What changed in Serve Robotics Inc. /DE/'s 10-K — 2022 vs 2023

Item 1. Business All references to “Serve” refer to Serve Operating Co. (formerly known as Serve Robotics Inc.), a privately held Delaware corporation and our direct, wholly-owned subsidiary. Unless otherwise stated or the context otherwise indicates, references to the “Company,” “we,” “our,” “us” or similar terms refer to Serve Robotics Inc.

(formerly named Patricia Acquisition Corp.) together with its wholly-owned subsidiary, Serve. Serve holds all material assets and conducts all business activities and operations of Serve Robotics Inc. Formation History Serve was incorporated in the State of Delaware on January 15, 2021. Serve is a spin-off of Uber Technologies, Inc. (“Uber”), a global ride-hailing and last-mile delivery platform.

The Serve initiative was initially formed in 2017 as the X division of Postmates Inc. (“Postmates”), a pioneering food delivery startup in the United States. Uber acquired Postmates in 2020, including the Postmates X division.

At the beginning of 2021, Uber’s leadership agreed to contribute the intellectual property developed by the Postmates X division team, the related assets, as well as a capital investment to Serve in return for a minority equity interest in the business.

Glossary of Terms and Abbreviations The following is a glossary of technical terms used in this annual report: AI — Artificial Intelligence AV — Autonomous Vehicle GHG — Greenhouse Gases GPS — Global Positioning System GPU — Graphical Processing Unit IMU — Inertial Measurement Unit LIDAR — A digital sensor for measuring distance to objects which uses the principle of radar, but uses light from a laser ODD — Operating Design Domain describes the specific operating conditions in which the automated driving system is designed to properly operate, including but not limited to roadway types, speed range, and environmental conditions Reverse Logistics — A type of supply chain management that moves goods from customers back to the sellers or manufacturers Company Overview We are on a mission to deliver a sustainable future by transforming how goods move among people.

Serve has developed an advanced, AI-powered robotics mobility platform, with last-mile delivery in cities as its first application. According to the Bureau of Transportation Statistics in 2017, 45% of car trips are taken for shopping and errands, while FedEx has stated that, as of 2019, over 60% of merchants’ customers live within three miles of a store location.

By eliminating unnecessary car traffic, and by reducing the cost of last-mile transportation, Serve aims to reshape cities into sustainable, safe, and people-friendly environments, with thriving local economies. 1 Serve’s first product is a low-emissions robot that serves people in public spaces, starting with food delivery.

In 2017, our core technology development began by our co-founders and a growing product and engineering team. In 2020, the team launched a fleet of sidewalk delivery robots (hereafter simply referred to as “delivery robots”) in Los Angeles performing contactless restaurant deliveries during the COVID-19 pandemic shutdowns.

By the end of that year, Serve robots had successfully completed over 10,000 commercial deliveries for Postmates in California, augmenting Postmates’ fleet of human couriers. After the contribution of assets in 2021, Serve established a commercial partnership with Uber, with deliveries starting in January 2022 at a small scale.

In May 2022, Uber announced a pilot program with Serve, and by June, it executed a commercial-scale agreement with Serve to deploy up to 2,000 of its robots across the United States. The above mentioned 10,000 commercial deliveries for Postmates were related to research and development of technology.

Serve’s current fleet consists of over 100 robots, and we plan to expand our fleet by building and deploying hundreds of new robots in coming years after raising additional rounds of financing. Our goal is to deploy all 2,000 Uber robots by the end of 2025, though the exact timing and robot quantity will be determined by future capital availability.

We currently do not expect to be able to build and deploy robots in 2024 based on our existing capital.

We have platform-level integrations with Uber Eats and 7-Eleven, Inc. in Los Angeles, California, which means Serve robots can provide real-time presence and status updates on those platforms and receive requests to perform deliveries with respect to customer orders placed on those platforms as needed.

We have also successfully conducted pilots for Walmart, a major pizza quick service restaurant, and a major coffee shop chain. To date, Uber Eats is the only partner for whom we have completed a material number of deliveries. Our strategic investors include NVIDIA, Uber, 7-Ventures and Delivery Hero’s corporate venture units, alongside other world-class investors.

Because Serve started within a food delivery company, our team comes with a depth of expertise in food delivery. Additionally, the engineering team has extensive experience in AI, automation and robotics. Our leadership team includes veterans from Uber, Postmates, Waymo, Apple Inc., Blue Origin, LLC, GoPro, Inc., GoDaddy Inc., and Anki, Inc.

We believe our expertise positions us to service the ever-growing on-demand delivery market, including food delivery. Based on our proprietary historical delivery data, approximately half of all delivery distances in the United States are less than 2.5 miles and well-suited to delivery by sidewalk robots.

We provide a robotic delivery experience that delights customers, improves reliability for merchants and reduces traffic congestion and vehicle emissions. Moreover, at scale we expect our robots will complete deliveries at lower cost than human couriers, making on-demand delivery more affordable and accessible in the areas in which we operate.

Last-mile Delivery Costs Despite new technological innovations of the past few decades as well as growing adoption of online commerce and home delivery, last-mile delivery has remained costly and inefficient.

By our own estimate, issues such as refunds and crediting caused by driver error (e.g., failed deliveries or missing items) and fraud increase average delivery cost by over $1.00 per delivery. In 2022, DoorDash, the largest food delivery platform in the United States, reported 35% revenue growth while net losses increased over 190%.

Besides on-demand delivery, next-day parcel delivery has also struggled with last-mile cost.

For example, in May 2023, Amazon announced a program to reduce its delivery costs by offering customers $10 to pick up items from nearby stores. 2 Tailwinds for Automation While an ever-growing share of consumers is shopping online and demanding faster deliveries, a number of factors have contributed to keeping last-mile costs high: ● Labor shortages caused by the aging population and the COVID-19 pandemic have led to wage inflation. ● On-demand delivery companies in many jurisdictions are battling regulatory pressures to classify gig workers as employees, which would in turn increase labor costs. ● More recently, cities across the United States have introduced maximum limits on how much delivery platforms can charge restaurants and merchants, highlighting the need to lower underlying delivery costs.

Labor cost inflation and regulatory pressures serve as tailwinds that are expected to accelerate the adoption of automated robotic last-mile delivery. While labor costs typically increase over time, hardware and technology costs typically decrease.

We expect the cost of cameras, GPU processors, electric motors, batteries, and advanced sensors such as LIDAR to continue to decrease, while mobile networks will become faster and more reliable with higher bandwidth and geographic coverage, which will lead to a downward trend in the cost of building and operating robots.

Delivery Robots, Aerial Drones and Autonomous Vehicle Deliveries vary by distance, cargo size, cargo sensitivity and timing requirements, among other factors. Today, most next-day parcels are delivered using trucks, while on-demand food delivery largely takes place in personal vehicles. Overall, a small percentage of short-distance deliveries are performed on bicycles.

As automation is introduced, different automated technologies will be best suited for different deliveries. AVs will be best for longer distance and larger deliveries, though experts currently believe AVs are still many years away from scaled, profitable operation.

Delivery robots and aerial drones, however, have been commercially operating in a variety of environments for several years and are expected to scale rapidly over the coming years. Robots are best suited for short-distance deliveries in populated environments and drones are best suited for longer distances and less populated areas.

When different automated vehicles emerge at scale, we expect to see a considerable share of deliveries completed using multiple technologies collaboratively.

For example, while aerial drones may provide faster delivery experience across longer distances and less populated areas, they face many challenges when it comes to picking up orders from many restaurants located in densely populated areas: safety concerns to sidewalk pedestrians, noise pollution, and lack of availability of dedicated real estate at every store front, among others.

Instead, we expect delivery robots will be able to pick up items on busy streets and urban environments, and deliver them to a drone at a nearby hand-off location. While in motion, a battery-powered delivery robot often generates less noise and carries considerably less kinetic energy than a flying drone.

By blending with existing infrastructure without introducing significant noise or safety concerns, delivery robots may enable drones to access items in the most populated spaces that may otherwise be challenging for drones to access in the future. Similarly, when AVs become commercially viable, they will face challenges accessing merchants on congested streets where parking is limited.

Restaurant waiting staff are often too busy to walk to the nearest available parking space to load an AV. We expect delivery robots will facilitate this process and help accelerate the adoption of AVs by allowing them to commercialize within existing urban infrastructures.

In summary, delivery robots, aerial drones and AVs are each efficacious for deliveries with different attributes, and all three will work collaboratively to create the most efficient automated last-mile delivery network. Delivery Robot Operations Our sidewalk delivery robots start each day at a central hub located near their operating area.

Employees at the hub prepare robots for dispatch every morning by ensuring robots are cleaned, regular maintenance items are performed, and robots pass daily diagnostic tests.

While most robots deploy to and return from their operating area automatically and without further vehicular assistance, some robots may be transported to and from operating areas that are further away in a human-driven vehicle. 3 While in the field, we estimate that Serve robots are able to navigate over 80% of their environment autonomously.

They are supervised through mobile connectivity and video streaming by remote human operators who can assist robots when necessary, such as at intersection crossings or when robots are unable to navigate certain conditions (e.g., blocked paths, construction zones, etc.).

In less frequent occasions, if a robot requires physical assistance, such as when a robot is too low on battery to return home or if it has been damaged, a nearby employee is dispatched to repair or return the robot. As of January 2024, fewer than 1 out of every 500 of our robotic deliveries require physical assistance.

Throughout the day, each robot receives a series of delivery orders from partnered merchants and delivery platforms. Upon acceptance of any such order, the robot navigates to the pick-up location, waits outside, and notifies merchant staff, often through their existing delivery tablets or point-of-sale devices.

Once the merchant staff load the package into the robot, it navigates to its drop-off destination. A similar sequence of events results in customers meeting the robot at the curb, unlocking its cargo using their delivery app or on-screen instructions, and retrieving their package.

At night, robots return to their central hub to be recharged, maintained, upgraded when necessary, and prepared for next morning’s deployment. Also, various robot components are occasionally replaced due to wear and tear (e.g., tires, motors and batteries). Other components such as computers and key sensors like LIDAR have multi-year lifespans and are rarely replaced.

Overall, the useful life of a robot is measured in years, as calculated based on the average lifespan of individual components weighted by their cost. Sidewalk delivery robots have inherent limitations on how much cargo they can carry and how quickly they can move given the constraints of the sidewalk environment.

Item 2. Properties Our current headquarters are located in Redwood City, California, where we lease 4,200 square feet of office and industrial space pursuant to a lease that expires in 2025. We have an option to extend that lease by a four-year term.

Our headquarters contain research and development, operations and selling, general and administrative functions as well as test tracks for our robots. We also lease two other offices in Los Angeles, our current delivery area.

We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.

Item 3. Legal Proceedings From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.

We are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority. Item 4. Mine Safety Disclosures Not applicable. 45 Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information No public market currently exists for our common stock. Holders of Common Stock As of December 31, 2023, we have 24,832,814 shares of common stock outstanding held by approximately 244 stockholders of record.

Any future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board deems relevant. Recent Sales of Unregistered Securities Magna Warrant In connection with the strategic partnership with Magna New Mobility USA, Inc.

(“Magna”), on February 7, 2024, the Company issued to Magna a warrant (the “Magna Warrant”) to purchase up to 2,145,000 shares of the Company’s common stock, par value $0.0001 per share (the “Magna Warrant Shares”), subject to adjustments as provided therein, at an exercise price per share of $0.01.

The Magna Warrant will be exercisable in two equal tranches: (i) the first tranche will become exercisable no later than May 15, 2024, subject to certain conditions; and (ii) the second tranche will become exercisable upon the achievement by Magna of a certain manufacturing milestone as set forth in a production and purchase agreement to be entered into with respect to the contract manufacturing of the Company’s autonomous delivery robots by Magna or one of its affiliates.

Notwithstanding the foregoing, all of Magna Warrant Shares will vest and become exercisable upon any Change of Control (as defined in the Magna Warrant).

The Magna Warrant Shares that may be issued pursuant to the exercise of the Magna Warrant were offered and sold in a transaction exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act.

Convertible Promissory Notes Offering At an initial closing on January 2, 2024 and subsequent closings on January 12, 2024, January 22, 2024 and January 26, 2024, we issued an aggregate of $5.0 million in convertible promissory notes to accredited investors.

These transactions were exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering or Regulation D promulgated thereunder.

Secured Subordinated Promissory Note On December 27, 2023, Serve issued the December 2023 Kashani Note to Ali Kashani, a holder of greater than 5% of the Company’s capital stock who serves as Chief Executive Officer and is a member of the Board, in exchange for a loan with the aggregate principal amount of $70,000.

Pursuant to the December 2023 Kashani Note, the loan accrued interest on the unpaid principal amount at a rate of 7.67% per annum, computed as simple interest.

Serve repaid the December 2023 Kashani Note on January 3, 2024. 46 The issuance of the December 2023 Kashani Note was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated by the SEC thereunder.

The Bridge Financing On April 21, 2023, in connection with the Bridge Financing, Serve offered and sold to accredited investors $3,001,500 principal amount of the Bridge Notes in a private placement. The Bridge Notes bore interest at 10% per annum and were payable on October 21, 2023, subject to earlier conversion as described below.

On July 31, 2023, upon the closing of the Merger and the initial closing of the Private Placement, the outstanding principal amount of the Bridge Notes was automatically converted into 937,961 shares of our common stock at a conversion price of $3.20 per share, and investors in the Bridge Notes received Bridge Warrants to purchase a number of shares of common stock equal to 50% of the number of shares of common stock into which the Bridge Notes were converted, at an exercise price of $3.20 per share for a term of three years.

If at any time after the Registration Effectiveness Date there is no effective registration statement registering for resale, or the prospectus contained therein is not available for the resale of the shares of common stock issuable upon exercise of the Bridge Warrants by the holder, the Bridge Warrants may also be exercised, in whole or in part, at such time by means of a “cashless” net exercise.

In connection with the sale of the Bridge Notes, Serve agreed to cause the Company to issue to the Bridge Brokers, upon closing of the Merger and the Private Placement, Bridge Broker Warrants to purchase a number of shares of Serve’s common stock equal to 8% of the number of shares of common stock into which the Bridge Notes, other than those purchased by Insider Investors, would convert at the closing of the Merger and Private Placement, with an exercise price per share of $3.20 and a term of three years.

The Bridge Brokers were entitled to be issued Bridge Broker Warrants to purchase an aggregate of 74,662 shares of our common stock.

The private placement of the Bridge Notes, and the grant of the Bridge Warrants and Bridge Broker Warrants were exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated by the SEC thereunder.

The Bridge Notes were sold to “accredited investors,” as defined in Regulation D, and the offering was conducted on a “reasonable best efforts” basis.

Private Placement On July 31, 2023, in connection with the Private Placement, we issued an aggregate of 2,782,378 shares of common stock at a price of $4.00 per share for aggregate gross consideration of approximately $11.13 million to 71 accredited investors.

These transactions were exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering or Regulation D promulgated thereunder.

On August 30, 2023, in connection with the Private Placement, we issued an aggregate of 257,762 shares of common stock at a price of $4.00 per share for aggregate gross consideration of approximately $1.03 million to 5 accredited investors.

These transactions were exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering or Regulation D promulgated thereunder.

On October 26, 2023, in connection with the Private Placement, we issued an aggregate of 143,531 shares of common stock at a price of $4.00 per share for aggregate gross consideration of approximately $0.57 million to 8 accredited investors.

These transactions were exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering or Regulation D promulgated thereunder. 47 Placement Agent Warrants In connection with the Private Placement and subject to the closing of the Private Placement, we agreed to pay each of the Placement Agents, Aegis Capital Corp. and Network 1 Financial Services, Inc., each a U.S. registered broker-dealer, a cash placement fee of 8% of the gross proceeds raised from investors in the Private Placement (or 4% of gross proceeds raised from Insider Investors) and to issue to them Placement Agent Warrants consisting of (a) Placement Agent A Warrants to purchase a number of shares of our common stock equal to 8% of the number of shares of common stock sold in the Private Placement (other than to Insider Investors), with a term expiring three years after the common stock begins to trade on Nasdaq or NYSE and an exercise price of $4.00 per share and (b) Placement Agent B Warrants to purchase 125,000 shares of common stock with the same term as the Placement Agent A Warrants and an exercise price of $0.001 per share.

The grant of the Placement Agent Warrants was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated by the SEC thereunder.

Securities Issued in Connection with the Merger On July 31, 2023, pursuant to the terms of the Merger Agreement, 3,091,672 shares of Serve’s Series Seed preferred stock, 2,440,411 shares of Serve’s Series Seed-1 preferred stock, 2,088,696 shares of Serve’s Series Seed-2 preferred stock, and 357,836 shares of Serve’s Series Seed-3 stock were converted into an aggregate of 7,978,616 shares of our common stock.

These transactions were exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering or Regulation D promulgated thereunder. None of the securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.

Sales of Unregistered Securities of Serve The following list sets forth information as to all securities Serve sold from January 15, 2021, through immediately prior to the consummation of the Merger, which were not registered under the Securities Act. The following description is historical and has not been adjusted to give effect to the Merger.

The proceeds from these sales were used by the Company for working capital. 1. Between April 27, 2021 and June 25, 2021, Serve issued a total of 3,535,400 shares of Serve’s common stock at a price per share of $0.0012 to stockholders of Serve for gross proceeds of $4,400.

Serve relied upon the exemption from registration provided by Regulation 4(2) under the Securities Act. 2.

Between April 12, 2021 and September 19, 2021, Serve issued a total of 3,663,819 shares of common stock at a price per share of $0.0013 to service providers of Serve pursuant to the Serve Plan, of which 2,775,306 are outstanding for gross proceeds of $4,725.27.

Serve relied upon the exemption from registration provided by Rule 701 of the Securities Act. 3. Between August 23, 2022 and September 7, 2022, Serve issued a total of 338,122 shares of common stock at a price per share of $0.49 to service providers of Serve pursuant to the Serve Plan.

Serve relied upon the exemption from registration provided by Rule 701 of the Securities Act. 4. Between December 23, 2021 and October 8, 2022, Serve issued options to purchase a total of 1,229,755 shares of common stock at an exercise price of $0.49 per share to service providers of Serve pursuant to the Serve Plan, of which 829,749 are outstanding.

Serve relied upon the exemption from registration provided by Rule 701 of the Securities Act. 5. On February 24, 2021, Serve issued a simple agreement for future equity for an aggregate purchase amount of $1.00 million (the “February 2021 SAFE”) to an investor of Serve.

The February 2021 SAFE converted into 2,440,411 shares of Serve’s Series Seed-1 Preferred Stock at a price per share of $1.5161 on October 4, 2021. Serve relied upon the exemption from registration provided by Regulation 4(2) under the Securities Act. 6.

Between January 29, 2021 and March 16, 2021, Serve issued SAFEs for an aggregate purchase amount of $5.68 million (the “2021 SAFEs”) to investors of Serve. The 2021 SAFEs converted into 2,088,696 shares of Serve’s Series Seed-2 Preferred Stock at a price per share of $2.7170 on October 4, 2021.

Serve relied upon the exemption from registration provided by Regulation 4(2) under the Securities Act. 48 7. On July 13, 2021, Serve issued a simple agreement for future equity for an aggregate purchase amount of $1.25 million (the “Bridge SAFE”) to investors of Serve.

The Bridge SAFE converted into 357,836 shares of Serve’s Series Seed-3 Preferred Stock at a price per share of $3.4932 on October 4, 2021. Serve relied upon the exemption from registration provided by Regulation 4(2) under the Securities Act. 8.

On October 4, 2021, Serve entered into a Series Seed Preferred Stock Purchase Agreement, pursuant to which the Company issued 3,091,672 shares of Serve’s Series Seed Preferred Stock at a price per share of $3.8814, 2,440,411 shares of Serve’s Series Seed-1 Preferred Stock, 2,088,696 shares of Serve’s Series Seed-2 Preferred Stock, and 357,836 shares of Serve’s Series Seed-3 Preferred Stock to stockholders of Serve.

Serve raised a total of $12.00 million from the sale of Serve’s Series Seed Preferred Stock. Serve relied upon the exemption from registration provided by Regulation 4(2) under the Securities Act. 9. On October 4, 2021, Serve issued a warrant to purchase 128,819 shares of Serve’s Series Seed Preferred Stock at an exercise price of $3.88 per share.

Serve relied upon the exemption from registration provided by Regulation 4(2) under the Securities Act. 10. On November 11, 2021, Serve issued a warrant to purchase 13,911 shares of Serve’s common stock at an exercise price of $3.88 per share. Serve relied upon the exemption from registration provided by Regulation 4(2) under the Securities Act. 11.

Between February 4, 2022 and March 9, 2022, Serve issued SAFEs for an aggregate purchase amount of $10.59 million to investors of Serve. Serve relied upon the exemption from registration provided by Regulation 4(2) under the Securities Act. 12.

On March 1, 2022, Serve issued a warrant to purchase 40,292 shares of Serve’s common stock at an exercise price of $0.49 per share. Serve relied upon the exemption from registration provided by Regulation 4(2) under the Securities Act. 13.

Between December 1, 2022 and January 18, 2023, Serve issued simple agreement for future equity for an aggregate purchase amount of $4.97 million to investors of Serve. Serve relied upon the exemption from registration provided by Regulation 4(2) under the Securities Act. 14.

On March 15, 2023, Serve issued options to purchase a total of 255,240 shares of common stock at an exercise price of $0.50 per share to service providers of Serve pursuant to the Serve Plan. Serve relied upon the exemption from registration provided by Rule 701 of the Securities Act. 15.

On June 7, 2023, Serve issued options to purchase a total of 510,237 shares of common stock at an exercise price of $0.86 per share to service providers of Serve pursuant to the Serve Plan. Serve relied upon the exemption from registration provided by Rule 701 of the Securities Act. 16.

On June 28, 2023, Serve issued the June 2023 Kashani Note to Ali Kashani, in exchange for a loan with the aggregate principal amount of $449,000. Pursuant to the June 2023 Kashani Note, the loan accrued interest on the unpaid principal amount at a rate of 7.67% per annum, computed as simple interest. Dr.

Kashani was entitled to an exit fee equal to 16% of the stated principal amount of the June 2023 Kashani Note, less the total amount of interest that accrued on the June 2023 Kashani Note prior to the Closing of the Merger.

Serve paid the Kashani Exit Fee and repaid the June 2023 Kashani Note upon the Closing of the Merger. On August 4, 2023, payment of $520,840 was made to Dr. Kashani as repayment of the promissory note, which includes $449,000 in principal and $71,840 in interest. No additional fees were paid.

The issuance of the June 2023 Kashani Note was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated by the SEC thereunder. 49 Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the notes to those statements included in this Annual Report on Form 10-K for the period ended December 31, 2023.

Some of the information contained in this discussion and analysis including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risk, uncertainties and assumptions. You should read Part I, Item 1A.

Risk Factors of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Note about Forward-Looking Statements This Annual Report on Form 10-K includes statements that constitute “forward-looking statements.” These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “intends,” “plans,” “expects,” or “anticipates,” and do not reflect historical facts.

Specific forward-looking statements contained in this portion of the report include, but are not limited to: (i) statements that are based on current projections and expectations about the markets in which we operate, (ii) statements about current projections and expectations of general economic conditions, (iii) statements about specific industry projections and expectations of economic activity, (iv) statements relating to our future operations, prospects, results, and performance, and (v) statements that the cash on hand and additional cash generated from operations together with potential sources of cash through issuance of debt or equity will provide the Company with sufficient liquidity for the next 12 months.

Forward-looking statements involve risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements.

Factors and risks that could affect our results, future performance and capital requirements and cause them to materially differ from those contained in the forward-looking statements include those identified in the “Cautionary Note Regarding Forward-Looking Statements” and the Part 1, Item 1A.

Risk Factors in this report, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future. In addition, the foregoing factors may generally affect our business, results of operations and financial position. Forward-looking statements speak only as of the date the statements were made.

We do not undertake and specifically decline any obligation to update any forward-looking statements. Any information contained on our website www.serverobotics.com or any other websites referenced in this report are not part of this report. Our Company We are an operating company which has experienced losses since our inception.

Our sources of cash to date have been capital invested by shareholders and venture capital investors/lenders. The following discussion contains forward-looking statements, as discussed above. Please see the sections entitled “ Cautionary Note Regarding Forward-Looking Statements ” and Part I, Item 1A.

Risk Factors in this report for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements. Our principal offices are located at 730 Broadway, Redwood City, CA 94063, our telephone number is (818) 860-1352 and our corporate website (which does not form part of this report) is located at www.serverobotics.com.

Overview On July 31, 2023, Patricia Acquisition Corp., Acquisition Sub, and Serve entered into a Merger Agreement. Pursuant to the terms of the Merger Agreement, on the Closing Date, Acquisition Sub merged with and into Serve, with Serve continuing as the surviving corporation and our wholly owned subsidiary.

As a result of the Merger, we acquired the business of Serve and will continue the existing business operations of Serve as a public reporting company under the name Serve Robotics Inc.

On the Closing Date, Serve’s predecessor was renamed Serve Operating Co. 50 The Merger was treated as a recapitalization and reverse acquisition for us for financial reporting purposes, and Serve is considered the acquirer for accounting purposes.

As a result of the Merger and the change in our business and operations, a discussion of the past financial results of Patricia Acquisition Corp. is not pertinent, and under applicable accounting principles, the historical financial results of Serve, the accounting acquirer, prior to the Merger are considered our historical financial results.

Our discussion and analysis are organized as follows: ● Executive Summary – Summary analysis of financial and other highlights to provide context for the discussion and analysis. ● Results of Operations – An analysis of our financial results. ● Liquidity, and Capital Resources – An analysis of changes in our balance sheets and cash flows and a discussion of our financial condition and potential sources of liquidity. ● Critical Accounting Estimates – Accounting estimates that management believes are the most important to understanding the assumptions and judgments incorporated in our financial results and forecasts and involve a significant level of estimation uncertainty.

Serve Robotics Serve is shaping the future of sustainable, self-driving delivery. We design, develop, and operate low-emissions robots that serve people in public spaces, starting with food delivery.

Starting in 2017, our core technology was developed by our co-founders and a majority of our product and engineering team in San Francisco, California as a special project within Postmates, one of the pioneering food delivery startups in the United States.

By the end of 2020, the team had developed a fleet of sidewalk robots that had successfully performed over 10,000 commercial deliveries for Postmates in California, augmenting Postmates’ fleet of human couriers.

Postmates was acquired by Uber in 2020, and in February of 2021, Uber’s leadership team agreed to contribute the intellectual property developed by the team and assets relating to this project to Serve. In return for this contribution and an investment of cash into the Company, Uber acquired a minority equity interest in the business.

By the end of the first quarter of 2021, the majority of the team that had worked on this project at Postmates joined Serve as full time employees. Because we started this project within a food delivery company, our team comes with a depth of combined expertise in food delivery, automation, and robotics.

Our expertise positions us to service the growing on-demand delivery market, including food delivery, where approximately half of all deliveries are less than 2.5 miles and well-suited to delivery by sidewalk robots. We provide a robotic delivery experience that delights customers, improves reliability for merchants, and reduces traffic congestion and eliminates vehicle emissions.

At scale, our delivery robots can complete deliveries at lower cost than human couriers, making on-demand delivery more affordable and accessible in areas we operate. Recent Developments License and Services Agreement On February 20, 2024, Serve entered into a License and Services Agreement (the “LSA”) with Magna as a part of a strategic partnership with Magna.

Pursuant to the LSA, Serve, as an independent contractor of Magna, agreed to (i) grant a non-exclusive license to the Serve AMR Technology in the Licensed Fields of Use (each as defined in the LSA) to Magna and its affiliates and (ii) provide all reasonable engineering, technical and related support services that Magna may request from time to time in writing and in furtherance of commercialization of the Serve AMR Technology and products (including software) using, practicing, or incorporating the Serve AMR Technology, and manufactured using, practicing or incorporating the Serve AMR Technology (such services and support, the “Development Services”).

Except as expressly set forth in the LSA, any Development Services shall be provided under the MSA (as defined below) and, if expired or terminated, under terms and conditions that are consistent with the terms therein.

The term of the LSA will continue unless terminated by either party pursuant to and in accordance with the terms and conditions set forth in the LSA. Master Services Agreement On February 1, 2024, Serve entered into a Master Services Agreement (the “MSA”) with Magna, retroactively effective as of January 15, 2024 (the “Effective Date”).

Pursuant to the MSA, Serve agreed to provide certain services to Magna as described in one or more statements of work (“SOWs”).

Such SOWs will contain a description of the scope, the time to be spent on performance, the fees to be paid to Serve, the functional requirements and technical specifications and, to the extent applicable, the timetable, schedule or milestones for the performance of the requested services. Serve and Magna entered into the first SOW on the Effective Date.

The term of the MSA commenced on the Effective Date and will continue for a term of three months, unless terminated earlier or mutually extended in accordance with its terms.

In connection with the strategic partnership with Magna, on February 7, 2024, we issued the Magna Warrant to purchase up to 2,145,000 shares of our common stock, subject to adjustments as provided therein, at an exercise price of $0.01 per share.

The Magna Warrant will be exercisable in two equal tranches: (i) the first tranche will become exercisable no later than May 15, 2024, subject to certain conditions; and (ii) the second tranche will become exercisable upon Magna’s achievement of a certain manufacturing milestone as set forth in a production and purchase agreement to be entered into with respect to the contract manufacturing of our autonomous delivery robots by Magna or its affiliates.

Notwithstanding the foregoing, the Magna Warrant Shares will vest and become exercisable upon any “change of control” (as defined in the Magna Warrant). 51 The Magna Warrant Shares that may be issued pursuant to the exercise of the Magna Warrant were offered and sold in a transaction exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act.

Convertible Promissory Notes Offering At an initial closing on January 2, 2024 and subsequent closings on January 12, 2024, January 22, 2024 and January 26, 2024, we issued to certain accredited investors convertible promissory notes, for which the Company received an aggregate of $5.0 million in proceeds.

The convertible promissory notes bear interest at a rate of 6.00% per year, compounded annually, due and payable upon request by each investor on or after the 12-month anniversary of the original issuance date of each note. The Company may not prepay or repay the notes in cash without the consent of the investors.

Note Payable – Related Party On December 27, 2023, Serve issued a senior secured promissory note to its Chief Executive Officer for which Serve received $70,000 in proceeds. The note bore interest at 7.67% per annum. The agreement contained a clause that the terms would be updated if subsequent notes were issued at a more favorable term.

Serve repaid the note on January 3, 2024. Merger Agreement On July 31, 2023, the Company, our wholly-owned subsidiary, Serve Acquisition Co., a corporation formed in the State of Delaware on July 10, 2023 (“Acquisition Sub”), and Serve entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”).

Pursuant to the terms of the Merger Agreement, on July 31, 2023 (the “Closing Date”), Acquisition Sub merged with and into Serve, with Serve continuing as the surviving corporation and our wholly-owned subsidiary (the “Merger”). As a result of the Merger, we acquired the business of Serve, a leading autonomous sidewalk delivery company based in Redwood City, California.

See Part I, Item 1. Business of this report.

At the time the certificate of merger reflecting the Merger was filed with the Secretary of State of Delaware (the “Effective Time”), each of Serve’s shares of capital stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive 0.8035 of a share of our common stock (in the case of shares held by accredited investors), with the maximum number of shares of our common stock issuable to the former holders of Serve’s capital stock equal to 20,948,917 shares after adjustments due to rounding for fractional shares.