Velo3D(VLD) - 2024 Q2 - Quarterly Report

Part I. Financial Information Financial Statements (unaudited) The unaudited Q2 2024 financial statements reflect significant deterioration, with reduced liquidity, revenue, and a gross loss, raising substantial doubt about going concern - The company's financial statements were prepared assuming it will continue as a going concern, but management has substantial doubt about this ability due to recurring losses and negative cash flows As of June 30, 2024, cash and short-term investments were approximately $3.2 million with an accumulated deficit of $385.5 million[30] - On June 13, 2024, the company effected a 1-for-35 reverse stock split of its common stock, with all share and per-share amounts retroactively adjusted[23][24] - The company received a notice of non-compliance from the NYSE on July 8, 2024, due to average market capitalization and stockholders' equity falling below $50 million, and intends to submit a compliance plan[27][28] Condensed Consolidated Balance Sheets (unaudited) As of June 30, 2024, the balance sheet shows significantly decreased liquidity, with cash and equivalents dropping to $2.5 million, total assets to $116.7 million, and total liabilities to $64.5 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,462 | $24,494 | | Total current assets | $82,170 | $113,024 | | Total assets | $116,652 | $153,799 | | Liabilities & Stockholders' Equity | | | | Debt – current portion | $24,592 | $21,191 | | Total current liabilities | $48,554 | $48,671 | | Total liabilities | $64,533 | $85,459 | | Total Stockholders' Equity | $52,119 | $68,340 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) For Q2 2024, revenue plummeted by 58.8% to $10.3 million, resulting in a gross loss of $2.9 million, though a non-cash gain on warrants led to a near break-even net loss of $0.2 million Q2 2024 vs. Q2 2023 Performance (in thousands) | Metric | Q2 2024 | Q2 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $10,344 | $25,134 | -58.8% | | Gross profit (loss) | $(2,897) | $2,536 | NM | | Loss from operations | $(20,520) | $(25,706) | -20.2% | | Net income (loss) | $(172) | $(23,201) | -99.3% | | Diluted EPS | $(0.02) | $(4.10) | -99.5% | H1 2024 vs. H1 2023 Performance (in thousands) | Metric | H1 2024 | H1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $20,130 | $51,821 | -61.2% | | Gross profit (loss) | $(5,712) | $5,068 | NM | | Loss from operations | $(41,970) | $(49,956) | -16.0% | | Net income (loss) | $(28,486) | $(59,526) | -52.1% | | Diluted EPS | $(3.55) | $(10.63) | -66.6% | Condensed Consolidated Statements of Cash Flows (unaudited) For H1 2024, net cash used in operating activities was $28.5 million, a significant improvement from H1 2023, with investing activities providing $6.0 million and financing activities $0.5 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(28,492) | $(58,778) | | Net cash provided by investing activities | $5,966 | $25,600 | | Net cash provided by financing activities | $490 | $30,074 | | Net change in cash and cash equivalents | $(22,032) | $(3,115) | Notes to Condensed Consolidated Financial Statements (unaudited) The notes detail critical financial aspects, including substantial doubt about going concern, Secured Notes terms, equity and warrant transactions, high customer concentration, and a significant August 2024 workforce reduction - The company has substantial doubt about its ability to continue as a going concern, as it lacks sufficient liquidity to meet its obligations for at least 12 months from the financial statement issuance date[31] - In April 2024, the company raised approximately $12 million in gross proceeds through a Best Efforts Public Offering (BEPO), selling shares and warrants[33][78] - On August 9, 2024, the company initiated a reduction in force affecting 63 employees (approx. 30% of the workforce), estimating restructuring costs of $1.1 million to $1.7 million[122] - For Q2 2024, three customers accounted for 24.0%, 26.5%, and 16.0% of total revenue, respectively, indicating significant customer concentration[113] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a strategic pivot to optimizing free cash flow and efficiency, reiterating substantial doubt about going concern due to a severe liquidity crisis, with Q2 2024 revenue declining 58.8% and gross margin turning negative - The company has strategically realigned its operations to pivot from emphasizing revenue growth to optimizing free cash flow, maximizing customer success, and reducing expenditures[130] - The company's precarious financial condition has caused customers to delay orders and has negatively impacted supplier relationships, leading to higher component costs and unfavorable payment terms[132][171] - As of August 2, 2024, the company had only $1.1 million in cash and short-term investments against $17.5 million in accounts payable and $24.6 million in Secured Notes, highlighting a severe liquidity crisis[131][197] - Management states that without additional funding, the company will not be able to continue operations and may be required to sell assets, liquidate, and/or file for bankruptcy[137][197] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Velo3D is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[226] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of June 30, 2024, due to several unremediated material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of June 30, 2024[228] - Multiple material weaknesses in internal control over financial reporting remain unremediated These include deficiencies in: - Control environment and sufficient accounting personnel - Segregation of duties for journal entries and reconciliations - Accounting for complex debt and equity instruments - Controls over inventory and contract assets/liabilities - Financial statement preparation and disclosure - IT general controls, including user access and change management[229][230][231][233] - These weaknesses have resulted in past financial statement revisions and adjustments and could lead to material misstatements in the future[232] Part II. Other Information Legal Proceedings The company reports that it is not currently a party to any material legal proceedings - As of the report date, the company is not involved in any material legal proceedings[239] Risk Factors This section emphasizes critical risks, including substantial doubt about going concern, severe liquidity shortage, the need for additional capital, potential NYSE delisting, and restrictive debt covenants - There is substantial doubt about the company's ability to continue as a going concern, which has made it difficult to raise financing, sell products, and retain employees[241][243] - The company requires significant additional capital to fund near-term operations and satisfy debt obligations Failure to secure this funding could force the company to cease operations, liquidate assets, or file for bankruptcy[245][246] - The company is not in compliance with NYSE continued listing standards regarding minimum market capitalization and stockholders' equity Failure to submit an acceptable compliance plan or regain compliance could result in the delisting of its common stock[250][251][252] - The terms of the company's Secured Notes contain restrictive covenants that limit operational and financial flexibility A breach could result in an event of default and acceleration of debt, which the company would be unable to repay[254][255] Unregistered Sales of Equity Securities and Use of Proceeds The company has an ATM Sales Agreement for up to $75 million, but no shares were sold under this agreement during the three months ended June 30, 2024 - During the three months ended June 30, 2024, the company sold no shares pursuant to its ATM Sales Agreement[261] Defaults Upon Senior Securities This item is not applicable for the reporting period Mine Safety Disclosures This item is not applicable for the reporting period Other Information During Q2 2024, no director or Section 16 officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[263] Exhibits This section lists all exhibits filed with the 10-Q report, including certificates of incorporation, warrant agreements, note amendments, and officer certifications