26.026 24.996\nLess: Discount on debt - 3.800\n\n26,026 21.196\nLess: Current portion 26,026 10,517\nLong-term portion of debt $ $ 10,679\n\nContractual interest expense related to the 2020 Term Loan, 2021 Term Loan, and 2023 Term Loan (collectively. the \u201cTerm\nLoans\u201d), was $0.7 million and $0.7 million for the three months ended March 31, 2024 and March 31, 2023 and the amortization of\ndebt issuance costs was $0.7 million and $0.5 million for the three months ended March 31, 2024 and March 31, 2023, respectively.\n\nAmendment to 2020, 2021 and 2023 Term Loans\n\nOn March 27, 2024, ILE entered into an agreement to amend the 2020, 2021 and 2023 Term Loans (the \u201cAmendment\u2019\u2019). The\namended terms consisted of:\n\n(i) revision to the amortization schedule for the Term Loans in exchange for 1,019,999 shares of \u201cNewCo\u201d (defined in Note\n14 - Subsequent Events) common stock to be issued upon completion of the SPAC Transaction (the \u201cLoan Restructuring\nShares\u201d)\n\n(ii) agreement to terminate the outstanding warrants issued in connection with the Term Loans and the respective put rights\n\nassociated with each, in exchange for the Company\u2019s agreement to provide the respective lenders with an aggregate\namount of 3,399,999 shares of NewCo common stock to be issued upon completion of the SPAC Transaction.\n\nPursuant to the Amendment, if the Company repays the \u201cAmended Term Loans\u201d in full, on or before (i) April 15, 2024, then 90%\nof the Loan Restructuring Shares will be canceled, (ii) May 1, 2024, then 80% of the Loan Restructuring Shares will be canceled, and\niii) July 1, 2024, then 50% of the Loan Restructuring Shares will be canceled.\n\nIn addition, the Amendment provides that, if the Company prepays the Amended Term Loans, then at the Company\u2019s option, the\nCompany may prepay 50% of the amount of scheduled but unpaid payments of interest that would have accrued after the prepayment\ndate by issuing a number of shares of NewCo common stock obtained by dividing (A) the product of (x) the unpaid scheduled interest\npayments and (y) 2.75, by (B) the volume-weighted average price of NewCo common stock over the seven (7) trading days\nimmediately preceding the date of issuance.\n\nThe Loan Restructuring Shares were determined to be classified as a liability initially measured at fair value with subsequent\nchanges in fair value recorded in earnings. The initial fair value of the Loan Restructuring Shares was determined to be $2.8 million.\nThe Loan Restructuring Shares are presented within \u201cLoan restructuring share liability\u201d in the accompanying consolidated balance\nsheet. There was no change in fair value between the date of the initial fair value determined on March 27, 2024 and March 31, 2024.\n\nThe Amendment was accounted for as a debt extinguishment under US GAAP, through which the Company recorded a $10.0\nmillion loss on debt extinguishment within the accompanying condensed consolidated statement of operations.\n\nF-66\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 330 of 408\n\nThe Company elected to account for the Amended Term Loans under the fair value option Under the fair value option, the\nbalance is subsequently measured at fair value for each reporting period with changes in fair value. including changes due to instrument\nspecific credit risk, recorded in earnings The initial fair value of the Amended Term Loans was determined to be $26 0 million and\nthere were no changes in fair value between the date of the Amendment on March 27, 2024 and March 31, 2024\n\nAmended\n\nTerm Loans\n(in\n\nthousands)\nFair value on March 27, 2024\nChange in fair value of term loan due to instrument-specific credit risk -\nRemaining changes in fair value -\nFair value as of March 31, 2024 $ 26,026\n\n\u201c\ni\nSY\n\u00b0\nQ\na\n\nOn April 18, 2024, the Company prepaid the full amount of the Amended Term Loans using a combination of cash and 159,379\nshares of NewCo common stock. Based on the timing of the prepayment, 815,999 Loan Restructuring Shares were canceled.\n\nDebt Covenant Compliance\n\nThe Company\u2019s 2020, 2021, and 2023 Term Loans were subject to covenant clauses. Covenant breaches related to timely filing of\npayroll tax returns and failure to maintain $2.0 million of restricted cash were waived by the respective lenders as part of the\nAmendment. Due to the waivers obtained, as of March 31, 2024, the Company is in compliance with all debt covenants.\n\nWarrants\n\nThe following is a schedule of changes in warrants issued and outstanding from December 31, 2023 to March 31, 2024:\n\nUnits\nOutstanding as of December 31, 2023 1,094,299\nWarrants issued \u201c\nOutstanding as of March 31, 2024 1,094,299\n\nThe fair value of the warrant liability was determined using an option pricing model, see Note 11, Fair Value Measurements, for\ndisclosure in assumption of the warrant liability.\n\n6. Convertible Notes\n\nThe following is a schedule of the Company\u2019s convertible notes at fair value as of March 31, 2024, and December 31, 2023:\n\nDecember\nMarch 31, 31,\n2024 2023\n(In thousands)\n2023 Convertible Notes $ 35.936 $ 31,547\n2024 Convertible Notes 1,776 -\nTotal $ 37,712 $ 31,547\n\nOn April 27, 2023, the Company entered into the 2023 convertible note purchase agreement (the \u201c2023 Convertible Note\nPurchase Agreement\u201d) pursuant to which the Company issued and sold 2023 Convertible Notes with an aggregate principal amount of\n$17 4 million The 2023 Convertible Notes mature on October 27, 2025, unless converted earlier, redeemed, or repurchased prior to the\nmaturity date\n\nOn March 21, 2024 (\u201cIssuance Date\u201d), the Company entered into the 2024 convertible note purchase agreement (the \u201c2024\nConvertible Notes\u201d) pursuant to which the Company issued and sold 2024 Convertible Notes with an aggregate principal amount of\n$0 7 million The 2024 Convertible Notes mature 30 months after the Issuance Date\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 331 of 408\n\nThe 2024 Convertible Notes contain a make whole provision, such that for each share of each common stock converted under the\n2024 Convertible Notes, a number of additional incentive shares (rounded down to the nearest whole share) equal to (1) $10 00 (the\n\u201cConversion Price\u201d), divided by the greater of (1) the volume weighted average price of the NewCo common shares over the ten\ntrading days immediately preceding November 30, 2024 (the \u201cReference Date\u201d) and (ii) $1 00 (the \u201cReference Price\u201d), minus (ii) one\nwill be issued The Conversion Price and Reference Price shall be appropriately adjusted for any stock dividend, stock split, stock\ncombination, recapitalization or other similar transaction during the period beginning on the date the NewCo common shares are issued\nupon conversion of the 2024 Convertible Notes and ending on the Reference Date\n\nF 67\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 332 of 408\n\nThe 2023 and 2024 Convertible Notes bear simple interest, accrued on a daily basis in arrears, at a rate of 15 0% per annum until\naggregate accrued interest is greater than 25 0% of the principal amount, and at a rate of 8 0% per annum thereafter\n\nThe 2023 and 2024 Convertible Notes are convertible to shares including under the following circumstances\n\ne upon the occurrence of an equity financing, the lender can elect to exchange the convertible notes into the number of\nshares of equity securities issued in such equity financing equal to the note balance divided by the equity price in such\nequity financing and\n\n@ immediately prior to the consummation of a qualified de SPAC transaction, the convertible notes shall automatically\nconvert, in whole, into shares of common stock of the Company thereby entitling the lender to receive a number of\nshares equal to (i) 2 75, multiplied by the outstanding principal under each convertible note, plus all accrued and unpaid\ninterest thereon, divided by (ii) $10 00\n\nAdditionally, pursuant to the respective convertible note purchase agreements, the Company may prepay the 2023 and 2024\nConvertible Notes in cash without the consent of the holders, at an amount equal to the balance of the note before maturity\n\nAs of March 31, 2024, the fair value of the 2023 and 2024 Convertible Notes was $35 9 million and $1 8 million, respectively,\nand the corresponding change in fair value recorded within the accompanying condensed consolidated statements of operations for the\nthree months ended March 31, 2024 was $5 5 million The fair value of the 2023 Convertible Notes as of December 31, 2023 was\n$31 5 million\n\n7 Share Based Compensation\n\nOn August 12, 2021, the Company adopted the 2020 Equity Incentive Plan (the \u201cPlan\u201d) The total restricted stock units (\u201cRSUs\u201d)\ngranted under the Plan as of March 31, 2024 and December 31, 2023 was 8,338,438 The awards have a four year service requirement\nwith a one year cliff vesting starting on the employment date and are subject to the Liquidity Event provision defined below\n\nAs of March 31, 2024 and December 31, 2023, the Company had 39,883 388 shares of restricted stock awards outstanding with\nthe Company\u2019s founders with a ten year service requirements starting on the day of the Liquidity Event (defined below) (the \u201cFounder\nRestricted Shares\u201d) and 360,290 restricted shares outstanding with a former employee, in which the service requirement had been\ndeemed met on the grant date (together with the Founder Restricted Shares, the \u201cRestricted Shares\u201d) The Company\u2019s 40 243.678\noutstanding Restricted Shares participate on par with common shares in all distributions from the Company, as the holders of these\nrestricted shares are entitled to non forfeitable dividend rights Each of the RSUs and Restricted Shares is subject to a change of control\nprovision; an effective registration statement under the Securities Act of 1933, as amended (the \u201cSecurities Act\u201d); a direct listing on the\nNasdaq Global Select Market or New York Stock Exchange: or the Company\u2019s completion of a merger or consolidation with a SPAC\nwhereby the surviving company\u2019s common stock are publicly traded in a public offering pursuant to an effective registration statement\nunder the Securities Act (collectively, the \u201cLiquidity Events\u2019)\n\nThe summary of nonvested RSUs and Restricted Shares whose vesting is subject to the achievement of a Liquidity Event for the\nperiod ended March 31, 2024 is disclosed below\n\nWeighted\nAverage\nGrant Date\nShares Fair Value\nRSUs\nNonvested as of January 1, 2024 8.338.438 $ 4.09\nGranted - -\nNonvested as of March 31, 2024 8.338.438 $ 409\na\nWeighted\nAverage\nGrant Date\nShares Fair Value\n\nRestricted Shares\nNonvested as of January 1, 2024 40,243.678 $ 3'53\n\fFicaasiel Case 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 333 of 408\n\nNonvested as of March 31, 2024 40.243.678 $ 3.53\n\nF 68\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 334 of 408\n\nThe aggregate unrecognized compensation expense for these awards whose vesting is subject to the achievement of a Liquidity\nEvent is $176 1 million as of March 31, 2024\n\nThe vesting of these RSUs and Restricted Shares is contingent upon the Liquidity Events that are considered not probable of\noccurring until it actually occurs, therefore no share based compensation expense will be recognized until any of the Liquidity Events\nare achieved\n\n8 Income Taxes\n\nThe Company\u2019s income tax provision is computed based on the federal statutory rate and the average state statutory rates, net of\nthe related federal benefit For the three months ended March 31, 2024 and 2023, the Company recorded an income tax expense of $1 2\nmillion and income tax benefit of $0 2 million, respectively\n\nThe Company\u2019s estimate of the realizability of the deferred tax asset is dependent on estimates of projected future levels of\ntaxable income In analyzing future taxable income levels, the Company considered all evidence currently available, both positive and\nnegative Accordingly, as of March 31, 2024 and December 31, 2023, the Company no longer maintains a valuation allowance outside\nof the Australia and India jurisdiction\n\n9 Net (Loss) Income Per Share\n\nBasic net (loss) income per share is computed using the weighted average number of common shares outstanding during the\nperiod Diluted net (loss) income per share is computed using the weighted average number of common shares and, if dilutive,\ncommon share equivalents outstanding during the period\n\nThe computation of basic and diluted net (loss) income per share and weighted average shares of the Company\u2019s common stock\noutstanding during the periods presented is as follows\n\nThree Months Ended\nMarch 31,\n\n2024 2023\n\n(in thousands, except share\nand per share amounts)\n\nBasic net (loss) income per share:\n\nNet (loss) income $ (25,935) $ 451\nIncome allocated to participating securities - (133)\nNet (loss) income attributable to common stockholders \u2014 basic $ (25,935) $ 318\n\nDiluted net (loss) income per share:\n\nNet (loss) income attributable to common stockholders \u2014 basic $ (25,935) $ 451\nInterest expense on the 2019 Convertible Notes - (133)\nNet (loss) income attributable to common stockholders \u2014 diluted $ (25.935) $ 318\n\nShares used in computation:\n\nWeighted-average common shares outstanding 95,782,605 95,782,605\nWeighted-average effect of dilutive securities:\nDiluted weighted-average common shares outstanding 95,782,605 95.782,605\n\nNet (loss) income per share attributable to common stockholders:\nBasic $ (0.27) $ 0.00\nDiluted $ (0.27) $ 0.00\n\nF-69\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 335 of 408\n\nThere were no dividends declared or accumulated on the common shares during the three months ended March 31, 2024 and\n2023 The Company applies the two class method to its Restricted Shares, which contains non forfeitable dividend rights and thereby\nmeets the definition of participating securities, which requires earnings available to common stockholders for the period to be allocated\nbetween common stock and participating securities based upon their respective rights to receive dividends as if all earnings for the\nperiod had been distributed Net loss is not allocated to participating securities in accordance with the contractual terms The\nCompany\u2019s weighted average restricted shares outstanding was 40 243,678 for the three months ended March 31, 2024 and 2023 The\nCompany excluded the following securities, presented based on amounts outstanding at each period end. from the computation of\ndiluted net (loss) income per share attributable to common stockholders for the periods indicated, as including them would have had an\nanti dilutive effect\n\nThree Months Ended\nMarch 31,\n2024 2023\nWarrants to purchase common stock\u201c) 1,094,299 873,618\nRsus@) 8,338,438 7,138,438\nContingent consideration to In2vate\u00ae) 34,030 34,030\nConvertible Notes 5,157,432 -\nRestricted Shares) 40,243,678 40,243,678\nLoan restructuring share liability 1,019,999 -\n\n1) Warrants of 220.681 are out-of-the-money during the three months ended March 31, 2024. The warrants of 873,618 are in-the-\nmoney during the three months ended March 31, 2024, however, are not considered exercised as the Company is in a net loss\nposition.. The warrants of 873,618 are out-of-the money during the three-months ended March 31, 2023. Therefore, all warrants\nare excluded from the dilutive EPS calculation.\n\n2) RSUs are subject to the vesting condition under the Liquidity Event. as discussed in Note 7 \u2014 Share Based Compensation. As\nthese securities are considered as contingently issuable shares where the contingency has not been met at the end of the reporting\nperiod, they are excluded from the dilutive net income (loss) per share calculation for the periods presented.\n\n3) Contingencies underlying contingent consideration payable to In2vate was not met as of the end of the reporting period.\nTherefore, these shares have been excluded from the dilutive net (loss) income per share calculation for the periods presented.\n\n4) If-converted method was applied to the Convertible Notes, in which the impact was anti-dilutive for the three months ended\nMarch 31, 2024. Therefore, they are excluded from the dilutive EPS calculation.\n\n5) Restricted Shares and Loan Restructuring Shares were excluded from dilutive earnings per share calculation for the three months\nended March 31, 2024 as the impact of including such shares would be anti-dilutive.\n\n10. Payroll Taxes Payable\n\nThe Company has not paid or filed employment payroll tax returns for any period from inception through December 31, 2020.\nThe federal and state withholding tax, employer payroll taxes, penalties, and interest liability from inception of the Company through\nDecember 31, 2023 and related penalties and interest were recorded within Payroll Taxes Payable on the condensed consolidated\nbalance sheets. The total liability was $3.0 million each as of March 31, 2024 and December 31, 2023, respectively. The related charge\nfor these accruals is recorded to \u201cSelling. general, and administrative expenses\u201d within the condensed consolidated statements of\noperations.\n\n11. Fair Value Measurements\nThe Company\u2019s financial instruments consist of warrant liability, 2020 Term Loans, 2021 Term Loans, 2023 Term Loans,\n\nAmended Term Loans, 2023 and 2024 Convertible Notes, Loan Restructuring and Subordinated Payable to Technology Partner.\n\nF-70\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 336 of 408\n\nThe carrying value and estimated fair value of the Company\u2019s 2020 Term Loans, 2021 Term Loans, 2023 Term Loans, Amended\nTerm Loans. 2023 Convertible Notes, 2024 Convertible Notes, Loan Restructuring and Subordinated Payable to Technology Partner as\nof March 31, 2024 and December 31, 2023, were as follows\n\nMarch, 31, 2024 December, 31, 2023\nPrincipal Carrying Principal Carrying\namount amount Fair value amount amount Fair value\n(In thousands)\n\n2020 Term Loans $ - \u00a7$ - \u00a7 - \u00a7$ 2,697 $ 2,483 $ 2,697\n2021 Term Loans - - - 12,299 11,498 12,299\n2023 Term Loan - - - 10,000 7,215 10,000\nAmended Term Loans 21,967 26,026 26,026 - - -\n2023 Convertible Notes 17,400 35,936 35,936 17,400 31,547 31,547\n2024 Convertible Notes 700 1,776 1,776 - - -\nSubordinated payable to Technology\n\nPartner 49,789 49,789 49.789 49.163 49.163 49,163\nLoan restructuring share liability - 2,813 2,813 - & =\n\n$ 89.856 $ 116,340 \u00a7 116,340 $ 91559 $ 101,906 $ 105.706\n\nWith respect to the 2020 Term Loans, 2021 Term Loans. 2023 Term Loans, the Company concluded the fair values as of\nDecember 31, 2023 approximated the principal value. For Subordinated Payable to Technology Partner, the Company determined that\nthe fair value approximated the principal value as of March 31, 2024 and December 31, 2023. The 2023 and 2024 Convertible Notes\nand the Loan restructuring share liability are presented are carried at fair value for each period presented.\n\nThe fair values of the 2023 and 2024 Convertible Notes, Loan restructuring share liability and Amended Term Loans are\nestimated using a scenario-based approach which considers the conversion feature and related payoffs within each scenario.\n\nThe level 3 inputs used in the valuation model for the Amended Term Loans as of March 31, 2024 included the following:\n\nMarch 31, 2024\nPrepay by Prepay by Prepay by\nApril 15, May 1, July 1, Hold to\nRedemption Event 2024 2024 2024 Maturity Private Sale\nDiscount spread 27.90% 27.90% 27.90% 27.90% 27.90%\nProbability 5% 48% 38% 5% 5%\nTerm matched risk- free rate 5.49% 5.49% 5.46%-5.49% 447%-5.49% 4.47%-5.49%\n\nThe level 3 inputs used in the valuation model for the 2024 Convertible Notes as of March 31, 2024 included the following:\n\nMarch 31, 2024\n\nDe-SPAC Hold-to-\nRedemption Event Transaction Maturity\nProbability 95% 5%\nTime to event date (years) 0.04 2.48\nDiscount spread 574.2% 574.2%\nRisk-free rate 5.6% 4.6%\nDiscount yield 579.8% 578.8%\n\nThe level 3 inputs used in the valuation model for the 2023 Convertible Notes as of March 31, 2024 and December 31, 2023\nincluded the following:\n\nMarch 31, 2024\nDe-SPAC Hold-to-\nRedemption Event Transaction Maturity\nProbability 95% 5%\n\nTime to event date (years) 0 04 158\n\fDiscount spreads\u201d 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 33701, 408 574.2%\n\nRisk free rate 56% 4 8%\nDiscount yield 579 8% 579 0%\n\nF 71\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nFiled 09/18/25\n\nPage 338 of 408\n\nDecember 31, 2023\n\nEquity De-SPAC Hold-to-\nRedemption Event Financing Transaction Maturity\nProbability 8.0% 90.0% 2.0%\nTime to event date (years) 0.13 0.13 1.82\nDiscount spread 574.2% 574.2% 574.2%\nRisk-free rate 5.6% 5.6% 44%\nDiscount yield 579.8% 579.8% 578.6%\n\nThe fair value of the warrant liability and Loan restructuring share liability was determined using an option pricing model which\n\nutilized the following level 3 inputs:\n\nVolatility\n\nRisk-free interest rate\n\nDividend yield\n\nExercise price for $6.94 warrants\nExercise price for $10.14 warrants\nDiscount for Lack of Marketability\nTerm\n\nEquity value\n\nMarch 31, 2024\nPrivate Sale SPAC\nScenario Scenario\n(5% (95%\nProbability) Probability)\n65.0% 45.0%\n5.1% 5.42%\n0.0% 0.0%\n$ 6.94 \u00a7$ 6.94\n$ 10.14 $ 10.14\n0.0% 2.0%\n0.75 Years 0.04 Years\n$588.496.671 $1.233.314.103\n\n1) Equity value was derived from weighted average of discounted cash flow, guideline company method, and transaction\n\nmethodologies.\n\nVolatility\n\nRisk-free interest rate\n\nDividend yield\n\nExercise price for $6.94 warrants\nExercise price for $10.14 warrants\nTerm\n\nEquity value)\n\nDecember 31, 2023\n\nPrivate Sale SPAC\nScenario Scenario\n(10% (90%\nProbability) Probability)\n60.0% 50.0%\n4.7% 5.5%\n0.0% 0.0%\n$ 6.94 \u00a7 6.94\n$ 10.14 \u00a7$ 10.14\n1.0 Years 0.1 Years\n\n$585,798,557\n\n$1,235,675,336\n\n1) Equity value was derived from weighted average of discounted cash flow, guideline company method, and transaction\n\nmethodologies.\n\nThe Company\u2019s liabilities measured at fair value on a recurring basis were categorized as follows within the fair value hierarchy.\n\nMarch 31, 2024\nLevel 1 Level 2 Level 3 Total\n\n(In thousands)\nLiabilities\nWarrant liabilities $ $ $ 26.988 $ 26.988\nAmended Term Loans 26,026 26.026\n2023 Convertible Notes 35,936 35.936\n2024 Convertible Notes 1,776 1.776\n\fCase 8: a4. \u00a2v-02900-DKC Document 90-2 Filed 09/18/25 Page 339 of 408\nLoan restructuring share liability - - 2,813 2.813\n\nTotal liabilities $ - \u00a7$ x &\u00a7 93.539 \u00a7$ 93.539\n\nF 72\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 340 of 408\n\nDecember 31, 2023\nLevel 1 Level 2 Level 3 Total\n(In thousands)\nLiabilities\nWarrant liability $ - \u00a7$ - \u00a7 11,870 \u00a7$ 11.870\n2023 Convertible Notes - - 31,547 31,547\nTotal liabilities $ - \u00a7$ - \u00a7 43.417 $ 43.417\n\nThe following table summarizes the activity for the Company\u2019s Level 3 liabilities measured at fair value:\n\nWarrant Convertible Loan Amended\nLiability Notes Restructuring Term Loans\n(In thousands)\nBalance as of December 31, 2023 $ 11,870 $ 31,547 $ - \u00a7$ -\nIssuance - 700 2,813 26.026\nChange in fair value 15,118 5.465 - =\nBalance as of March 31, 2024 $ 26,988 $ 37,712 $ 2.813 $ 26,026\n\nDuring the three months ended March 31, 2024 and 2023, there were no transfers between Level 1 and Level 2, nor into and out\nof Level 3.\n\n12. Commitments and Contingencies\nContingencies\n\nThe Company evaluates for any potential impact of loss contingencies that are probable and reasonably estimable. As of March\n31, 2024, there were no loss contingencies recorded.\n\nWhile the Company does not anticipate that the resolution of any ongoing matters will have a material impact on its results of\noperations, financial condition, or cash flows, it is important to note that the ultimate outcome of these matters remains uncertain. In the\nevent of an unfavorable resolution of one or more of these contingencies, it could have a material effect on the Company\u2019s financial\ncondition, results of operations, or cash flows.\n\nThe Company will continue to monitor these matters and disclose any significant developments or changes in future financial\nstatements as necessary.\n\nPurchase Commitments\n\nThe Company entered into a long-term software licensing contract with a major customer that commenced in 2018 and is set to\nexpire in June 2024, subject to an additional 5-year renewal. The contract has an annual value of $50.3 million. As part of the\nagreement, the Company installs its software licenses on the customer\u2019s servers, and in exchange, the customer pays an annual fee for\naccess to the software license and related maintenance services. Additionally. the Company has a separate contract with the customer\nfor the purchase of the customer\u2019s end-user data. This data is essential for the Company\u2019s development and utilization of its next-\ngeneration artificial intelligence platform. The annual price for this data acquisition amounts to approximately $30.0 million.\n\nThe sale of the software license and the purchase of the customer\u2019s end-user data are treated as distinct and independent\ntransactions. Furthermore, the software licensing contract and the data acquisition contract can be canceled individually without\naffecting the other contract, with the data acquisition contract requiring twelve months notice for cancellation by either party. Due to\nthe distinct nature of the data acquisition from the customer, which is obtained at fair value and used primarily for research and\ndevelopment purposes, the revenue generated from the software licensing contract is recognized on a gross basis. Conversely, the\nexpenses associated with the data acquisition are also recognized on a gross basis and classified as research and development expenses.\n\nF-73\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 341 of 408\n\nFinancial Advisor Agreement\n\nThe Company has a financial advisory agreement in place with a designated financial advisor to assist with any future equity\nfundraising activities According to the terms of the agreement, the financial advisor will recetve compensation based on the following\nstructure\n\nFor equity raises comprising less than a majority of the Company\u2019s equity capitalization, the financial advisor will be entitled to a\nfee equal to 5 0% of the gross proceeds generated from the equity raise\n\nIn the event of an equity raise comprising a majority of the Company\u2019s equity capitalization, the financial advisor\u2019s compensation\nwill be calculated based on the greater of the following\n\ni) A flat fee of $3 5 million\n\nii) 10% of the aggregate value of the equity raise up to $1 0 billion, plus an additional 1 5% of the portion of the aggregate\nvalue of the equity raise that exceeds $1 0 billion\n\nThese compensation terms outline the financial advisor\u2019s entitlement to fees based on the successful completion of equity\nfundraising activities For non equity transactions the specific fee is open to negotiation on a transaction by transaction basis to ensure\nthat the financial advisor\u2019s compensation aligns with the scale and significance of the equity raise, considering the Company\u2019s equity\ncapitalization and the total value of the funds raised\n\nOn March 27, 2024, the Company and the financial advisor amended the financial advisory agreement to provide that, in lieu of\npayment in cash of the full amount of any advisory fees or other fees or expenses owed under the financial advisor agreement, the\nCompany will pay the financial advisor $7 500,000 in cash or NewCo shares, at the sole discretion of the Company As of March 31,\n2024 and December 31, 2023, the financial advisor\u2019s fees were not yet probable of being paid, nor was the amount of the payment\ndeterminable As a result, no amount is accrued within the condensed consolidated balance sheets at either period, for the potential\ncompensation outlined within the financial advisor agreement\n\nLitigation\n\nThe Company is involved in litigation arising in the normal course of business Such litigation is not expected to have a material\neffect on the Company\u2019s financial condition, results of operations, and cash flows\n\n13 Related Party Transactions\nReceivable from related party\n\nThe Company had outstanding receivables from Directors in the amount of $0 5 million as of December 31, 2023, related to\nexpenses that the Company incurred on behalf of the Directors\n\nIn February 2024, the Company collected the full amount of the related party receivable from each Director There is no\noutstanding balance as of March 31, 2024\n\n14 Subsequent Events\n\nThe Company has evaluated all events subsequent to March 31, 2024 and through May 15, 2024, which represents the date these\ncondensed consolidated financial statements were available to be issued The Company is not aware of any subsequent event that\nwould require recognition or disclosure in the condensed consolidated financial statements other than those described below\n\nClosing of the Merger and Related Transactions\n\nOn April 16, 2024, (the \u201cClosing Date\u201d), the Company consummated the previously announced merger contemplated by the\nMerger Agreement dated April 27, 2023 (the \u201cSPAC Transaction\u201d) Refer to Note 1 for additional detail\n\nThe business combination is being accounted for as a reverse recapitalization, in accordance with U S GAAP Under this method\nof accounting, although Arrowroot issued shares for outstanding equity interests of iLearningEngines, Inc in the business combination,\n\feae Cv- 02900- DKC ocument 90-2 File ed 09/18/25 Page 340. of 408\n\nArrowroot is Gasie as the \u201cacquired\u201d company for financial reporting purposes Accordingly, the busin\u00e9ss combination 8 treated as\nthe equivalent of the Company issuing stock for the net assets of Arrowroot, accompanied by a recapitalization The net assets of\nArrowroot is stated at historical cost, with no goodwill or other intangible assets recorded Operations prior to the business combination\nwill be those of the Company\n\nIn connection with the closing of the business combination, Arrowroot Acquisition Corp (NASDAQ ARRW) changed its name\nto \u201ciLearningEngines, Inc \u201d (\u2018NewCo\u201d) and is listed on the NASDAQ under the new ticker symbol \u201cAILE\u201d\n\nF 74\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 343 of 408\n\nOn the Closing Date, the following transactions occurred pursuant to the terms of the Merger Agreement:\n\ni) Current ILE stockholders own 109,684,738 shares of NewCo common stock on the Closing Date in exchange for former\nILE shares;\n\nii) Former Arrowroot public stockholders own 638,977 shares of NewCo common stock on the Closing Date in exchange\nfor former Arrowroot public shares;\n\niii) Current and former affiliates of Arrowroot own 8,674,617 shares of NewCo common stock on the Closing Date in\nexchange for former Arrowroot convertible and promissory notes;\n\niv) Convertible note investors (not including affiliates of Arrowroot) own 11,551,784 shares of NewCo common stock on\nthe Closing Date in exchange for former ILE convertible notes (see \u201cConvertible Note Purchase Agreement\u201d below for\nportion of convertible notes entered into on Closing Date);\n\nv) The 2020 Lender, 2021 Lender and 2023 Lender own 4,419,998 shares of NewCo common stock on the Closing Date\nbased on amendments to term loans (see \u201cAmendments to 2020, 2021 and 2023 Term Loan\u201d below for further details).\nUpon repayment of the term loans on April 18, 2024, 815,999 of the shares of NewCo common stock were cancelled.\n\nConvertible Note Purchase Agreement\n\nIn connection with the SPAC Transaction, the Company issued and converted $29.4 million of 2024 Convertible Notes. The\nCompany issued $0.7 million of convertible notes on March 21, 2024, and $28.7 million of convertible notes on the Closing Date\ncollectively, the \u201c2024 Convertible Notes\u201d). The 2024 Convertible Notes were converted to 8,089,532 common shares of NewCo on\nthe Closing Date.\n\nNegotiation of Payables to Third-Party Vendors\n\nThe Company negotiated concessions on accounts payable to other third-party vendors in several forms. The form of concessions\ninclude: (1) providing a discount to the total amount payable, (2) the option to settle certain payables in common stock, and (3) entering\ninto a deferred payment agreement for certain payables. The concessions became effective on the Closing Date.\n\nProposed 2024 Equity Incentive Plan\nThe Company proposed a new equity incentive plan for 2024 and the plan was approved on April 1, 2024.\nEast West Bank Financing\n\nOn April 17, 2024 (the \u201cLoan Closing Date\u201d), Legacy iLearningEngines entered into a Loan and Security Agreement (the\n\u201cRevolving Loan Agreement\u201d), by and among Legacy iLearningEngines as borrower (\u201cBorrower\u201d), the lenders party thereto (the\n\u201cLenders\u201d) and East West Bank, as administrative agent and collateral agent for the Lenders (\u201cAgent\u201d). The Revolving Loan\nAgreement provides for (i) a revolving credit facility in an aggregate principal amount of up to $40.0 million and (ii) an uncommitted\naccordion facility allowing the Borrower to increase the revolving commitments by an additional principal amount of $20.0 million at\nBorrower\u2019s option and upon Agent\u2019s approval (collectively, the \u201cRevolving Loans\u201d). Borrower drew $40.0 million in Revolving Loans\non the Loan Closing Date, which was used (x) to repay in full Borrower\u2019s Term Loans and (y) for general corporate purposes.\n\nThe obligations under the Revolving Loan Agreement are secured by a perfected security interest in substantially all of the\nBorrower\u2019s assets except for certain customary excluded property pursuant to the terms of the Revolving Loan Agreement. On the Loan\nClosing Date, the Company and In2 Vate, L.L.C., an Oklahoma limited liability company (the \u201cGuarantors\u201d) and wholly-owned\nsubsidiary of Legacy iLearningEngines entered into a Guaranty and Suretyship Agreement (the \u201cGuaranty\u201d) with the Agent, pursuant to\nwhich the Guarantors provided a guaranty of Borrower\u2019s obligations under the Revolving Loan Agreement and provided a security\ninterest in substantially all of the Guarantors\u2019 assets except for certain customary excluded property pursuant to the terms of the\nGuaranty.\n\nThe interest rate applicable to the Revolving Loans is Adjusted Term Secured Overnight Financing Rate (\u201cSOFR\u201d) (with an\ninterest period of 1 or 3 months at the Borrower\u2019s option) plus 3.50% per annum, subject to an Adjusted Term SOFR floor of 4.00%.\n\nThe maturity date of the Revolving Loans is April 17, 2027. The Revolving Loan Agreement contains customary representations\nand warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens,\ninvestments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. Borrower is also required\nto comply with the following financial covenants, which are more fully set forth in the Revolving Loan Agreement (i) minimum\nliquidity, (ii) minimum revenue performance to plan, (iii) minimum fixed charge coverage ratio and (iv) maximum leverage ratio.\n\fCase 8-24, Cv-02900-DKC Document oF acrahal SOAS ae Page. 344 of 408\n\nThe Revolving Loan Agreement also includes customary events o ure to pay\u201cprincipal, interest or certain\nother amounts when due, material inaccuracy of representations and warranties, violation of covenants, specified cross default and\ncross acceleration to other material indebtedness, certain bankruptcy and insolvency events, certain undischarged judgments, material\ninvalidity of guarantees or grant of security interest, material adverse effect and change of control, in certain cases subject to certain\nthresholds and grace periods If one or more events of default occurs and continues beyond any applicable cure period, the Agent may,\nwith the consent of the Lenders holding a majority of the loans and commitments under the facility, or will, at the request of such\nLenders, terminate the commitments of the Lenders to make further loans and declare all of the obligations of the Company under the\n\nRevolving Loan Agreement to be immediately due and payable\n\nF-75\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 345 of 408\n\nREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n\nTo the Shareholders and Board of Directors of\niLearningEngines, Inc\n\nOpinion on the Financial Statements\n\nWe have audited the accompanying consolidated balance sheets of iLearningEngines, Inc (the \u201cCompany\u201d) as of December 31, 2023\nand 2022, the related consolidated statements of operations, changes in shareholders\u2019 deficit and cash flows for each of the three years\nended December 31, 2023, 2022 and 2021, and the related notes (collectively referred to as the \u201cfinancial statements\u201d) In our opinion,\nthe financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and\n2022, and the results of its operations and its cash flows for the years ended December 31, 2023, 2022 and 2021, in conformity with\naccounting principles generally accepted in the United States of America\n\nBasis for Opinion\n\nThese financial statements are the responsibility of the Company\u2019s management Our responsibility is to express an opinion on the\nCompany\u2019s financial statements based on our audits We are a public accounting firm registered with the Public Company Accounting\nOversight Board (United States) (\u201cPCAOB\u201d) and are required to be independent with respect to the Company in accordance with the\nUS federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB\n\nWe conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted\nin the United States of America Those standards require that we plan and perform the audits to obtain reasonable assurance about\nwhether the financial statements are free of material misstatement, whether due to error or fraud The Company is not required to have,\nnor were we engaged to perform, an audit of its internal control over financial reporting As part of our audits, we are required to obtain\nan understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the\nCompany\u2019s internal control over financial reporting Accordingly, we express no such opinion\n\nOur audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error\nor fraud, and performing procedures that respond to those risks Such procedures included examining, on a test basis, evidence\nregarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used\nand significant estimates made by management, as well as evaluating the overall presentation of the financial statements We believe\nthat our audits provide a reasonable basis for our opinion\n\ns/ Marcum LLP\nMarcum LLP\n\nWe have served as the Company\u2019s auditor since 2021\nPhiladelphia, PA\n\nApril 22, 2024\n\nF 76\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 346 of 408\n\nILEARNINGENGINES, INC AND SUBSIDIARIES\nCONSOLIDATED BALANCE SHEETS\n(in thousands, except share amounts)\n\nAs of December 31,\n\n2023 2022\nAssets\nCurrent assets:\nCash $ 4.763 \u00a7$ 856\nRestricted cash 2,000 -\nAccounts receivable, net of provision for credit loss of $336 and $0, respectively 73,498 34,698\nContract asset 509 9.408\nPrepaid expenses 62 88\nTotal current assets 80.832 45,050\nReceivable from Technology Partner 13,602 10,217\nReceivable from related party 465 595\nOther assets 729 885\nDeferred tax assets, net 5,703 6.798\nDeferred transaction costs 3,990 -\nLiabilities and shareholders\u2019 deficit\nCurrent liabilities:\nTrade accounts payable $ 3,753 $ 787\nAccrued expenses 2,982 1,284\nCurrent portion of long-term debt, net 10,517 8.138\nContract liability 2,765 2,106\nPayroll taxes payable 3,037 2.789\nOther current liabilities 116 237\nTotal current liabilities 23,170 15,341\nConvertible notes 31,547\nWarrant liability 11,870 7,645\nLong term debt, net 10,679 9.713\nSubordinated payable to Technology Partner 49.163 47,495\nOther non-current liabilities 74 126\nTotal liabilities 126,503 80,320\nShareholders\u2019 deficit:\nCommon Shares $0.0001 par value: 200,000,000 shares authorized: 95,782,605 shares issued and\noutstanding at December 31, 2023 and December 31, 2022 10 10\nAdditional paid-in capital 36,384 36,384\nAccumulated deficit (57,576) (53.169)\nTotal shareholders\u2019 deficit (21,182) (16.775)\nTotal liabilities and shareholders\u2019 deficit $105,321 $ 63.545\n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\nF-77\n\n\fCase 8:24-cv-02900-DKC Document 90-2\n\nFiled 09/18/25\n\nILEARNINGENGINES, INC AND SUBSIDIARIES\nCONSOLIDATED STATEMENTS OF OPERATIONS\n(In thousands, except share and per share amounts)\n\nRevenue\nCost of revenue\nGross profit\nOperating expenses:\nSelling. general, and administrative expenses\nResearch and development expenses\nTotal operating expenses\nOperating income\nOther (expense) income:\nInterest expense\nChange in fair value of warrant liability\nChange in fair value of convertible notes\nOther expense\nTotal other expense, net\nNet (loss) income before income tax (expense) benefit\nIncome tax (expense) benefit\n\nNet (loss) income\n\nNet (loss) income per share \u2014 basic\n\nNet (loss) income per share \u2014 diluted\n\nWeighted average common shares outstanding _ basic\n\nWeighted average common shares outstanding \u2014 diluted\n\nPage 347 of 408\n\nYear Ended December 31,\n\n2023 2022 2021\n$ 420.582 $ 309,170 $ 217.867\n132.154 93.890 64.834\n288.428 215,280 153.033\n140.897 105.966 74,434\n128 544 97.436 70.913\n269.441 203.402 145.347\n18 987 11.878 7.686\n(6,274) (6.614) (5.047)\n(771) 248 (83)\n(14,147) x =\n(45) (21) (3)\n(21,237) (6,387) (5.133)\n(2.250) 5.491 2.553\n(2.157) 5,975 (32)\n$ (4.407) $ 11,466 $ 2,521\n$ (0.05) $ 0.08 $ 0.02\nEE) rT ee\n$ (005) $ 008 $ 0 02\n95.782.605 95.728.760 94.697.428\nz= QS == LEE\n\n95.782.605\n\n95.728.760\n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\nF-78\n\n98.042.878\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 348 of 408\n\nILEARNINGENGINES, INC AND SUBSIDIARIES\nCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS\u2019 DEFICIT\n(In thousands, except share amounts)\n\nAdditional Total\nCommon Stock Paid-In Accumulated Shareholders\u2019\nShares Amount Capital Deficit Deficit\nBalances at January 1, 2021 94,483,835 $ 9 \u00a7 34,928 \u00a7$ (67.156) $ (32,219)\nCapital contribution from related party - \u2014 574 \u2014 574\nIssuance of shares for cash 1,082,800 1 (1) \u2014 \u2014\nNet income \u2014_ \u2014 \u2014 2,521 2,521\nBalances at December 31, 2021 95,566,635 10 35 501 (64,635) (29.124)\nIssuance of shares from acquisition 215 970 883 883\nNet income \u2014 \u2014 \u2014 11,466 11,466\nBalances at December 31, 2022 95,782,605 10 36,384 (53,169) (16.775)\nNet loss (4.407) (4.407)\nBalances at December 31, 2023 95,782,605 $ 10 $ 36,384 \u00a7$ (57,576) $ (21,182)\n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\nF-79\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 349 of 408\n\nILEARNINGENGINES, INC AND SUBSIDIARIES\nCONSOLIDATED STATEMENTS OF CASH FLOWS\n\n(In thousands)\nYears ended December 31,\n2023 2022 2021\nCash flows used in operating activities:\nNet (loss) income $ (4,407) $ 11,466 \u00a7$ 2,521\nAdjustments to reconcile net income to net cash flows used in operating activities:\nDepreciation and amortization 128 77 \u2014\nShare based compensation expense \u2014 \u2014 39\nAmortization of debt discount and debt issuance costs 2,103 3,248 2,186\nProvision for deferred taxes 1,095 (6,798) \u2014\nAccretion of interest on subordinated payable to Technology Partner 1,668 1,667 1,668\nChange in fair value of warrant liability 771 (248) 83\nChange in fair value of convertible debts 14,147 \u2014 \u2014\nProvision for credit losses 336 \u2014 \u2014\nChanges in operating assets and liabilities:\nAccounts receivable (39,136) (18,740) (5,395)\nReceivable from related party 130 20 (350)\nContract asset 8,899 7,645 2,115\nAdvance to customer \u2014 362 (362)\nPrepaid expenses and other current assets 26 (31) (56)\nReceivable from Technology Partner (3.385) (9,490) (727)\nTrade accounts payable 1,906 163 536\nAccrued expenses and other current liabilities (47) 702 (718)\nContract liability 659 613 613\nSubordinated payable to Technology Partner \u2014 \u2014 (10,503)\nPayroll taxes payable 248 401 116\nDeferred transaction costs (1,307) \u2014 \u2014_\nNet cash flows used in operating activities (16,166) (8,943) (8,234)\nCash flows (used in) provided by investing activities:\nPurchase of property and equipment (24) _ (18)\nCash acquired from business acquisition 161\nNet cash flows (used in) provided by investing activities: (24) 161 (18)\nCash flows provided by financing activities\nProceeds from term loans 15,000 10,000 7,000\nRepayment of term loans (10 303) (4.766) (272)\nProceeds from convertible notes 17,400\nOther financing activities \u2014 (3) 1\nNet cash flows provided by financing activities: 22,097 5,231 6.729\nNet change in cash 5,907 (3,551) (1,523)\nCash and restricted cash, beginning of year 856 4.407 5,930\nCash and restricted cash, end of year $ 6.763 $ 856 $ 4,407\nSupplemental disclosure of cash flows information:\nCash paid during the year for interest $ 2,510 $ 3,557 $ 922\nSupplemental disclosure of non-cash investing and financing information:\nIssuance of warrants to purchase common shares $ 3.455 $ 1,027 $ 3,193\nIssuance of equity for acquisition of In2vate, LLC $ \u2014 \u00a7$ 883 \u00a7$ \u2014\nAccrued transaction costs $ 2.683 $ \u2014 \u00a7 \u2014\nCapital contribution from cancellation of convertible notes $ \u2014 $ \u2014 \u00a7 574\nReconciliation of cash and restricted cash\nCash $ 4.763 $ 856 $ 4,407\nRestricted cash $ 2.000 $ \u2014 \u00a7$ \u2014\n\n\fTotal cash andy egeead cas vi 029 00-D KC Document 90-2 Filed oof e763\" 856 0 $ 4,407\nSS\n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\nF-80\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 351 of 408\n\nILEARNINGENGINES, INC AND SUBSIDIARIES\nNOTES TO CONSOLIDATED FINANCIAL STATEMENTS\n1 Nature of the Business and Basis of Presentation\n\niLearningEngines, Inc (together with its subsidiaries, the \u201cCompany,\u201d or \u201cILE\u201d), a company headquartered in Maryland,\nUnited States of America, was incorporated in Delaware on November 17, 2010 The Company offers an Artificial Intelligence (\u201cAI\u201d)\nplatform focused on automation of learning and enabling organizations to drive mission critical outcomes at scale The AI Learning and\nEngagement platform has cloud based, mobile, offline and multimedia capabilities that can be used to deliver highly personalized\nlearning and engagement modules The Company has developed an in process learning platform that enables organizations to deliver\nlearning in the flow of day to day activities\n\nDuring the year ended December 31, 2021, the Company\u2019s management incorporated iLearningEngines FZ LLZ (\u201cILE Dubai\u201d), a\nfree zone company incorporated in the Dubai Development Authority Zone The objective of this entity is to develop ILE\u2019s customer\nbased in the Middle East ILE Dubai operates under the direction and supervision of ILE The Company has determined that it has a\nvariable interest in ILE Dubai and is the primary beneficiary, therefore the Company has consolidated ILE Dubai as a variable interest\nentity (\u201cVIE\u201d)\n\nDuring the year ended December 31, 2021, the Company acquired a majority ownership in iLearningEngines India Private\nLimited, a private limited company formed under the laws of India (\u201cILE India\u201d) The objective of this acquisition was for ILE India to\ndevelop employees and support operations in India, with hiring of talent and employees through ILE India for utilization within the\nCompany ILE India operates under the direction and supervision of ILE The Company has determined that it has a variable interest in\nILE India and is the primary beneficiary, therefore the Company has consolidated ILE India as a VIE\n\nDuring the year ended December 31, 2022, the Company registered iLearningEngines Australia as a wholly owned subsidiary The\nobjective of this subsidiary is to develop new sales and channel partners in Australia, New Zealand, and Southeast Asia\n\nDuring the year ended December 31, 2022, the Company acquired all outstanding equity of In2vate, LLC (\u201cIn2vate\u201d), a risk\nmanagement and learning platform provider\n\nProposed Business Combination\n\nOn April 27, 2023, the Company entered into an Agreement and Plan of Merger and Reorganization (the \u201cMerger Agreement\u201d)\nwith Arrowroot Acquisition Corp (NASDAQ ARRW) (\u201cArrowroot\u201d), a special purpose acquisition company (\u201cSPAC\u201d), and ARAC\nMerger Sub, Inc , a Delaware corporation and a direct, wholly owned subsidiary of Arrowroot (\u201cMerger Sub\u201d) Upon closing of the\nMerger Agreement and upon approval by the shareholders of Arrowroot, the combined company will be renamed to \u201ciLearningEngines,\nInc \u201d and will be listed on the NASDAQ under the new ticker symbol \u201cAILE \u201d Arrowroot has agreed to acquire all of the outstanding\nequity interests of the Company Completion of the transaction is subject to certain customary regulatory consents and approval by\nstockholders of Arrowroot and the Company\n\nBasis of Presentation\n\nThe accompanying consolidated financial statements have been prepared in accordance with accounting principles generally\naccepted in the United States of America (\u201cU S GAAP\u201d) and the rules and regulations of the Securities and Exchange Commission\n(\u201cSEC\u201d) The consolidated financial statements include the accounts of iLearningEngines, Inc and its subsidiaries\n\nReclassifications\n\nCertain reclassifications have been made to conform the prior period presentation\n\nRisks and Uncertainties\n\nImpact of Conflicts in Ukraine and Middle East\n\nFollowing Russia\u2019s military invasion of Ukraine in February 2022, NATO deployed additional military forces to nearby countries\nin Eastern Europe, and the United States, European Union, and other nations announced various sanctions against Russia The invasion\n\fof Ukraine an HS Bia vio tint have bound ume Qoifbe ile d oe f8/2 By the IGE P33 ORR, and other\n\ncountries have created potential global security concerns and could have a lasting impact on regional and global economies, which\ncould in turn adversely affect the Company\n\nIn addition, although our business has experienced limited disruption as a result of the Russia Ukraine conflict, continued\nescalation of this conflict as well as the Israeli Hamas conflict and Houthi movement in the Red Sea may negatively impact the global\neconomy and our future operating results and financial condition\n\nThe conflicts in Ukraine and the Middle East have not presently resulted in a material impact on the Company\u2019s financial\n\nposition, operating results, or future forecasts The Company continues to monitor these conflicts\n\nF 81\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 353 of 408\n\n2 Summary of Significant Accounting Policies\nConsolidation Policy\n\nThe accompanying consolidated financial statements include the accounts of the Company and all wholly owned subsidiaries, ILE\nIndia and ILE Dubai Consolidation of an entity is also assessed pursuant to Financial Accounting Standards Board (\u201cFASB\u201d)\nAccounting Standards Codification (\u2018ASC\u2019) 810, Consolidation, which requires a variable interest holder to consolidate a VIE if that\nparty will absorb a majority of the expected losses of the VIE, receive a majority of the residual returns of the VIE, or both, and\nassesses whether an enterprise is the primary beneficiary of a VIE The Company has determined that it has a variable interest in ILE\nIndia and ILE Dubai, and is considered the primary beneficiary for each entity, therefore the Company has fully consolidated ILE India\nand ILE Dubai under ASC 810 All intercompany transactions and accounts have been eliminated\n\nBusiness Combinations\n\nIn accordance with ASC 805, Business Combinations, the Company assesses whether a business acquisition meets the definition of\nan asset acquisition or a business combination Business combinations are accounted for using the acquisition method Under the\nacquisition method, the acquiring entity in a business combination recognizes 100% of the assets acquired and liabilities assumed, at\ntheir acquisition date fair values The Company utilizes valuation techniques appropriate for the assets and liabilities being measured in\ndetermining these fair values The excess of the purchase price over the fair value of the net assets of the acquired business is goodwill\n\nCash\n\nCash consists of funds held in checking accounts maintained at financial institutions The Company classifies all highly liquid\ninstruments with an original maturity of three months or less as cash equivalents There are no cash equivalents as of December 31,\n2023 and 2022\n\nRestricted Cash\n\nRestricted cash consists of cash earmarked for a specific purpose and is not available for immediate and general use by the\nCompany The Company\u2019s restricted cash reserve is prohibited from being spent in the ordinary course of business through a\ncontractual arrangement with the Company\u2019s lenders As of December 31, 2023, the Company had $2 0 million in restricted cash\n\nConcentration of Credit Risk and Major Sales Channels\n\nFinancial investments that potentially subject the Company to credit risk consist of cash The Company places its cash with certain\nUS financial institutions At various times, the Company\u2019s cash deposits with any one financial institution may exceed the amount\ninsured by the Federal Deposit Insurance Corporation (the \u201cFDIC\u201d) The Company has not experienced any losses of such amounts and\nmanagement believes it is not exposed to any significant credit risk on its cash\n\nDuring the year ended December 31, 2023, there were four customers, representing 19 3%, 16 0%, 11 9%, and 11 7%,\nrespectively, who individually accounted for 10% or more of the Company\u2019s revenue During the year ended December 31, 2022, there\nwere five customers, representing 17 4%, 17 0%, 14 9%, 14 3% and 10 3%, respectively, who individually accounted for 10% or more\nof the Company\u2019s revenue During the year ended December 31, 2021, there were four customers, representing 22 8%, 20 2%, 13 1%\nand 11 0%, respectively, who individually accounted for 10% or more of the Company\u2019s revenue\n\nUse of Estimates\n\nThe preparation of consolidated financial statements in conformity with U S GAAP requires management to make estimates and\nassumptions that affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the\ndate of the consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period\nEstimates are based on several factors including the facts and circumstances available at the time the estimates are made, historical\nexperience, risk of loss, general economic conditions and trends and the assessment of the probable future outcome Subjective and\nsignificant estimates include, but are not limited to, allowance for credit losses, and valuation of warrants Actual results could differ\nfrom those estimates Estimates and assumptions are reviewed periodically and the effects of changes, if any, are reflected in the\nconsolidated statements of operations in the period that they are determined\n\nSegment Information\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 354 of 408\n\nThe Company determined that it has a single operating segment after considering the Company\u2019s organizational structure and the\ninformation regularly reviewed and evaluated by the Company\u2019s chief operating decision maker (\u201cCODM\u201d) in deciding how to allocate\nresources and assess performance The Company has determined that its CODM is its Chief Executive Officer The CODM reviews the\nCompany\u2019s financial information on a basis for purposes of evaluating financial performance and allocating resources On the basis of\nthese factors, the Company determined that it operates and manages its business as one operating segment, that develops, markets, and\nprovides consumer learning automation solutions; and accordingly has one reportable segment for financial reporting purposes\n\nF 82\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 355 of 408\n\nForeign Currency Translation and Transactions\n\nThe Company\u2019s functional currency is the U \u00a7 dollar Assets and liabilities of foreign subsidiaries that operate primarily in a\ncurrency other than the U S dollar are remeasured and translated into U S dollars using the current exchange rate in effect at the\nbalance sheet date, except for non monetary assets and liabilities that are translated at historical exchange rates Transactions\ndenominated in currencies other than the Company\u2019s functional currency are measured at the functional currency\u2019s exchange rate in\neffect at the time of transaction At the end of each reporting period, monetary assets and liabilities are remeasured to the functional\ncurrency using exchange rates in effect at the balance sheet date Foreign currency translation adjustments are recorded as a component\nof accumulated other comprehensive income and are not adjusted for income taxes when they relate to permanent investments in\nforeign subsidiaries Gains and losses from foreign currency transactions are included in other income in the consolidated statements of\noperations Foreign currency translation adjustments were immaterial for the years ended December 31, 2023, 2022, and 2021\n\nAccounts Receivable and Provision for Credit Losses\n\nAccounts receivable are uncollateralized, noninterest bearing customer obligations due under normal trade terms and generally\nrequiring payment within 30 to 90 days of the invoice date Accounts receivable are stated at the amount billed to the customer, net of\nprovision for credit losses in accordance with ASC 326, Financial Instruments Credit Losses Payments of accounts recetvable are\nallocated to the specific invoices identified on the customer\u2019s remittance advice, or, if unspecified, are applied to the earliest unpaid\ninvoice\n\nThe estimation of the provision for credit loss is based on an analysis of historical loss experience, current receivables aging, any\nknown or expected changes to the customers\u2019 ability to fulfill their payment obligations, and management\u2019s assessment of current\nconditions and estimated future conditions The general CECL reserve is measured on a collective (pool) basis when similar risk\ncharacteristics exist for multiple financial instruments The Company notes its account receivables do not similar risks, and the\nCompany measures the CECL reserve on an individual customer account basis\n\nAt the end of each reporting period, the provision for credit losses is reviewed relative to management\u2019s expected credit loss model\nand is adjusted as necessary The expense associated with the provision for expected credit losses is recognized in selling, general, and\nadministrative expenses in the consolidated statements of operations Accounts receivable write offs are recorded when management\nbelieves it is probable a receivable will not be recovered The provision for credit losses as of December 31, 2023 was $0 3 million\n\nCosts to Obtain and Fulfill Contracts\n\nSales commissions tied to new customer contracts earned by the Company\u2019s Technology Partner, discussed in Note 5, are\nconsidered incremental and recoverable costs of obtaining a contract with a customer Sales commissions for renewal of a contract are\nconsidered commensurate with the commissions paid for the acquisition of the initial contract and are earned only as the revenue to\nwhich they relate is recognized The Company has elected the practical expedient of expensing its costs to obtain contracts as incurred\nbecause the amortization period over which they would otherwise be amortized is one year or less\n\nThe Company does not have any capitalizable costs to fulfill contracts Internal and external labor costs related to providing\nimplementation services are expensed as incurred\n\nDebt Issuance Costs and Deferred Financing Costs\n\nThe Company borrows from various lenders to finance its growth and operations Costs incurred in connection with debt\nfinancings, such as origination fees, original issue discount, investment banking fees and legal fees, are classified as debt issuance costs\nand are presented as a deduction from the related borrowing Debt issuance costs are amortized over the expected life of the related\nfinancing agreements as a component of interest expense under the effective interest method Debt issuance costs are expensed\nimmediately upon early extinguishment of the debt In a debt modification, the initial issuance costs and any additional fees incurred as\na result of the modification are amortized over the term of the modified agreement\n\nThe Company accounts for certain debt issuance costs relating to the undrawn portion of term loan commitments as assets, which\nare included with deferred financing costs in the consolidated balance sheets and amortized into interest expense on a straight line basis\nover the loan commitment period Once the commitment is drawn, the pro rata portion of the unamortized asset is reclassified as a\ndeduction from the related borrowing\n\nWarrants Issued in Connection with Indebtedness\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 356 of 408\n\nWarrants issued in connection with the issuance of indebtedness that are accounted for as liabilities are initially recorded at fair\nvalue Proceeds are first allocated to the warrants in an amount equal to the fair value of the warrants The residual proceeds remaining\nafter allocation to the warrant are allocated to debt as a debt discount The debt discount is accreted over the term of the indebtedness as\ninterest expense, using the effective interest method The warrants are subject to remeasurement at each balance sheet date and any\n\nchange in fair value is recognized as a component of change in fair value of warrant liability in the consolidated statements of\noperations\n\nF 83\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 357 of 408\n\nTechnology Partner\n\nThe Company has a long term relationship with a Technology Partner The Technology Partner provides research and development\n(\u201cR&D\u201d), sales and marketing, and implementation and support services to the Company In addition, the Technology Partner also\npurchases, integrates and resells the Company\u2019s platform to end customers\n\nWhen ILE contracts directly with the end customer, the Technology Partner provides front end sales and marketing support to\nidentify the end customer, but ILE contracts directly with the end customer to provide Implementation Services and the ILE platform\nSeparately, the Company contracts with the Technology Partner for the Technology Partner to provide implementation support services\non behalf of the Company to the end customer The Company is primarily responsible for fulfilling the promise to provide the specified\ngoods and services over the contract term to the end customer and has discretion in establishing the price Therefore, the Company\ndetermined the end customer is its customer, and the Technology Partner is acting as the Company\u2019s agent\n\nWhen the Technology Partner purchases and integrates the ILE platform into the Technology Partner\u2019s own software solution\nprovided to the Technology Partner\u2019s end customer, the Technology Partner identifies and contracts with the end customer to provide\nthe integrated software solution, implementation services, and support services In these arrangements, the Technology Partner controls\nthe ILE platform, and the Company considers the Technology Partner to be its end customer for this contractual relationship\n\nBecause the Technology Partner is a customer in some arrangements and a vendor in other arrangements, the Company evaluated\nthe fees it pays the Technology Partner for the various services provided to the Company The Company determined the services it\nreceived from the Technology Partner were distinct and the consideration paid to the Technology Partner was equivalent to an arms\nlength transaction As a result, no costs incurred by the Company related to services provided by the Technology Partner have been\nnetted against revenues earned from the Technology Partner\n\nThe sales commissions paid to the Technology Partner are recognized in accordance with ASC 340 40 The implementation fees\nare presented within cost of revenue, while any fees paid for R&D services are presented in research and development expense and\nmarketing fees are presented in selling, general and administrative expense on the consolidated statements of operations\n\nIf at any time the services fees exceed collections resulting in a net payable to the Technology Partner, subsequent collections will\nfirst be applied to the net payable including any accrued interest on the balance The details of the Master Arrangement are further\ndescribed Note 5\n\nGoodwill and Indefinite Lived Intangible Assets\n\nThe Company evaluates goodwill and indefinite lived intangible assets for impairment annually or more frequently when an event\noccurs, or circumstances change that indicate the carrying value may not be recoverable The Company may elect to utilize a\nqualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit or indefinite lived intangible\nasset is less than its carrying value and if so, the Company performs a quantitative test The Company compares the carrying value of\neach reporting unit and indefinite lived intangible asset to its estimated fair value and if the fair value is determined to be less than the\ncarrying value, the Company recognizes an impairment loss for the difference Goodwill and indefinite lived intangible assets are\npresented under Other Assets in the consolidated balance sheets\n\nLong Lived Assets and Finite Lived Intangible Assets\n\nLong lived assets and finite lived intangible assets are reviewed for impairment whenever events or changes in circumstances\nindicate that the carrying amount of the assets might not be recoverable Conditions that would necessitate an impairment assessment\ninclude a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is\nused, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be\nrecoverable\n\nFor long lived assets used in operations, including lease assets, impairment losses are only recorded if the asset\u2019s carrying amount\nis not recoverable through its undiscounted, probability weighted future cash flows We measure the impairment loss based on the\ndifference between the carrying amount and estimated fair value Long lived assets are considered held for sale when certain criteria\nare met, including when management has committed to a plan to sell the asset, the asset is available for sale in its immediate condition,\nand the sale is probable within one year of the reporting date\n\fCase 8:24-cv-02900-DK Document 90-2 Filed g/18l2s Page 358 of 408\n\nFinite lived intangible assets are amortized using the straight line method over their estimated period of benefit, ranging\nfrom five to twelve years Long lived assets and finite lived intangible assets are presented under Other Asset in the consolidated\nbalance sheets\n\nF 84\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 359 of 408\n\nFair Value Measurements\n\nASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value, and\nexpands disclosures about fair value measurements Fair value is to be determined based on the exchange price that would be received\nfor an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an\norderly transaction between market participants In determining fair value, the Company uses various valuation approaches A fair\nvalue hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes\nthe use of unobservable inputs by requiring that the most observable inputs be used when available Observable inputs are those that\nmarket participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company\n\nUnobservable inputs reflect the Company\u2019s assumption about the inputs that market participants would use in pricing the asset or\nliability developed based on the best information available in the circumstances The fair value hierarchy is categorized into three\nlevels, based on the inputs, as follows\n\ne Levell Valuations based on quoted prices for identical instruments in active markets Since valuations are based on quoted\nprices that are readily and regularly available in an active market, valuation of these instruments does not entail a significant\ndegree of judgment\n\ne Level2 Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for either\nsimilar instruments in active markets, identical or similar instruments in markets that are not active, or model derived\nvaluations whose inputs or significant value drivers are observable or can be corroborated by observable market data\n\n@ Level3 Valuations based on inputs that are unobservable These valuations require significant judgment\n\nThe availability of valuation techniques and observable inputs can vary and is affected by a wide variety of factors, including the\ntype of asset or liability, whether the asset or liability is new and not yet established in the marketplace, and other characteristics\nparticular to the transaction To the extent that valuation is based on models or inputs that are less observable or unobservable in the\nmarket, the determination of fair value requires more judgment Those estimated values do not necessarily represent the amounts that\nmay be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined Because of the inherent\nuncertainty of valuations, those estimated values may be materially higher or lower than the values that would have been used had a\nready market for the assets or liabilities existed\n\nThe level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input\nthat is significant to the fair value measurement in its entirety\n\nFair Value Option (\u201cFVO\u201d) Election\n\nThe Company entered into a Convertible Note Purchase Agreement on April 27, 2023, referred to herein as the \u201cConvertible\nNotes\u201d, which are accounted under the \u201cfair value option election\u201d as discussed below\n\nUnder Financial Accounting Standards Board (\u201cFASB\u201d) Accounting Standards Codification (\u201cASC\u201d) Topic 815, Derivative and\nHedging, (\u201cASC 815\u201d), a financial instrument containing embedded features and /or options may be required to be bifurcated from the\nfinancial instrument host and recognized as separate derivative asset or liability, with the bifurcated derivative asset or liability initially\nmeasured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each\nreporting period balance sheet date\n\nAlternatively, FASB ASC Topic 825, Financial Instruments, (\u201cASC 825\u201d) provides for the \u201cfair value option\u201d (\u201cFVO\u201d) election In\nthis regard, ASC 825 10 15 4 provides for the FVO election (to the extent not otherwise prohibited by ASC 825 10 15 5) to be\nafforded to financial instruments, wherein the financial instrument is initially measured at estimated fair value as of the transaction\nissue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date, with changes in the\nestimated fair value recognized as other income or expense in the statement of operations The estimated fair value adjustment of the\nConvertible Notes is presented in a single line item within change in fair value of convertible notes in the accompanying consolidated\nstatement of operations (as provided for by ASC 825 10 50 30(b)) Further, as required by ASC 825 10 45 5, to the extent a portion of\nthe fair value adjustment is attributed to a change in the instrument specific credit risk, such portion would be recognized as a\ncomponent of other comprehensive income (\u201cOCT\u201d) (for which there have been no such adjustments with respect to the Convertible\nNotes ) Under the fair value option election described the Company presents the entire change in fair value of the Convertible Notes,\n\fCase 8:24-cv-02900-DKC Document 90-2 . Filed 09/18)? ted Frage 360. of 408\n\nincluding the component related to interest expense, within in a single line item on the conso ments of operations which is\ncaptioned \u201cChange in fair value of convertible notes\u201d\n\nThe fair value of the Convertible Notes as of December 31, 2023 was $31 5 million and is presented within \u201cConvertible notes\u201d on\nthe consolidated balance sheets Refer to Note 7 for additional detail regarding the Convertible Notes\n\nF 85\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 361 of 408\n\nDeferred Transaction Costs\n\nThe Company incurred direct and incremental transaction costs for the year ended December 31, 2023 related to the contemplated\nmerger with Arrowroot Transaction costs of $4 0 million were deferred and capitalized to the deferred transaction costs line item on\nthe consolidated balance sheet as of December 31, 2023\n\nAfter consummation of the merger, these costs will be recorded to shareholders\u2019 deficit as a reduction of additional paid in capital\ngenerated as a result of the merger If the merger with Arrowroot is subsequently aborted, the Company will review the deferred\ntransaction costs for impairment As of December 31, 2023, $1 1 million and $1 6 million of unpaid transaction costs are included\nwithin the trade accounts payable and accrued expenses line items on the consolidated balance sheet, respectively\n\nShare Based Compensation\nThe Company records compensation costs related to share based awards in accordance with ASC Topic 718,\nCompensation Stock Compensation (\u201cASC 718\u201d), whereby the Company measures compensation cost at the grant date based on the\nestimated fair value of the award Compensation cost is recognized on a straight line basis over the requisite service period of the\naward, which is generally the vesting period Forfeitures are accounted for when they occur\nRevenue Recognition\nThe Company recognizes revenue in accordance with ASC Topic 606\nRevenues are recognized when control of services is transferred to the Company\u2019s customers, in an amount that reflects the\nconsideration ILE expects to be entitled to in exchange for those services over the term of the agreement, generally when made\navailable to the customers Revenues are recognized net of sales credits and allowances Revenue is recognized net of any taxes\ncollected from customers, which are subsequently remitted to governmental authorities\nRevenue is recognized based on the following five step model in accordance with ASC 606\ne Identification of the contract with a customer;\ne Identification of the performance obligations in the contract;\ne Determination of the transaction price;\ne Allocation of the transaction price to the performance obligations in the contract; and\ne Recognition of revenue when, or as, the Company satisfies a performance obligation\nA performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of\naccounting Determining whether products and services are considered distinct performance obligations that should be accounted for\nseparately versus together may require significant judgment The Company\u2019s contracts with customers include two performance\nobligations, (1) implementation, and (41) combined software license and maintenance The Company records individual performance\nobligations separately by allocating the contract\u2019s total transaction price to each performance obligation of each distinct good or service\nin the contract\nImplementation services\nAll customers require implementation services prior to being able to use the ILE platform To date ILE has outsourced these\nservices to its Technology Partner who has been trained to provide the implementation services Refer to Note 5 for further discussion\nof the Technology Partner Implementation services generally take 1 3 months and consist of the phases the Company follows as part\n\nof the customer onboarding process\n\nThe Company is primarily responsible for fulfilling the promise to provide implementation services to a customer and also has\ndiscretion in establishing pricing for these services Accordingly, the Company is identified as the principal in the arrangement\n\fase 8:24-cv-02 00-DKC Document 90-2. Filed 09/18/25 Page. 36 of 408\n\nThe imple nation services do not involve significant customization or creating new software onality Instead, the services\nmainly focus on configuration and mapping customer data with the required attributes within the software platform to ensure the\nplatform\u2019s built in functionalities can be utilized by the customer Revenues from implementations are recognized over time as such\nservices are performed using an input method of efforts expended, compared to total estimated efforts to complete the project\n\nF 86\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 363 of 408\n\nCombined software license and maintenance\n\nThe combined software license and maintenance performance obligation relates to the license to the ILE AI platform and related\nmaintenance services (including critical support functions and updates) provided over the license term The software licenses to the AI\nplatform is not considered distinct from the maintenance services, because the customer cannot derive the intended value from the\nsoftware without ongoing critical support services and updates that are provided by the maintenance services ILE recognizes revenue\nfrom the combined software license and maintenance performance obligation ratably over the contract term beginning on the date that\nthe software license is delivered to the customer and related maintenance services are made available, as the customer simultaneously\nreceives and consumes the benefits of the combined software license and maintenance performance obligation Contracts with\ncustomers typically include a fixed amount of consideration and are generally cancelable with 90 days to 24 months\u2019 notice ILE\ntypically invoices customers quarterly in advance for ILE\u2019s software license and maintenance services upon execution of the initial\ncontract or subsequent renewal\n\nA contract\u2019s transaction price, which is generally a fixed fee in the Company\u2019s arrangements, is allocated to each performance\nobligation and recognized as revenue as the respective performance obligation is satisfied The Company\u2019s process for determining SSP\ninvolves significant management judgment since the Company\u2019s performance obligations are not sold separately In determining the\nSSP of implementation services, the Company estimates the cost of providing the services and adds a reasonable margin The\ndetermination of the added margin considers what a market participant would be willing to pay and is adjusted for differences in\nproducts, geographies, customers, and other factors The Company\u2019s cost estimates are primarily based on historical cost data for\nsimilar implementation projects The SSP of the combined software license and maintenance performance obligation is based on the\nresidual approach as the Company sells the ILE AI platform and related maintenance services to different customers at a highly\nvariable range of amounts\n\nDisaggregation of Revenue\n\nThe Company disaggregates revenue into categories that depict the nature. amount, and timing of revenue and cash flows based on\ndiffering economic risk profiles for each category In concluding such disaggregation, the Company evaluated the nature of the\nproducts and services, consumer markets, sales terms, and sales channels which have similar characteristics such that the level of\ndisaggregation provides an understanding of the Company\u2019s business activities and historical performance The level of disaggregation\nis evaluated annually and as appropriate for changes to the Company or its business, either from internal growth, acquisitions,\ndivestitures, or otherwise Revenue from implementation services and combined software license and maintenance is recognized over\nthe respective performance obligation period As such, there is no disaggregation of revenue by point in time as all of the Company\u2019s\nrevenue is recognized over time\n\nWith respect to the Company\u2019s disaggregation of revenue by customer geography, geography is primarily determined based on the\nlocation of the customer identified in the contract As described in the Technology Partner policy note above, the Company enters\ncontracts with the Technology Partner though which the Technology Partner purchases and integrates the ILE platform into the\nTechnology Partner\u2019s own software solution provided to one of the Technology Partner\u2019s customers In this type of contractual\narrangement, the Company identifies the Technology Partner as its customer In contractual arrangements in which the Technology\nPartner is identified as the customer, the Technology Partner\u2019s end customer may or may not be known by the Company In cases in\nwhich the Technology Partner\u2019s customer is known to the Company, the geography is determined based on the location of the\nTechnology Partner\u2019s customer and conversely, in cases in which the Technology Partner\u2019s customer is not known, the customer\ngeography is determined based on the geography of the Technology Partner The following table presents this disaggregation of\nrevenue by customer geography\n\nYears Ended December 31,\n\n2023 2022 2021\n(in thousands)\nIndia $ 162.854 $ 138,048 \u00a7$ 126.371\nNorth America 194.886 116,112 47,953\nOther) 62.842 55.010 43,543\nTotal Revenues $ 420,582 $ 309,170 $ 217,867\n\n1) Other includes customers in Middle East and Europe.\n\fCase 8:24-cv-02900-DKC Document.90-2 Filed 09/18/25 Page 364 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 365 of 408\n\nThe following table presents to disaggregation of revenue by type of revenue\n\nYears Ended December 31,\n\n2023 2022 2021\n(in thousands)\nRevenue related to implementation services $ 16.491 $ 15.872 $ 5.495\nCombined software license and maintenance revenues 404.091 293.298 212,372\nTotal Revenues $ 420,582 $ 309.170 $ 217,867\n\nContract asset\n\nContract asset balances represent amounts for which the Company has recognized revenue, pursuant to its revenue recognition\npolicy, for software licenses already delivered, implementation services, and maintenance services already performed but invoiced in\narrears. As of December 31, 2023 and 2022 contract assets were $0.5 million and $9.4 million, respectively.\n\nContract liability\n\nContract liability represents either customer advance payments or billings for which the revenue recognition criteria has not yet\nbeen met. Contract liability is primarily unearned revenue related to combined software and maintenance services. During the year\nended December 31, 2023 and 2022, $2.8 million and $2.1 million of combined software and maintenance services revenue were\nrecognized, respectively, that was included in the contract liability balances at the beginning of the period.\n\nRemaining performance obligations\n\nAs of December 31, 2023, the total remaining performance obligations under the Company\u2019s contracts with customers was\n$409.6 million, and the Company expects to recognize approximately 90% of the remaining performance obligations as revenue within\nthe next twelve months. As of December 31, 2022, the total remaining performance obligations under the Company\u2019s contracts with\ncustomers was $235.1 million, and the Company recognized revenues on approximately 70% of these remaining performance\nobligations over the year ended December 31, 2023.\n\nCost of Revenue\nCost of revenue is comprised of expenses related to customer support and fees paid to third parties.\nIncome Taxes\n\nThe Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets\nand liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.\nUnder this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the consolidated\nfinancial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are\nexpected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements\nof operations in the period of the enactment date.\n\nThe Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to\nbe realized In making such a determination, the Company considers all available positive and negative evidence, including future\nreversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent\noperations During 2022, the Company achieved sufficient profits to release the entirety of its valuation allowance established in a prior\nperiod Accordingly, as of December 31, 2023, the Company no longer maintains a valuation allowance outside of the Australia\njurisdiction\n\nThe Company records uncertain tax positions in accordance with ASC Topic 740, Income Taxes, (\u201cASC 740\u201d) on the basis of a\ntwo-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the\nbasis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the\nCompany will recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement\nwith the related tax authority.\n\nThe Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the\naccompanying consolidated statements of operations As of December 31, 2023 and 2022. no accrued interest or penalties are included\non the related tax liability line in the consolidated balance sheets\n\nResearch and Development Expenses\n\fase 8:24-cv-02900-DKC . Docum ML 90- 2 Filed 09/18/29 Pa 350 OL age\n\nSoftware development costs are expensed as incurred until the point the Company establishes technologic\nTechnological feasibility is established upon the completion of a working model Costs incurred by the Company between\nestablishment of technological feasibility and the point at which the product is ready for general release are capitalized, subject to their\nrecoverability, and amortized over the economic life of the related products Because the Company believes its current process for\ndeveloping its software products essentially results in the completion of a working product concurrent with the establishment of\ntechnological feasibility, no software development costs have been capitalized to date There were no software development costs\nrequired to be capitalized under ASC Topic 985 20, Costs of Software to be Sold Leased or Marketed The Company\u2019s R&D costs are\nprimarily incurred with the Company\u2019s Technology Partner discussed in Note 5\n\nF 88\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 367 of 408\n\nEmerging Growth Company Status\n\nThe Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the \u201cJOBS Act\u201d)\nUnder the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the\nenactment of the JOBS Act until such time as those standards apply to private companies The Company has elected to use this\nextended transition period for complying with new or revised accounting standards that have different effective dates for public and\nprivate companies until the earlier of the date that it () is no longer an emerging growth company or (ii) affirmatively and irrevocably\nopts out of the extended transition period provided in the JOBS Act As a result, these consolidated financial statements may not be\ncomparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates\n\nRecently Adopted Accounting Pronouncements\n\nIn August 2020, the FASB issued ASU No 2020 06, Debt Debt with Conversion and Other Options (Subtopic 470 20) and\nDerivatives and Hedging Contracts in Entity s Own Equity (Subtopic 815 40) (ASU No 2020 06\u201d) ASU No 2020 06 was issued to\naddress issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain\nfinancial instruments with characteristics of liabilities and equity For convertible instruments, the FASB decided to reduce the number\nof accounting models for convertible debt instruments and convertible preferred stock In addition to eliminating certain accounting\nmodels, the FASB also decided to enhance information transparency by making targeted improvements to the disclosures for\nconvertible instruments and earnings per share guidance This update is effective for public business entities for fiscal years beginning\nafter December 15, 2021, and interim periods within those fiscal year For all other entities, this update is effective for fiscal years\nbeginning after December 15, 2023, and interim periods within those fiscal years Early adoption is permitted, but no earlier than fiscal\nyears beginning after December 31, 2020\n\nOn January 1, 2023, the Company adopted this standard and it did not have a material impact on the Company\u2019s consolidated\nresults of operations, financial position, cash flows, or related disclosures On January 1, 2023, the Company adopted FASB ASU No\n2016 13, Financial Instruments Credit Losses (Topic 326) (\u201cASU No 2016 13\u201d) ASU No 2016 13 was issued to bring consistency\nin the accounting treatment of different types of financial instruments, require consideration of a broader range of variables when\nforming loss estimates, and require immediate recognition of management\u2019s estimates of current expected credit losses (*CECL\u201d) See\n\u201cAccounts Receivable and Provision for Credit Losses\u201d above for further information\n\nRecent Accounting Pronouncements Not Yet Adopted\n\nIn November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No 2023 07,\nSegment Reporting (Topic 280) Improvements to Reportable Segment Disclosures, which requires a public entity to disclose\nsignificant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures\nabout a reportable segment\u2019s profit or loss and assets that are currently required annually Additionally, it requires a public entity to\ndisclose the title and position of the Chief Operating Decision Maker (CODM) The ASU does not change how a public entity identifies\nits operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments The new standard\nis effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15,\n2024, with early adoption permitted A public entity should apply the amendments in this ASU retrospectively to all prior periods\npresented in the financial statements We expect this ASU to only impact our disclosures with no impacts to our results of operations,\ncash flows and financial condition\n\nIn December 2023, the FASB issued ASU No 2023 09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures,\nwhich focuses on the rate reconciliation and income taxes paid ASU No 2023 09 requires a public business entity (PBE) to disclose,\non an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with\ncertain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold In\naddition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign\nand by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds recetved For PBEs, the new standard is\neffective for annual periods beginning after December 15, 2024, with early adoption permitted An entity may apply the amendments in\nthis ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the\npre ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all\nperiod presented We expect this ASU to only impact our disclosures with no impacts to our results of operations, financial position, or\ncash flows\n\nF 89\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 368 of 408\n\n3 Acquisitions\n\nOn April 4, 2022, the Company completed the acquisition of 100% interest of In2vate, LLC (\u201cIn2vate\u201d) In2vate is a risk\nmanagement and learning platform provider in Tulsa, Oklahoma In2vate serves more than two million users delivering high impact\nrisk management programs and services to enterprises, educational institutions, health systems and law enforcement organizations\nTotal consideration of $0 9 million was exchanged, consisting of 215 970 shares of the Company\u2019s common stock and contingent\nconsideration of 34,030 shares of the Company\u2019s common stock, both at a price per share of $3 53, the contingent consideration will\nonly vest upon the occurrence of any of the following events an initial public offering of the Company\u2019s common stock; a merger with\na special purpose acquisition company; a merger or consolidation of the Company that is also a change of control: the sale, lease,\ntransfer, exclusive license, or other disposition of substantially all of the assets of the Company; or the sale or disposition of one or\nmore subsidiaries of the Company if substantially all of the assets of the Company are held by those subsidiaries This contingent\nconsideration meets the requirements for permanent equity classification and was recorded to Additional Paid In Capital within the\nconsolidated balance sheets Transaction costs related to the acquisition totaling $0 05 million are included in selling. general and\nadministrative expenses in the consolidated statements of operations and consist primarily of legal and other management due diligence\nfees, for the year ended December 31, 2022\n\nThe following table summarizes the consideration transferred and the purchase price allocation of the fair values of the assets\nacquired and liabilities assumed at the acquisition date\n\nAmount\n(in\nthousands)\n\nTotal consideration exchanged, less cash and cash equivalents of $161 $722\n\nee\n\nAccounts receivables, net $ 60\n\nProperty and equipment, net 454\n\nGoodwill and intangible assets 319\n\nOther assets 1\n\nTotal assets acquired 834\nAccounts payable (84)\nOther current liabilities (28)\nTotal liabilities assumed (112)\n\nTotal net assets assumed $ 722\n\nGoodwill represents the excess of the consideration paid over the fair values of the acquired net assets and is included in Other\nAssets in the consolidated balance sheets. The allocated value of goodwill primarily relates to the value of the existing workforce and\nanticipated synergies by combining existing Company functions. The results of operations of the acquired company are included in the\nCompany\u2019s consolidated statements of income from the date of acquisition. The goodwill is amortizable for tax purposes over 15 years.\n\n4. Accrued Expenses\n\nThe following table presents the components of accrued expenses as of December 31, 2023, and 2022:\n\nAs of\nDecember 31, December 31,\n2023 2022\n(In thousands)\nAccrued income taxes $ 1,742 $ 834\nOther accrued expenses) 1,240 450\nTotal $ 2,982 $ 1,284\n\n1) Other Accrued Expense includes accrued professional service fees, accrued interest, accrued compensation and benefits, and other\ncurrent liabilities.\n\n5. Technology Partner\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 369 of 408\n\nIn 2019, the Company entered a Master Agreement (\u201cMA\u201d) with the Technology Partner, which allows for quarterly netting of\namounts collected by the Technology Partner from end users, against the cost of the Technology Partner\u2019s services rendered and\nbillable to the Company The MA has an initial term of five years with an automatic renewal for five additional years\n\nOn January 1, 2021, the Company amended the interest rate with the Technology Partner which changed from a 12 month LIBOR\nrate plus 2 0% to a fixed rate of 3 99% through December 31, 2023 Subsequent to December 31, 2023, the Company amended the\ninterest rate with the Technology Partner to a fixed rate of 5 99% through December 31, 2024 The Company is not required to repay\nany outstanding balance or accrued interest until the tenth anniversary of the effective date of termination of the MA As of the date of\nthese consolidated financial statements, the MA has not been terminated\n\nF 90\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 370 of 408\n\nThe following table summarizes the expenses charged to company by the Technology Partner that are presented within cost of\nrevenue, selling. general and administrative expenses, and research and development expenses on the consolidated statements of\noperations for the years ended December 31, 2023, 2022 and 2021\n\nDecember 31,\n\n2023 2022 2021\n(In thousands)\nCost of revenue $ 132,111 $ 93,753 $ 64,834\nSelling. general and administrative expense 127 538 96,972 68,931\nResearch and development expense 128,539 97,396 70,836\n\n$ 388.188 $ 288.121 $ 204,601\n\nSubordinated Payable to the Technology Partner\nOn December 30, 2020, in conjunction with the 2020 Term Loans issuance described in Note 6 Debt, the Company and the\nTechnology Partner entered into a subordination agreement whereby the payable to the Technology Partner became subordinated to the\n\n2020 and 2021 Term Loans\n\nDecember 31,\n\n2023 2022\n(In thousands)\nBeginning balance $ 47,495 \u00a7 45.828\nAccrued interest 1,668 1,667\nSubordinated payable to Technology Partner $ 49.163 $ 47,495\n\nInterest expense related to the subordinated payable to the Technology Partner was $1 7 million for each of the years ended\nDecember 31, 2023, 2022, and 2021\n\nNet Receivable from Technology Partner\n\nSubsequent to the execution of the subordination agreement, the Company and the Technology Partner resumed quarterly netting\nof collections and the cost of services provided with the same interest rate terms defined above\n\nDecember 31,\n\n2023 2022\n(In thousands)\nOpening balance of receivable from Technology Partner $ 10,217 $ 727\nCollections by Technology Partner 389,361 297,710\nCost of services provided by Technology Partner (388,189) (288.121)\nNet cash transfers between Company and Technology Partner 2,213 (99)\nClosing balance of receivable from Technology Partner $ 13,602 \u00a7$ 10,217\n\n6 Debt\nThe following table presents the components of the Company\u2019s debt as of December 31, 2023 and 2022\n\nDecember 31,\n\n2023 2022\n(In thousands)\n2020 Term Loans $ 2,697 $ 6,708\n2021 Term Loans 12,299 13,377\n2023 Term Loans 10,000\nOther Loans - 160\n24,996 20.245\n\nLess: Discount on debt 3.800 2.394\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 371 of 408 \u2014___\n\nLess: Current portion 10,517 8,138\nLong-term portion of debt $ 10,679 \u00a7$ 9.713\n\nF-91\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 372 of 408\n\nContractual interest expense related to long term debt was $2 5 million, $2 0 million, and $1 Imillion for the years ended\nDecember 31, 2023, 2022, and 2021, respectively The amortization of debt issuance costs was $2 1 million, $3 2 million and $2 2\nmillion for the years ended December 31, 2023, 2022, and 2021, respectively\n\nAggregate annual maturities of long term debt obligations for each of the next five years are as follows for the years ending\nDecember 31\n\nLong Term\nYear ended December 31, Debt\n(in\nthousands)\n2024 $ 12,745\n2025 8.356\n2026 3.895\nTotal $ 24,996\n\nTerm Loans and Warrants Issued\n\nOn December 30, 2020, the Company entered into a Loan and Security Agreement (the \u201c2020 Term Loan\u201d) with Venture Lending\n& Leasing IX, Inc (the \u201c2020 Lender\u2019), pursuant to which the 2020 Lender made available to the Company a term loan facility in an\naggregate principal amount of $10 0 million\n\nIn connection with the 2020 Term Loan, the Company issued to Venture Lending & Leasing IX, LLC, an affiliate of the 2020\nLender, warrants to purchase 433 597 shares of the Company (the \u201c2020 Warrants\u201d) The 2020 Warrants are classified as a liability and\nrecorded at their fair value because there are certain put rights that may obligate the Company to repurchase the 2020 Warrants in the\nfuture, based on events that are outside of the control of the Company The 2020 Warrants have an exercise price of $6 94 per share and\nare exercisable through July 31, 2036 In the event that the Company participates in a preferred stock financing round, the warrant will\nalso become exercisable for shares of preferred stock at an exercise price equal to the lowest price per share of any preferred stock\nfinancing round The 2020 Warrants are presented within the Warrant liability line item of the December 31, 2023 and December 31,\n2022 consolidated balance sheets As of December 31, 2023, the weighted average effective interest rate for 2020 Term Loan is 32 4%\n\nOn October 21, 2021, the Company entered into a Loan and Security Agreement (the \u201c2021 Term Loan\u201d, together with the 2020\nTerm Loan Agreement, the \u201cTerm Loan Agreement\u2019\u2019) with Venture Lending & Leasing IX, Inc and WTI Fund X, Inc (collectively, the\n\u201c2021 Lender\u201d), pursuant to which the 2021 Lender made available to the Company a term loan facility in an aggregate principal\namount of $20 0 million The Company made its fourth draw on the 2021 Term Loan of $5 0 million on January 10, 2023 The 2021\nTerm Loan bears interest of 11 5% per annum The Company incurred debt discounts on the 2021 Term Loan in connection with the\nfair value of the warrants referenced below As of December 31, 2023, the weighted average effective interest rate for 2021 Term Loan\nis 191%\n\nIn connection with the 2021 Term Loan, the Company issued to Venture Lending & Leasing IX, LLC and WTI Fund X, LLC,\naffiliates of the 2021 Lenders, warrants to purchase 440,021 common shares of the Company (the \u201c2021 Warrants\u201d), of which 55,005\nwere issued in 2023 in connection with the $5 0 million draw on the 2021 Term Loan on January 10, 2023 The 2021 Warrants are\nclassified as a liability and recorded at their fair value because there are certain put rights that may obligate the Company to repurchase\nthe 2021 Warrants in the future, based on events that are outside of the control of the Company The 2021 Warrants have an exercise\nprice of $6 94 per share and are exercisable through July 31, 2037 In the event that the Company participates in a preferred stock\nfinancing round, the warrant will also become exercisable for shares of preferred stock at an exercise price equal to the lowest price per\nshare of any preferred stock financing round The 2021 Warrants are presented within the Warrant liability line item of the December\n31, 2023 and December 31, 2022 consolidated balance sheets\n\nOn October 31, 2023, the Company entered a Loan and Security Agreement with WTI Fund X, Inc (the \u201c2023 Lender\u2019), pursuant\nto which the 2023 Lender made available to the Company a term loan facility with an aggregate principal amount of $10 0 million (the\n\u201c2023 Term Loan\u201d) On October 31, 2023, the Company drew down the full principal amount of $10 0 million In connection with the\n2023 Term Loan, the Company issued to WTI Fund X, LLC, an affiliate of the 2023 Lender. warrants to purchase 220,681 common\nshares The 2023 Warrants have an exercise price of $10 14 per share and are exercisable through October 31, 2038 As of December\n31, 2023, the effective interest rate for 2023 Term Loan is 35 9%\n\fCase 8:24-cv-02900-DKC _ Document 90-2 _ Filed 09/18/25 Page 373 of 408\n\nThe Company\u2019s 2020, 3001. and 2023 Term Loans are subject to covenant clauses, whereby the pany 1s required to pay and\nfile all taxes in a timely manner as well as deliver audited consolidated financial statements within six months after the end of each\nfinancial reporting year The Company did not pay or file employment payroll tax returns for any period from its inception through the\nyear ended December 31, 2020 The Company also failed to deliver audited consolidated financial statements for the years ended\nDecember 31, 2022 and 2021 within the required time period In addition, the Company failed to maintain $2 0 million as restricted\ncash in a separate bank account, as required under the terms of 2023 Term Loan, for the year ended December 31, 2023 Due to these\nbreaches of covenant clauses, the 2020, 2021, and 2023 Lenders were contractually entitled to request immediate repayment of the\noutstanding 2020, 2021, and 2023 Term Loans, however agreed to waive the each of the various covenant breaches described\nAccordingly, the current portion of long term debt presented within the consolidated balance sheets represent only the principal\n\npayments contractually due within the twelve months of each balance sheet date\n\nF 92\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 374 of 408\n\nThe following is a schedule of changes in warrants issued and outstanding from January 1, 2022 to December 31, 2023\n\nUnits\nOutstanding as of December 31, 2021 708,609\nWarrants issued 110,004\nOutstanding as of December 31, 2022 818,613\nWarrants issued 275,686\nOutstanding as of December 31, 2023 1,094,299\n\n7. Convertible Notes\n\nThe Company entered into a Convertible Note Purchase Agreement on April 27, 2023 with Arrowroot Capital, to finance the\nproposed business combination discussed in Note 1 \u2014 Nature of the Business and Basis of Presentation. The Convertible Notes shall\nbear simple interest, accrued on a daily basis in arrears, at a rate of 15.0% per annum until aggregate accrued interest is greater than\n25.0% of the principal amount, and at a rate of 8.0% per annum thereafter. An amount equal to the sum of the product of the\noutstanding principal balance times 2.75, or $47.9 million at December 31, 2023, and the unpaid accrued interest on the notes are due\nand payable upon the earlier of the maturity date and occurrence of any event of default, as defined in the agreement. The Convertible\nNotes are issuable with an aggregate principal amount up to $50.0 million payable in cash of which $17.4 million has been drawn upon\nas of December 31, 2023. The Convertible Notes mature on October 27, 2025, unless converted earlier, redeemed, or repurchased in\naccordance with their terms, prior to the maturity date.\n\nUnder the terms of the Convertible Note Purchase Agreement, the Convertible Notes will be convertible to shares including under\nthe following circumstances after April 27, 2023:\n\ne@ upon the occurrence of an equity financing, the lender can elect to exchange the Convertible Notes into the number of\nshares of equity securities issued in such equity financing equal to the note balance divided by the equity price in such\nequity financing and\n\ne immediately prior to the consummation of a qualified de-SPAC transaction, the Convertible Notes shall automatically\nconvert, in whole, into shares of common stock of the Company thereby entitling the lender to receive a number of shares\nequal to the note balance, divided by $10.00.\n\nAdditionally, pursuant to the note purchase agreement, the Company may prepay the Convertible Notes in cash without the consent\nof the holders, at an amount equal to the balance of the note, at any time prior to October 27, 2025. As of December 31, 2023, the fair\nvalue of the Convertible Notes was $31.5 million, and the corresponding change in fair value of the Convertible Notes was an increase\nof $14.1 million for the year ended December 31, 2023.\n\n8. Share-Based Compensation\n\nOn August 12, 2021, the Company adopted the 2020 Equity Incentive Plan (the \u201cPlan\u2019\u2019). The total restricted stock units (\u201cRSUs\u201d)\ngranted under the Plan as of December 31, 2023 and December 31, 2022 was 8,338,438 and 7,138,438, respectively. The awards have a\nfour year service requirement with a one-year cliff vesting starting on the employment date and are subject to the Liquidity Event\nprovision defined below.\n\nAs of December 31, 2023 and December 31, 2022, the Company had 39,883.388 shares of restricted stock awards outstanding\nwith the Company\u2019s founders with a ten year service requirements starting on the day of the Liquidity Event (defined below) (the\n\u201cFounder Restricted Shares\u201d) and 360,290 restricted shares outstanding with a former employee, in which the service requirement had\nbeen deemed met on the grant date (together with the Founder Restricted Shares, the \u201cRestricted Shares\u201d). The Company\u2019s 40,243,678\noutstanding Restricted Shares participate on par with common shares in all distributions from the Company, as the holders of these\nrestricted shares are entitled to non-forfeitable dividend rights. Each of the RSUs and Restricted Shares is subject to a change of control\nprovision; an effective registration statement under the Securities Act of 1933, as amended (the \u201cSecurities Act\u2019): a direct listing on the\nNasdaq Global Select Market or New York Stock Exchange; or the Company\u2019s completion of a merger or consolidation with a SPAC\nwhereby the surviving company\u2019s common stock are publicly traded in a public offering pursuant to an effective registration statement\nunder the Securities Act (collectively, the \u201cLiquidity Events\u201d).\n\fCase 8:24-cv-02900-DKC Document.90-2 Filed 09/18/25 Page 375 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 376 of 408\n\nThe summary of nonvested RSUs and Restricted Shares whose vesting is subject to the achievement of a Liquidity Event for the\nyear ended December 31, 2023 is disclosed below\n\nWeighted Average\nGrant Date Fair\nShares Value\nRSUs\nNonvested as of January 1, 2022 7,138,438 $ 3:53\nGranted - -\nNonvested as of December 31, 2022 7.138.438 $ 3.53\nGranted 1.200.000 $ 7.39\nNonvested as of December 31, 2023 8.338.438 $ 4.09\nWeighted Average\nGrant Date Fair\nShares Value\nRestricted Shares\nNonvested as of January 1, 2022 40,243,678 $ 3.53\nGranted -\nNonvested as of December 31, 2022 40.243.678 $ 3.53\nGranted - -\nNonvested as of December 31, 2023 40,243.678 $ 353\n\nThe aggregate unrecognized compensation expense for these awards whose vesting is subject to the achievement of a Liquidity\nEvent is $176.1 million as of December 31, 2023.\n\nThe vesting of these RSUs and Restricted Shares is contingent upon the Liquidity Events that are considered not probable of\noccurring until it actually occurs, therefore no share-based compensation expense will be recognized until any of the Liquidity Events\nare achieved.\n\n9. Income Taxes\n\nLoss) income before income tax expense (benefit) consisted of the following (in thousands):\n\nYears Ended December 31,\n\n2023 2022 2021\nDomestic $ (2 230) $ 5,441 $ 2,524\nForeign (20) 50 29\nNet (loss) income before income tax (benefit) expense $ (2.250) $ 5,491 $ 2,553\nLS\n\nThe components of the provision (benefit) for income taxes are as follows (in thousands)\n\nYears Ended December 31,\n\n2023 2022 2021\nCurrent expense:\nFederal $ 637 $ 483 $ \u2014\nState 406 319 32\nForeign 21 21 \u2014\nTotal current expense: 1,064 823 32\nDeferred expense (benefit):\nFederal 1,325 (6,623) \u2014\nState (229) (172) \u2014\nForeign (3) (3) \u2014\n\nTotal deferred benefit: 1,093 (6.798)\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Pa og\nTotal income tax expense (benefit) $ 2557 (5.975) $ 32\n\u2014 Ee Ee\n\nF-94\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 378 of 408\n\nA reconciliation of the Company\u2019s statutory income tax rate to the Company\u2019s effective income tax rate is as follows\n\nYears Ended December 31,\n2023 2022 2021\nFederal statutory rate 21.0% 21.0% 21.0%\nEffect of:\nState taxes, net of federal tax benefit (6.4)% 1.6% 2.4%\nPermanent differences (0.3)% 0.2% 0.4%\nFDI provisions 28.5% (1.6)% 0.0%\nForeign rate differential 0.5% 0.2% (0.2)%\nChange in fair value of securities (139.2)% (0.9)% 0.7%\nChange in state rates 2.4% 11.0% 71.2%\nStock compensation (0.9)% 0.0% 0.3%\nChange in valuation allowance (1.4)% (140.3)% (94.6)%\nEffective tax rate (95.8)% (108.8)% 1.2%\nEe es ee\n\nThe net deferred income tax asset balance related to the following (in thousands):\n\nYears Ended December 31,\n\n2023 2022\n\nDeferred tax assets\n\nFederal, state and local net operating loss carryforwards $ 3,101 $ 5,579\n\nPayroll taxes 743 643\n\n163) disallowed interest 224 7\n\nCapitalized R&D expenses 2,935 1,883\n\nAccrued expenses 127 10\n\nTotal deferred tax assets before valuation allowance 7,130 8.122\n\nDeferred tax liabilities:\n\nOther (80) (86)\n\n481(A) adjustment (1,315) (1,238)\nTotal deferred tax liabilities before valuation allowance (1.395) (1.324)\nValuation allowance (32) a\nNet deferred tax asset $ 5,703 :$ 6,798\n\nAs of December 31, 2023, 2022, and 2021, the Company had federal net operating loss carryforwards of $14.5 million,\n$26.3 million, and $37.8 million, respectively. As of December 31, 2023 and 2022, the Company has state net operating loss (\u201cNOL\u201d)\ncarryforwards of $26.7 million and $37.4 million. The Federal net operating loss carryforwards may be carried forward indefinitely,\nsubject to 80% of taxable income limitation. The state net operating loss carryforwards begin to expire in 2037. As of December 31.\n2023, the Company had foreign NOL carryforwards of $0.1 million, primarily related to Australia. There were no foreign NOL\ncarryforwards as of December 31, 2022.\n\nAs of December 31, 2023, the Company had interest expense carryforward for U.S. income tax purposes of $0.9 million. The\nentire $0.9 million has an indefinite carryforward period. These carryforwards are available, subject to certain limitations, to offset\nfuture taxable income.\n\nFuture realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on\nthe existence of sufficient taxable income within the carryforward period. As of December 31, 2023 and 2022, the Company performed\nan evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive\nand negative, which included the results of operations for the current and preceding years. With the exception of the Australia\njurisdiction, the Company determined that future taxable income is probable and determined that it is more likely than not that all of the\ndeferred tax assets will be realized. Accordingly, as of December 31, 2023, the Company no longer maintains a valuation allowance\noutside of the Australia jurisdiction.\n\nF-95\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 379 of 408\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 380 of 408\n\nThe Tax Cuts and Jobs Act (\u201cTCJA\u201d) resulted in significant changes to the treatment of R&D expenditures under Section 174 For\ntax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&D expenditures that are paid or\nincurred in connection with their trade or business Specifically, costs for U S based R&D activities must be amortized over five years\nand costs for foreign R&D activities must be amortized over 15 years both using a midyear convention During the year ended\nDecember 31, 2023, the Company capitalized $4 5 million of foreign R&D expenses for income tax purposes\n\nUnder Internal Revenue Code Section 382, if a corporation undergoes an \u201cownership change.\u201d the corporation\u2019s ability to use its\npre change NOL carryforwards and other pre change tax attributes to offset its post change income may be limited The Company has\nnot completed a study to assess whether an \u201cownership change\u201d has occurred or whether there have been multiple ownership changes\nsince ILE became a \u201closs corporation\u201d as defined in Section 382 Future changes in the Company\u2019s stock ownership, which may be\noutside of ILE\u2019s control, may trigger an \u201cownership change \u201d In addition, future equity offerings or acquisitions that have equity as a\ncomponent of the purchase price could result in an \u201cownership change \u201d If an \u201cownership change\u201d has occurred or does occur in the\nfuture. utilization of the NOL carryforwards or other tax attributes may be limited, which could potentially result in increased future tax\nliability to the Company\n\nThe calculation of the Company\u2019s tax liabilities involves dealing with uncertainties in the application of complex tax laws and\nregulations for both federal taxes and the many states in which the Company operates or does business in ASC 740 states that a tax\nbenefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon\nexamination. including resolutions of any related appeals or litigation processes, on the basis of the technical merits\n\nThe Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when the\nCompany\u2019s judgment changes as a result of the evaluation of new information not previously available Because of the complexity of\nsome of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company\u2019s current\nestimate of the unrecognized tax benefit liabilities These differences will be reflected as increases or decreases to income tax expense\nin the period in which new information is available As of December 31, 2023 and 2022, the Company has not recorded any uncertain\ntax positions in the Company\u2019s financial statements\n\nThe Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the\naccompanying consolidated statements of operations As of December 31, 2023 and 2022, no accrued interest or penalties are accrued\n\non the consolidated balance sheet\n\nA reconciliation of the beginning and ending amounts of unrecognized tax provision is as follows\n\nYear Ended December 31,\n2023 2022\n(In thousands)\nGross tax contingencies as of beginning of year $ $ 1,715\nDecreases in gross tax contingencies \u2014 (1.715)\nGross tax contingencies as of end of year $ \u2014 \u00a7 \u2014\n\nThe Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates In the normal course of\nbusiness, the Company is subject to examination by federal and state jurisdictions, where applicable There are currently no pending tax\nexaminations\n\nF 96\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 381 of 408\n\n10. Net (Loss) Income Per Share\n\nBasic net (loss) income per share is computed using the weighted average number of common shares outstanding during the\nperiod Diluted net (loss) income per share is computed using the weighted average number of common shares and, if dilutive,\ncommon share equivalents outstanding during the period\n\nThe computation of basic and diluted net (loss) income per share and weighted-average shares of the Company\u2019s common stock\noutstanding during the periods presented is as follows:\nYear Ended December 31,\n\n2023 2022 2021\n(in thousands, except share and per share\namounts)\nBasic net (loss) income per share:\nNet (loss) income $ (4,407) $ 11,466 \u00a7$ 2,521\nIncome allocated to participating securities \u2014 (3,393) (358)\nNet (loss) income attributable to common stockholders _ basic $ (4.407) $ 8.073 $ 2.163\nee\nDiluted net (loss) income per share:\nNet (loss) income attributable to common stockholders \u2014 basic $ (4.407) $ 8,073 $ 2,163\nInterest expense on the 2019 Convertible Notes \u2014_ \u2014 39\nNet (loss) income attributable to common stockholders diluted $ (4,407) $ 8.073 $ 2,202\nOe\nShares used in computation:\nWeighted-average common shares outstanding 95,782,605 95,728,760 94.697.428\nWeighted-average effect of dilutive securities:\nAssumed conversion of the 2019 Convertible Notes \u2014 \u2014 3,345,450\nDiluted weighted average common shares outstanding 95.782.605 95,728.760 98.042.878\nee\nNet (loss) income per share attributable to common stockholders:\nBasic $ (0.05) $ 0.08 \u00a7$ 0.02\nDiluted $ (0.05) $ 0.08 \u00a7$ 0.02\n\nThere were no dividends declared or accumulated on the common shares during the years ended December 31, 2023, 2022 and\n2021 The Company applies the two class method to its Restricted Shares, which contains non forfeitable dividend rights and thereby\nmeets the definition of participating securities, which requires earnings available to common stockholders for the period to be allocated\nbetween common stock and participating securities based upon their respective rights to receive dividends as if all earnings for the\nperiod had been distributed Net loss is not allocated to participating securities in accordance with the contractual terms The\nCompany\u2019s weighted average restricted shares outstanding for the years ended December 31, 2023, 2022 and 2021 are 40 243,678,\n40,243,678 and 15,656,445, respectively The Company excluded the following securities, presented based on amounts outstanding at\neach period end, from the computation of diluted net (loss) income per share attributable to common stockholders for the periods\nindicated, as including them would have had an anti dilutive effect\n\nYear Ended December 31,\n\n2023 2022 2021\nWarrants to purchase common stock\u201c) 1,094,299 818,613 708,609\nRSUs@) 8.338.438 7.138.438 6.988.938\nContingent consideration to In2vate\u00ae) 34,030 34,030 \u2014\nConvertible Notes 4.905.672 \u2014 \u2014\nRestricted Shares 40,243.678\n\n1) The treasury stock method was applied to warrants, in which the impact was anti-dilutive for the year ended December 31, 2023\nand 2022. Therefore, they are excluded from the dilutive EPS calculation.\n\n(2) RSUs are subject to the vesting condition under the Liquidity Event, as discussed in Note 8 Share Based Compensation As these\nsecurities are considered as contingently issuable shares where the contingency has not been met at the end of the reporting period,\nthey are excluded from the dilutive net income (loss) per share calculation for the periods presented\n\fCase 8:24-cv-02900-DKC. Document 90-2 Filed 09/18/25, ond #9 282 01 o08, d Therefore,\n\n(3) Contingencies underlying contingent consideration payable to In2vate was not met as o\nthese shares have been excluded from the dilutive net (loss) income per share calculation for the periods presented\n\n4) If-converted method was applied to the Convertible Notes, in which the impact was anti-dilutive for the year ended December 31,\n2023. Therefore, they are excluded from the dilutive EPS calculation.\n\n(5) Restricted Shares were excluded from dilutive earnings per share calculation for the year ended December 31, 2023 as the impact\nof including such shares would be anti dilutive\n\nF-97\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 383 of 408\n\n11 Payroll Taxes Payable\n\nThe Company has not paid or filed employment payroll tax returns for any period from inception through December 31, 2020\nThe federal and state withholding tax, employer payroll taxes. penalties, and interest liability from inception of the Company through\nDecember 31, 2023 and related penalties and interest were recorded within Payroll Taxes Payable on the consolidated balance sheets\nThe total liability was $3 0 million and $2 8 million as of December 31, 2023 and December 31, 2022, respectively The related charge\nfor these accruals is recorded to Selling. General, and Administrative Expenses within the consolidated statements of operations\n\n12 Fair Value Measurements\n\nThe Company\u2019s financial instruments consist of its warrant liability, 2020 Term Loans, 2021 Term Loans, 2023 Term Loans, Other\nLoans, Convertible Notes, and Subordinated Payable to Technology Partner\n\nThe carrying value and estimated fair value of the Company\u2019s 2020 Term Loans, 2021 Term Loans, 2023 Term Loans, Other\nLoans, Convertible Notes, and Subordinated Payable to Technology Partner of December 31, 2023 and 2022, were as follows\n\nDecember 31, 2023 December 31, 2022\nPrincipal Carrying Principal Carrying\nAmount Amount Fair Value Amount Amount Fair Value\n(In thousands)\n2020 Term Loans $ 2.697 $ 2,483 $ 2.697 $ 6.708 $ 5.615 \u00a7 6.708\n2021 Term Loans 12,299 11,498 12,299 13,377 12,076 13.377\n2023 Term Loans 10,000 7,215 10.000 \u2014 \u2014 \u2014\nConvertible Notes 17.400 31,547 31.547 \u2014_\u2014 \u2014_ \u2014\nOther Loans \u2014 \u2014 \u2014 160 160 160\nSubordinated Payable to Technology\nPartner 49.163 49.163 49.163 47.495 47,A95 47.495\n\n$ 91559 $ 101,906 $ 105,706 $ 67.740 $ 65.346 \u00a7$ 67.740\n\nWith respect to the 2020 Term Loans, 2021 Term Loans, 2023 Term Loans, Other Loans, and Subordinated Payable to Technology\nPartner, the Company concluded the fair value approximated the principal value as of December 31, 2023 and 2022.\n\nThe fair value of the Convertible Notes is estimated using a scenario-based approach which considers the conversion feature and\n\nrelated payoffs within each scenario. The level 3 inputs used in the valuation model for the Convertible Notes as of December 31, 2023,\nincluded the following:\n\nDecember 31, 2023\n\nEquity De SPAC Hold to\nRedemption Event Financing | Transaction Maturity\nProbability 8.0% 90.0% 2.0%\nTime to Event Date (years) 0.13 0.13 1.82\nDiscount Spread 574.2% 574.2% 574.2%\nRisk free rate 5.6% 5.6% 44%\nDiscount Yield 579.8% 579.8% 578.6%\n\nThe fair value of the warrant liability was determined using an option pricing model which utilized the following level 3 inputs:\n\nDecember 31, 2023\nPrivate Sale Scenario SPAC Scenario\n\n(10% Probability ) (90% Probability)\nVolatility 60% 50%\nRisk-free interest rate 4.7% 5.5%\nDividend yield 0.0% 0.0%\nExercise price for $6.94 warrants $ 6.94 \u00a7 6.94\nExercise price for $10.14 warrants $ 10.14 \u00a7$ 10.14\n\nTerm 1.0 years 0.1 years\n\f(Fase 8:24-cv-02900-DKC Document 90-2 Filed 09/48/25 Page 384 of 408\n\nEquity value 585,798,557 $ = 1,235,675,336\n\n1) Equity value was derived from weighted average of discounted cash flow, guideline company method, and transaction\nmethodologies.\n\nF-98\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 385 of 408\n\nDecember\n31,\n2022\nVolatility 72 0%\nRisk free interest rate 45%\nDividend yield 00%\nExercise price $ 694\nTerm 2 0 Years\nEquity value) $514.210,000\n\n1) Equity value was derived from weighted average of discounted cash flow, guideline company method, and transaction\nmethodologies.\n\nThe Company\u2019s liabilities measured at fair value on a recurring basis were categorized as follows within the fair value hierarchy.\n\nDecember 31, 2023\nLevel 1 Level 2 Level 3 Total\n(In thousands)\n\nLiabilities\n\nWarrant liability $ - \u00a7 - \u00a7$ 11,870 \u00a7$ 11,870\nConvertible Notes - - 31,547 31,547\nTotal liabilities $ $ $ 43,417 \u00a7$ 43.417\n\nDecember 31, 2022\nLevel 1 Level 2 Level 3 Total\n(In thousands)\n\nLiabilities\n\nWarrant liability $ - \u00a7$ - \u00a7$ 7,645 $ 7,645\nTotal liabilities $ $ $ 7,645 $\u00a7$ 7,645\n\nThe following table summarizes the activity for the Company\u2019s Level 3 liabilities measured at fair value:\n\nWarrant\nLiability\n(in\nthousands)\nBalance as of January 1, 2022 $ 6.866\nIssuance 1,027\nChange in fair value (248)\nBalance as of December 31, 2022 $ 7.645\nIssuance 3.454\nChange in fair value 771\nBalance as of December 31, 2023 $ 11,870\nConvertible\nNotes\n(in\nthousands)\nBalance as of December 31, 2022 $\nIssuance 17.400\nChange in fair value 14,147\nBalance as of December 31, 2023 $ 31,547\n\nDuring the years ended December 31, 2023 and 2022, there were no transfers between Level 1 and Level 2, nor into and out of\nLevel 3\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 386 of 408\n\n13. Commitments and Contingencies\nContingencies\n\nThe Company evaluates for any potential impact of loss contingencies that are probable and reasonably estimable. As of\nDecember 31, 2023 and 2022, there were no loss contingencies recorded.\n\nWhile the Company does not anticipate that the resolution of any ongoing matters will have a material impact on its results of\noperations, financial condition, or cash flows, it is important to note that the ultimate outcome of these matters remains uncertain In the\nevent of an unfavorable resolution of one or more of these contingencies, it could have a material effect on the Company\u2019s financial\ncondition, results of operations, or cash flows\n\nThe Company will continue to monitor these matters and disclose any significant developments or changes in future financial\nstatements as necessary.\n\nF 99\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 387 of 408\n\nPurchase Commitments\n\nThe Company entered into a long term software licensing contract with a major customer that commenced in 2018 and is set to\nexpire in June 2024, subject to an additional 5 year renewal The contract has an annual value of $50 3 million As part of the\nagreement, the Company installs its software licenses on the customer\u2019s servers, and in exchange, the customer pays an annual fee for\naccess to the software license and related maintenance services Additionally, the Company has a separate contract with the customer\nfor the purchase of the customer\u2019s end user data This data is essential for the Company\u2019s development and utilization of its next\ngeneration artificial intelligence platform The annual price for this data acquisition amounts to approximately $30 0 million\n\nThe sale of the software license and the purchase of the customer\u2019s end user data are treated as distinct and independent\ntransactions Furthermore, the software licensing contract and the data acquisition contract can be canceled individually without\naffecting the other contract, with the data acquisition contract requiring twelve months\u2019 notice for cancellation by either party Due to\nthe distinct nature of the data acquisition from the customer, which is obtained at fair value and used primarily for research and\ndevelopment purposes, the revenue generated from the software licensing contract is recognized on a gross basis Conversely, the\nexpenses associated with the data acquisition are also recognized on a gross basis and classified as research and development expenses\n\nThis accounting treatment accurately reflects the separate nature of these transactions and ensures appropriate recognition of\nrevenue and expenses related to the software licensing and data acquisition activities\n\nFinancial Advisor Agreement\nThe Company has a financial advisory agreement in place with a designated financial advisor to assist with any future equity\nfundraising activities According to the terms of the agreement, the financial advisor will recetve compensation based on the following\n\nstructure\n\nFor equity raises comprising less than a majority of the Company\u2019s equity capitalization, the financial advisor will be entitled to a\nfee equal to 5 0% of the gross proceeds generated from the equity raise\n\nIn the event of an equity raise comprising a majority of the Company\u2019s equity capitalization, the financial advisor\u2019s compensation\nwill be calculated based on the greater of the following\n\ni) A flat fee of $3 5 million\n\nii) 10% of the aggregate value of the equity raise up to $1 0 billion, plus an additional 1 5% of the portion of the aggregate value\nof the equity raise that exceeds $1 0 billion\n\nThese compensation terms outline the financial advisor\u2019s entitlement to fees based on the successful completion of equity\nfundraising activities For non equity transactions the specific fee is open to negotiation on a transaction by transaction basis to ensure\nthat the financial advisor\u2019s compensation aligns with the scale and significance of the equity raise, considering the Company\u2019s equity\ncapitalization and the total value of the funds raised\n\nLitigation\n\nThe Company is involved in litigation arising in the normal course of business Such litigation is not expected to have a material\neffect on the Company\u2019s financial condition, results of operations, and cash flows\n\n14 Related Party Transactions\nReceivable from related party\n\nThe Company had outstanding receivables from Directors in the amounts of $0 5 million and $0 6 million as of December 31,\n2023 and December 31, 2022, respectively related to expenses that the Company incurred on behalf of the Directors\n\nIn February 2024, the Company collected the full amount of the related party receivable from each Director No balance is\noutstanding after the collection\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 388 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 389 of 408\n\n15 Subsequent Events\n\nThe Company has evaluated all events subsequent to December 31, 2023 and through April 22, 2024, which represents the date\nthese consolidated financial statements were available to be issued\n\nClosing of the Merger and Related Transactions\n\nOn April 16, 2024, (the \u201cClosing Date\u201d), the Company consummated the previously announced merger contemplated by the\nMerger Agreement dated April 27, 2023 (the \u201cSPAC Transaction\u201d) Refer to Note 1 for additional detail\n\nThe business combination is being accounted for as a reverse recapitalization, in accordance with U S GAAP Under this method\nof accounting, although Arrowroot issued shares for outstanding equity interests of iLearningEngines, Inc in the business combination,\nArrowroot is treated as the \u201cacquired\u201d company for financial reporting purposes Accordingly, the business combination is treated as\nthe equivalent of the Company issuing stock for the net assets of Arrowroot, accompanied by a recapitalization The net assets of\nArrowroot is stated at historical cost, with no goodwill or other intangible assets recorded Operations prior to the business combination\nwill be those of the Company\n\nIn connection with the closing of the business combination, Arrowroot Acquisition Corp (NASDAQ ARRW) changed its name to\n\u201cjLearningEngines, Inc \u201d (\u201c\u201cNewCo\u2019\u201d) and is listed on the NASDAQ under the new ticker symbol \u201cAILE\u201d\n\nOn the Closing Date, the following transactions occurred pursuant to the terms of the Merger Agreement\n\nG) Current ILE stockholders own 109,684,738 shares of NewCo common stock on the Closing Date in exchange for former ILE\nshares;\n\n(ii) Former Arrowroot public stockholders own 638 977 shares of NewCo common stock on the Closing Date in exchange for\nformer Arrowroot public shares;\n\n(ii) Current and former affiliates of Arrowroot own 8,674,617 shares of NewCo common stock on the Closing Date in exchange\nfor former Arrowroot convertible and promissory notes;\n\n(iv) Convertible note investors (not including affiliates of Arrowroot) own 11,551,784 shares of NewCo common stock on the\nClosing Date in exchange for former ILE convertible notes (see \u201cConvertible Note Purchase Agreement\u201d below for portion of\nconvertible notes entered into on Closing Date);\n\n(v) The 2020 Lender, 2021 Lender and 2023 Lender own 4,419 998 shares of NewCo common stock on the Closing Date based\non amendments to term loans (see \u201cAmendments to 2020, 2021 and 2023 Term Loan\u201d below for further details) Upon\nrepayment of the term loans on April 18, 2024, 815 999 of the shares of NewCo common stock were cancelled\n\nConvertible Note Purchase Agreement\n\nIn connection with the SPAC Transaction, the Company issued and converted $29 4 million of 2024 convertible notes The\nCompany issued $0 7 million of convertible notes on March 21, 2024, and $28 7 million of convertible notes on the Closing Date\n(collectively, the \u201c2024 Convertible Notes\u201d) The 2024 Convertible Notes were converted to 8,089 532 common shares of NewCo on\nthe Closing Date\n\nAmendments to 2020, 2021 and 2023 Term Loan\n\nOn March 27, 2024, ILE entered into an agreement to amend the 2020, 2021 and 2023 Term Loans (\u201cTerm Loans\u201d) Pursuant to\nthe amendment, the Term Loans were amended to\n\n(i) revise the amortization schedule for the Term Loans in exchange for 1,019,999 shares of NewCo common stock to be issued\nupon completion of the SPAC Transaction (the \u201cLoan Restructuring Shares\u201d)\n\n(ii) terminate the 2020 Warrants, 2021 Warrants and 2023 Warrants and the respective put rights associated with each in exchange\nfor our agreement to provide the 2020 Lenders, 2021 Lenders and 2023 Lender with an aggregate amount of 3 399,999 shares\nof NewCo common stock to be issued upon completion of the SPAC Transaction\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 390 of 408\n\nF 101\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 391 of 408\n\nIf the Company repays the Term Loans on or before (i) April 15, 2024, then 90% of the Loan Restructuring Shares will be\ncancelled, (ii) May 1, 2024, then 80% of the Loan Restructuring Shares will be cancelled, and (iii) July 1, 2024, then 50% of the Loan\nRestructuring Shares will be cancelled The Company repaid the Term Loans on April 18, 2024, and 815,999 shares were cancelled\n\nIn addition, the amendment provides that, if the Company prepays the Term Loans, then at the Company\u2019s option, the Company\nmay prepay 50% of the amount of scheduled but unpaid payments of interest that would have accrued after the prepayment date by\nissuing a number of shares of NewCo common stock obtained by dividing (A) the product of (x) the unpaid scheduled interest\npayments and (y) 2 75, by (B) the VWAP of NewCo common stock over the seven (7) trading days immediately preceding the date of\nissuance The Company prepaid the full amount of the Term Loan on April 18, 2024 in a combination of cash and 159,379 shares of\ncommon stock\n\nNegotiation of Payables to Third Party Vendors\n\nOn March 27, 2024, the Company and the financial advisor (refer to Note 13) amended the financial advisory agreement to\nprovide that, in lieu of payment in cash of the full amount of any advisory fees or other fees or expenses owed under the financial\nadvisory agreement, the Company will pay the financial advisor $7,500,000 in cash or NewCo shares, at the sole discretion of the\nCompany\n\nThe Company also negotiated concessions on accounts payable to other third party vendors in several forms The form of\nconcessions include (1) providing a discount to the total amount payable, (2) the option to settle certain payables in common stock,\nand (3) entering into a deferred payment agreement for certain payables The concessions became effective on the Closing Date\n\nProposed 2024 Equity Incentive Plan\nThe Company proposed a new equity incentive plan for 2024 and the plan was approved on April 1, 2024\nEast West Bank Financing\n\nOn April 17, 2024 (the \u201cLoan Closing Date\u201d), Legacy iLearningEngines entered into a Loan and Security Agreement (the\n\u201cRevolving Loan Agreement\u201d), by and among Legacy iLearningEngines as borrower (\u201cBorrower\u201d), the lenders party thereto (the\n\u201cLenders\u201d) and East West Bank, as administrative agent and collateral agent for the Lenders (\u2018Agent\u201d) The Revolving Loan\nAgreement provides for (i) a revolving credit facility in an aggregate principal amount of up to $40 0 million and (ii) an uncommitted\naccordion facility allowing the Borrower to increase the revolving commitments by an additional principal amount of $20 0 million at\nBorrower\u2019s option and upon Agent\u2019s approval (collectively, the \u201cRevolving Loans\u201d) Borrower drew $40 0 million in Revolving Loans\non the Loan Closing Date, which was used (x) to repay in full Borrower\u2019s Term Loans and (y) for general corporate purposes\n\nThe obligations under the Revolving Loan Agreement are secured by a perfected security interest in substantially all of the\nBorrower\u2019s assets except for certain customary excluded property pursuant to the terms of the Revolving Loan Agreement On the Loan\nClosing Date, the Company and In2Vate, L L C , an Oklahoma limited liability company (the \u201cGuarantors\u201d) and wholly owned\nsubsidiary of Legacy iLearningEngines entered into a Guaranty and Suretyship Agreement (the \u201cGuaranty\u201d) with the Agent, pursuant to\nwhich the Guarantors provided a guaranty of Borrower\u2019s obligations under the Revolving Loan Agreement and provided a security\ninterest in substantially all of the Guarantors\u2019 assets except for certain customary excluded property pursuant to the terms of the\nGuaranty\n\nThe interest rate applicable to the Revolving Loans is Adjusted Term SOFR (with an interest period of 1 or 3 months at the\nBorrower\u2019s option) plus 3 50% per annum, subject to an Adjusted Term SOFR floor of 4 00%\n\nThe maturity date of the Revolving Loans is April 17, 2027 The Revolving Loan Agreement contains customary representations\nand warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens,\ninvestments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions Borrower is also required\nto comply with the following financial covenants, which are more fully set forth in the Revolving Loan Agreement (i) minimum\nliquidity, (ii) minimum revenue performance to plan, (iii) minimum fixed charge coverage ratio and (iv) maximum leverage ratio\n\nThe Revolving Loan Agreement also includes customary events of default, including failure to pay principal, interest or certain\nother amounts when due, material inaccuracy of representations and warranties, violation of covenants, specified cross default and\ncross acceleration to other material indebtedness, certain bankruptcy and insolvency events, certain undischarged judgments, material\ninvalidity of guarantees or grant of security interest, material adverse effect and change of control, in certain cases subject to certain\n\fCase 8:24-cy-02900-DKC_ D cument 90- Filed 09/18/25 Pa e 392 of 408\n\nthresholds and grace periods If one or more events of default occurs and continues beyond any app e cure period, the Agent may,\nwith the consent of the Lenders holding a majority of the loans and commitments under the facility, or will, at the request of such\nLenders, terminate the commitments of the Lenders to make further loans and declare all of the obligations of the Company under the\nRevolving Loan Agreement to be immediately due and payable\n\nF 102\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 393 of 408\n\nPART II\nINFORMATION NOT REQUIRED IN PROSPECTUS\nItem 13 Other Expenses of Issuance and Distribution\n\nThe following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by us in\nconnection with the sale of the securities being registered All amounts shown are estimates except for the SEC registration fee\n\nAmount\nSEC registration fee $ 118,044.01\nAccountants\u2019 fees and expenses $ 75,950.00\nLegal fees and expenses $ 200,000.00\nMiscellaneous fees and expenses $ 40,000.00\nTotal expenses $ 433,994.01\n\nDiscounts, concessions, commissions and similar selling expenses attributable to the sale of shares of Common Stock covered by\nthis prospectus will be borne by the selling securityholders. We will pay all expenses (other than discounts, concessions, commissions\nand similar selling expenses) relating to the registration of the shares with the SEC, as estimated in the table above.\n\nItem 14. Indemnification of Directors and Officers.\n\nSection 145 of the Delaware General Corporation Law, as amended (\u201cDGCL\u201d) provides that a corporation may indemnify\ndirectors and officers as well as other employees and individuals against expenses (including attorneys\u2019 fees), judgments, fines and\namounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed\nactions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer,\nemployee or agent of the Registrant. The DGCL provides that Section 145 is not exclusive of other rights to which those seeking\nindemnification may be entitled under any bylaws, agreement, vote of stockholders or disinterested directors or otherwise. The\nRegistrant\u2019s Certificate of Incorporation and Bylaws provide for indemnification by the Registrant of its directors and officers to the\nfullest extent permitted by the DGCL.\n\nSection 102(b)(7) of the DGCL permits a corporation to provide in its Certificate of Incorporation that a director of the corporation\nshall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director,\nexcept for liability (1) for any breach of the director\u2019s duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not\nin good faith or which involve intentional misconduct or a knowing violation of law, (3) for unlawful payments of dividends or\nunlawful stock repurchases redemptions or other distributions or (4) for any transaction from which the director derived an improper\npersonal benefit. The Registrant\u2019s Certificate of Incorporation provides for such limitation of liability to the fullest extent permitted by\nthe DGCL.\n\nThe Registrant has entered into indemnification agreements with each of its directors and executive officers to provide contractual\nindemnification in addition to the indemnification provided in our Certificate of Incorporation. Each indemnification agreement\nprovides for indemnification and advancements by the Registrant of certain expenses and costs relating to claims, suits or proceedings\narising from his or her service to the Registrant or, at our request, service to other entities, as officers or directors to the maximum\nextent permitted by applicable law. We believe that these provisions and agreements are necessary to attract qualified directors.\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 394 of 408\n\nThe Registrant also maintains standard policies of insurance under which coverage is provided (1) to its directors and officers\nagainst loss arising from claims made by reason of breach of duty or other wrongful act, while acting in their capacity as directors and\nofficers of the Registrant and (2) to the Registrant with respect to payments which may be made by the Registrant to such officers and\ndirectors pursuant to any indemnification provision contained in the Registrant\u2019s Certificate of Incorporation and Bylaws or otherwise\nas a matter of law\n\nItem 15 Recent Sales of Unregistered Securities\nThe following list sets forth information regarding all unregistered securities sold by us since January 1, 2021\n\n(1) In November 2020, we issued an aggregate of 5,750,000 Arrowroot Class B Common Stock for a total subscription price of\n$30,000 On December 31, 2020, we effectuated a 5 for 4 stock split, resulting in 7,187 500 Arrowroot Class B Common Stock\noutstanding;\n\n(2) In March 2021, we issued an aggregate of 8 250,000 private placement warrants to Sponsor at a price of $1 00 per private\nplacement warrant, generating gross proceeds of $8 250,000;\n\n(3) In April 2024, substantially concurrently with the Closing, we issued 8,089 532 shares of our Common Stock to holders of our\n2024 Convertible Notes upon the conversion of the 2024 Convertible Notes originally issued in a private placement pursuant to the\n2024 Convertible Note Purchase Agreement;\n\n(4) In April 2024, substantially concurrently with the Closing, we issued 82,091 shares of Common Stock to certain investors\npursuant to a non redemption agreement with certain investors as consideration for the non exercise of redemption nights by such\ninvestors;\n\n(5) In April 2024, substantially concurrently with the Closing, we issued 460,384 shares of Common Stock to the Sponsor for the\nrepayment in full of all outstanding obligations under unsecured promissory notes issued to ARRW;\n\n(6) In April 2024, substantially concurrently with the Closing, we issued 4,419 998 shares of Common Stock to the Lenders\npursuant to the Second Omnibus Amendment to Loan Documents with In2vate, L L C and the Lenders as consideration for the\nrevision of amortization schedules under the WTI Loan Agreements prior to the Business Combination 815,999 shares of Common\nStock were subsequently cancelled pursuant to the Second Omnibus Amendment to Loan Documents with In2vate, L L C;\n\n(7) In April 2024, we issued 159,379 shares of Common Stock to the Lenders pursuant to the Second Omnibus Amendment to\nLoan Documents with In2vate, L L C and the Lenders as consideration for the repayment in full of all outstanding obligations under\nthe WTI Loan Agreements;\n\n(8) In June 2024, we issued 511,073 shares of Common Stock to BTIG, LLC at a price of $5 87 per share pursuant to the BTIG\nAmendment in connection with the payment of certain Business Combination transaction expenses;\n\n(9) In June 2024, we issued 1,022,146 shares of Common Stock to Cantor Fitzgerald & Co in lieu of payment of deferred\nunderwriting commissions in an aggregate amount of $6,000,000 at a price of $5 87 per share pursuant to the Fee Modification\nAgreement in connection with the Closing; and\n\n(10) In June 2024, we issued 221,465 shares of Common Stock to Cooley LLP at a price of $5 87 per share pursuant to the Cooley\nFee Agreement in connection with the payment of Business Combination transaction expenses\n\nNone of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering We\nbelieve each of these transactions was exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities\nAct (and Regulation D promulgated thereunder) as transactions by an issuer not involving any public offering or Rule 701 promulgated\nunder Section 3(b) of the Securities Act as transactions by an issuer under benefit plans and contracts relating to compensation as\nprovided under Rule 701 The recipients of the securities in each of these transactions represented their intentions to acquire the\nsecurities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends\nwere placed on the share certificates issued in these transactions All recipients had adequate access, through their relationships with us,\nto information about us The sales of these securities were made without any general solicitation or advertising\n\fCase 8:24-cv-02900-DKC Document,99-2 Filed 09/18/25 Page 395 of 408\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 396 of 408\nItem 16 Exhibits and Financial Statement Schedules\n\nIncorporated by Reference\n\nExhibit\nNumber\n\nSchedule/ Filing\nDescription Form File No. Exhibit Date\n\n21\n\nZE1\n\n52\n\n41\n\n42\n\n43\n\n44\n\n45\n\n46\n\n47\n\n48\n\n51\n\n101\n\n102\n\n10 3*+\n\nMerger Agreement, dated as of April 27,2023,\nby and among Arrowroot Acquisition Corp ,\nARAC Merger Sub, Inc . and iLearningEngines,\nInc.\n\nSecond Amended and Restated Certificate of\nIncorporation of iLearningEngines, Inc\n\nAmended and Restated Bylaws of\niLearningEngines, Inc\n\nAmended and Restated Registration Rights\nAgreement, dated April 16, 2024. by and among\niLearningEngines, Inc , members of Arrowroot\nAcquisition LLC, and certain former\nstockholders of iLearningEngines, Inc.\n\nSpecimen Common Stock Certificate\n\nSpecimen Warrant Certificate\n\nWarrant Agreement, dated March 4, 2021. by\n\nand between Arrowroot Acquisition Corp . and\n\nContinental Stock Transfer & Trust Company, as\nwarrant agent\n\nForm of 2020 Warrant to Acquire Shares of\nExercise Stock of iLearningEngines Inc\n\nForm of 2021 Warrant to Acquire Shares of\nExercise Stock of iLearningEngines Inc\n\nForm of 2023 Warrant to Acquire Shares of\nExercise Stock of iLearningEngines Inc\n\nForm of Restricted Stock Agreement\n\nOpinion of Cooley LLP\n\nForm of Sponsor Support Agreement, by and\namong Arrowroot Acquisition Corp ,\niLearningEngines, Inc , Arrowroot Acquisition\nLLC _and certain stockholders of\niLearningEngines, Inc_\n\nForm of Stockholder Support Agreement, by and\n\namong Arrowroot Acquisition Corp .\niLearningEngines, Inc and certain stockholders\n\nof iLearningEngines, Inc\n\nExecutive Employment Agreement, dated as of\nJanuary 1, 2011. by and between iHealthEngines\n\n8K\n\n8K\n\n8K\n\n8K\n\n8K\n\n8K\n\n8K\n\nS4/A\n\nS4/A\n\nS4/A\n\n8K\n\nSl\n\nS4\n\nS4\n\nS4/A\n\n001 40129\n\n001 40129\n\n001 40129\n\n001 40129\n\n001 40129\n\n001 40129\n\n001 40129\n\n333 274333\n\n333 274333\n\n333 274333\n\n001 40129\n\n333 279908\n\n333 274333\n\n333 274333\n\n333 274333\n\n21\n\nSid\n\n3i2\n\n101\n\n41\n\n42\n\n41\n\n46\n\n47\n\n48\n\n47\n\n51\n\n10 14\n\n22\n\n10 21\n\nMay 2, 2023\n\nApril 22, 2024\n\nApril 22, 2024\n\nApril 22, 2024\n\nApril 22, 2024\nApril 22, 2024\n\nMarch 5, 2021\n\nDecember 8.\n2023\n\nDecember 8.\n2023\n\nDecember 8.\n2023\n\nApril 22, 2024\nJune 3, 2024\n\nSeptember 5,\n2023\n\nSeptember 5,\n2023\n\nDecember 8.\n2023\n\fCase 8: 4 cy-0 \u201c02900- DKC Document 90-2 Filed 09/18/25 Page 397 of 408\n\nInc an dambaran\n10 4*+ Executive Employment Agreement, dated as of SA/A 333 274333 10 22 December 8,\nFebruary 20. 2019. by and between 2023\n\niLearningEngines Inc and Sayyed Farhan Naqvi\n\nII 3\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 398 of 408\n\nIncorporated by Reference\n\nExhibit Schedule/ Filing\nNumber Description Form File No. Exhibit Date\n10.5*+ Executive Employment Agreement, dated as of S-4/A 333-274333 10.23 December 8, 2023\n\nOctober 10. 2018. by and between\n\niLearningEngines Inc. and Balakrishnan\nArackal\n\n10.6*# Employment Offer Letter, dated as of S-4/A 333-274333 10.24 December 8. 2023\n\nSeptember 15, 2022. by and between\n\niLearningEngines FZ-LLC and Ramakrishnan\nParameswaran\n\n10.7* Executive Employment Agreement, dated as of S-4/A 333-274333 10.25 December 8. 2023\n\nOctober 12. 2023. by and between\niLearningEngines Inc. and David Samuels\n\n10.8* iLearningEngines Inc. 2020 Equity Incentive S-4/A 333-274333 10.19 December 8. 2023\nPlan\n10.9* Form of Restricted Stock Unit Agreement and S-4/A 333-274333 10.20 December 8. 2023\n\nGrant Notice under the iLearningEngines Inc.\n2020 Equity Incentive Plan\n\n10.10* iLearningEngines, Inc. 2024 Equity Incentive 8-K 001-40129 10.11 April 22, 2024\nPlan.\n10.11* Form of Stock Option Grant Notice and Form 8-K 001-40129 10.12 April 22, 2024\n\nof Stock Option Agreement under 2024 Equity\n\nIncentive Plan.\n\n10.12*+ Form of Restricted Stock Unit Grant Notice 8-K 001-40129 10.13 April 22, 2024\n\nand Form of Restricted Stock Unit Agreement\nunder 2024 Equity Incentive Plan.\n\n10.13* iLearningEngines, Inc. 2024 Employee Stock 8-K 001-40129 10.14 April 22, 2024\nPurchase Plan.\n10.14* Form of Indemnification Agreement by and 8-K 001-40129 10.15 April 22, 2024\n\nbetween the Company and its directors and\nexecutive officers.\n\n10.15+ Loan and Security Agreement, dated as of S-4/A 333-274333 10.26 December 8, 2023\n\nDecember 30, 2020. between iLearningEngines\nInc. and Venture Lending & Leasing IX. Inc.\n\n10.16+# Supplement to the Loan and Security S-4/A 333-274333 10.27 December 8, 2023\n\nAgreement. dated as of December 30. 2020.\nbetween iLearningEngines Inc. and Venture\nLending & Leasing IX, Inc.\n\n10.17 Amendment No. 1 to the Loan and Security S-4/A 333-274333 10.28 December 8. 2023\n\nAgreement. dated as of October 21. 2021.\nbetween iLearningEngines Inc. and Venture\nLending & Leasing IX, Inc.\n\f10 18+\n\n10 19+#\n\n10 20+\n\nCase 8: 8.24 cv-02900-DKC. po cument 90- Ey)\n\nLoan and Security Agreement, dated as of\n\u2014 21,2021, between iLearningEngines\nInc , and Venture Lending & Leasing IX, Inc\nand WTI Fund X. Inc.\n\nSupplement to the Loan and Security S4/A\nAgreement, dated as of October 21. 2021,\n\nbetween iLearningEngines Inc , and Venture\n\nLending & Leasing IX, Inc_and WTI Fund X,\n\nInc\n\nLoan and Security Agreement, dated as of S4/A\nOctober 31,2023, between iLearningEngines\nInc , and WTI Fund X, Inc\n\n4\n\na Filed Q9\n33\n\n[18/25\n2743\n\n333 274333\n\n333 274333\n\nPage. 399 of 408\n\n10 30\n\n10 31\n\nDecember 8, 2023\n\nDecember 8, 2023\n\nDecember 8, 2023\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 400 of 408\n\nIncorporated by Reference\nExhibit Schedule/ Filing\nNumber Description Form File No. Exhibit Date\n10.21+# Supplement to the Loan and Security S-4/A 333-274333 10.32 December 8, 2023\n\nAgreement, dated as of October 31, 2023.\nbetween iLearningEngines Inc., and WII Fund\n\nX. Inc.\n\n10.22+# Intellectual Property Security Agreement, dated S-4/A 333-274333 10.33 December 8, 2023\nas of December 30, 2020. between\niLearningEngines Inc. and Venture Lending &\nLeasing IX. Inc.\n\n10.23+# Intellectual Property Security Agreement, dated S-4/A 333-274333 10.34 December 8, 2023\nas of October 21, 2021, between\niLearningEngines Inc., and Venture Lending &\nLeasing IX. Inc. and WTI Fund X, Inc.\n\n10.24+# Intellectual Property Security Agreement, dated S-4/A 333-274333 10.35 December 8, 2023\nas of October 31, 2023. between\n\niLearningEngines Inc., and WTI Fund X, Inc.\n\n10.25 Form of 2023 Convertible Note Purchase S-4 333-274333 10.15 September 5, 2023\nAgreement.\n\n10.26 Form of 2023 Convertible Note. S-4/A 333-274333 10.16 January 5, 2024\n\n10.27 Form of 2024 Convertible Note Purchase 8-K 001-40129 10.28 April 22, 2024\nAgreement.\n\n10.28+ Form of 2024 Convertible Note. 8-K 001-40129 10.29 April 22, 2024\n10.29 Form of Subordination Agreement. 8-K 001-40129 10.30 April 22, 2024\n\n10.30+# Loan and Security Agreement. dated April 17. 8-K 001-40129 10.31 April 22, 2024\n2024. by and among iLearningEngines\nHoldings. Inc... as borrower. East West Bank, as\nagent, and the lenders.\n\n10.31+ Intellectual Property Security Agreement, dated 8-K 001-40129 10.32 April 22, 2024\nApril 17. 2024, by and among\niLearningEngines Holdings. Inc. and In2vate,\n\nL.L.C, as grantors. for the benefit of East West\nBank.\n\n10.32 Guaranty and Suretyship Agreement, dated 8-K 001-40129 10.33 April 22, 2024\nApril 17.2024, by and among\niLearningEngines Holdings. Inc. and In2vate,\n\nL.L.C, as debtors, and East West Bank as agent\nfor the lenders.\n\n10.33 Subordination Agreement, dated April 17. 8-K 001-40129 10.34 April 22, 2024\n\n2024. by and among iLearningEngines\n\nHoldings, Inc, and Experion Technologies, FZ\nELC:\n\f10 34+#\n\n10 35\n\n10 36\n\nSecond Omnibus Amendment fo Loan\nDocuments by and among iLearningEngines\nHoldings, Inc , as borrower, and In2vate,\nLLC, Venture Lending & Leasing IX. Inc ,\n\nand WTI Fund X, Inc _ as the lenders\n\nFee Reduction Agreement, dated March 27,\n\n2024. by and among Cantor Fitzgerald & Co ,,\n\nArrowroot Acquisition Corp and\niLearningEngines Inc\n\nAmendment No_1. dated March 27, 2024, to\nthe Letter Agreement, dated June 5, 2020, by\nand among Mizuho Securities USA LLC,\niLearningEngines Inc_and Arrowroot\n\nAcquisition Corp_\n\nCase 8:24-cv-02900-DKC _ Document 90- ok\n\n8K\n\n8K\n\nFiled 0 1\n\nCO\n\n/\n\n$0\nNO\nO1\n\n=\n,\n\u00b0.\n\u2014\ntN\n\\o'\n\n001 40129\n\n001 40129\n\nPag\n\ne 40\n10 35\n\n10 36\n\n10 37\n\n1 of 408\n\nApril 22, 2024\n\nApril 22, 2024\n\nApril 22, 2024\n\n\fExhibit\nNumber\n\nCase 8:24-cv-02900-DKC Document 90-2\n\nDescription\n\nFiled 09/18/25\n\nPage 402 of 408\n\nIncorporated by Reference\n\nSchedule/\nForm\n\nFiling\n\nFile No. Exhibit Date\n\n10.37\n\n10.38\n\n10.39\n\n10 40\n\n10.41\n\n10.42\n\n16.1\n\n211\n\n2351%\n\n23:2\n\n23.3\n\n241\n\n101.INS\n\n101.SCH\n\n101.CAL\n\n101 DEF\n\n101.LAB\n\nAmendment to the Letter Agreement. dated\nMarch 27. 2024. between BTIG, LLC and\n\nArrowroot Acquisition Corp.\n\nFee Equitization Agreement, dated March 27,\n\nAcquisition Corp. and iLearningEngines Inc.\n\nAmendment No. 1 to Fee Equitization\nAgreement, dated May 31. 2024. by and among\niLearningEngines, Inc. and Cooley LLP\n\nForward Purchase Agreement, dated April 26,\n2023\n\nLetter Agreement. dated April 9. 2024. by and\namong Polar Multi-Strategy Master Fund.\nArrowroot Acquisition Corp. and\niLearningEngines Inc.\n\nFirst Amendment to Loan and Security\nAgreement, among iLearningEngines Holdings,\nInc.,_as borrower, East West Bank, as\nadministrative agent, and the lenders party\nthereto\n\nLetter from WithumSmith+Brown, PC to the\nSEC.\n\nList of Subsidiaries of iLearningEngines, Inc\n\nConsent of Marcum LLP. independent registered\npublic accounting firm\n\nConsent of WithumSmith+Brown, PC,\nindependent registered public accounting firm\n\nConsent of Cooley LLP (included in Exhibit\nai}\n\nPower of Attorney (included on signature page)\n\nInline XBRL Instance Document.\n\nInline XBRL Taxonomy Extension Schema\nDocument.\n\nInline XBRL Taxonomy Extension Calculation\nLinkbase Document.\n\nInline XBRL Taxonomy Extension Definition\nLinkbase Document\n\nInline XBRL Taxonomy Extension Label\nLinkbase Document.\n\n8-K\n\nS-1\n\nS-L/A\n\nS4/A\n\nS-1/A\n\nS-1/A\n\n8K\n\nS-1\n\nSl\n\n001-40129 10.38 April 22, 2024\n\n333-279908 10.38 June 3, 2024\n\n333-279908 10.39 July 1, 2024\n\n333 274333 10 16 November 6.\n\n2023\n\n333-279908 10.41 July 1, 2024\n\n333-279908 10.42 July 1, 2024\n\n001-40129 16.1\n\nApril 22, 2024\n\n001 40129 211 April 22, 2024\n\n333-279908 23.3 June 3, 2024\n\n333 279908 241 June 3, 2024\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 403 of 408\n\n101.PRE Inline XBRL Taxonomy Extension Presentation\nLinkbase Document.\n104 Cover Page Interactive Data File (formatted as\nInline XBRL and contained in Exhibit 101).\n107 Filing Fee Table S-1 333-279908 107 June 3, 2024\n\u201c Filed herewith.\n+ The schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S K A copy of any\nomitted schedule and/or exhibit will be furnished to the SEC upon request\n# Certain portions of this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(10)(iv) because they are not\n\nmaterial and are the type of information that the Registrant treats as private or confidential. The Registrant agrees to furnish\nsupplementally an unredacted copy of the Exhibit, or any section thereof, to the SEC upon request\n\nIndicates management contract or compensatory plan or arrangement\n\nIl 6\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 404 of 408\n\nItem 17 Undertakings\nThe undersigned Registrant hereby undertakes\n\n(a) To file, during any period in which offers or sales are being made, a post effective amendment to this Registration\nStatement\n\n(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;\n\nGi) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the\nmost recent post effective amendment thereof) which, individually or in the aggregate, represent a fundamental\nchange in the information set forth in this Registration Statement Notwithstanding the foregoing, any increase or\ndecrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which\nwas registered) and any deviation from the low or high end of the estimated maximum offering range may be\nreflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the\nchanges in volume and price represent no more than 20% change in the maximum aggregate offering price set forth\nin the \u201cCalculation of Registration Fee\u201d table in the effective registration statement; and\n\n(iii) To include any material information with respect to the plan of distribution not previously disclosed in this\nRegistration Statement or any material change to such information in this Registration Statement\n\n(b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post effective amendment\nthat contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered\ntherein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof\n\n(c) To remove from registration by means of a post effective amendment any of the securities being registered which remain\nunsold at the termination of the offering\n\n(d) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed\npursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying\non Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the\nregistration statement as of the date it is first used after effectiveness Provided, however, that no statement made ina\nregistration statement or prospectus that is part of the registration statement or made in a document incorporated or\ndeemed incorporated by reference into the registration statement or prospectus that is part of the registration statement\nwill, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was\nmade in the registration statement or prospectus that was part of the registration statement or made in any such document\nimmediately prior to such date of first use\n\n(ce) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the\ninitial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the\nundersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the\nsecurities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following\ncommunications,\n\n(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed\npursuant to Rule 424;\n\nqi) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or\nreferred to by the undersigned registrant;\n\n(iii) The portion of any other free writing prospectus relating to the offering containing material information about the\nundersigned registrant or its securities provided by or on behalf of the undersigned registrant; and\n\n(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser\n\nInsofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and\ncontrolling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the\n\fopinion of mecSeee 8:24-cv-02900-DKC ae ent 90-2 File | Q9/18/25 Page 405 of 408\n\nsuch indemmification is agains ic policy as expressed in the Securities Act of and is, therefore,\nunenforceable In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of\nexpenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or\nproceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant\nwill, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate\njurisdiction the question whether such indemnification by them is against public policy as expressed in the Securities Act of 1933 and\nwill be governed by the final adjudication of such issue\n\nIl 7\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 406 of 408\n\nSIGNATURES\n\nPursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its\nbehalf by the undersigned, thereunto duly authorized, in Bethesda, Maryland, on July 22, 2024\n\nILEARNINGENGINES. INC\n\nBy /s/ Harish Chidambaran\n\nName: Harish Chidambaran\nTitle: Chief Executive Officer\n\nPursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in\nthe capacities and on the dates indicated.\n\nSignature Title Date\ns/ Harish Chidambaran Chief Executive Officer and Chairman of the Board July 22, 2024\n\nHarish Chidambaran (Principal Executive Officer)\n\n: Chief Financial Officer July 22, 2024\n\nFarhan Naqvi (Principal Financial and Accounting Officer)\n\n* Director July 22, 2024\n\nBalakrishnan Arackal\n\n* Director July 22, 2024\n\nMatthew Barger\n\n= Director July 22, 2024\nTan Davis\n\n* Director July 22, 2024\nBruce Mehlman\n\n\u2018 Director July 22, 2024\nMichael Moe\n\n* Director July 22, 2024\n\nThomas Olivier\n\n*By /s/ Harish Chidambaran\n\nHarish Chidambaran\nAttorney-in-Fact\n\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 407 of 408\n\nEX 23 1 2 ea020968801ex23 1 ilearning htm CONSENT OF MARCUM LLP, INDEPENDENT REGISTERED PUBLIC\nACCOUNTING FIRM\n\nExhibit 23 1\n\nINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\u2019S CONSENT\n\nWe consent to the inclusion in this Registration Statement of iLearningEngines, Inc on Amendment No 2 to Form \u00a7 1, File No 333\n\n279908, of our report date April 22, 2024 with respect to our audits of the consolidated financial statements of iLearningEngines, Inc\n\nas of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022, and 2021, which report appears in the\nProspectus, which is part of this Registration Statement We also consent to the reference to our Firm under the heading \u201cExperts\u201d in\nsuch Prospectus\n\ns/ Marcum LLP\nMarcum LLP\n\nPhiladelphia, PA\nJuly 22, 2024\n\fCase 8:24-cv-02900-DKC Document 90-2 Filed 09/18/25 Page 408 of 408\nEX 23 2 3 eca020968801ex23 2 ilearning htm CONSENT OF WITHUMSMITH+BROWN, PC, INDEPENDENT REGISTERED\nPUBLIC ACCOUNTING FIRM\nExhibit 23 2\n\nCONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n\nWe hereby consent to the use in the Prospectus constituting a part of this Registration Statement on Amendment No 2 to Form S$ | of\nour report dated April 1, 2024, (which includes an explanatory paragraph regarding Arrowroot Acquisition Corp \u2019s ability to continue as\na going concern), relating to the consolidated financial statements of Arrowroot Acquisition Corp as of and for the years ended\nDecember 31, 2023 and 2022, which is contained in that Prospectus We also consent to the reference to our Firm under the caption\n\u201cExperts\u201d in the Prospectus\n\ns/ WithumSmith+Brown, PC\n\nNew York, New York\nJuly 22, 2024\n","ocr_status":1,"date_upload":"2026-05-19T22:34:27.864962-07:00","document_number":"90","attachment_number":2,"pacer_doc_id":"093015171199","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit A - Amendment No. 2 to Form S-1 Registration Statement","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/479807135/","id":479807135,"tags":[],"absolute_url":"/docket/69233925/90/3/walker-v-chidambaran/","date_created":"2026-05-19T22:33:16.103192-07:00","date_modified":"2026-05-22T08:53:04.761717-07:00","sha1":"a142c742bf11f8bc76f67824ca2c70781db0bb8b","page_count":1,"file_size":4888,"filepath_local":"recap/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.90.3.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.mdd.568958/gov.uscourts.mdd.568958.90.3.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 8:24-cv-02900-DKC Document 90-3 Filed 09/18/25 Page 1 of 1\n\n\n\n UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF MARYLAND\n (Southern Division)\n\n\n DANNY WALKER, Individually and on )\n Behalf of All Others Similarly Situated, )\n )\n Plaintiff, )\n )\n v. ) Civil Action No. DKC 24-2900\n )\n HARISH CHIDAMBARAN, et al., )\n )\n Defendants. )\n )\n )\n )\n ______________________________________ )\n\n\n [PROPOSED] ORDER DENYING DEFENDANTS\u2019 MOTIONS TO DISMISS\n\n\n Having considered Defendants Marcum LLP\u2019s, Thomas Olivier\u2019s, Harish Chidambaran\u2019s,\n\nSayyed Farhan Naqvi\u2019s, and Defendants Matthew Barger\u2019s, Ian Davis\u2019s, Bruce Mehlman\u2019s, and\n\nMichael Moe\u2019s (collectively, \u201cDefendants\u201d) respective motions to dismiss the Amended Class\n\nAction Complaint for Violations of the Federal Securities Laws (ECF Nos. 80, 82, 83, 84, 85),\n\nDefendants\u2019 memoranda of law in support thereof, Plaintiffs\u2019 oppositions thereto, and Defendants\u2019\n\nreplies, IT IS HEREBY ORDERED:\n\n 1. Defendants\u2019 motions to dismiss are DENIED in their entirety.\n\n\n\nIT IS SO ORDERED.\n\n\n\nDated: ___________________ ____________________________\n Honorable Deborah K. Chasanow\n United States District Judge\n 1\n\f","ocr_status":2,"date_upload":"2026-05-19T22:33:47.810349-07:00","document_number":"90","attachment_number":3,"pacer_doc_id":"093015171200","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Text of Proposed Order","acms_document_guid":""}],"date_created":"2025-12-17T07:51:10.708475-08:00","date_modified":"2026-05-18T23:59:55.623399-07:00","date_filed":"2025-09-18","time_filed":null,"entry_number":90,"recap_sequence_number":"2025-09-18.001","pacer_sequence_number":259,"description":"RESPONSE in Opposition re 85 MOTION to Dismiss the Amended Complaint, 82 MOTION to Dismiss for Failure to State a Claim filed by Louis Leveque, Iqbal al Hamid. (Attachments: # 1 Affidavit Declaration of Nicholas I. Porritt, # 2 Exhibit A - Amendment No. 2 to Form S-1 Registration Statement, # 3 Text of Proposed Order)(Porritt, Nicholas) (Entered: 09/18/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/447475301/","id":447475301,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69233925/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/462228751/","id":462228751,"tags":[],"absolute_url":"/docket/69233925/89/walker-v-chidambaran/","date_created":"2025-12-17T07:51:10.678730-08:00","date_modified":"2026-05-18T23:59:55.604511-07:00","sha1":"","page_count":null,"file_size":null,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"89","attachment_number":null,"pacer_doc_id":"","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"","acms_document_guid":""}],"date_created":"2025-12-17T07:51:10.652758-08:00","date_modified":"2026-05-18T23:59:55.576203-07:00","date_filed":"2025-09-03","time_filed":null,"entry_number":89,"recap_sequence_number":"2025-09-03.001","pacer_sequence_number":null,"description":"PAPERLESS ORDER THANKING counsel for 88 status report and APPROVING request to defer service on Defendant Balakrishnan until the court decides the pending motions to dismiss. Signed by Judge Deborah K. Chasanow on 9/3/2025. (sat, Chambers) (Entered: 09/03/2025)","tags":[]}],"entries_total":"https://www.courtlistener.com/api/rest/v4/docket-entries/?count=on&docket=69233925&page_size=40"}