[Explanatory Note – Certain Defined Terms](index=3&type=section&id=Explanatory%20Note%20%E2%80%93%20Certain%20Defined%20Terms) This section defines key terms and acronyms used throughout the Annual Report to ensure clarity and consistent understanding - This section defines key terms and acronyms used throughout the Annual Report, such as '2022 Private Warrant,' 'ATM Offering,' 'Board,' 'Closing,' 'Exchange Act,' 'GAAP,' 'IPO,' 'Secured Notes,' and 'Velo3D,' to ensure clarity and consistent understanding[7](index=7&type=chunk)[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) [Market and Industry Data](index=5&type=section&id=MARKET%20AND%20INDUSTRY%20DATA) Market and industry information relies on third-party sources and company assumptions, subject to inherent limitations and potential changes - Information regarding the market and industry is based on third-party sources and company assumptions, which are subject to numerous limitations, risks, and potential changes[40](index=40&type=chunk)[41](index=41&type=chunk) - Cited Market and Industry Reports include analyses on Investment Casting, Global Metal Forging, Metal Machining, Braze Alloys, and Additive Manufacturing/3D printing[42](index=42&type=chunk) [Special Note Regarding Forward-Looking Statements](index=6&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) The report contains forward-looking statements based on current expectations, which involve risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements based on current expectations and beliefs, which involve risks and uncertainties that may cause actual results or performance to differ materially[44](index=44&type=chunk)[45](index=45&type=chunk) - Examples of forward-looking statements include those related to market opportunity, growth strategy, R&D advancements, financing ability, regulatory developments, and expected financial performance[46](index=46&type=chunk) [Summary of Risk Factors](index=7&type=section&id=SUMMARY%20OF%20RISK%20FACTORS) The company faces significant risks including operating losses, going concern doubts, customer concentration, intense competition, operational challenges, and intellectual property issues - The company has a history of operating losses and there is substantial doubt about its ability to continue as a going concern, requiring additional capital that may not be available on acceptable terms[50](index=50&type=chunk)[52](index=52&type=chunk) - Key business risks include reliance on a limited number of customers, significant delays in product commercialization, intense competition in the additive manufacturing industry, and challenges in managing rapid growth[51](index=51&type=chunk)[52](index=52&type=chunk)[55](index=55&type=chunk) - Operational risks encompass potential defects in additive manufacturing systems, dependence on independent contractors and third-party suppliers, and vulnerability of the primary facility to disruptions[53](index=53&type=chunk)[55](index=55&type=chunk) - Intellectual property risks involve the failure to protect IP rights and potential third-party lawsuits alleging infringement[56](index=56&type=chunk)[59](index=59&type=chunk) [PART I](index=10&type=section&id=PART%20I) This part covers the company's business operations, risk factors, unresolved staff comments, cybersecurity, properties, legal proceedings, and mine safety disclosures [Item 1. Business](index=10&type=section&id=Item%201.%20Business) Velo3D is an additive manufacturing company providing integrated hardware and software solutions based on proprietary laser powder bed fusion technology for complex metal parts - Velo3D produces fully integrated hardware and software solutions using proprietary Laser Powder Bed Fusion (L-PBF) technology, which significantly reduces or eliminates the need for support structures in metal 3D printing[62](index=62&type=chunk)[68](index=68&type=chunk) - The Sapphire family of systems (Sapphire, Sapphire 1MZ, Sapphire XC, Sapphire XC 1MZ) enables the production of complex metal parts for high-value applications in space, aviation, defense, automotive, energy, and industrial markets[64](index=64&type=chunk)[85](index=85&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - The company's growth strategy is a 'land and expand' approach, focusing on uncontested market segments by validating technology with initial sales and then integrating solutions into customer processes for repeat purchases[67](index=67&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - Key components of the integrated solution include Flow print preparation software, Sapphire metal AM printers, Assure quality assurance software, and the Intelligent Fusion manufacturing process[71](index=71&type=chunk)[88](index=88&type=chunk)[94](index=94&type=chunk)[96](index=96&type=chunk) - As of December 31, 2024, Velo3D owned **63 issued patents** (**43 U.S., 20 foreign**) and **51 publicly pending patent applications**, with issued patents expiring between 2035 and 2047[83](index=83&type=chunk)[114](index=114&type=chunk) - Space Exploration Technologies Corp. ('SpaceX') was the largest customer, accounting for **23.0% of revenue in 2024**, a significant increase from **4.0% in 2023**[98](index=98&type=chunk) Research and Development Expenses | Year Ended December 31, | R&D Expenses (in millions) | | :---------------------- | :------------------------- | | 2024 | $17.1 | | 2023 | $42.0 | - The company had **105 full-time employees** as of December 31, 2024, a reduction from **237 in 2023**, with a focus on talent acquisition, development, and retention[115](index=115&type=chunk)[117](index=117&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks that could adversely affect the company's business, financial condition, and operating results, including going concern issues and customer reliance - The company has a history of operating losses (**$82.3 million in 2024** and **$133.3 million in 2023**) and anticipates incurring operating losses and negative cash flow in the near-term, raising substantial doubt about its ability to continue as a going concern[130](index=130&type=chunk)[132](index=132&type=chunk) - Sales to the top three customers accounted for **47.0% of revenue in 2024** (up from **24.5% in 2023**), indicating a high reliance on a limited customer base, with SpaceX being the largest customer[136](index=136&type=chunk)[137](index=137&type=chunk) - The company expects to require additional financing (equity or debt) to fund operations and satisfy obligations, but obtaining capital on acceptable terms may be difficult due to its financial condition and going concern issues[140](index=140&type=chunk)[141](index=141&type=chunk) - The additive manufacturing industry is characterized by rapid technological change and intense competition, requiring continuous product development and innovation to remain competitive[169](index=169&type=chunk)[171](index=171&type=chunk) - Material weaknesses in internal control over financial reporting have been identified, including an ineffective control environment, insufficient segregation of duties, and inadequate controls over debt, equity, inventory, and contract accounting[187](index=187&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - As of December 24, 2024, an entity controlled by the Chief Executive Officer, Arun Jeldi, owns approximately **95% of the outstanding common stock**, granting him significant influence over company matters[263](index=263&type=chunk) - The company's common stock is currently quoted on the OTC Pink, which may limit liquidity and price compared to national securities exchanges[284](index=284&type=chunk) [Item 1B. Unresolved Staff Comments](index=52&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item states that there are no unresolved staff comments from the SEC - Not applicable[299](index=299&type=chunk) [Item 1C. Cybersecurity](index=52&type=section&id=Item%201C.%20Cybersecurity) Velo3D's Board oversees a comprehensive cybersecurity risk management program, including technical safeguards, incident response, and employee training, with no material incidents in 2024 - The Board, supported by the Audit Committee, oversees cybersecurity risk management, receiving quarterly reports and prompt updates on material incidents[301](index=301&type=chunk)[309](index=309&type=chunk) - The cybersecurity program includes technical safeguards (firewalls, intrusion prevention, access controls), incident response and recovery plans, and a dedicated Security Incident Response Team (SIRT)[303](index=303&type=chunk)[304](index=304&type=chunk) - Mandatory annual training is provided to personnel regarding cybersecurity threats and evolving information security policies[307](index=307&type=chunk) - The company is not aware of any material risks from cybersecurity threats in 2024 that have materially affected or are reasonably likely to materially affect its business strategy, operations, or financial condition[312](index=312&type=chunk) [Item 2. Properties](index=54&type=section&id=Item%202.%20Properties) Velo3D's global corporate headquarters and primary manufacturing facility are in Fremont, California, with R&D leases in Campbell, CA, terminated in late 2024 - The global corporate headquarters and primary manufacturing facility (**80,000+ sq ft**) are located in Fremont, California[314](index=314&type=chunk)[315](index=315&type=chunk) - Leases for two Research and Development facilities in Campbell, CA (**17,200 sq ft** and **5,000 sq ft**) were terminated in the second half of 2024[315](index=315&type=chunk) [Item 3. Legal Proceedings](index=54&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[316](index=316&type=chunk) [Item 4. Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[317](index=317&type=chunk) [PART II](index=55&type=section&id=PART%20II) This part covers market information for common equity, management's discussion and analysis of financial condition, financial statements, and controls and procedures [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=55&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Velo3D's common stock is quoted on the OTC Pink, with over 195 holders of record as of March 27, 2025, and the company has never paid cash dividends - The company's common stock is currently quoted on the OTC Pink under the symbol 'VLDX', having previously traded on OTCQX and NYSE[319](index=319&type=chunk) - As of March 27, 2025, there were over **195 holders of record** of the company's common stock[320](index=320&type=chunk) - The company has never declared or paid cash dividends on its common stock and intends to retain all available funds and future earnings for business operations[321](index=321&type=chunk) [Item 6. [Reserved]](index=55&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - Reserved[326](index=326&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Velo3D's financial condition and results of operations, highlighting revenue trends, costs, and liquidity challenges, including going concern doubts [Recent Developments](index=57&type=section&id=Recent%20Developments) Recent developments include a strategic business review, a debt-for-equity exchange, issuance of Senior Secured Convertible Promissory Notes, a warrant exchange, and a 1-for-35 reverse stock split - A strategic business review concluded on December 24, 2024, with Arrayed Notes Acquisition Corp. purchasing Senior Secured Notes and subsequently exchanging debt for equity, resulting in Arrayed owning approximately **95% of the company's issued and outstanding common stock**[335](index=335&type=chunk)[336](index=336&type=chunk) - The company issued a **$5.0 million Senior Secured Convertible Promissory Note** in January 2025 (due April 7, 2025) and a **$10.0 million note** in February 2025 (due six months from funding)[337](index=337&type=chunk)[338](index=338&type=chunk) - A warrant exchange was completed on February 24, 2025, converting an aggregate of **4,665,793 warrants** into **14,852,379 shares of common stock** at an exchange ratio of three acquired shares for each warrant[339](index=339&type=chunk)[801](index=801&type=chunk) - A **1-for-35 reverse stock split** of the company's issued and outstanding common stock was implemented effective June 13, 2024[340](index=340&type=chunk) [Key Financial and Operational Metrics](index=58&type=section&id=Key%20Financial%20and%20Operational%20Metrics) The company evaluates revenue, bookings, and backlog, which saw declines in revenue and bookings in 2024, while backlog increased, and customer concentration remained high Key Financial and Operational Metrics (in millions) | Metric | 2024 | 2023 | Change (YoY) | | :------- | :--- | :--- | :----------- | | Revenue | $41 | $77 | -$36 (-46.8%) | | Bookings | $31 | $56 | -$25 (-44.6%) | | Backlog | $16 | $13 | +$3 (+23.1%) | - Sales to the top three customers accounted for **47.0% of revenue in 2024**, compared to **24.5% in 2023**, indicating continued high customer concentration[347](index=347&type=chunk) - The Sapphire XC 1MZ system, first shipped at the end of 2022, has capacity to make parts **400% larger** and reduce production costs per part by approximately **65% to 80%** compared to the original Sapphire system[344](index=344&type=chunk) [Components of Results of Operations](index=59&type=section&id=Components%20of%20Results%20of%20Operations) This section outlines revenue streams from 3D Printer sales, recurring payments, and support services, along with cost components, operating expenses, and other financial items - Revenue is primarily derived from 3D Printer sales, recurring payments (operating leases), support services, and other revenue, such as licensing agreements[352](index=352&type=chunk)[354](index=354&type=chunk)[358](index=358&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk) - 3D Printer sales include both structured fixed purchase prices and a phased-out sale and utilization fee model, which represented **0% of revenue in 2024** and **3% in 2023**[355](index=355&type=chunk)[452](index=452&type=chunk) - Cost of revenue includes manufacturing costs for 3D Printers, depreciation of leased equipment, and costs for spare parts, installation, and field service for support services[362](index=362&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk) - Operating expenses are categorized into Research and Development, Selling and Marketing, and General and Administrative[366](index=366&type=chunk)[367](index=367&type=chunk)[368](index=368&type=chunk) - Other financial items include interest expense, gains/losses on fair value of warrants, contingent earnout liabilities, debt derivatives, and loss on debt extinguishment[369](index=369&type=chunk)[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk) [Results of Operations (2024 vs. 2023)](index=63&type=section&id=Results%20of%20Operations%20%282024%20vs.%202023%29) In 2024, total revenue decreased significantly, but gross loss and loss from operations improved, driven by reduced R&D expenses and increased G&A due to bad debt Consolidated Statements of Operations (Selected Items, in thousands) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :-------------------------------------- | :---------- | :---------- | :---------- | :---------- | | Total Revenue | $41,003 | $77,443 | $(36,440) | (47.1)% | | 3D Printer Revenue | $25,368 | $68,938 | $(43,570) | (63.2)% | | Support Services Revenue | $9,581 | $6,829 | $2,752 | 40.3% | | Other Revenue | $5,000 | $0 | $5,000 | NS | | Total Cost of Revenue | $43,088 | $103,710 | $(60,622) | (58.5)% | | Gross Loss | $(2,085) | $(26,267) | $24,182 | (92.1)% | | Research and Development Expenses | $17,108 | $42,031 | $(24,923) | (59.3)% | | Selling and Marketing Expenses | $13,808 | $23,229 | $(9,421) | (40.6)% | | General and Administrative Expenses | $49,346 | $41,727 | $7,619 | 18.3% | | Loss from Operations | $(82,347) | $(133,254) | $50,907 | (38.2)% | | Interest Expense | $(15,968) | $(9,722) | $(6,246) | 64.2% | | Gain on Fair Value of Warrants | $32,094 | $2,338 | $29,756 | 1272.7% | | Net Loss | $(73,297) | $(135,139) | $61,842 | (45.8)% | - The decrease in 3D Printer sales was primarily due to lower systems sold, lower production volumes, and discounted pricing, partially offset by a shift to higher-priced Sapphire 1MZ, XC, and XC 1MZ systems[378](index=378&type=chunk) - Other revenue increased to **$5.0 million in 2024**, attributed to a licensing agreement with SpaceX for certain patents and technologies[381](index=381&type=chunk) - Research and development expenses decreased by **$24.9 million**, primarily due to the completion of Sapphire 1MZ, XC, and XC 1MZ system development in 2023 and a reduction in new R&D projects in 2024 as part of strategic realignment[396](index=396&type=chunk)[397](index=397&type=chunk) - General and administrative expenses increased by **$7.6 million**, mainly due to a **$13.2 million increase in bad debt expense** and a **$4.4 million increase in public company-related advisory, legal, accounting fees, and insurance**[403](index=403&type=chunk) [Liquidity and Capital Resources](index=68&type=section&id=Liquidity%20and%20Capital%20Resources) Velo3D faces substantial doubt about its ability to continue as a going concern due to low cash and an accumulated deficit, necessitating additional financing and expense reductions Cash, Cash Equivalents, and Short-Term Investments (in millions) | Metric | 2024 | 2023 | | :----------------------------------- | :---- | :---- | | Cash, cash equivalents & short-term investments | $1.2 | $31.1 | | Accumulated deficit | $430.3| $357.0| - There is substantial doubt about the company's ability to continue as a going concern due to insufficient liquidity to meet operating needs for the twelve-month period following the filing date[415](index=415&type=chunk) - The company expects to require additional financing (equity or debt) to fund operations, repay Secured Convertible Notes, provide working capital, and support product development and infrastructure[416](index=416&type=chunk) - A debt-for-equity exchange on December 24, 2024, cancelled **$22.4 million in principal** and **$0.4 million in accrued interest** of Secured Notes, leaving **$5.0 million outstanding**[422](index=422&type=chunk) - In January and February 2025, the company issued **$15.0 million in Senior Secured Convertible Promissory Notes**[423](index=423&type=chunk)[424](index=424&type=chunk) Contractual Obligations as of December 31, 2024 (in thousands) | Obligation Type | Less than 1 year | 1 – 3 years | 3 – 5 years | Total | | :-------------------------- | :--------------- | :---------- | :---------- | :------- | | Operating leases | $2,390 | $7,320 | $8,779 | $18,489 | | Debt principal, interest & fees | $5,993 | $0 | $0 | $5,993 | | Purchase commitments | $3,200 | $0 | $0 | $3,200 | | **Total** | **$11,583** | **$7,320** | **$8,779** | **$27,682**| Cash Flow Summary (in thousands) | Cash Flow Activity | 2024 | 2023 | | :-------------------------------------- | :---------- | :----------- | | Net cash used in operating activities | $(32,677) | $(105,636) | | Net cash provided by investing activities | $7,767 | $38,891 | | Net cash provided by financing activities | $1,460 | $59,261 | [Critical Accounting Policies and Significant Estimates](index=72&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) This section details critical accounting policies and significant estimates for revenue recognition, stock-based compensation, warrants, earnout liabilities, and fair value measurements, requiring substantial judgment - Revenue recognition follows a five-step model, allocating transaction price to performance obligations (3D Printers and Support Services) based on relative standalone selling price (SSP)[447](index=447&type=chunk)[448](index=448&type=chunk)[449](index=449&type=chunk) - 3D Printer revenue is recognized at the point of transfer of control to the customer at shipment, while Support Services revenue is recognized evenly over the contract period[450](index=450&type=chunk)[458](index=458&type=chunk) - Common Stock Warrants are classified as derivative liabilities and are remeasured at fair value at each balance sheet date, with changes recognized in the consolidated statements of operations[477](index=477&type=chunk) - Contingent earnout liabilities for Earnout Shares are accounted for as liabilities and subsequently remeasured at fair value using a Monte Carlo simulation model[478](index=478&type=chunk) - Stock-based compensation for stock options and restricted share units (RSUs) is measured at fair value on the grant date and expensed ratably over the service period, using Black-Scholes or Monte-Carlo valuation models[462](index=462&type=chunk)[463](index=463&type=chunk)[464](index=464&type=chunk)[590](index=590&type=chunk)[591](index=591&type=chunk)[592](index=592&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=77&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Velo3D is not required to provide quantitative and qualitative disclosures about market risk - The company is not required to provide quantitative and qualitative disclosures about market risk as it is a smaller reporting company[481](index=481&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=77&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2024 and 2023, including balance sheets, statements of operations, cash flows, and equity, with auditors highlighting going concern doubts - Independent auditors' reports (Frank, Rimerman + Co. LLP for 2024 and PricewaterhouseCoopers LLP for 2023) express an opinion on the fair presentation of the consolidated financial statements[487](index=487&type=chunk)[495](index=495&type=chunk) - Both auditors' reports highlight substantial doubt about the company's ability to continue as a going concern due to incurred losses from operations and negative cash flows from operations since inception[488](index=488&type=chunk)[496](index=496&type=chunk) Consolidated Balance Sheets (Selected Items, in thousands) | Metric | 2024 | 2023 | | :----------------------------------- | :---------- | :---------- | | Cash and cash equivalents | $1,212 | $24,494 | | Short-term investments | $0 | $6,621 | | Total current assets | $57,724 | $113,024 | | Total assets | $89,180 | $153,799 | | Total current liabilities | $38,000 | $48,671 | | Long-term debt – less current portion | $0 | $11,941 | | Total liabilities | $49,516 | $85,459 | | Total stockholders' equity | $39,664 | $68,340 | Consolidated Statements of Operations and Comprehensive Loss (Selected Items, in thousands) | Metric | 2024 | 2023 | | :-------------------------------------- | :---------- | :---------- | | Total Revenue | $41,003 | $77,443 | | Gross loss | $(2,085) | $(26,267) | | Loss from operations | $(82,347) | $(133,254) | | Net loss | $(73,297) | $(135,139) | | Basic Net loss per share | $(5.77) | $(23.97) | | Diluted Net loss per share | $(5.77) | $(23.97) | Consolidated Statements of Cash Flows (Selected Items, in thousands) | Cash Flow Activity | 2024 | 2023 | | :-------------------------------------- | :---------- | :----------- | | Net cash used in operating activities | $(32,677) | $(105,636) | | Net cash provided by investing activities | $7,767 | $38,891 | | Net cash provided by financing activities | $1,460 | $59,261 | - The company's accumulated deficit increased to **$430.3 million in 2024** from **$357.0 million in 2023**[502](index=502&type=chunk) - The company adopted ASU 2023-07, Segment Reporting, retrospectively for the year ended December 31, 2024, requiring enhanced disclosures for its single reportable segment[611](index=611&type=chunk) - Material weaknesses in internal control over financial reporting were identified, including an ineffective control environment, insufficient segregation of duties, and inadequate controls over debt, equity, inventory, and contract accounting[807](index=807&type=chunk)[810](index=810&type=chunk)[811](index=811&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=133&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - None[802](index=802&type=chunk) [Item 9A. Controls and Procedures](index=133&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of December 31, 2024, due to material weaknesses in internal control over financial reporting, with remediation efforts underway - Disclosure controls and procedures were deemed not effective as of December 31, 2024, due to identified material weaknesses in internal control over financial reporting[804](index=804&type=chunk) - Material weaknesses include an ineffective control environment, insufficient segregation of duties, and inadequate controls over accounting and disclosure for debt and equity instruments, inventory, and contract assets/liabilities[807](index=807&type=chunk)[810](index=810&type=chunk)[811](index=811&type=chunk) - Remediation measures have begun, including hiring additional accounting and IT personnel, providing training, and designing/implementing controls for segregation of duties and IT general controls[812](index=812&type=chunk) - As an emerging growth company, Velo3D is exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act[806](index=806&type=chunk) [Item 9B. Other Information](index=135&type=section&id=Item%209B.%20Other%20Information) This section states that there are no Rule 10b5-1 Plan Adoptions and Modifications to report - None[815](index=815&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=135&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[816](index=816&type=chunk) [PART III](index=136&type=section&id=PART%20III) This part covers information regarding directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and principal accountant fees [Item 10. Directors, Executive Officers and Corporate Governance](index=136&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company maintains a Code of Business Conduct and Ethics, with further information incorporated by reference from the 2025 Annual Meeting of Stockholders Proxy Statement - The company maintains a Code of Business Conduct and Ethics applicable to all employees, independent contractors, and board of directors, published on its Investor Relations website[818](index=818&type=chunk) - Further information required by this item will be included in the Proxy Statement for the 2025 Annual Meeting of Stockholders and is incorporated by reference[819](index=819&type=chunk) [Item 11. Executive Compensation](index=136&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation will be included in the company's Proxy Statement for the 2025 Annual Meeting of Stockholders and is incorporated by reference - Information required by this item will be included in the Proxy Statement to be filed with the SEC, within 120 days of the year ended December 31, 2024, and is incorporated herein by reference[820](index=820&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=136&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership will be included in the company's Proxy Statement for the 2025 Annual Meeting of Stockholders and is incorporated by reference - Information required by this item will be included in the Proxy Statement to be filed with the SEC, within 120 days of the year ended December 31, 2024, and is incorporated herein by reference[821](index=821&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=136&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships and related transactions, and director independence, will be included in the company's Proxy Statement for the 2025 Annual Meeting of Stockholders and is incorporated by reference - Information required by this item will be included in the Proxy Statement to be filed with the SEC, within 120 days of the year ended December 31, 2024, and is incorporated herein by reference[822](index=822&type=chunk) [Item 14. Principal Accountant Fees and Services](index=136&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services will be included in the company's Proxy Statement for the 2025 Annual Meeting of Stockholders and is incorporated by reference - Information required by this item will be included in the Proxy Statement to be filed with the SEC, within 120 days of the year ended December 31, 2024, and is incorporated herein by reference[823](index=823&type=chunk) [PART IV](index=137&type=section&id=PART%20IV) This part includes exhibits, financial statement schedules, a Form 10-K summary, and required signatures [Item 15. Exhibits and Financial Statement Schedules](index=137&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the company's consolidated financial statements and a detailed exhibit index of various corporate documents - The section includes the company's consolidated financial statements and an exhibit index[826](index=826&type=chunk)[827](index=827&type=chunk)[828](index=828&type=chunk)[829](index=829&type=chunk) - The exhibit index details various corporate documents, such as business combination agreements, certificates of incorporation, warrant agreements, securities purchase agreements, and employment agreements[830](index=830&type=chunk)[831](index=831&type=chunk)[833](index=833&type=chunk) [Item 16. Form 10-K Summary](index=141&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item states that no Form 10-K Summary is provided - None[836](index=836&type=chunk) [Signatures](index=142&type=section&id=Signatures) This section contains the required signatures for the Form 10-K report from key officers and directors, dated March 31, 2025 - The report is signed by the Chief Financial Officer, Chief Executive Officer, Chief Operating Officer, and other Directors, dated March 31, 2025[839](index=839&type=chunk)[840](index=840&type=chunk)

[Overview and Strategic Initiatives](index=1&type=section&id=Overview%20and%20Strategic%20Initiatives) The company underwent a significant ownership change, implemented a new go-to-market strategy, and launched a new 'Rapid Production Solutions' business to drive future growth and profitability [Management Commentary and Strategic Outlook](index=1&type=section&id=Management%20Commentary%20and%20Strategic%20Outlook) Management details Q4 2024 as a transformational period, focusing on new strategies, revenue expansion, and the launch of the 'Rapid Production Solutions' business for future profitability - Arrayed Notes Acquisition Corp. became the majority shareholder following a debt-for-equity exchange, significantly strengthening the company's balance sheet[1](index=1&type=chunk)[2](index=2&type=chunk) - The company launched a new 'Rapid Production Solutions' (RPS) business for parts production, which is expected to account for up to **40% of revenue in 2026**[3](index=3&type=chunk)[5](index=5&type=chunk) - The new go-to-market strategy focuses on a total solutions approach, integrating internal parts production with system sales, particularly targeting U.S. defense and aerospace industries[4](index=4&type=chunk) [Financial Performance Analysis](index=1&type=section&id=Financial%20Performance%20Analysis) This section analyzes Velo3D's Q4 and full-year 2024 financial results, highlighting revenue trends, margin improvements, expense reductions, and providing fiscal year 2025 guidance [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Velo3D's Q4 2024 revenue significantly increased, while full-year revenue decreased, alongside improvements in gross margin and net loss, and a 25% reduction in operating expenses Q4 and FY 2024 Financial Results (GAAP) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue (Millions USD) | $12.6 | $2.5 | $41.0 | $77.4 | | Gross Margin (%) | (3.5) | (>100) | (5.1) | (33.9) | | Net Loss (Millions USD) | ($21.7) | ($56.1) | ($73.3) | ($135.1) | | Net Loss per Share (USD) | ($0.84) | ($9.45) | ($5.77) | ($23.97) | - The company ended 2024 with a backlog of **$16 million**[3](index=3&type=chunk) - Full-year 2024 operating expenses decreased by **25%** compared to 2023[3](index=3&type=chunk) [Fourth Quarter 2024 Performance](index=3&type=section&id=Fourth%20Quarter%202024%20Performance) Q4 2024 saw revenue of **$12.6 million** driven by Sapphire XC sales, with improved but negative gross margin, reduced GAAP operating expenses, and a net loss of **$21.7 million** - Q4 revenue of **$12.6 million** was driven by an increase in Sapphire XC system sales[6](index=6&type=chunk) - Gross margin was **negative 3.5%** due to lower fixed cost absorption from a reduced number of systems shipped[7](index=7&type=chunk) Q4 Operating Expenses | Expense Type | Q4 2024 (Millions USD) | Q4 2023 (Millions USD) | | :--- | :--- | :--- | | GAAP Operating Expenses | $21.1 | $25.9 | | Non-GAAP Operating Expenses | $18.7 | $20.5 | - The company reported a Q4 net loss of **$21.7 million** and an Adjusted EBITDA of **negative $14.6 million**[9](index=9&type=chunk) [Fiscal Year 2025 Guidance](index=3&type=section&id=Fiscal%20Year%202025%20Guidance) Velo3D projects **FY 2025 revenue of $50-60 million**, targeting over **30% gross margin by Q4 2025**, with positive EBITDA expected in H1 2026 FY 2025 Guidance | Metric | Guidance | | :--- | :--- | | Revenue (Millions USD) | $50 - $60 | | Gross Margin (Q4 2025) (%) | >30 | | Non-GAAP Operating Expenses (Millions USD) | $40 - $50 | | Capex (Millions USD) | $15 - $20 | - The company forecasts annual revenue growth of **over 30%** for 2025[3](index=3&type=chunk) - Velo3D expects to be **EBITDA positive in the first half of 2026**[3](index=3&type=chunk)[10](index=10&type=chunk) [Financial Statements and Reconciliations](index=9&type=section&id=Financial%20Statements%20and%20Reconciliations) This section presents the consolidated statements of operations, balance sheets, cash flows, and non-GAAP reconciliations for Velo3D's fiscal year 2024 [Consolidated Statements of Operations](index=13&type=section&id=Consolidated%20Statements%20of%20Operations) FY 2024 total revenue decreased to **$41.0 million**, primarily due to lower 3D Printer sales, while gross loss significantly improved and net loss reduced to **$73.3 million** FY 2024 vs. FY 2023 Income Statement Highlights (in thousands) | Line Item | FY 2024 (Thousands USD) | FY 2023 (Thousands USD) | | :--- | :--- | :--- | | Total Revenue | $41,003 | $77,443 | | Gross Loss | ($2,085) | ($26,267) | | Loss from Operations | ($82,347) | ($133,254) | | Net Loss | ($73,297) | ($135,139) | | Net Loss per Share (Basic) | ($5.77) | ($23.97) | [Consolidated Balance Sheets](index=14&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2024, total assets decreased to **$89.2 million**, driven by reduced cash and inventories, while total liabilities also decreased to **$49.5 million** Balance Sheet Highlights (in thousands) | Account | Dec 31, 2024 (Thousands USD) | Dec 31, 2023 (Thousands USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,212 | $24,494 | | Total Current Assets | $57,724 | $113,024 | | Total Assets | $89,180 | $153,799 | | Total Liabilities | $49,516 | $85,459 | | Total Stockholders' Equity | $39,664 | $68,340 | [Consolidated Statements of Cash Flows](index=15&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) FY 2024 net cash used in operating activities significantly improved to **$32.7 million**, with cash and cash equivalents ending at **$1.2 million** after a **$23.5 million** decrease Cash Flow Summary (in thousands) | Cash Flow Activity | FY 2024 (Thousands USD) | FY 2023 (Thousands USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($32,677) | ($105,636) | | Net cash provided by investing activities | $7,767 | $38,891 | | Net cash provided by financing activities | $1,460 | $59,261 | | Net change in cash and cash equivalents | ($23,454) | ($7,489) | | Cash and cash equivalents at end of period | $1,212 | $24,494 | [Non-GAAP Reconciliations](index=9&type=section&id=Non-GAAP%20Reconciliations) This section reconciles non-GAAP measures to GAAP equivalents, showing FY 2024 Non-GAAP Net Loss of **$86.6 million** and Adjusted EBITDA of **negative $61.6 million** FY 2024 GAAP vs. Non-GAAP (in thousands) | Metric | GAAP (Thousands USD) | Non-GAAP (Thousands USD) | | :--- | :--- | :--- | | Net Loss | ($73,297) | ($86,567) | | Operating Expenses | $80,262 | $64,899 | - For FY 2024, Adjusted EBITDA was **negative $61.6 million**, an improvement from **negative $98.5 million** in FY 2023[24](index=24&type=chunk) - Major adjustments from GAAP to Non-GAAP Net Loss include stock-based compensation, gain on fair value of warrants, and loss on extinguishment of debt[22](index=22&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the period ended September 30, 2024 [Condensed Consolidated Balance Sheets (unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) The balance sheet reflects a significant decline in liquidity, total assets, and stockholders' equity Key Balance Sheet Items | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | Change (In thousands) | Percentage Change | | :--------------------------------- | :-------------------------------- | :--------------------------------- | :-------------------- | :------------------ | | **Assets** | | | | | | Cash and cash equivalents | $1,637 | $24,494 | $(22,857) | -93.3% | | Short-term investments | — | $6,621 | $(6,621) | -100.0% | | Total current assets | $79,792 | $113,024 | $(33,232) | -29.4% | | Total assets | $110,787 | $153,799 | $(43,012) | -28.0% | | **Liabilities** | | | | | | Debt – current portion | $29,602 | $21,191 | $8,411 | 39.7% | | Total current liabilities | $63,402 | $48,671 | $14,731 | 30.3% | | Total liabilities | $76,100 | $85,459 | $(9,359) | -10.9% | | **Stockholders' Equity** | | | | | | Total stockholders' equity | $34,687 | $68,340 | $(33,653) | -49.2% | - The company's **cash and cash equivalents significantly decreased by 93.3%** from $24.5 million at December 31, 2023, to $1.6 million at September 30, 2024, indicating a substantial reduction in liquidity[17](index=17&type=chunk) - **Total assets declined by 28.0%**, from $153.8 million to $110.8 million, while **total liabilities saw a modest decrease of 10.9%**, from $85.5 million to $76.1 million[17](index=17&type=chunk) - **Stockholders' equity decreased by 49.2%**, from $68.3 million to $34.7 million, primarily due to an accumulated deficit of $(408.4) million as of September 30, 2024[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)%20(unaudited)) The income statement shows a sharp revenue decline but a significant gross profit increase, offset by higher interest expenses Three-Month Operational Results | Metric | Three Months Ended Sep 30, 2024 (In thousands) | Three Months Ended Sep 30, 2023 (In thousands) | Change (In thousands) | % Change | | :--------------------------------------- | :------------------------------------- | :------------------------------------- | :-------------------- | :------- | | Total Revenue | $8,247 | $23,167 | $(14,920) | -64.4% | | Total cost of revenue | $4,176 | $23,004 | $(18,828) | -81.8% | | Gross profit (loss) | $4,071 | $163 | $3,908 | 2397.5% | | Total operating expenses | $22,816 | $26,025 | $(3,209) | -12.3% | | Loss from operations | $(18,745) | $(25,862) | $7,117 | -27.5% | | Interest expense | $(10,949) | $(3,018) | $(7,931) | 262.8% | | Net income (loss) | $(22,858) | $(19,464) | $(3,394) | 17.4% | | Basic EPS | $(2.47) | $(3.37) | $0.90 | -26.7% | | Diluted EPS | $(2.47) | $(3.37) | $0.90 | -26.7% | Nine-Month Operational Results | Metric | Nine Months Ended Sep 30, 2024 (In thousands) | Nine Months Ended Sep 30, 2023 (In thousands) | Change (In thousands) | % Change | | :--------------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Total Revenue | $28,377 | $74,988 | $(46,611) | -62.2% | | Total cost of revenue | $30,018 | $69,757 | $(39,739) | -57.0% | | Gross profit (loss) | $(1,641) | $5,231 | $(6,872) | -131.4% | | Total operating expenses | $59,074 | $81,049 | $(21,975) | -27.1% | | Loss from operations | $(60,715) | $(75,818) | $15,103 | -19.9% | | Interest expense | $(20,309) | $(3,582) | $(16,727) | 467.0% | | Net income (loss) | $(51,344) | $(78,990) | $27,646 | -35.0% | | Basic EPS | $(6.09) | $(13.96) | $7.87 | -56.4% | | Diluted EPS | $(6.09) | $(13.96) | $7.87 | -56.4% | - For the three months ended September 30, 2024, **total revenue decreased by 64.4% to $8.2 million**, primarily due to a significant drop in 3D Printer sales, partially offset by new licensing revenue[19](index=19&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[220](index=220&type=chunk) - **Gross profit saw a substantial increase of 2397.5% to $4.1 million** for the three months, mainly driven by the lower cost associated with license revenue[19](index=19&type=chunk)[232](index=232&type=chunk) - **Net loss for the three months increased by 17.4% to $(22.9) million**, largely influenced by a 262.8% increase in interest expense[19](index=19&type=chunk)[240](index=240&type=chunk) [Condensed Consolidated Statements of Cash Flows (unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) Cash flows show reduced use in operations and lower proceeds from investing and financing activities Nine-Month Cash Flow Summary | Cash Flow Activity | Nine Months Ended Sep 30, 2024 (In thousands) | Nine Months Ended Sep 30, 2023 (In thousands) | Change (In thousands) | | :--------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | | Net cash used in operating activities | $(30,465) | $(81,109) | $50,644 | | Net cash provided by investing activities | $6,644 | $31,055 | $(24,411) | | Net cash provided by financing activities | $958 | $76,213 | $(75,255) | | Net change in cash and cash equivalents | $(22,857) | $26,148 | $(49,005) | - **Net cash used in operating activities significantly decreased by $50.6 million**, from $(81.1) million in 2023 to $(30.5) million in 2024, primarily due to a lower net loss and changes in operating assets and liabilities[21](index=21&type=chunk)[298](index=298&type=chunk)[300](index=300&type=chunk) - **Net cash provided by investing activities decreased by $24.4 million**, from $31.1 million in 2023 to $6.6 million in 2024, mainly due to lower proceeds from maturities of available-for-sale investments[21](index=21&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) - **Net cash provided by financing activities saw a substantial decrease of $75.3 million**, from $76.2 million in 2023 to $1.0 million in 2024, reflecting reduced proceeds from convertible notes and ATM offerings[21](index=21&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(unaudited)) Stockholders' equity declined significantly due to an increased accumulated deficit from net losses Changes in Stockholders' Equity | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | Change (In thousands) | | :--------------------------------- | :-------------------------------- | :--------------------------------- | :-------------------- | | Common Stock (Shares) | 9,647,652 | 7,502,478 | 2,145,174 | | Common Stock (Amount) | $2 | $2 | $0 | | Additional Paid-In Capital | $443,066 | $425,471 | $17,595 | | Accumulated Deficit | $(408,381) | $(357,037) | $(51,344) | | Total Stockholders' Equity | $34,687 | $68,340 | $(33,653) | - **Total stockholders' equity decreased by $33.7 million**, from $68.3 million at December 31, 2023, to $34.7 million at September 30, 2024[24](index=24&type=chunk) - The **accumulated deficit increased by $51.3 million**, reflecting the net loss incurred during the nine months ended September 30, 2024[24](index=24&type=chunk) - **Additional paid-in capital increased by $17.6 million**, primarily due to stock-based compensation and capital raises[24](index=24&type=chunk) [Notes to Condensed Consolidated Interim Financial Statements (unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Interim%20Financial%20Statements%20(unaudited)) These notes detail the company's business, accounting policies, financial events, and going concern uncertainty [Note 1. Description of Business and Basis of Presentation](index=10&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) The company produces metal 3D printers and faces substantial doubt about its ability to continue as a going concern - Velo3D, Inc. produces metal additive 3D Printers for high-value metal parts in industries like space, jet engines, and fuel delivery systems, also offering support services[27](index=27&type=chunk) - The company completed a **1-for-35 reverse stock split** effective June 13, 2024, retroactively adjusting all share numbers and per share amounts[32](index=32&type=chunk)[33](index=33&type=chunk) - Velo3D's common stock and warrants were **delisted from the NYSE** on September 10, 2024, and commenced trading on the OTCQX Best Market on September 11, 2024[36](index=36&type=chunk) - Management believes there is **substantial doubt about the company's ability to continue as a going concern** due to incurred losses, negative cash flows, and insufficient liquidity to meet obligations for the next 12 months[37](index=37&type=chunk)[38](index=38&type=chunk) - On December 24, 2024, the company completed a **debt-for-equity exchange**, issuing 185,151,333 shares of common stock to Arrayed Acquisition Corp. in exchange for the cancellation of $22.4 million in Secured Notes principal and $0.4 million in accrued interest. **Arrayed now owns 95% of the company's common stock**[44](index=44&type=chunk)[161](index=161&type=chunk) - On January 7, 2025, Velo3D issued a **Senior Secured Convertible Promissory Note for $5.0 million**, due April 7, 2025, with a repayment amount of $5.75 million, convertible into common stock at $1.56 per share upon default[45](index=45&type=chunk)[163](index=163&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=12&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting policies, including revenue recognition for licenses and product warranty accruals - The FASB issued ASU 2023-09, 'Income Taxes (Topic 740): Improvement to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024, which the company is currently evaluating for impact[49](index=49&type=chunk) - Licensing revenue from perpetual licenses is recognized upfront upon delivery, while post-contract support (PCS) revenue is recognized ratably over the contract term or as support is used[51](index=51&type=chunk) - Revenue from time-based subscription licenses is allocated between the term license (recognized upfront) and PCS (recognized ratably over the term)[52](index=52&type=chunk)[53](index=53&type=chunk) - Product warranties for 3D printers, typically one year, are accrued at the time of sale based on historical data and future assumptions[54](index=54&type=chunk)[55](index=55&type=chunk) [Note 3. Basic and Diluted Net Loss per Share](index=13&type=section&id=Note%203.%20Basic%20and%20Diluted%20Net%20Loss%20per%20Share) This note provides the calculation of net loss per share, excluding antidilutive common stock equivalents Net Loss Per Share Calculation | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) (In thousands) | $(22,858) | $(19,464) | $(51,344) | $(78,990) | | Basic weighted average shares outstanding | 9,240,453 | 5,771,465 | 8,431,298 | 5,656,713 | | Diluted weighted average shares outstanding | 9,240,453 | 5,771,465 | 8,431,298 | 5,656,713 | | Basic Net income (loss) per share | $(2.47) | $(3.37) | $(6.09) | $(13.96) | | Diluted Net income (loss) per share | $(2.47) | $(3.37) | $(6.09) | $(13.96) | - Potentially dilutive common stock equivalents, totaling **6,210,347 for the three and nine months ended September 30, 2024**, were excluded from diluted net loss per share computation due to their antidilutive effect[56](index=56&type=chunk) [Note 4. Fair Value Measurements](index=14&type=section&id=Note%204.%20Fair%20Value%20Measurements) This note details the fair value hierarchy for financial assets and liabilities, with key liabilities valued using Level 3 inputs Fair Value of Financial Instruments | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | | :--------------------------------------- | :-------------------------------- | :--------------------------------- | | **Assets** | | | | Money market funds (Level 1) | $1,347 | $3,422 | | Corporate bonds (Level 2) | — | $6,621 | | Total financial assets | $1,347 | $10,043 | | **Liabilities** | | | | Common stock warrant liabilities (Level 3) | $2,350 | $11,785 | | Contingent earnout liabilities (Level 3) | $11 | $1,456 | | Total financial liabilities | $2,361 | $13,291 | - The company's financial liabilities measured at fair value, primarily common stock warrant liabilities and contingent earnout liabilities, are **classified as Level 3** due to significant unobservable inputs[58](index=58&type=chunk)[62](index=62&type=chunk) - The fair value of Private Placement Warrant liabilities, contingent earnout liabilities, and 2024 Private Warrants are determined using the **Monte Carlo simulation model**[63](index=63&type=chunk) - The fair value of 2022 Private Warrant, RDO Warrants, Placement Agent Warrants, BEPO Warrants, BEPO Agent Warrants, July 2024 Private Warrants, and August Inducement Warrants are estimated using the **Black-Scholes option pricing model**[64](index=64&type=chunk) [Note 5. Investments](index=16&type=section&id=Note%205.%20Investments) The company held no available-for-sale investments as of September 30, 2024 - As of September 30, 2024, there were **no available-for-sale (AFS) investments**, with investments sold during the quarter resulting in a realized loss of less than $0.1 million[65](index=65&type=chunk) Available-for-Sale Investments (as of Dec 31, 2023) | Item | Gross Amortized Cost (In thousands) | Gross Unrealized Loss (In thousands) | Fair Value (In thousands) | | :-------------------- | :---------------------------------- | :--------------------------------- | :------------------------ | | Corporate bonds | $6,717 | $(96) | $6,621 | | Total AFS investments | $6,717 | $(96) | $6,621 | [Note 6. Balance Sheet Components](index=16&type=section&id=Note%206.%20Balance%20Sheet%20Components) This note provides a detailed breakdown of various balance sheet accounts, including receivables, inventories, and liabilities Accounts Receivable, Net | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | Change (In thousands) | | :--------------------------------- | :-------------------------------- | :--------------------------------- | :-------------------- | | Trade receivables | $13,049 | $10,203 | $2,846 | | Less: Allowances for credit losses | $(2,836) | $(620) | $(2,216) | | Total Accounts receivable, net | $10,213 | $9,583 | $630 | Inventories, Net | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | Change (In thousands) | | :----------------- | :-------------------------------- | :--------------------------------- | :-------------------- | | Raw materials | $64,767 | $75,581 | $(10,814) | | Work-in-progress | $12,756 | $9,922 | $2,834 | | Finished goods | $10,267 | $2,406 | $7,861 | | Less: Inventory reserve | $(25,814) | $(27,093) | $1,279 | | Total Inventories, net | $61,976 | $60,816 | $1,160 | Prepaid Expenses and Other Current Assets | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | Change (In thousands) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | :-------------------- | | Prepaid insurance and other | $1,774 | $2,738 | $(964) | | Vendor prepayments | $160 | $1,262 | $(1,102) | | Total Prepaid expenses and other current assets | $1,934 | $4,000 | $(2,066) | Property, Plant and Equipment, Net | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | Change (In thousands) | | :--------------------------------- | :-------------------------------- | :--------------------------------- | :-------------------- | | Total property, plant and equipment | $25,233 | $25,236 | $(3) | | Less accumulated depreciation and amortization | $(12,081) | $(8,910) | $(3,171) | | Property, plant and equipment, net | $13,152 | $16,326 | $(3,174) | Other Assets | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | Change (In thousands) | | :--------------------------------- | :-------------------------------- | :--------------------------------- | :-------------------- | | Right of use assets | $8,041 | $10,672 | $(2,631) | | Non-current contract assets | $2,957 | $5,117 | $(2,160) | | Non-current prepaid expenses and other assets | $3,062 | $1,993 | $1,069 | | Total Other assets | $14,060 | $17,782 | $(3,722) | Accrued Expenses and Other Current Liabilities | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | Change (In thousands) | | :--------------------------------------- | :-------------------------------- | :--------------------------------- | :-------------------- | | Accrued expenses | $1,769 | $1,948 | $(179) | | Accrued salaries and benefits | $1,668 | $2,277 | $(609) | | Lease liability – current portion | $1,888 | $2,266 | $(378) | | Total Accrued expenses and other current liabilities | $5,325 | $6,491 | $(1,166) | Other Noncurrent Liabilities | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | Change (In thousands) | | :--------------------------------- | :-------------------------------- | :--------------------------------- | :-------------------- | | Lease liabilities – noncurrent portion | $8,887 | $10,176 | $(1,289) | | Other noncurrent liabilities | $1,450 | $1,380 | $70 | | Total other noncurrent liabilities | $10,337 | $11,556 | $(1,219) | [Note 7. Equipment on Lease, Net](index=18&type=section&id=Note%207.%20Equipment%20on%20Lease%2C%20Net) This note details the cost basis and future payments for equipment leased to customers - The cost basis of equipment leased to customers **decreased from $7.4 million** at December 31, 2023, **to $4.6 million** at September 30, 2024[77](index=77&type=chunk) - Depreciation expense for equipment on lease was **$0.1 million** for both the three months ended September 30, 2024 and 2023, and **$0.6 million and $0.7 million** for the nine months ended September 30, 2024 and 2023, respectively[78](index=78&type=chunk) Future Minimum Lease Payments | Period | Equipment on Lease Payments (In thousands) | | :------------------------- | :--------------------------------------- | | Remainder of 2024 | $500 | | 2025 | $1,167 | | Total lease payments to be received | $1,667 | [Note 8. Leases](index=19&type=section&id=Note%208.%20Leases) This note outlines the company's operating lease liabilities for its office and manufacturing facilities - The company leases office and manufacturing facilities under non-cancellable operating leases expiring between 2024 and 2032[81](index=81&type=chunk) Lease Assets and Liabilities | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | | :--------------------------------------- | :-------------------------------- | :--------------------------------- | | Right-of-use assets (Net book value) | $8,041 | $10,672 | | Operating lease liabilities (Current) | $1,749 | $2,153 | | Operating lease liabilities (Noncurrent) | $8,737 | $9,973 | | Total operating lease liabilities | $10,486 | $12,126 | | Total lease liabilities | $10,775 | $12,442 | Future Operating Lease Payments | Year | Operating Lease Payments (In thousands) | | :---------------- | :-------------------------------------- | | Remainder of 2024 | $661 | | 2025 | $2,390 | | 2026 | $2,430 | | 2027 | $2,400 | | 2028 | $2,490 | | Thereafter | $8,779 | | Total operating lease payments | $19,150 | | Less imputed interest | $(8,664) | | Total operating lease liabilities | $10,486 | [Note 9. Debt](index=20&type=section&id=Note%209.%20Debt) This note details the company's Secured Notes, including interest, maturity, and repayment terms Debt Composition | Item | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | | :--------------------------------- | :-------------------------------- | :--------------------------------- | | Secured notes | $30,055 | $33,516 | | Deferred financing costs | $(453) | $(384) | | Total Debt | $29,602 | $33,132 | | Debt – current portion | $29,602 | $21,191 | | Long-term debt – less current portion | — | $11,941 | - The company's debt consists of **Secured Notes** with High Trail Investments ON LLC and an affiliated institutional investor, bearing **6.00% interest per annum** and maturing on August 1, 2026[86](index=86&type=chunk)[90](index=90&type=chunk) - Repayment of principal on Secured Notes requires paying **120% of the principal amount** (Repayment Price) plus accrued interest[90](index=90&type=chunk) - On July 1, 2024, a Third Note Amendment **deferred a $10.5 million partial redemption payment** over ten equal monthly payments starting August 1, 2024[88](index=88&type=chunk) Future Minimum Debt Payments | Year | Minimum Aggregate Payments (In thousands) | | :--- | :---------------------------------------- | | 2024 | $15,550 | | 2025 | $16,700 | | Total | $32,250 | [Note 10. Equity Instruments](index=21&type=section&id=Note%2010.%20Equity%20Instruments) This note describes the company's common stock, warrants, and recent equity offerings - As of September 30, 2024, Velo3D had **9,647,652 shares of common stock outstanding**, with 500,000,000 shares authorized[97](index=97&type=chunk) - On April 10, 2024, the company completed a BEPO Offering, selling 979,592 shares of common stock and warrants for $12.25 per share, generating approximately **$12 million in gross proceeds**[99](index=99&type=chunk)[100](index=100&type=chunk) - In connection with the Second Note Amendment, the company issued **627,117 2024 Private Warrants** exercisable at $15.946 per share[107](index=107&type=chunk) - On July 1, 2024, the company issued **1,650,000 July 2024 Private Warrants** exercisable at $3.00 per share[108](index=108&type=chunk) - On August 12, 2024, a warrant inducement **reduced the exercise price of 742,857 Existing Warrants** from $19.78 to $2.28 per share and issued 1,485,714 August Inducement Warrants at $2.28 per share[109](index=109&type=chunk) Reserved Common Stock | Item | September 30, 2024 (share data) | December 31, 2023 (share data) | | :--------------------------------------- | :------------------------------ | :----------------------------- | | Common stock warrants | 5,504,118 | 1,455,574 | | Shares available for future grant under 2021 Equity Incentive Plan | 595,704 | 844,496 | | Reserved for At-the-Market offering | 80,742 | 80,742 | | Reserved for employee stock purchase plan | 284,367 | 210,606 | | Total shares of common stock reserved | 6,464,931 | 2,591,418 | Outstanding Warrants | Warrant Type | Issue Date | Expiration Date | Number of Warrants | Exercise Price per warrant | | :--------------------------------------- | :--------- | :-------------- | :----------------- | :------------------------- | | Private Placement Warrants | 12/02/2020 | 09/29/2026 | 127,143 | $402.50 | | Public Warrants | 12/02/2020 | 09/29/2026 | 246,429 | $402.50 | | 2022 Private Warrant | 07/25/2022 | 07/24/2034 | 2,000 | $89.60 | | RDO Warrants | 12/29/2023 | 12/29/2028 | 285,714 | $19.78 | | Placement Agent Warrants | 12/29/2023 | 12/29/2028 | 51,429 | $21.75 | | 2024 Private Warrants | 4/1/2024 | 5/16/2025 | 627,117 | $15.95 | | BEPO Warrants | 4/12/2024 | 4/12/2029 | 979,592 | $12.25 | | BEPO Agent Warrants | 4/12/2024 | 4/12/2029 | 48,980 | $13.48 | | July 2024 Private Warrants | 7/01/2024 | 7/01/2029 | 1,650,000 | $3.00 | | August Inducement Warrants | 8/13/2024 | 08/12/2029 | 1,485,714 | $2.28 | | Total | | | 5,504,118 | | [Note 11. Equity Incentive Plans and Stock-Based Compensation](index=28&type=section&id=Note%2011.%20Equity%20Incentive%20Plans%20and%20Stock-Based%20Compensation) This note details the company's equity incentive plans and associated stock-based compensation expenses - As of September 30, 2024, the company had **595,704 shares reserved** for issuance under its 2021 Equity Incentive Plan (2021 EIP) and **284,367 shares** under its 2021 Employee Stock Purchase Plan (2021 ESPP)[139](index=139&type=chunk) Stock Option Activity | Metric | September 30, 2024 | September 30, 2023 | | :--------------------------------------- | :------------------- | :------------------- | | Options Outstanding | 275,000 | 433,000 | | Weighted Average Exercise Price | $25.91 | $19.60 | | Weighted Average Remaining Contractual Term (years) | 5.3 | 6.7 | RSU Activity | Metric | September 30, 2024 | September 30, 2023 | | :--------------------------------------- | :------------------- | :------------------- | | RSUs Balance | 431,000 | 350,000 | | Weighted Average Grant Date Fair Value | $49.53 | $121.80 | | Aggregate Intrinsic Value | $310,000 | $26,411,000 | Stock-Based Compensation Expense | Expense Type | Three Months Ended Sep 30, 2024 (In thousands) | Three Months Ended Sep 30, 2023 (In thousands) | Nine Months Ended Sep 30, 2024 (In thousands) | Nine Months Ended Sep 30, 2023 (In thousands) | | :--------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Restricted stock units | $2,445 | $4,917 | $9,375 | $13,720 | | Stock options | $16 | $88 | $115 | $956 | | Earnout shares–employees | $1,246 | $1,711 | $3,551 | $4,810 | | Total Stock-based compensation expense | $3,707 | $6,716 | $13,041 | $19,486 | [Note 12. Income Taxes](index=30&type=section&id=Note%2012.%20Income%20Taxes) No income tax provision was recorded due to projected losses and a full valuation allowance on deferred tax assets - **No provision for federal and state income taxes** was recorded for any periods presented due to projected losses, and a **full valuation allowance** was maintained on deferred tax assets as of September 30, 2024 and 2023[148](index=148&type=chunk) [Note 13. Commitments and Contingencies](index=30&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) The company has significant purchase commitments but is not aware of any material litigation - The company is **not aware of any material litigation**, claims, or assessments that would adversely affect its financial position as of September 30, 2024[149](index=149&type=chunk) - Non-cancellable **purchase commitments** for parts and assemblies totaled **$18.7 million**, due upon receipt and expected to be delivered throughout the remainder of 2024[150](index=150&type=chunk) [Note 14. Employee Defined-Contribution Plans](index=30&type=section&id=Note%2014.%20Employee%20Defined-Contribution%20Plans) This note details the company's contributions to its 401(k) employee retirement plan - The company contributed **$0.2 million and $0.3 million** to its 401(k) Plan for the three months ended September 30, 2024 and 2023, respectively, and **$0.8 million and $1.0 million** for the nine months ended September 30, 2024 and 2023, respectively[151](index=151&type=chunk) [Note 15. Revenue](index=31&type=section&id=Note%2015.%20Revenue) This note provides a breakdown of revenue by customer concentration and geographic region Revenue by Customer Concentration | Customer | Three Months Ended Sep 30, 2024 (Revenue %) | Three Months Ended Sep 30, 2023 (Revenue %) | Nine Months Ended Sep 30, 2024 (Revenue %) | Nine Months Ended Sep 30, 2023 (Revenue %) | | :--------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Customer 1 | 50.7% | <10% | 21.0% | <10% | | Customer 2 | 27.5% | <10% | 14.4% | <10% | | Customer 3 | <10% | —% | 16.4% | —% | | Customer 4 | <10% | <10% | 14.4% | <10% | | Customer 5 | <10% | 22.8% | <10% | <10% | | Customer 6 | <10% | 14.2% | <10% | <10% | | Customer 7 | —% | 14.1% | <10% | <10% | | Customer 8 | —% | 13.3% | —% | <10% | | Customer 9 | —% | 12.4% | —% | <10% | | Customer 10 | <10% | —% | <10% | —% | Revenue by Geographic Region | Geographic Region | Three Months Ended Sep 30, 2024 (In thousands) | Three Months Ended Sep 30, 2023 (In thousands) | Nine Months Ended Sep 30, 2024 (In thousands) | Nine Months Ended Sep 30, 2023 (In thousands) | | :------------------ | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Americas | $8,031 | $22,766 | $27,507 | $65,852 | | Europe | $205 | $329 | $706 | $8,927 | | Other | $11 | $72 | $164 | $209 | | Total | $8,247 | $23,167 | $28,377 | $74,988 | - Revenue recognized from contract liabilities was **$0.5 million and $2.1 million** for the three and nine months ended September 30, 2024, respectively[154](index=154&type=chunk) - There was **no revenue related to variable consideration** for the three and nine months ended September 30, 2024, compared to $3.9 million for the same periods in 2023[155](index=155&type=chunk) [Note 16. Revision of Previously Issued Condensed Consolidated Interim Financial Statements](index=31&type=section&id=Note%2016.%20Revision%20of%20Previously%20Issued%20Condensed%20Consolidated%20Interim%20Financial%20Statements) This note details the revision of prior period financial statements to correct immaterial errors - The company **revised previously issued condensed consolidated interim financial statements** for the period ended September 30, 2023, to correct immaterial errors related to revenue, other assets, contract assets, and classification of stock-based compensation[156](index=156&type=chunk)[157](index=157&type=chunk) Revisions for Three Months Ended Sep 30, 2023 | Metric | As Previously Reported (3M Sep 2023) | Adjustment (3M Sep 2023) | As Revised (3M Sep 2023) | | :--------------------------------------- | :----------------------------------- | :----------------------- | :----------------------- | | Total Revenue | $23,808 | $(641) | $23,167 | | Total cost of revenue | $22,320 | $684 | $23,004 | | Gross profit | $1,488 | $(1,325) | $163 | | Total operating expenses | $26,709 | $(684) | $26,025 | | Loss from operations | $(25,221) | $(641) | $(25,862) | | Interest expense | $(1,107) | $(1,911) | $(3,018) | | Net loss | $(17,396) | $(2,068) | $(19,464) | Revisions for Nine Months Ended Sep 30, 2023 | Metric | As Previously Reported (9M Sep 2023) | Adjustment (9M Sep 2023) | As Revised (9M Sep 2023) | | :--------------------------------------- | :----------------------------------- | :----------------------- | :----------------------- | | Total Revenue | $75,756 | $(768) | $74,988 | | Total cost of revenue | $68,363 | $1,394 | $69,757 | | Gross profit | $7,393 | $(2,162) | $5,231 | | Total operating expenses | $82,443 | $(1,394) | $81,049 | | Loss from operations | $(75,050) | $(768) | $(75,818) | | Interest expense | $(1,671) | $(1,911) | $(3,582) | | Net loss | $(76,795) | $(2,195) | $(78,990) | [Note 17. Subsequent Events](index=34&type=section&id=Note%2017.%20Subsequent%20Events) This note describes significant events after the reporting period, including a workforce reduction and debt-for-equity exchange - On October 9, 2024, the company initiated a **reduction in force, affecting 46 employees (approximately 32% of its workforce)**, with estimated costs of $1.3 million to $1.5 million[159](index=159&type=chunk) - On December 9, 2024, **Arrayed Acquisition Corp. purchased the Senior Secured Notes** from the original holders, and a forbearance agreement was entered into[160](index=160&type=chunk) - On December 24, 2024, a **debt-for-equity exchange** occurred where the company issued 185,151,333 shares of common stock to Arrayed in exchange for the cancellation of $22.4 million in Secured Notes principal and $0.4 million in accrued interest. **Arrayed became the owner of 95% of the company's common stock**[161](index=161&type=chunk) - On January 7, 2025, the company issued a **$5.0 million Senior Secured Convertible Promissory Note** to Thieneman Properties, LLC, payable by April 7, 2025, for $5.75 million, convertible at $1.56 per share upon default[163](index=163&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operational results, strategic shifts, and liquidity challenges [Overview](index=35&type=section&id=Overview) The company produces integrated 3D printing solutions and is realigning its strategy to focus on cash flow optimization - Velo3D produces fully integrated hardware and software solutions based on proprietary laser powder bed fusion (L-PBF) technology for high-value metal parts, enabling complex designs without support structures[167](index=167&type=chunk)[169](index=169&type=chunk) - The company employs a **'land and expand' strategy**, where customers initially validate the technology with a single machine and then purchase additional systems as the technology is integrated into their product roadmaps[170](index=170&type=chunk) - In October 2023, Velo3D initiated a strategic realignment to **pivot from emphasizing revenue growth to optimizing free cash flow**, maximizing customer success, reducing expenditures, and improving operational efficiency[172](index=172&type=chunk) [Recent Trends and Strategic Realignment](index=35&type=section&id=Recent%20Trends%20and%20Strategic%20Realignment) The company faces challenges from order delays and financial instability, prompting significant cost-reduction measures - Delayed shipments and customer order delays in the second half of 2023 led to **decreased system sales and backlog**, resulting in lower-than-expected annual revenue growth[171](index=171&type=chunk) - The strategic realignment includes **expense reduction and cash savings initiatives** such as workforce reductions (October 2023 and August 2024), streamlining facilities, managing working capital, and reducing capital expenditures and SG&A[172](index=172&type=chunk)[173](index=173&type=chunk)[176](index=176&type=chunk) - As of September 30, 2024, the company had approximately **$1.6 million in cash** and short-term investments and $10.2 million in accounts receivable, which is **insufficient to meet short-term obligations** of $17.7 million in accounts payable and $29.6 million in Secured Notes[174](index=174&type=chunk) - Financial instability has caused customers to delay orders and made it difficult to secure credit terms and volume discounts with suppliers, **negatively impacting product margins**[175](index=175&type=chunk) [Recent Debt and Equity Transactions](index=36&type=section&id=Recent%20Debt%20and%20Equity%20Transactions) The company has engaged in significant debt restructuring and equity financing to manage its liquidity crisis - In November 2023, the company repaid $12.5 million of Secured Convertible Notes with a $15.0 million cash payment and exchanged the remaining notes for **$57.5 million in Secured Notes** and 285,715 shares of common stock[177](index=177&type=chunk) - In December 2023, the company sold approximately 255,472 shares for **$5.0 million via an 'at-the-market' offering** and issued 1,028,572 shares and warrants for **$18.0 million in a registered direct offering**[177](index=177&type=chunk) - On April 1, 2024, the company made cash payments totaling **$10.5 million to redeem $8.8 million of Secured Notes principal** and issued warrants to purchase 627,117 shares of common stock[177](index=177&type=chunk) - On April 10, 2024, the company sold 979,592 shares of common stock and accompanying warrants for $12.25 per share, generating approximately **$12 million in gross proceeds**[177](index=177&type=chunk) - On December 24, 2024, a **debt-for-equity exchange with Arrayed Acquisition Corp. cancelled $22.4 million in Secured Notes** principal and $0.4 million in accrued interest in exchange for 185,151,333 shares of common stock, making **Arrayed a 95% owner**[179](index=179&type=chunk) - On January 7, 2025, a **$5.0 million Senior Secured Convertible Promissory Note** was issued to Thieneman Properties, LLC, due April 7, 2025, with a $5.75 million repayment amount[180](index=180&type=chunk) [Key Financial and Operational Metrics](index=37&type=section&id=Key%20Financial%20and%20Operational%20Metrics) Revenue and bookings have declined, while customer concentration has significantly increased Key Metrics | Metric | Three Months Ended Sep 30, 2024 (In millions) | Three Months Ended Sep 30, 2023 (In millions) | Nine Months Ended Sep 30, 2024 (In millions) | Nine Months Ended Sep 30, 2023 (In millions) | | :--------------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Revenue | $8 | $23 | $28 | $75 | | Bookings | $6 | $11 | $28 | $47 | | Backlog | $21 | $6 | $21 | $6 | - For the three months ended September 30, 2024, sales to the **top three customers accounted for 82.0% of revenue**, compared to 51.1% in the prior year, indicating increased customer concentration[186](index=186&type=chunk) - For the nine months ended September 30, 2024, sales to the **top three customers accounted for 51.7% of revenue**, compared to 22.1% in the prior year, with all top three customers being different from the comparable period in 2023[186](index=186&type=chunk) [Continued Investment and Innovation](index=38&type=section&id=Continued%20Investment%20and%20Innovation) The company continues to invest in customer-focused research and development despite financial challenges - The company remains customer-focused, **investing in research and development** to enhance its AM solutions and develop new product platforms and consumables based on customer demand[188](index=188&type=chunk) [Macroeconomic Conditions and Other World Events](index=38&type=section&id=Macroeconomic%20Conditions%20and%20Other%20World%20Events) Economic uncertainty and supply chain issues continue to pose risks to customer orders and gross margins - General economic and political conditions, including recessions, interest rates, inflation, and geopolitical conflicts, have introduced **uncertainty in customer orders and supply chain constraints**[189](index=189&type=chunk) - In 2022, supply chain challenges increased material and shipping costs, leading to delays and impacting gross margins; the company implemented improvements in 2023 and continues to focus on operational enhancements and strategic realignment in 2024[189](index=189&type=chunk) [Climate Change](index=38&type=section&id=Climate%20Change) Climate-related regulations and physical events could adversely affect business operations and costs - Material climate change-related legislation, regulations, and international accords could adversely affect the business through **increased capital expenditures**, indirect consequences (e.g., demand shifts, competition), and compliance costs[190](index=190&type=chunk) - Extreme weather and natural disasters, potentially increasing in intensity or frequency, may **disrupt the company's operations** or those of its suppliers and customers[190](index=190&type=chunk) [Components of Results of Operations](index=38&type=section&id=Components%20of%20Results%20of%20Operations) This section breaks down the key drivers of revenue, cost of revenue, operating expenses, and other financial items - **Revenue is primarily derived from 3D Printer sales** (structured fixed purchase price or sale and utilization fee model), recurring payment transactions (operating leases), and support services[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[197](index=197&type=chunk)[199](index=199&type=chunk) - **Cost of revenue includes manufacturing costs** for 3D Printers, depreciation of leased equipment for recurring payments, and costs for spare parts, installation, and field service engineering for support services[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk) - **Gross profit and gross margin are influenced by** product mix, average selling prices, material and shipping costs, production volumes, system reliability, and new product introductions[203](index=203&type=chunk) - **Operating expenses are categorized into** Research and Development, Selling and Marketing, and General and Administrative, primarily consisting of personnel costs, prototypes, marketing, professional fees, and allocated overhead[204](index=204&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - **Non-operating items include** interest expense, gains/losses on fair value of warrants and contingent earnout liabilities, and other income/expense[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) - **No provision for federal and state income taxes** was recorded due to projected losses, with a full valuation allowance maintained on deferred tax assets[212](index=212&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of operational results for the three and nine months ended September 30, 2024 and 2023 [Comparison of the Three Months Ended September 30, 2024 and 2023](index=41&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030%2C%202024%20and%202023) Quarterly results show a sharp revenue decline offset by new licensing income, leading to higher gross profit but a larger net loss Three-Month Operational Comparison | Metric | Sep 30, 2024 (In thousands) | Sep 30, 2023 (In thousands) | Change (In thousands) | % Change | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | 3D Printer Revenue | $1,049 | $20,787 | $(19,738) | -95.0% | | Recurring Payment Revenue | $192 | $531 | $(339) | -63.8% | | Licensing Revenue | $5,000 | — | $5,000 | 100.0% | | Support Services Revenue | $2,006 | $1,849 | $157 | 8.5% | | Total Revenue | $8,247 | $23,167 | $(14,920) | -64.4% | | Cost of 3D Printer | $2,224 | $20,772 | $(18,548) | -89.3% | | Cost of Recurring Payment | $195 | $111 | $84 | 75.7% | | Cost of Support Services | $1,757 | $2,121 | $(364) | -17.2% | | Total Cost of Revenue | $4,176 | $23,004 | $(18,828) | -81.8% | | Gross Profit (Loss) | $4,071 | $163 | $3,908 | 2397.5% | | Research and Development | $4,438 | $9,490 | $(5,052) | -53.2% | | Selling and Marketing | $3,099 | $5,772 | $(2,673) | -46.3% | | General and Administrative | $15,279 | $10,763 | $4,516 | 42.0% | | Loss from Operations | $(18,745) | $(25,862) | $7,117 | -27.5% | | Interest Expense | $(10,949) | $(3,018) | $(7,931) | 262.8% | | Gain on Fair Value of Warrants | $9,221 | $1,587 | $7,634 | 481.0% | | Net Income (Loss) | $(22,858) | $(19,464) | $(3,394) | 17.4% | - **Total revenue decreased by 64.4% to $8.2 million**, primarily due to a 95.0% decrease in 3D Printer sales, partially offset by **$5.0 million in new licensing revenue** from SpaceX[218](index=218&type=chunk)[220](index=220&type=chunk) - **Gross profit increased significantly by 2397.5% to $4.1 million**, driven by the lower cost associated with license revenue[232](index=232&type=chunk) - **Research and development expenses decreased by 53.2% to $4.4 million**, mainly due to reductions in purchased materials, headcount, and stock-based compensation[234](index=234&type=chunk) - **General and administrative expenses increased by 42.0% to $15.3 million**, primarily due to a **$6.7 million increase in bad debt expense**[238](index=238&type=chunk) - **Interest expense surged by 262.8% to $10.9 million** due to the issuance of Secured Notes[240](index=240&type=chunk) [Comparison of the Nine Months Ended September 30, 2024 and 2023](index=45&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030%2C%202024%20and%202023) Nine-month results show a significant revenue drop leading to a gross loss, despite reduced operating expenses and a lower net loss Nine-Month Operational Comparison | Metric | Sep 30, 2024 (In thousands) | Sep 30, 2023 (In thousands) | Change (In thousands) | % Change | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | 3D Printer Revenue | $17,388 | $68,425 | $(51,037) | -74.6% | | Recurring Payment Revenue | $954 | $1,141 | $(187) | -16.4% | | Licensing Revenue | $5,000 | — | $5,000 | 100.0% | | Support Services Revenue | $5,035 | $5,422 | $(387) | -7.1% | | Total Revenue | $28,377 | $74,988 | $(46,611) | -62.2% | | Cost of 3D Printer | $22,362 | $62,992 | $(40,630) | -64.5% | | Cost of Recurring Payment | $742 | $893 | $(151) | -16.9% | | Cost of Support Services | $6,914 | $5,872 | $1,042 | 17.7% | | Total Cost of Revenue | $30,018 | $69,757 | $(39,739) | -57.0% | | Gross Profit (Loss) | $(1,641) | $5,231 | $(6,872) | -131.4% | | Research and Development | $14,026 | $32,145 | $(18,119) | -56.4% | | Selling and Marketing | $12,181 | $18,054 | $(5,873) | -32.5% | | General and Administrative | $32,867 | $30,850 | $2,017 | 6.5% | | Loss from Operations | $(60,715) | $(75,818) | $15,103 | -19.9% | | Interest Expense | $(20,309) | $(3,582) | $(16,727) | 467.0% | | Gain on Fair Value of Warrants | $31,911 | $(138) | $32,049 | -23223.9% | | Net Income (Loss) | $(51,344) | $(78,990) | $27,646 | -35.0% | - **Total revenue decreased by 62.2% to $28.4 million**, primarily due to a 74.6% decrease in 3D Printer sales, partially offset by $5.0 million in new licensing revenue[249](index=249&type=chunk)[250](index=250&type=chunk)[252](index=252&type=chunk) - **Gross profit shifted from a gain of $5.2 million to a loss of $(1.6) million**, a 131.4% decrease, mainly due to the outsized impact of fixed costs on lower 3D printer sales volume and higher production costs[263](index=263&type=chunk) - **Research and development expenses decreased by 56.4% to $14.0 million**, driven by reductions in purchased materials, headcount, and stock-based compensation[265](index=265&type=chunk) - **Interest expense increased by 467.0% to $20.3 million** due to the issuance of Secured Notes[272](index=272&type=chunk) - The change in fair value of warrants resulted in a **significant gain of $31.9 million**, compared to a loss of $0.1 million in the prior year, driven by changes in the company's stock price[274](index=274&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces a severe liquidity crisis with insufficient cash to meet short-term obligations, raising substantial doubt about its ability to continue as a going concern - As of September 30, 2024, the company had **$1.6 million in cash** and short-term investments and $10.2 million in accounts receivable, which is **insufficient to cover short-term obligations** of $17.7 million in accounts payable and $29.6 million in Secured Notes[279](index=279&type=chunk) - There is **substantial doubt about the company's ability to continue as a going concern** for the next twelve months, necessitating additional funding to sustain operations and satisfy obligations[282](index=282&type=chunk) - The company will need to engage in **additional equity or debt financings** to fund operations, provide working capital, and repay Secured Notes, but securing such financing may be difficult due to its financial condition[287](index=287&type=chunk)[288](index=288&type=chunk) - **Purchase commitments** for parts and assemblies totaled **$18.7 million**, expected to be delivered throughout the remainder of 2024[283](index=283&type=chunk) [Debt Facilities](index=49&type=section&id=Debt%20Facilities) The company's outstanding Secured Notes carry a 6% interest rate and require significant redemption payments - As of September 30, 2024, the company had approximately **$29.6 million in Secured Notes outstanding**, bearing 6.00% interest per annum and maturing on August 1, 2026[290](index=290&type=chunk) - Repayment terms require paying **120% of the principal amount** (Repayment Price) plus accrued interest, with quarterly redemption payments of $10.5 million for an $8.75 million principal amount[290](index=290&type=chunk)[291](index=291&type=chunk) - The Third Note Amendment on July 1, 2024, **deferred a $10.5 million partial redemption payment** over ten equal monthly payments starting August 1, 2024[292](index=292&type=chunk) - On April 1, 2024, the company made cash payments totaling **$10.5 million to redeem $8.8 million of Secured Notes principal** and issued warrants to purchase 21,949,079 shares of common stock[292](index=292&type=chunk) [Cash Flow Summary](index=50&type=section&id=Cash%20Flow%20Summary) Cash used in operations decreased, while cash from investing and financing activities fell sharply Nine-Month Cash Flow Summary | Cash Flow Activity | Nine Months Ended Sep 30, 2024 (In thousands) | Nine Months Ended Sep 30, 2023 (In thousands) | Change (In thousands) | | :--------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | | Net cash used in operating activities | $(30,465) | $(81,109) | $50,644 | | Net cash provided by investing activities | $6,644 | $31,055 | $(24,411) | | Net cash provided by financing activities | $958 | $76,213 | $(75,255) | - **Net cash used in operating activities decreased by $50.6 million to $(30.5) million**, driven by a lower net loss and an increase in net operating assets[298](index=298&type=chunk)[299](index=299&type=chunk) - **Net cash provided by investing activities decreased by $24.4 million to $6.6 million**, primarily due to lower proceeds from maturities of available-for-sale investment securities[302](index=302&type=chunk)[303](index=303&type=chunk) - **Net cash provided by financing activities decreased by $75.3 million to $1.0 million**, reflecting reduced proceeds from capital raises and debt facilities compared to the prior year[305](index=305&type=chunk)[306](index=306&type=chunk) [Off-Balance Sheet Arrangements](index=51&type=section&id=Off-Balance%20Sheet%20Arrangements) The company had no off-balance sheet arrangements during the reporting periods - As of September 30, 2024, and December 31, 2023, the company **did not have any off-balance sheet arrangements**[308](index=308&type=chunk) [Recent Accounting Pronouncements](index=52&type=section&id=Recent%20Accounting%20Pronouncements) Information on recent accounting pronouncements is available in Note 2 of the financial statements - For a description of recent accounting pronouncements, including adoption dates and estimated effects, refer to **Note 2, Summary of Significant Accounting Policies**[310](index=310&type=chunk) [Implications of Being an Emerging Growth Company](index=52&type=section&id=Implications%20of%20Being%20an%20Emerging%20Growth%20Company) The company utilizes the extended transition period for new accounting standards as an emerging growth company - The company is an **'emerging growth company' (EGC)** and has elected to use the extended transition period for complying with new or revised financial accounting standards[311](index=311&type=chunk) - This EGC status allows for **delayed compliance with certain accounting standards**, potentially making financial results difficult to compare with non-EGCs or EGCs that opted out of the extended transition period[312](index=312&type=chunk) [Implications of Being a Smaller Reporting Company](index=52&type=section&id=Implications%20of%20Being%20a%20Smaller%20Reporting%20Company) The company's status as a smaller reporting company allows for reduced disclosure obligations - The company is a **'smaller reporting company' (SRC)** and can take advantage of reduced disclosure obligations, including providing only two years of audited consolidated financial statements[314](index=314&type=chunk) [Critical Accounting Policies and Significant Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) Details on critical accounting policies are provided in Note 2 and the annual report - For critical accounting policies and significant estimates, refer to **Note 2, Summary of Significant Accounting Policies**, in this report and Part II, Item 7 of the Annual Report on Form 10-K for the year ended December 31, 2023[316](index=316&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exempt from market risk disclosures as a smaller reporting company - The company is a smaller reporting company and is therefore **not required to provide** quantitative and qualitative disclosures about market risk[318](index=318&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concludes disclosure controls were ineffective due to material weaknesses in internal financial reporting controls - As of September 30, 2024, the company's disclosure controls and procedures were deemed **not effective due to material weaknesses** in internal control over financial reporting[320](index=320&type=chunk) - Identified material weaknesses include an **ineffective control environment** (insufficient personnel with accounting knowledge, inadequate segregation of duties), and **ineffective controls** over accounting for debt/equity instruments, inventory, and contract assets/liabilities[321](index=321&type=chunk)[322](index=322&type=chunk) - These material weaknesses led to **adjustments and revisions in previously issued financial statements** and could result in material misstatements[323](index=323&type=chunk) - **Remediation efforts include** hiring additional accounting and IT personnel, providing training, engaging third-party assistance for control design, and formalizing roles and review responsibilities[325](index=325&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings that would significantly impact its business - The company is **not currently a party to any material legal proceedings** that arise in the ordinary course of business[330](index=330&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, emphasizing going concern doubts and the critical need for additional capital - There is **substantial doubt about the company's ability to continue as a going concern**, which negatively impacts its ability to raise financing, sell products, and retain employees[332](index=332&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk) - The company **requires significant additional funding** to execute its business plan and continue operations, which may not be available on acceptable terms, if at all, leading to potential liquidation or bankruptcy[338](index=338&type=chunk)[339](index=339&type=chunk) - The Secured Notes contain **restrictive covenants** that limit the company's operations and require maintaining minimum cash levels, with a breach potentially leading to acceleration of indebtedness[340](index=340&type=chunk)[341](index=341&type=chunk) - **Servicing the Secured Notes requires significant cash**, and the company's current operations do not generate sufficient cash flow to meet these obligations, necessitating additional financing or restructuring[345](index=345&type=chunk)[347](index=347&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no sales under its ATM agreement and no unregistered sales of equity securities during the quarter - During the three months ended September 30, 2024, the company **sold no shares** pursuant to its At-the-Market (ATM) Sales Agreement[348](index=348&type=chunk) - There were **no unregistered sales of equity securities** or issuer purchases of equity securities reported[349](index=349&type=chunk)[350](index=350&type=chunk) [Item 3. Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - This item is **not applicable**[351](index=351&type=chunk) [Item 4. Mine Safety Disclosures](index=58&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - This item is **not applicable**[352](index=352&type=chunk) [Item 5. Other Information](index=58&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No director or Section 16 officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended September 30, 2024[353](index=353&type=chunk) [Item 6. Exhibits](index=59&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including bylaws, warrant forms, and other agreements - The exhibits include various agreements and certifications, such as the Second Amended and Restated Bylaws, Form of New Warrant (July 1, 2024 and August 12, 2024), Letter Agreement (July 1, 2024), Warrant Inducement Agreement, Licensing and Support Services Agreement with SpaceX, Forbearance Agreement, Exchange Agreement, Senior Secured Convertible Promissory Note, Secured Guaranty, and Offer Letter for Arun Jeldi[355](index=355&type=chunk) [Signatures](index=60&type=section&id=Signatures) The report is officially signed by the Chief Financial Officer of Velo3D, Inc - The report was signed by **Hull Xu, Chief Financial Officer**, Principal Financial Officer, and Authorized Officer of Velo3D, Inc. on January 14, 2025[359](index=359&type=chunk)[361](index=361&type=chunk)

Part I. Financial Information [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) This section presents Velo3D's unaudited condensed consolidated financial statements for Q1 2024, including balance sheets, income, cash flow, and equity statements, noting management's substantial doubt about the company's going concern ability - The company has incurred significant losses and negative cash flows since inception, leading to an accumulated deficit of **$385.4 million** as of March 31, 2024, with management concluding there is **substantial doubt** about the company's ability to continue as a going concern[38](index=38&type=chunk)[39](index=39&type=chunk) - On December 28, 2023, the company received a NYSE non-compliance notice for its average closing stock price being below **$1.00** for over 30 consecutive trading days, with a deadline of **June 28, 2024**, to regain compliance[35](index=35&type=chunk)[36](index=36&type=chunk) - Subsequent to the quarter end, in April 2024, the company amended its secured notes, making cash repayments of **$11.0 million**, and raised approximately **$12 million** in gross proceeds through an offering of common stock and warrants to fund working capital and repay debt[40](index=40&type=chunk)[41](index=41&type=chunk)[149](index=149&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$136.1 million** from **$153.8 million** by March 31, 2024, due to reduced cash, with liabilities rising and equity declining Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $7,754 | $24,494 | | Inventories | $62,799 | $60,816 | | Total current assets | $98,345 | $113,024 | | Total assets | $136,148 | $153,799 | | **Liabilities & Equity** | | | | Debt – current portion | $34,300 | $21,191 | | Total liabilities | $90,698 | $85,459 | | Total stockholders' equity | $45,450 | $68,340 | | Total liabilities and stockholders' equity | $136,148 | $153,799 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) For Q1 2024, revenue significantly declined to **$9.8 million** from **$26.7 million** year-over-year, resulting in a gross loss of **$2.8 million** and a net loss of **$28.3 million**, an improvement from the prior year's **$36.3 million** net loss Q1 2024 vs. Q1 2023 Statement of Operations (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenue | $9,786 | $26,687 | | Gross profit (loss) | $(2,815) | $2,532 | | Loss from operations | $(21,450) | $(24,250) | | Net loss | $(28,314) | $(36,325) | | Net loss per share (Basic & Diluted) | $(0.11) | $(0.19) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2024, net cash used in operating activities improved to **$20.5 million**, while investing activities provided **$3.5 million**, and financing activities provided a minimal **$0.3 million**, resulting in a net cash decrease of **$16.7 million** Q1 2024 vs. Q1 2023 Cash Flows (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,523) | $(30,834) | | Net cash provided by investing activities | $3,493 | $20,962 | | Net cash provided by financing activities | $285 | $15,034 | | **Net change in cash and cash equivalents** | **$(16,740)** | **$5,156** | [Notes to Condensed Consolidated Financial Statements (unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29) These notes provide critical context, including the basis of presentation, substantial doubt about going concern, details on debt agreements, valuation of warrants and earnout liabilities, and significant post-quarter financing events - The company is undertaking a strategic business review to explore alternatives, including a potential merger, business combination, or sale, to maximize stockholder value[45](index=45&type=chunk) - As of March 31, 2024, the company had **$36.8 million** in secured notes outstanding, bearing **6.00%** interest, requiring quarterly redemptions at **120%** of the principal amount, with the first **$8.75 million** principal redemption due on April 1, 2024[89](index=89&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - In April 2024, the company entered into a Second Note Amendment to its Secured Notes, agreeing to make cash payments totaling **$11.0 million** to redeem principal and interest, and issued new warrants to purchase up to **21.9 million** shares[149](index=149&type=chunk)[150](index=150&type=chunk) - On April 10, 2024, the company raised approximately **$12 million** in gross proceeds through a securities purchase agreement, selling **34.3 million** shares of common stock and warrants to purchase an additional **34.3 million** shares[151](index=151&type=chunk)[152](index=152&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the **63.3%** year-over-year revenue decrease in Q1 2024 due to fewer system sales and order delays, highlighting a strategic shift towards optimizing free cash flow and reducing expenses, while reiterating substantial doubt about the company's ability to continue as a going concern - The company has pivoted its strategy from emphasizing revenue growth to optimizing free cash flow, maximizing customer success, and reducing expenditures through a 'Strategic Realignment' plan[167](index=167&type=chunk) Key Operational Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue ($ in millions) | $10 | $27 | | Bookings ($ in millions) | $17 | $20 | | Backlog ($ in millions) | $22 | $24 | Results of Operations Summary (in thousands) | Line Item | Q1 2024 | Q1 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $9,786 | $26,687 | $(16,901) | (63.3)% | | Gross profit (loss) | $(2,815) | $2,532 | $(5,347) | (211.2)% | | Loss from operations | $(21,450) | $(24,250) | $2,800 | (11.5)% | | Net loss | $(28,314) | $(36,325) | $8,011 | (22.1)% | - Gross margin was negative **(28.8)%** for Q1 2024, compared to **9.5%** in Q1 2023, attributed to product mix, launch customer pricing for Sapphire XC, and higher production costs[220](index=220&type=chunk)[221](index=221&type=chunk) - Operating expenses decreased by **30.4%** year-over-year, driven by significant reductions in Research & Development (**-51.6%**) and Selling & Marketing (**-22.1%**) as part of the Strategic Realignment[203](index=203&type=chunk)[223](index=223&type=chunk)[225](index=225&type=chunk) - The company lacks sufficient liquidity to meet operating needs and debt obligations for at least the next 12 months, necessitating additional financings, without which it may be required to sell assets, liquidate, or file for bankruptcy[171](index=171&type=chunk)[240](index=240&type=chunk)[249](index=249&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Velo3D is not required to provide the information for this item - The company is a smaller reporting company as defined in Rule 12b-2 under the Exchange Act and is not required to provide the information required by this Item[275](index=275&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2024, due to un-remediated material weaknesses in internal control over financial reporting, with remediation efforts ongoing - The CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were not effective[277](index=277&type=chunk) - Material weaknesses in internal control over financial reporting, first identified in the 2023 10-K, have not been remediated as of March 31, 2024[278](index=278&type=chunk) - Specific material weaknesses include an ineffective control environment due to insufficient personnel with appropriate accounting knowledge, lack of segregation of duties, and ineffective controls over accounting for debt/equity instruments, inventory, contract assets/liabilities, financial statement presentation, and IT general controls[279](index=279&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk) - Remediation measures are underway, including hiring additional personnel, engaging third-party assistance, and designing and implementing new controls, though their full effectiveness is not yet confirmed[282](index=282&type=chunk)[284](index=284&type=chunk)[285](index=285&type=chunk) Part II. Other Information [Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) As of the filing date, Velo3D is not a party to any material legal proceedings - The company is currently not a party to any material legal proceedings[289](index=289&type=chunk) [Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) This section highlights critical risks, primarily the substantial doubt about the company's ability to continue as a going concern, which could impede capital raising, product sales, and employee retention, alongside the urgent need for additional capital and restrictive debt covenants - There is substantial doubt about the company's ability to continue as a going concern, which could make it difficult to raise necessary financing and may lead to business curtailment or bankruptcy[291](index=291&type=chunk)[292](index=292&type=chunk) - The company requires additional capital to fund near-term operations, and failure to obtain adequate financing could result in the company being unable to continue operations, potentially leading to liquidation or bankruptcy[293](index=293&type=chunk)[295](index=295&type=chunk) - The Secured Notes contain restrictive covenants that limit the company's ability to incur debt, make investments, and transfer assets, where a breach could result in an event of default and acceleration of the debt[296](index=296&type=chunk)[297](index=297&type=chunk) - Servicing the Notes requires significant cash, with quarterly redemptions of **$8.75 million** in principal (for a repayment price of **$10.5 million**) starting April 1, 2024, which the company may not generate sufficient cash flow to meet[300](index=300&type=chunk)[302](index=302&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2024, Velo3D did not sell any shares through its At-The-Market (ATM) Sales Agreement and reported no unregistered sales of equity securities or issuer purchases of its equity securities - During the three months ended March 31, 2024, the company sold no shares pursuant to its ATM sales agreement[303](index=303&type=chunk) - There were no unregistered sales of securities or issuer purchases of equity securities in the quarter[304](index=304&type=chunk)[305](index=305&type=chunk) [Defaults Upon Senior Securities](index=59&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for the reporting period - Not applicable[306](index=306&type=chunk) [Mine Safety Disclosures](index=59&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the reporting period - Not applicable[307](index=307&type=chunk) [Other Information](index=59&type=section&id=Item%205.%20Other%20Information) On May 10, 2024, the company revised CEO Bradley Kreger's Change in Control Agreement, extending severance and health benefits, and entered into a new Change in Control Agreement with CFO Hull Xu, providing for severance, bonus, and equity acceleration upon qualifying termination - On May 10, 2024, the company revised its Change in Control Agreement with CEO Bradley Kreger to extend the severance payment and continued health benefits from nine to twelve months[309](index=309&type=chunk) - On May 10, 2024, the company entered into a Change in Control Agreement with CFO Hull Xu, providing for severance, bonus payments, equity acceleration, and continued medical benefits for up to nine months upon a qualifying termination[310](index=310&type=chunk) [Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including revised and new Change in Control Agreements for the CEO and CFO, officer certifications, and Inline XBRL data files - Exhibits filed include revised and new Change in Control Agreements for the CEO and CFO, respectively, as well as required officer certifications[312](index=312&type=chunk)

[First Quarter 2024 Financial Results Overview](index=1&type=section&id=First%20Quarter%202024%20Financial%20Results%20Overview) Velo3D's first quarter 2024 results demonstrate strong commercial momentum and significant progress in operational efficiency [Executive Summary & Key Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Key%20Highlights) Velo3D reported strong demand in Q1 2024, with $17 million in new bookings and a $22 million backlog, driven by expansion in the defense sector. The company is executing its realignment plan, achieving a 30% year-over-year reduction in operating expenses and a 35% improvement in operating cash flow, positioning it to target cash flow breakeven in the second half of 2024 - The company is seeing strong commercial momentum with significant new orders and a solid backlog, particularly noting expansion in the defense sector with **3 new customers**[2](index=2&type=chunk)[3](index=3&type=chunk) Q1 2024 Commercial and Operational Highlights | Metric | Value | Note | | :--- | :--- | :--- | | **Bookings** | $17 million | $27 million since mid-December 2023 | | **Backlog** | $22 million | Exiting Q1 2024 | | **Operating Expenses** | Down 30% YoY | Down 15% sequentially (excl. one-time charges) | | **Operating Cash Flow** | 35% YoY improvement | On track for H2 2024 breakeven | | **Q2 Revenue Outlook** | >30% sequential growth | - | - Strategic realignment efforts are showing progress through significant cost reductions and improved operational efficiency, including a more than **40% reduction in installation days and labor** for Sapphire XC printers[2](index=2&type=chunk)[6](index=6&type=chunk) - Customer confidence is reflected in the fact that approximately **50% of Q1 bookings were from existing customers**, supported by improved system reliability and resolution of **100% of high-priority service tickets**[4](index=4&type=chunk)[6](index=6&type=chunk) [Financial Performance Analysis](index=2&type=section&id=Financial%20Performance%20Analysis) This section details Velo3D's Q1 2024 financial performance, including revenue, profitability, and cash flow metrics [First Quarter 2024 Financial Summary](index=2&type=section&id=First%20Quarter%202024%20Financial%20Summary) For Q1 2024, Velo3D generated $9.8 million in GAAP revenue, a significant increase from Q4 2023 but a decrease from Q1 2023. The company reported a GAAP net loss of $28.3 million, or ($0.11) per share, and a non-GAAP net loss of $20.2 million. Gross margin was negative 28.8% due to lower fixed cost absorption. The company ended the quarter with $11 million in cash and investments Q1 2024 Key Financial Metrics | Metric ($ in Millions, except per-share data) | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | **GAAP Revenue** | $9.8 | $2.5 | $26.7 | | **GAAP Gross Margin** | (28.8)% | (>100)% | 9.5% | | **GAAP Net Loss** | $(28.3) | $(56.1) | $(36.3) | | **GAAP Net Loss per Share** | $(0.11) | $(0.27) | $(0.19) | | **Non-GAAP Net Loss** | $(20.2) | $(58.6) | $(17.9) | | **Non-GAAP Net Loss per Share** | $(0.08) | $(0.28) | $(0.09) | | **Cash and Investments** | $11 | $31 | $64 | [Revenue](index=4&type=section&id=Revenue) Q1 2024 revenue increased sequentially, with continued growth expected in Q2 2024 - Revenue for Q1 was **$10 million**, showing a significant sequential increase from Q4 2023 driven by a rise in shipments[8](index=8&type=chunk) - The company anticipates continued momentum with expected revenue growth of more than **30% in the second quarter of 2024**[8](index=8&type=chunk) [Gross Margin](index=4&type=section&id=Gross%20Margin) Q1 2024 gross margin was negative due to fixed costs, with positive margin anticipated in Q2 2024 - Gross margin was **negative 29%** for the quarter, primarily due to the impact of lower fixed cost absorption despite increased shipments[9](index=9&type=chunk) - The company expects to achieve a **positive gross margin in Q2 2024**, driven by higher system shipments, improved material costs, and greater manufacturing efficiency[9](index=9&type=chunk) [Operating Expenses](index=4&type=section&id=Operating%20Expenses) Operating expenses saw significant sequential and year-over-year reductions, with further declines projected for Q2 2024 Q1 2024 Operating Expenses | Expense Type | Amount ($M) | Sequential Change | | :--- | :--- | :--- | | **GAAP Operating Expenses** | $18.6 | Down from $25.9 in Q4 2023 | | **Non-GAAP Operating Expenses** | $14.1 | Down 15% from Q4 2023 | - The company expects non-GAAP quarterly operating expenses to decline by more than **10% in Q2 2024** compared to Q1 2024[10](index=10&type=chunk) [Net Loss and EBITDA](index=4&type=section&id=Net%20Loss%20and%20EBITDA) The company reported GAAP and non-GAAP net losses, alongside an adjusted EBITDA loss for Q1 2024 Q1 2024 Profitability Metrics | Metric | Amount ($M) | | :--- | :--- | | **Net Loss (GAAP)** | $(28.3) | | **Non-GAAP Net Loss** | $(20.2) | | **Adjusted EBITDA** | $(11.7) | [Cash Position and Cash Flow](index=4&type=section&id=Cash%20Position%20and%20Cash%20Flow) Velo3D ended Q1 with $11 million in cash, showing improved cash flow year-over-year and expected sequential improvements - The company ended Q1 with **$11 million in cash, cash equivalents, and investments**[12](index=12&type=chunk) - First quarter cash flow (excluding financing) improved by more than **35% year-over-year** and the company expects sequential quarterly improvement in cash flow throughout 2024[12](index=12&type=chunk) [Business Outlook and Guidance](index=5&type=section&id=Business%20Outlook%20and%20Guidance) Velo3D provides its financial projections and strategic goals for 2024, including revenue and profitability targets [2024 Financial Guidance](index=5&type=section&id=2024%20Financial%20Guidance) Velo3D maintains its full-year 2024 guidance, projecting revenue between $80 million and $95 million and non-GAAP operating expenses of $40 million to $50 million. The company anticipates over 30% sequential revenue growth in Q2 and expects to achieve a gross margin of approximately 30% by Q4 2024, while reiterating its goal of reaching free cash flow breakeven in the second half of the year 2024 Financial Guidance | Metric | Guidance | | :--- | :--- | | **Q2 2024 Revenue Growth** | > 30% (sequential) | | **FY 2024 Revenue** | $80 million to $95 million | | **Q4 2024 Gross Margin** | Approx. 30% | | **FY 2024 Non-GAAP OpEx** | $40 million to $50 million | - The company reaffirms its goal to achieve **free cash flow breakeven in the second half of 2024**[13](index=13&type=chunk) [Financial Statements and Reconciliations](index=10&type=section&id=Financial%20Statements%20and%20Reconciliations) This section presents Velo3D's unaudited consolidated financial statements and reconciliations of GAAP to non-GAAP measures [Non-GAAP Reconciliations](index=10&type=section&id=Non-GAAP%20Reconciliations) This section provides detailed reconciliations of GAAP to non-GAAP financial measures. It includes tables for Non-GAAP Net Loss, which adjusts for items like stock-based compensation and fair value changes; Non-GAAP Adjusted EBITDA, which further excludes interest, taxes, and depreciation; and Non-GAAP Operating Expenses, which excludes stock-based compensation - Non-GAAP Net Loss for Q1 2024 was **$(20.2) million**, reconciled from a GAAP Net Loss of **$(28.3) million** by excluding items such as **$5.1 million in stock-based compensation** and a **$3.1 million combined loss on fair value of warrants and contingent earnout liabilities**[25](index=25&type=chunk) - Adjusted EBITDA for Q1 2024 was a loss of **$(11.7) million**, compared to a loss of **$(16.1) million in Q1 2023**[27](index=27&type=chunk) - Adjusted Operating Expenses for Q1 2024 were **$14.1 million**, reconciled from GAAP operating expenses of **$18.6 million** primarily by excluding **$4.5 million in stock-based compensation**[29](index=29&type=chunk) [Condensed Consolidated Financial Statements](index=13&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the period ended March 31, 2024. It includes the Statement of Operations, which details revenues, costs, and net loss; the Balance Sheet, showing assets of $136.1 million and liabilities of $90.7 million; and the Statement of Cash Flows, which indicates a net cash usage of $20.5 million in operating activities Q1 2024 Statement of Operations Summary (in thousands) | Line Item | Q1 2024 | | :--- | :--- | | **Total Revenue** | $9,786 | | **Gross Profit (Loss)** | $(2,815) | | **Loss from Operations** | $(21,450) | | **Net Loss** | $(28,314) | Balance Sheet Summary as of March 31, 2024 (in thousands) | Line Item | Amount | | :--- | :--- | | **Total Current Assets** | $98,345 | | **Total Assets** | $136,148 | | **Total Current Liabilities** | $60,858 | | **Total Liabilities** | $90,698 | | **Total Stockholders' Equity** | $45,450 | - Net cash used in operating activities was **$(20.5) million** for the three months ended March 31, 2024, an improvement from **$(30.8) million** in the prior year period[34](index=34&type=chunk) [Appendix](index=6&type=section&id=Appendix) This section provides background information on Velo3D and important disclaimers regarding forward-looking statements and non-GAAP financial measures [About Velo3D](index=6&type=section&id=About%20Velo3D) Velo3D is a metal 3D printing technology company specializing in additive manufacturing (AM) for mission-critical parts. Their integrated solution, including Flow software, Sapphire printers, and Assure quality control, enables innovation in industries like space exploration, aviation, and energy. Key partners include SpaceX, Honeywell, and Lam Research - Velo3D is a metal 3D printing technology company focused on additive manufacturing for high-value metal parts, overcoming limitations of legacy AM technology[16](index=16&type=chunk) - The company's fully integrated solution includes Flow print preparation software, the Sapphire family of printers, and the Assure quality control system[17](index=17&type=chunk) - Velo3D serves customers in space exploration, aviation, power generation, energy, and semiconductor industries, with strategic partners like SpaceX, Honeywell, and Lam Research[17](index=17&type=chunk) [Forward-Looking Statements and Non-GAAP Information](index=8&type=section&id=Forward-Looking%20Statements%20and%20Non-GAAP%20Information) This section contains standard legal disclaimers. It cautions investors that the press release includes "forward-looking statements" subject to significant risks and uncertainties, and that actual results may differ materially. It also explains the company's use of non-GAAP financial measures like Adjusted EBITDA and Non-GAAP Net Loss, stating they are supplemental to GAAP results and providing a rationale for their use - The press release contains forward-looking statements regarding guidance, performance, and strategic initiatives, which are subject to significant risks and uncertainties that could cause actual results to differ materially[20](index=20&type=chunk) - The company uses non-GAAP financial measures such as Non-GAAP Net Loss, EBITDA, and Adjusted EBITDA as supplemental information and advises that they should not be considered in isolation from, or as a substitute for, GAAP measures[22](index=22&type=chunk)

Financial Performance - The company reported an operating loss of $133.3 million for the year ended December 31, 2023, compared to a loss of $106.3 million for 2022[138]. - The company experienced less annual revenue growth than expected in 2023 due to delayed shipments and customer order delays, resulting in a decrease in system sales and backlog in Q4 2023[189]. - Changes in transaction models and product mix may lead to fluctuations in gross margins, affecting overall financial performance[165]. - The company anticipates requiring additional capital to fund operations and may need to engage in equity or debt financings to secure these funds[148]. - There is substantial doubt about the company's ability to continue as a going concern for the next twelve months, which could adversely impact operations and financing[140]. Customer Base and Sales - Sales to the top three customers accounted for 24.5% of revenue in 2023, down from 48.5% in 2022, indicating a diversification in the customer base[144]. - Over 50% of the company's customers have multiple products from the Sapphire family of systems, indicating a growing customer relationship[145]. - The company relies on a limited number of customers for a significant portion of its near-term revenue, increasing vulnerability to their financial conditions[146]. Operational Challenges - The company experienced delays in shipments and customer orders, leading to lower than expected annual revenue growth and a backlog in the fourth quarter of 2023[139]. - The company may face significant delays in the design, production, and commercialization of additive manufacturing solutions, impacting market readiness[152]. - New product launches may experience delays, which could adversely affect brand reputation and financial performance[153]. - The company faces significant operational risks from international sales, including currency fluctuations that may affect product pricing and competitiveness in foreign markets[182]. - The company relies heavily on IT systems for operations, and any disruption could significantly affect supply chain management, product development, and customer experience, leading to increased costs and decreased sales[200][201]. Research and Development - The company has historically invested in research and development, which may impact operating results and liquidity if returns are lower than expected[136]. - The additive manufacturing industry is characterized by rapid technological change, requiring continuous product development to meet evolving customer demands[137]. - The company relies heavily on future collaborative and supply chain partners for R&D programs, which poses risks if suitable partnerships are not established or maintained[224]. Financial Liabilities and Risks - A significant portion of outstanding receivables is currently past due, raising credit risk concerns, especially with early-stage customers[147]. - The company may incur substantial costs in protecting, enforcing, and defending its IP rights against third parties[253]. - The company may face significant liabilities from third-party IP claims, which could adversely affect its financial condition[252]. - The company is required to redeem $8,750,000 of the principal amount of the Secured Notes for a repayment price of $10,500,000 on each Partial Redemption Date starting July 1, 2024[267]. - The company may not generate sufficient cash flow from operations in the future to satisfy obligations under the Notes or other permitted indebtedness, indicating a potential need for additional financing[269]. Corporate Governance and Compliance - Material weaknesses in internal control over financial reporting were identified, leading to adjustments in accounts receivable, inventory, and other financial statement components[192]. - The company has identified material weaknesses in its IT general controls, specifically in user access and program change management, which could lead to material misstatements in financial statements[195][196]. - The company is subject to privacy and data security regulations, which could increase compliance costs and affect marketing capabilities[242]. - Non-compliance with anti-corruption and trade control laws could lead to civil and criminal penalties, harming the company's reputation and financial condition[233]. Market and Competitive Landscape - The company is subject to increasing competition from various producers of additive manufacturing equipment, which may adversely affect its market share and financial condition[178]. - The company intends to continue expanding its product development and distribution network to enhance its competitive position, although future competition may arise from new technologies and patents[181]. - Analysts' projections may adversely affect the company's stock price if actual results do not meet expectations[295]. Workforce and Restructuring - The company announced a reduction in force impacting approximately 21% of its workforce as part of a restructuring plan to streamline operations and reduce costs[191]. - The company has incurred restructuring costs related to severance payments and may face unintended consequences such as employee attrition and decreased morale[191]. Insurance and Liability - Current insurance coverage may not be adequate for potential liabilities, and the company may face challenges in obtaining insurance on commercially reasonable terms[206][207]. - The company may incur significant costs related to environmental damages or liabilities, which could adversely affect its business and financial results[239]. Stock and Securities - The company has the ability to sell up to $300 million of additional shares of common stock or other securities, with $75 million available under the ATM Sales Agreement[281]. - The average closing price of the company's common stock was below $1.00 over a consecutive 30 trading-day period, triggering a notice from the NYSE regarding non-compliance with listing standards[292]. - If the company fails to meet NYSE listing standards, it may face delisting, adversely affecting liquidity and market price of its securities[293].

Revenue Performance - Fourth quarter revenue was $2 million, reflecting a significant reduction in system shipments due to lower than planned bookings in the second half of 2023[7] - Fiscal year 2023 revenue totaled $77.6 million, down from $80.8 million in 2022[7] - Revenues for Q4 2023 were $1,806 thousand, a significant decrease from $29,780 thousand in Q4 2022, representing a decline of 93.9%[24] - Total revenue for Q4 2023 was $1.806 million, a decrease of 93.4% compared to $29.78 million in Q4 2022[30] - Guidance for fiscal year 2024 includes revenue expectations in the range of $80 million to $95 million and a gross margin of 20% to 30%[15] Operating Expenses - Operating expenses for the fourth quarter were $24.5 million, down from $26.7 million in the third quarter, with a non-GAAP operating expense of $16.5 million, a decrease of approximately 17% sequentially[9] - Total operating expenses for Q4 2023 reached $24,544 thousand, up 1359.0% from $23,662 thousand in Q4 2022[28] - Operating expenses for the year ended December 31, 2023, totaled $106.987 million, slightly down from $107.155 million in 2022[30] Net Loss and Financial Health - Net loss for Q4 2023 was $58,225 thousand, compared to a net income of $22,607 thousand in Q4 2022, marking a change of 357.8%[24] - Non-GAAP Net Loss for Q4 2023 was $61,147 thousand, a drastic increase from a loss of $16,388 thousand in Q4 2022, reflecting a change of 273.5%[24] - The net loss for the year ended December 31, 2023, was $135.020 million, compared to a net income of $10.020 million in 2022[34] - Cash and cash equivalents decreased to $24.494 million as of December 31, 2023, from $31.983 million in 2022[32] - Total assets decreased to $157.507 million as of December 31, 2023, from $225.114 million in 2022[32] - Total liabilities increased to $86.997 million as of December 31, 2023, compared to $84.268 million in 2022[32] Research and Development - Research and development expenses for Q4 2023 were $9,211 thousand, a 510.0% increase from $7,828 thousand in Q4 2022[28] - The company reported a significant increase in research and development expenses, totaling $42.031 million for the year ended December 31, 2023, compared to $46.266 million in 2022[30] Cash Flow and Financial Position - The company achieved a 35% year-over-year improvement in free cash flow and is well-positioned to reach cash flow breakeven in the second half of FY 2024[3] - The company had a cash flow used in operating activities of $102.630 million for the year ended December 31, 2023, compared to $123.962 million in 2022[34] Customer and Market Development - Total bookings since mid-December 2023 reached $15 million, with over 50% of orders coming from existing customers[3] - The company added 12 new customers in 2023, including three new defense customers, expanding its installed base[3] Operational Improvements - The company has reduced field issue resolution times by more than 45% since Q3 2023 and improved system uptime by 10%[5] Gross Margin - Gross margin for the fourth quarter was negative 1,857%, but the company anticipates a positive gross margin in the first quarter of 2024 due to improved material costs and operational efficiency[8]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q _____________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission File Number: 001-39757 Velo3D, Inc. ______________________________ (Exact name of registrant as spec ...

Financial Performance - Revenue for Q2 2023 was $25 million, up 25% from $20 million in Q2 2022[157] - Total revenue for the three months ended June 30, 2023, was $25.1 million, an increase of $5.5 million or 27.9% compared to $19.6 million in 2022[191] - Total revenue for the six months ended June 30, 2023, was $51.9 million, an increase of $20.1 million or 63.0% compared to $31.9 million in 2022[221] - 3D Printer sales increased to $23.2 million in Q2 2023 from $17.6 million in Q2 2022, reflecting a growth of $5.6 million or 31.6%[192] - 3D Printer sales contributed $47.8 million, representing a 71.8% increase from $27.8 million in the same period last year[222] Bookings and Backlog - Bookings for Q2 2023 were $16 million, down 11% from $18 million in Q2 2022, while total bookings for the first half of 2023 remained flat at $36 million compared to the same period in 2022[157] - Backlog as of June 30, 2023, was $15 million, significantly down from $55 million as of June 30, 2022[157] - The company expects demand for the Sapphire family of systems to drive future revenue growth, with a backlog of $15 million for 3D Printers as of June 30, 2023[195] Profitability and Expenses - Gross profit for the three months ended June 30, 2023, was $3.0 million, with a gross margin of 11.9%, compared to a gross profit of $1.2 million and a margin of 6.3% in 2022[204] - Total cost of revenue for Q2 2023 was $22.2 million, an increase of $3.7 million or 20.3% from $18.4 million in Q2 2022[198] - Gross profit for the six months ended June 30, 2023, was $5.9 million, with a gross margin of 11.4%, up from $1.2 million and 3.9% in 2022[231] - Total cost of revenue increased to $46.0 million, a rise of $15.4 million or 50.4% from $30.6 million in 2022[226] - The company reported a net loss of $59.4 million for the six months ended June 30, 2023, compared to a net income of $62.6 million in 2022, reflecting a change of $122.0 million[219] Research and Development - Research and development expenses are expected to increase, which may adversely affect near-term profitability as the company focuses on innovation[161] - Research and development expenses decreased to $12.5 million in Q2 2023 from $13.0 million in Q2 2022, a reduction of $0.5 million[206] - Research and development expenses decreased to $23.0 million, down $2.9 million from $25.9 million in the prior year[232] - Continued investment in product development is seen as crucial for future growth, with a focus on addressing customer needs and enhancing AM solutions[161] Customer Concentration and Diversification - Sales to the top three customers accounted for 47.0% of total sales in Q2 2023, a decrease from 65.1% in Q2 2022, indicating improved customer diversification[159] - The company aims to diversify its customer base but remains susceptible to risks associated with customer concentration[160] Cash Flow and Financing - As of June 30, 2023, the company had $47.3 million in cash and cash equivalents, down from $80.2 million at the end of 2022[240] - The company entered into a securities purchase agreement to issue up to $105 million in senior secured convertible notes, with $70 million issued on August 14, 2023, generating approximately $66 million in net proceeds[241] - Net cash used in operating activities for the six months ended June 30, 2023, was $58.8 million, a decrease of $10.0 million compared to $68.8 million in the same period of 2022[253] - Net cash provided by investing activities for the six months ended June 30, 2023, was $25.6 million, a significant improvement from a net cash outflow of $94.8 million in the same period of 2022[257] - Net cash provided by financing activities during the six months ended June 30, 2023, was $30.1 million, compared to a net cash outflow of $0.5 million in the same period of 2022[260] - The company believes its cash and cash equivalents, along with expected future cash generation, will be sufficient to meet working capital and capital expenditure requirements for at least twelve months[245] Operational Challenges - The company continues to face supply chain challenges that have increased material and shipping costs, impacting gross margins[164] - The timeframe from order to completion of the site acceptance test is expected to be reduced as production scales[169] - The company expects cash used in operating activities to decrease due to stabilizing working capital requirements and cost reduction initiatives for the remainder of 2023[256] - The company anticipates a decrease in capital expenditures for the remainder of 2023, limiting the number of 3D Printer systems for lease to customers[259] Interest and Liabilities - Interest expense increased to $0.3 million in Q2 2023 from $0.1 million in Q2 2022, reflecting the impact of recent financing activities[212] - Interest expense increased to $0.6 million for the six months ended June 30, 2023, compared to $0.2 million in 2022[235] - The gain on fair value of contingent earnout liabilities decreased significantly to $1.8 million in Q2 2023 from $130.2 million in Q2 2022, a decline of 98.6%[189] - The change in fair value of contingent earnout liabilities resulted in a loss of $7.8 million for the six months ended June 30, 2023, compared to a gain of $99.0 million in 2022[237] Regulatory and Compliance - The company is classified as a smaller reporting company under Rule 12b-2 of the Exchange Act, thus exempt from providing certain market risk disclosures[273]

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements (unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) This section presents Velo3D, Inc.'s unaudited condensed consolidated financial statements for the quarter ended March 31, 2023, reporting a **$36.2 million** net loss and sufficient liquidity for the next twelve months Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $37,139 | $31,983 | | Short-term investments | $26,870 | $48,214 | | Inventories | $73,937 | $71,202 | | Total current assets | $164,924 | $172,922 | | Total assets | $213,726 | $225,114 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $37,729 | $46,053 | | Total liabilities | $91,786 | $84,268 | | Total stockholders' equity | $121,940 | $140,846 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total Revenue | $26,814 | $12,218 | | Gross profit | $2,925 | $15 | | Loss from operations | $(24,123) | $(28,173) | | Net loss | $(36,198) | $(65,341) | | Net loss per share (Basic & Diluted) | $(0.19) | $(0.36) | Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(30,834) | $(30,107) | | Net cash provided by (used in) investing activities | $20,962 | $(72,709) | | Net cash provided by (used in) financing activities | $15,034 | $(367) | | Net change in cash and cash equivalents | $5,156 | $(103,176) | - The company produces metal additive 3D printers for high-value parts in industries like space, aviation, and energy, also providing support services[27](index=27&type=chunk) - The company has incurred losses and negative cash flows from operations since inception, with an accumulated deficit of **$256.0 million** as of March 31, 2023[31](index=31&type=chunk) - An At-the-Market (ATM) offering initiated in February 2023 raised **$10.5 million** net of costs by March 31, 2023, with management believing current and future cash will be sufficient for at least the **next 12 months**[33](index=33&type=chunk)[35](index=35&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial performance, noting a **119.5% revenue increase** to **$26.8 million**, improved gross margin to **10.9%**, ongoing customer concentration, and sufficient liquidity for the next twelve months despite historical losses, alongside recent debt facility modifications - Velo3D produces a fully integrated hardware and software solution using proprietary laser powder bed fusion (L-PBF) technology for complex, mission-critical metal parts in industries like space, aviation, and defense[141](index=141&type=chunk)[142](index=142&type=chunk) Key Financial and Operational Metrics | Metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Revenue ($ in millions) | $27 | $12 | | Bookings ($ in millions) | $20 | $12 | | Backlog ($ in millions) as of March 31 | $24 | $34 | - Sales to the top three customers accounted for **44.9%** of revenue in Q1 2023, indicating significant customer concentration[149](index=149&type=chunk) Results of Operations Comparison (in thousands) | Metric | Q1 2023 | Q1 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $26,814 | $12,218 | $14,596 | 119.5% | | Gross Profit | $2,925 | $15 | $2,910 | 19400.0% | | Loss from Operations | $(24,123) | $(28,173) | $4,050 | (14.4)% | | Net Loss | $(36,198) | $(65,341) | $29,143 | (44.6)% | - The revenue increase was driven by higher production volumes and a product mix shift towards higher-priced Sapphire XC and Sapphire XC 1MZ systems[183](index=183&type=chunk) - As of March 31, 2023, the company had **$64.0 million** in cash, cash equivalents, and short-term investments, which management believes is sufficient for working capital and capital expenditure requirements for at least the **next twelve months**[210](index=210&type=chunk)[213](index=213&type=chunk) - The company has an "at-the-market" (ATM) offering program to sell up to **$40.0 million** of common stock, and in April 2023, drew an additional **$5.0 million** on its revolving credit facility, leaving **$17.0 million** undrawn[212](index=212&type=chunk)[220](index=220&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Velo3D, as a smaller reporting company, is not required to provide quantitative and qualitative disclosures about market risk under SEC regulations - As a smaller reporting company, Velo3D is not required to provide the information regarding market risk as per Item 305(e) of Regulation S-K[245](index=245&type=chunk) [Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were **not effective** as of March 31, 2023, due to un-remediated material weaknesses in internal control over financial reporting, including control environment, segregation of duties, inventory, and IT general controls - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were **not effective**[247](index=247&type=chunk) - Material weaknesses in internal control over financial reporting, initially described in the 2022 Form 10-K, remain unremediated as of March 31, 2023[248](index=248&type=chunk) - The material weaknesses include an ineffective control environment, lack of segregation of duties, and ineffective controls over inventory, contract assets/liabilities, and IT general controls (user access and program change management)[249](index=249&type=chunk)[253](index=253&type=chunk) - Remediation measures are in progress, involving additional personnel, third-party assistance, and new control design and implementation, though these are not yet complete or fully tested[252](index=252&type=chunk)[253](index=253&type=chunk) [Part II. Other Information](index=52&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - As of the report date, Velo3D is not a party to any material legal proceedings[257](index=257&type=chunk) [Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section updates previously disclosed risk factors from the 2022 Form 10-K, adding specific risks related to adverse market conditions, economic uncertainty, and U.S. banking system instability, including the failure of Silicon Valley Bank - There have been no material changes to the risk factors described in the 2022 Form 10-K, except for the addition of risks related to economic uncertainty[259](index=259&type=chunk) - The company highlights that market conditions and economic downturns, including recessions, inflation, rising interest rates, and banking system instability, could adversely affect business and operating results[260](index=260&type=chunk) - The failure of several U.S. banks, including SVB in March 2023, is cited as an example of banking system instability that could threaten the company's ability to access cash or financing[263](index=263&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales or issuer purchases of its equity securities during the quarter - There were no unregistered sales of equity securities during the reporting period[265](index=265&type=chunk) - There were no issuer purchases of equity securities during the reporting period[266](index=266&type=chunk) [Defaults Upon Senior Securities](index=54&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon its senior securities - None[267](index=267&type=chunk) [Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Velo3D's business operations - Not applicable[268](index=268&type=chunk) [Other Information](index=54&type=section&id=Item%205.%20Other%20Information) The company discloses two recent amendments to its loan agreement with Silicon Valley Bank, modifying depository requirements and updating financial covenants for fiscal 2023 - On April 7, 2023, the company amended its loan agreement with New SVB to reduce the requirement to maintain operating and depository accounts with the bank from **90%** to **50%** of its dollar value[269](index=269&type=chunk) - On May 5, 2023, the company entered into a fifth loan modification agreement with New SVB, updating certain financial covenants for fiscal 2023 and establishing an inventory appraisal requirement to be conducted within **90 days**[270](index=270&type=chunk) [Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including loan agreement amendments, CEO/CFO certifications, and interactive data files - The filed exhibits include the Letter Agreement (April 7, 2023) and Fifth Loan Modification Agreement (May 5, 2023) with Silicon Valley Bank, CEO and CFO certifications, and Inline XBRL documents[274](index=274&type=chunk) [Signatures](index=56&type=section&id=Signatures) The report is duly signed on behalf of Velo3D, Inc. by its Chief Financial Officer, William McCombe, on May 10, 2023 - The report was signed by William McCombe, Chief Financial Officer, on May 10, 2023[276](index=276&type=chunk)[278](index=278&type=chunk)