Velo3D(VLD) - 2021 Q4 - Annual Report

Financial Performance - The company has incurred net losses of $107.1 million and $21.8 million for the years ended December 31, 2021 and 2020, respectively, and expects to continue experiencing operating losses and negative cash flow in the near term [116]. - The company’s financial performance may fluctuate based on the mix of transaction models, with lower gross margin transactions potentially reducing profitability [138]. - Economic uncertainty, including factors like inflation and rising interest rates, could adversely affect business and operating results [185]. - Changes in tax laws and regulations could materially affect the company's financial position and results of operations [175]. - The company may face volatility in stock prices due to various market and industry factors, including changes in operating performance and economic conditions [240]. Customer Concentration and Revenue Risks - Sales to the top three customers accounted for 62.0% and 71.8% of total revenue for the years ended December 31, 2021 and 2020, respectively, with SpaceX being the largest customer, contributing 27.8% and 41.1% of revenue in those years [120][121]. - The company relies on a limited number of customers for a significant portion of its near-term revenue, increasing credit risk if these customers face financial difficulties [123]. - The company faces challenges in maintaining and increasing sales of its additive manufacturing products and service contracts, which are crucial for generating recurring revenues [139]. Competition and Market Challenges - The company may face increased competition in the additive manufacturing industry, which could adversely affect its operating results [115]. - The company is experiencing increased competition in the additive manufacturing industry, which may adversely affect its operating results and market share [153]. - The company’s business model is sensitive to price competition, and failure to meet customer price expectations could negatively impact demand for its products [142]. Operational and Logistical Challenges - There are significant technological and logistical challenges associated with producing and commercializing additive manufacturing solutions, which may lead to delays in product launches [126]. - The ongoing COVID-19 pandemic has disrupted the company's operations, leading to increased costs and delays in product installations, particularly affecting the Sapphire® and Sapphire® XC printers [134]. - The construction of planned production facilities may face delays or cost overruns, impacting business operations and financial condition [202]. - The company operates primarily at two facilities, and disruptions at either location could adversely affect operations and results [201]. Research and Development - The company has invested significantly in research and development, which may affect operating results and liquidity if the returns on these investments are lower than expected [125]. - The company is committed to investing in research and development to remain competitive in a rapidly changing technological landscape, but faces challenges in effectively addressing customer needs and emerging industry standards [151]. - The company plans to continue product development and expand its distribution network to enhance its competitive position [156]. Regulatory and Compliance Risks - The company is subject to various regulatory rules and regulations, which may increase costs and the risk of non-compliance [253]. - Compliance with U.S. and international anti-corruption laws is critical, as violations could lead to civil, criminal, and administrative penalties, harming the company's reputation [208]. - The company is subject to various environmental laws and regulations, which could result in compliance costs and potential liabilities [212]. Intellectual Property and Confidentiality - The company relies on proprietary information and intellectual property, and failure to protect these rights could harm competitive advantages and financial performance [218]. - The company may face challenges in securing patent protections, which could limit its ability to commercialize products and technologies [221]. - Breaches of confidentiality agreements could harm the company's competitive position and result in decreased sales and operating results [222]. - The company's ability to protect its IP rights is crucial for future revenue growth, relying on a combination of registered and unregistered IP [227]. Management and Internal Controls - Material weaknesses in internal control over financial reporting have been identified, which could lead to misstatements and regulatory consequences [177]. - There is insufficient segregation of duties in finance and accounting functions, contributing to material weaknesses [181]. - Management acknowledges that remediation of these material weaknesses may not occur in a timely manner, potentially affecting the accuracy of financial reporting [182]. Growth and Capital Requirements - The company may require additional capital to support business growth, which might not be available on acceptable terms, potentially impacting its ability to develop new features or enhance products [124]. - The company has experienced rapid growth and is making significant investments in infrastructure, technology, and market expansion, but must generate sufficient revenue to support these investments [163]. - Effective management of anticipated growth is crucial, requiring enhancements in operational, financial, and management controls [164]. Shareholder and Market Dynamics - Approximately 77.9% of the outstanding common stock is owned by former holders of Legacy Velo3D capital stock immediately after the closing [242]. - The public and private placement warrants will become exercisable for common stock, increasing the number of shares eligible for future resale and resulting in dilution for stockholders [244]. - A significant portion of total outstanding shares is restricted from immediate resale, which could lead to a drop in market price if sold in large quantities [241]. - The company may not satisfy the continued listing standards of the NYSE, which could lead to delisting and adversely affect liquidity and market price [250].