SecProbe.io

CORRESP
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M. ALI PANJWANI

Partner

Direct Tel: 212-326-0820

Fax: 212-326-0806

ali.panjwani@pryorcashman.com

July 31, 2024

Securities and Exchange Commission

Division of Corporation Finance

100 F Street N.E.

Washington, D.C. 20549

 Attention: Uwem Bassey

Jan Woo

Dave Edgar

Chris Dietz

Re: zSpace, Inc.

Amendment No. 1 to Registration Statement on Form S-1 (the “Registration
Statement”)

Filed on July 22, 2024

File No. 333-280427

Ladies and Gentlemen:

On behalf of our client,
zSpace, Inc. (the “Company”), we are responding to the oral comment of Ms. Dietz of the Staff (the “Staff”)
of the Securities and Exchange Commission (the “Commission”) from a phone conversation on July 29, 2024, in
which Ms. Dietz expressed there may be a further review of the difference between the Company’s March 5, 2024 valuation of *****
per share of its common stock pursuant to its equity grants and the estimated price range of the Company’s initial public
offering (“IPO”) of ***** per share.

Because of the commercially
sensitive nature of the information contained herein, this submission is accompanied by the Company’s request for confidential
treatment of selected portions of this letter pursuant to Rule 83 of the Commission’s Rules on Information and Requests, 17 C.F.R.
 § 200.83 and the Freedom of Information Act.

Price Range

The Company advises the Staff
that, on July 22, 2024, representatives of Roth Capital Partners, the lead underwriter for the Company’s IPO, and Craig-Hallum
Capital Group (the “Joint Managers”), recommended a preliminary price range of $***** for the IPO (“Price Range”), resulting in a midpoint of the Price Range of *****per share (the “Midpoint Price”) . The Price Range has been estimated based on a number of factors,
including the progress of the developments in the Company’s business, input received from the Company’s “testing the
waters meetings,” current market conditions, and input received from representatives of the Joint Managers based on quantitative
and non-quantitative factors.

This Price Range does not
take into account the current lack of liquidity for the Company’s common stock and assumes a successful IPO with no weighting attributed
to any other outcome for the Company’s business, such as remaining a privately held company or being sold in an acquisition transaction.
As is typical for IPOs, the Price Range was not derived using a formal determination of fair value but was determined as a result of
discussions among representatives of the Company and the Joint Managers. During these discussions, the parties considered quantitative
factors, as well as non-quantitative factors, such as the valuations of recently completed public offerings and evaluating those issuers’
respective stages of development as compared to the Company, the current valuations of public companies at a similar stage of development
as compared to the Company, and recent market conditions.

Equity Grants and Common Stock Valuation

As stated in the Registration
Statement, the Company has granted stock-based awards consisting of stock options to its employees and directors.

Securities and Exchange Commission

July 31, 2024

Page 2

The Company measures stock-based
awards granted to employees and directors based on their estimated fair value on the date of grant and recognizes compensation expense
for those awards over the requisite service period, which is generally the vesting period of the respective award. Generally, the Company
issues stock options and restricted stock awards with service-based and performance-based vesting conditions and records the expense
for these awards using the straight-line method or upon completion of the performance condition.

The Registration Statement
describes the Company’s use of the Black-Scholes option-pricing model (“Black-Scholes”) for the purpose
of calculating the estimated grant date fair value of the stock options. The Company’s board of directors (the “Board”),
with input from management, determined the estimated fair value per share of the Company’s common stock to be as follows:

    Valuation

    As of Date

    Valuation

     Issue Date

    Estimated
    Fair Value

    Per Share of Common

    Stock Underlying Option

    Grants(1)

    Valuation Method

    March 31, 2022

    August
    25, 2022

    *****

    Hybrid
    of OPM / Reverse Merger Scenario

    December 31, 2022

    April 12, 2023

    *****

    Hybrid of OPM
    / Reverse Merger Scenario

    September 30, 2023

    January 24, 2024

    *****

    Hybrid of OPM
    / IPO

    December 31, 2023

    February 7, 2024

    *****

    Hybrid of OPM
    / IPO

    March 31,  2024

    June 17, 2024
    (Draft)

    *****

    Hybrid of OPM
    / IPO

1March
31, 2022, December 31, 2022 and September 30, 2023 adjusted for 75:1 reverse stock split on December 29, 2023

These estimated fair values
per share of common stock were determined by the Board after considering valuation reports from an independent third-party valuation
specialist, Carta Valuations, LLC (“Carta”) , as well as other objective and subjective factors as appropriate,
including the Company’s business activities and product development and programs, the Company’s cash burn and cash balances,
the value of public companies with similar profiles to the Company, the likelihood of achieving a liquidity event, the issuance of preferred
stock and the rights, preferences and privileges of preferred stock as compared to common stock and the other factors described below.
Set forth below in this letter is a discussion of each valuation and equity grant date since September 1, 2022, along with a comparison
of the estimated fair value of the Company’s common stock.

    Grant
    Date
    Vesting Terms
    Number
    of

    Shares(1)
    Exercise
    Price per

    Share(1)
    Estimated
    Fair

    Value per Share on

    Grant Date(1)

    September
    5, 2022
    Service-based and Performance-based
      *****
    *****
    *****

    December 9, 2022
    Service-based and Performance-based
      *****
    *****
    *****

    March 5, 2024
    Service-based Performance-based
      *****
    *****
    *****

    May 10, 2024
    Service-based
      *****
    *****
    *****

1March
31, 2022, December 31, 2022 and September 30, 2023 adjusted for 75:1 reverse stock split on December 29, 2023

In preparing the March 31,
2022 valuation, the Company determined its enterprise value using the option pricing model (“OPM”). Because
of the Company’s stage of development and other relevant factors, the Company believed that OPM was the appropriate method for
valuing the Company’s common stock. The resulting estimated fair value of the Company’s common stock was $*****per share on a non-marketable, minority basis.

Securities and Exchange Commission

July 31, 2024

Page 3

March 31, 2022 and December 31, 2022 Valuations

In determining the March
31, 2022 and December 31, 2022 valuations, the Company used a hybrid method of the Going Concern (OPM) and the Reverse Merger scenarios.
The hybrid method was determined to be the appropriate method to model various exit scenarios for purposes of valuing the Company’s
common stock because of the stage of development of the Company and the expected timing of the consummation of the Company’s reverse
merger into a SPAC, factoring in the inherent uncertainty associated with being able to complete the reverse merger. The resulting estimated
fair value of the Company’s common stock as of March 31, 2022 and December 31, 2022 was $*****and $4.50 per share, respectively, on a non-marketable, minority basis. The key drivers in the determinations included the following:

    March
    31, 2022
    December
    31, 2022

    The
    Company exceeded its FY 2021 sales targets, as measured by closed orders. Due to supply chain disruptions, revenue was 90% of plan.
    Backorders were over $11.0 million at December 31, 2021.
    Company
    had performed strongly over FY 2022. Management was forecasting FY 2022 revenue of $*****  million with actual revenue coming in at
    $*****  million, a beat of ~10%.

    Gross
    margin and operating expense improvements led to a reduction in operating loss, when not including supply chain and resulting COVID
    impacted product end-of-life non-recurring expenditures.
    EBITDA
    loss was smaller than expected with EBITDA expected to be -$9.5M million with actual EBITDA coming in at ($8.2) million.

    The
    Company signed a semi-exclusive distribution and technology partnership with a major PC OEM in December 2021, where the PC OEM and
    zSpace combine their products to deliver an auto-stereoscopic laptop to the world-wide education market.
    Management
    forecasted $***** million in revenue / EBITDA for FY 2023.

    With
    its return to growth post the COVID impacts in 2020 and early 2021, the Company moved aggressively to implement a program for going
    public in 2022.
    The
    forecast provided assumed the deSPAC underway was completed.

    The
    Company signed an LOI with a SPAC to complete the deSPAC process and list by December 2022. The transaction would value the Company's
    enterprise value at $***** million, inclusive of a $*****million earn-out provision, but exclusive of 1 million warrants to be issued to the current shareholders with an exercise
    price of $***** per share.
    The
    Company had ~$4.1 million of cash on hand, as well as $48.3 million of debt obligations.  Approximately, $67.01 million of debt
    converted into a "Non-Convertible/Voting" preferred share class, as a consideration made by certain investors in order
    to facilitate the deSPAC transaction.

In the March 31, 2022 and
December 31, 2022 valuations, the hybrid and probability-weighted expected return method (“PWERM”) was used
to address two scenarios: Going Concern and a Reverse Merger / deSPAC scenario. The following probability weights were assigned to the
scenarios at each valuation date.

    March
    31, 2022
    December
    31, 2022

    Going Concern – 50%

    Reverse Merger – 50%

    Going Concern – 60%

    Reverse Merger – 40%

The relative probability
of each type of future event scenario was based on an analysis of market conditions at the time, including then-current initial public
offering valuations of similarly situated companies, and expectations as to the timing and likely prospects of such scenarios.

The Going Concern scenario
assumed an equity valuation determined by the OPM which was used to determine the value of each class of the Company’s capital
stock and a back-solve method based on a probability-weighted price of the preferred stock tied to its initial issuance price. To calculate
the estimated fair market value of the Company’s common stock, the Black-Scholes method was used, requiring a series of variables,
including the equity value of the Company, time to liquidity event, risk-free rate and volatility. For each valuation, the Company used:

    March
    31, 2022

    December
    31, 2022

    an implied
    equity value of approximately

    $***** million

    $***** million

    a probability weighted time to exit after accounting for the Company’s approximation
    of the time it would take the Company to exit of;

    2.00 years

    2.00 years

    a risk-free interest rate based on the yield of U.S. Treasury bonds as
    of the valuation date, a maturity which closely approximated the forecasted liquidity horizon of the Company, of; and

    2.28
    %

    4.41
    %

    an estimate
    for expected volatility based on an analysis of the historical volatility of guideline public companies and factors specific to the
    Company.

    77.00
    %

    80.00
    %

Securities and Exchange Commission

July 31, 2024

Page 4

The following discounts for
lack of marketability (“DLOM”) were applied to the March 31, 2022 and December 31, 2022 valuations. The DLOMs used for all
scenarios reflected the Company’s then-current estimates of the time to a liquidity event.

    Going
    Concern
    Reverse
    Merger

    DLOM
      35.0 %
      30.0 %

September 6, 2022 and December 9, 2022 Grants

At September 6, 2022 and
December 9, 2022, the Board determined that the estimated fair value of the Company’s common stock was $*****per share based on the valuation analysis as of March 31, 2022 and, and other objective and subjective factors as appropriate,
including increased complexity of the reverse merger terms and overall volatility in the stock markets, and in the SPAC sector in particular.
As part of this determination, the Board concluded that no significant internal or external value-affecting events had taken place between
the March 31, 2022 valuation date and the grant dates that were not already reflected in the March 31, 2022 valuation.

On
June 21, 2023, as more fully described in the Registration Statement, the reverse merger transaction
was terminated by the other party to the transaction. As a result, in accordance with the terms of the applicable option agreements,
the performance based options terminated.

September 30, 2023, December 31, 2023 and March 31, 2024 Valuations

In determining the September
30, 2023 and December 31, 2023 and March 31, 2024 valuations, the Company used a hybrid method of the Going Concern (OPM) and IPO (common
stock equivalent) scenarios. Again, the hybrid method was determined to be the appropriate method to model various exit scenarios for
purposes of valuing the Company’s common stock because of the stage of development of the Company and the expected timing of an
IPO, factoring in the inherent uncertainty associated with being able to complete the IPO. The resulting estimated fair value of the
Company’s common stock as of September 30, 2023 and December 31, 2023 and March 31, 2024 was *****,
$***** and $***** per share, respectively, on
a non-marketable, minority basis. The key drivers in the fair values determined included the following:

    September
    30, 2023
    December
    31, 2023
    March
    31, 2024

    The
    Company achieved $44.7 million in revenue in the last twelve months, representing 50.3% growth when compared to the prior twelve
    months revenue of $29.2 million;
    The
    Company achieved $42.3 million in revenue in the last twelve months, representing 18.2% growth when compared to the prior twelve
    months revenue of $35.8 million;
    The
    Company achieved $43.6 million in revenue in the last twelve months, representing 17.3% growth when compared to the prior twelve
    months revenue of $37.1 million;

    The
    Company entered into manufacturing supply arrangement with a new partner to deliver additional laptop products beginning in early
    2024;

    The
    Company gained board approval to move forward via the IPO route, and agreed on its 2023 audit schedule for S-1 financials, with the
    S-1 expected to be filed in early February 2024; and
    The
    Company expected to exit via IPO as early as September 2024, depending on market conditions;
    The
    Company had filed two DRS amendments based on SEC comments in March 2024 and an annual audit bring-up and SEC Comments were expected
    in early May 2024;

    From
    early discussions with bankers, the Company expected an enterprise value of approximately $*****million.
    The
    Company had not selected a banker, but based on continued discussions, the Company expected an enterprise value of approximately
    $***** million; and
    The Company
    engaged Roth Capital Partners as its lead underwriter for the planned IPO, with a target listing by mid-August and the Company submitted
    its Nasdaq Application. The expected enterprise value remained at approximately $*****
    million ; and

    The
    Company converted approximately $***** million its existing NCNV Preferred shares and
    outstanding venture debt to NCNV Series 1,