SecProbe.io

CORRESP
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M. ALI PANJWANI

Partner

Direct Tel: 212-326-0820

Fax: 212-326-0806

ali.panjwani@pryorcashman.com

September 9, 2024

Via Edgar

Uwem Bassey

Jan Woo

Dave Edgar

Chris Dietz

Securities and Exchange Commission

Division of Corporate Finance

100 F Street, N.E.

Washington, D.C. 20549

    Re:
    zSpace, Inc.

    Amendment No. 2 to
    Registration Statement on Form S-1

    Filed August 9, 2024

    CIK No. 0001637147

    File No. 333-280427                                                                   

Ladies and Gentlemen:

On behalf of our client,
zSpace, Inc., a Delaware corporation (the “Company”), and pursuant to the applicable provisions of the Securities
Act of 1933, as amended (the “Securities Act”), and the rules promulgated thereunder, we hereby submit in electronic
form the accompanying Amendment No. 3 to Registration Statement on Form S-1 of the Company (as amended, the “Form S-1”),
marked to indicate changes from the Amendment No. 2 to Registration Statement on Form S-1 that was filed with the Securities
and Exchange Commission (the “Commission”) on August 9, 2024.

The
Form S-1 reflects the responses of the Company to comments received from the Staff of the Commission (the “Staff”) in
a letter dated August 16, 2024 (the “Comment Letter”). In addition to addressing the comments received from the
Staff, the Company has also revised the Form S-1 to update other disclosures in the Form S-1. The discussion below is presented
in the order of the numbered comments in the Comment Letter. Certain capitalized terms set forth in this letter are used as defined in
the Form S-1. For your convenience, references in the responses to page numbers are to the marked version of the Form S-1
and to the prospectus included therein.

Securities and Exchange Commission

September 9, 2024

Page 2

The Company has asked us
to convey the following responses to the Staff:

Amendment No. 2 to Form S-1

Prospectus Summary, page 1

 1. We note your revised disclosure
                                            in response to prior comment 3 that you expect that the majority of the proceeds will be
                                            directed to funding product commitments and software development initiatives. Please revise
                                            the disclosure in the prospectus summary correspondingly.

 Response: In
                                            response to the Staff’s comment, the Company has revised the disclosure in the Prospectus
                                            Summary to include disclosure similar to the disclosure in the Use of Proceeds section of
                                            the Form S-1.

Oral Comment

    2.
    On
    September 5, 2024, the Company and the Staff had a telephonic discussion wherein the Staff provided oral comments regarding the Company’s
    response to prior comment 9.

    Response:
    In response to the Staff’s oral comment
    asking for a description of the historical capitalization of the Company in relation to its NCNV preferred stock and the resulting
    impact on determining the fair value of its common stock, the Company provides the following response. The Company advises the Staff
    that the following response should be reviewed in conjunction with the Company’s prior correspondence on this matter dated
    July 31, 2024 and August 9, 2024. Because of the commercially sensitive nature of the information contained within this response,
    this submission is accompanied by the Company’s request for confidential treatment of selected portions of this response 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.

As described in various sections of
the Form S-1 and in particular Note 5. Debt and Related Party Debt of the Company’s consolidated financial statements as
of and for the years ended December 31, 2023 and 2022, over the past few years the Company has primarily financed its operations through
debt arrangements as it has resumed growth following the COVID-19 pandemic.

In early 2020, the Company underwent
a significant recapitalization pursuant to which it removed all prior preferred stock classes and the Company became primarily financed
by bSpace Investments Ltd. (“bSpace”), and Kuwait Investment Authority (“KIA,” and together with bSpace, the
 “Investors”). As described in the Form S-1, prior to May 2022, the Company incurred debt obligations including the value
of conversion and repayment premiums to the Investors of approximately $103.6 million. Since 2022, the Company’s strategy has been
to seek conversion of its debt into equity in preparation to raise additional capital through the sale of equity in public markets.

Pursuant to the Company’s plan
to raise capital through the sale of equity in the public markets, in May 2022, the Company entered into a merger agreement with EdtechX
Holdings Acquisition Corp II (“EdtechX”), a Special Purpose Acquisition Company (SPAC) (the “EdtechX Merger”).
In keeping with the Company’s intent to convert debt to improve its capitalization profile prior to going public, the Investors,
agreed to convert their debt pursuant to the terms of the EdtechX Merger. In May 2022, approximately $59 million of the bSpace debt was
converted into the Company’s former NCNV preferred stock pursuant to the terms of a conversion agreement. In addition, approximately
$8.1 million of debt owed to KIA was converted to the Company’s former NCNV preferred stock under a separate conversion agreement.
The terms of the conversions were such that the liquidation preference of the former NCNV preferred stock was equal to the amount of
the debt converted. As of December 31, 2022, the Company’s remaining debt outstanding to the Investors was reduced to the approximate
aggregate amount of $36.5 million, which was due to be converted upon the completion of the EdtechX Merger. On June 21, 2023, the EdtechX
Merger was abandoned, and, as a result, no conversions that were contingent upon the consummation of the EdtechX Merger occurred.

Securities and Exchange Commission

September 9, 2024

Page 3

Following the failed EdtechX Merger,
in October 2023, the Company decided to proceed with going public through a traditional initial public offering (“IPO”).
In December 2023, in keeping with the intent to convert all of the debt held by the Investors prior to going public, the remaining debt
of approximately $42.2 million (plus accrued interest) that had not already converted in the May 2022 conversion was converted into new
series of NCNV Preferred Stock 1, NCNV Preferred Stock 2 and NCNV Preferred Stock 3 (“New NCNV Preferred Stock”). In addition,
the former NCNV preferred stock held by each of the Investors was exchanged for shares of the New NCNV Preferred Stock with amended conversion
terms. As of December 31, 2023, the New NCNV Preferred Stock had a value of approximately $107 million.

In January 2024, the Company entered
into an engagement with Roth Capital Partners (“Roth”) to act as its lead underwriter for a proposed IPO. Between January
2024 and March 2024, ongoing discussions between the Company and Roth focused around an enterprise value range between $****
 million - $**** million as an appropriate range given the Company’s
then-current and projected operating results, capitalization level and the then-current capital market pricing expectation. As of March
31, 2024, the New NCNV Preferred Stock value remained at approximately $107 million.

When working with Carta Valuations
LLC to determine the December 31, 2023 and March 31, 2024 common stock valuations for purposes of 409A of the Internal Revenue Code (the
 “Carta Valuations”), the Company used a hybrid method of the Going Concern (OPM) and IPO (common stock equivalent) 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 then-current stage of development of the Company and the expected timing of an IPO, factoring in the inherent
uncertainty associated with being able to complete an IPO. The resulting estimated fair value of the Company’s common stock as
of December 31, 2023 and March 31, 2024 was $**** and $****
 per share, respectively, on a non-marketable, minority basis, as shown below in the table previously provided in the Company’s
prior correspondence on this matter dated August 9, 2024.

Securities and Exchange Commission

September 9, 2024

Page 4

    December
    31, 2023
    March
    31, 2024

    Going

    Concern
    IPO

    Going

    Concern

    IPO

    Company
    Equity Value ($ Millions)(1) (2)
    $ ****M
    $ ****M
    $ ****M
    $ ****M

    Common Value per Share

    Shares
      174,265
      28,236,741
      174,077
      30,659,169

    Fully
    Marketable Value (1) (2)
    $ ****
    $ ****
    $ ****
    $ ****

    DLOM
    (3)
      35.0 %
      25.0 %
      35.0 %
      18.0 %

    Non-marketable Fair Value
    $ ****
    $ ****
    $ ****
    $ ****

    PWERM
    Weighting (4)
      50.0 %
      50.0 %
      40.0 %
      60.0 %

    Concluded Fair Market Value
      $****
      $****

(1-4)
Refers to detailed footnotes as presented in the Company’s prior correspondence on this matter dated August 9, 2024.

In
the Carta Valuations, the New NCNV Preferred Stock was treated as follows: (1) the going concern scenario treated the New NCNV Preferred
Stock as debt-like and was included with other interest bearing liabilities that reduce the Company Equity Value and (2) the IPO scenario
treated the New NCNV Stock as equity (and not-debt like) because they would convert into common stock
upon an IPO. As result, the Company Equity Value in the going concern scenario was reduced by approximately $107 million because of the
debt-like treatment of the New NCNV Preferred Stock as shown below in the table previously provided in the Company’s prior
correspondence on this matter dated August 9, 2024.

    12/31/2023
    (a)
    03/31/2024
    (a)

    ($
    millions)
    Metric
    Multiple
    Weighting
    Weighted

    Value
    Metric
    Multiple
    Weighting
    Weighted

    Value

    2024 Revenue
    $ ****
      ****
      100 %
    $ ****
    $ ****
      ****
      50 %
    $ ****

    2025 Revenue

    $ ****
      ****
      50 %
    $ ****

    Business enterprise value

    $ ****

    $ ****

    Plus: Cash
    and cash equivalents

    $ 3.2

    $ 1.2

    Market value of invested capital

    $ ****

    $ ****

    Less:
    Interest-bearing liabilities (b)

    $ 123.4

    $ 128.6

    Equity value (rounded)

    $ ****

    $ ****

(a)
Carta Valuations pages 16 and 17, as of 12/31/23 and 03/31/24, respectively.

(b)
Includes NCNV Preferred Stock liquidation value.

Furthermore, total
shares of common stock outstanding under the IPO scenario increased by 19,428,583 shares because of the assumed conversion of New NCNV
Preferred Stock into common stock at the IPO price (30,659,169 shares in the March 31, 2024 Carta Valuation), while the going concern
scenario does not include such a conversion and thus the total of shares was dramatically lower in such a scenario (174,077 shares in
the December 31, 2023 Carta Valiation).

In conclusion, the
primary factor that caused the large difference between the Company Equity Value (and thus the final concluded fair market value) in
the going concern scenario and the IPO scenario in the Carta Valuations was the treatment of the New NCNV Preferred Stock. Due to the
large amount of common stock that the New NCNV Preferred Stock would convert into upon an IPO, and its treatment as debt or as equity,
resulted in a major variation in Company Equity Value (and thus the final concluded fair market value) under each scenario.

*       *       *

Securities and Exchange Commission

September 9, 2024

Page 5

As it is the goal of the
Company to have the Form S-1 declared effective as soon as possible, the Company would greatly appreciate the Staff’s review
of the Form S-1 as promptly as practicable. If the Staff has any questions with respect to the foregoing, please contact the undersigned
at (212) 326-0820.

    Very truly yours,

    /s/M. Ali Panjwani

    M. Ali Panjwani

    cc:
    Mr. Paul Kellenberger

    zSpace, Inc.