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What changed in Velo3D, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Velo3D, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+418 added−372 removedSource: 10-K (2024-04-03) vs 10-K (2023-03-20)

Top changes in Velo3D, Inc.'s 2023 10-K

418 paragraphs added · 372 removed · 305 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+11 added−10 removed58 unchanged
Biggest changeCorporate Information We were incorporated on September 11, 2020 as a special purpose acquisition company and a Cayman Islands exempted company under the name JAWS Spitfire Acquisition Corporation. On December 7, 2020, JAWS Spitfire completed its initial public offering. On September 29, 2021, JAWS Spitfire consummated the Merger with Legacy Velo3D pursuant to the Business Combination Agreement.
Biggest changeOn December 7, 2020, JAWS Spitfire completed its initial public offering. On September 29, 2021, JAWS Spitfire consummated the Merger with Legacy Velo3D pursuant to the Business Combination Agreement. In connection with the Merger, JAWS Spitfire’s jurisdiction of incorporation was changed from the Cayman Islands to the State of Delaware, and JAWS Spitfire changed its name to Velo3D, Inc.
Our customers are primarily original equipment manufacturers (" OEMs ") and contract manufacturers (" CMs ") who look to AM to solve issues with traditional metal parts manufacturing technologies. Those traditional manufacturing technologies rely on processes, including casting, stamping and forging, that typically require high volumes to drive competitive costs and have long lead times for production.
Our customers are primarily original equipment manufacturers (" OEMs ") and contract manufacturers (" CMs ") who look to AM to solve issues with traditional manufacturing technologies for metal parts. Those traditional manufacturing technologies rely on processes, including casting, stamping and forging, that typically require high volumes to drive competitive costs and have long lead times for production.
We offer customers a fully integrated solution, which includes the following key components: • Flow print preparation software conducts sophisticated analysis of the features of the metal part and specifies a production process that significantly reduces and often eliminates the need for support structures. • Sapphire metal AM printers produce the part using our proprietary L-PBF technology.
We offer customers a fully integrated solution, which includes the following key components: • Flow print preparation software conducts a sophisticated analysis of the features of the metal part and specifies a production process that significantly reduces and often eliminates the need for support structures. • Sapphire metal AM printers produce the part using our proprietary L-PBF technology.
Our issued patents will expire at different times in the future, with the earliest expiring in 2035 and the latest expiring in 2047. Our currently pending patent applications will generally remain in effect for 20 years from the date of filing of the initial patent application of each.
Our issued patents will expire at different times in the future, with the earliest expiring in 2035 and the latest expiring in 2047. Our currently pending patent applications will generally remain in effect for 20 years from the date of filing of the initial patent application of each.
We pursue patent protection when we believe it is possible and consistent with our overall strategy for safeguarding IP. Our patent profile is a broad portfolio across our systems, apparatuses, devices, methods (e.g., of production), software, and composition of matter (e.g., 3D objects). Metal parts produced using our system technology have a signature that is readily recognizable and traceable.
We pursue patent protection when we believe it is possible and consistent with our overall strategy for safeguarding IP. Our patent profile includes a broad portfolio across our systems, apparatuses, devices, methods (e.g., of production), software, and composition of matter (e.g., 3D objects). Metal parts produced using our system technology have a signature that is readily recognizable and traceable.
Accelerate global acquisition of new customers We plan to increase the number of customer relationships we have globally in the coming years both organically and through distribution partnerships. In recent years, we have demonstrated that our technology can bring tremendous value across a number of use cases in the space, aviation and defense, automotive, energy and 8 industrial segments.
Accelerate global acquisition of new customers We plan to increase the number of customer relationships we have globally in the coming years both organically and through distribution partnerships. In recent years, we have demonstrated that our technology can bring tremendous value across a number of use cases in the space, aviation and defense, automotive, energy and industrial segments.
A subsequent Extended Support Agreement is available for renewal after the initial contract period based on the then-fair value of the service, which is paid for separately. 3D Printer sale transactions fall into two categories: a structured fixed purchase price for the system or a sale and utilization (variable consideration) fee model.
A subsequent Extended Support Agreement is available for renewal after the initial contract period based on the then-fair value of the service, which is paid for separately. 8 3D Printer sale transactions fall into two categories: a structured fixed purchase price for the system or a sale and utilization (variable consideration) fee model.
We make certain estimates in calculating the variable consideration, including amount of hours, the estimated life of the equipment and the 7 discount rate. Although estimates may be made on a contract-by-contract basis, whenever possible, we use all available information including historical customer usage and collection patterns to estimate variable consideration. Management reassesses the estimated variable consideration quarterly.
We make certain estimates in calculating the variable consideration, including the amount of hours, the estimated life of the equipment and the discount rate. Although estimates may be made on a contract-by-contract basis, whenever possible, we use all available information including historical customer usage and collection patterns to estimate variable consideration. Management reassesses the estimated variable consideration quarterly.
We have 9 built these relationships by demonstrating the value that our differentiated technology can achieve and integrating our solutions into their operations, resulting in repeat sales to multiple customers within a short span of time. Our success in partnering with existing customers has also validated our differentiated technology for other potential customers.
We have built these relationships by demonstrating the value that our differentiated technology can achieve and integrating our solutions into their operations, resulting in repeat sales to multiple customers within a short span of time. Our success in partnering with existing customers has also validated our differentiated technology for other potential customers.
In addition to our U.S., Australian and European sales organization, we have also established relationships with distribution partners in the Asia-Pacific region (Taiyo Nippon Sanso Corporation, and Avaco) and in the U.S. (GoEngineer, and HarTech Group) and sales agents in the Middle East to provide greater leverage to our sales team and enable expansion into new markets.
In addition to our U.S. and European sales organization, we have also established relationships with distribution partners in the Asia-Pacific region (Taiyo Nippon Sanso Corporation, and Avaco) and in the U.S. (GoEngineer and HarTech Group) and sales agents in the Middle East to provide greater leverage to our sales team and enable expansion into new markets.
In recent years, we have successfully demonstrated the utility of our technology across multiple target markets, including the highest performance application in the space, aviation and defense, automotive, energy and industrial end markets. We believe these successful deployments have seeded the market and will enable increased acquisition of new customers in those segments.
In recent years, we have successfully demonstrated the utility of our technology across multiple target markets, including the highest performance application in the space, aviation, semiconductor, defense, automotive, energy and industrial end markets. We believe these successful deployments have seeded the market and will enable increased acquisition of new customers in those segments.
We generally do not compete in the segment of the AM market composed of applications which can be served by the multiple existing competitors in metal AM. Our primary focus is on those applications where demand for our solution is expected to be the strongest, thus supporting our long-term margins.
We generally do not compete in the segment of the AM market composed of applications which can be served by the multiple existing competitors in metal AM. Our primary focus 9 is on those applications where demand for our solution is expected to be the strongest, thus supporting our long-term margins.
At the end of 2022, we launched our Sapphire XC 1MZ system, and at the end of 2021, we launched our Sapphire XC system, both of which enable production of larger parts at a lower cost. Our software is fully integrated into the design, production and quality control platform with our Sapphire family of systems.
At the end of 2022, we launched our Sapphire XC 1MZ system, and at the end of 2021, we launched our Sapphire XC system, both of which enable production of larger parts at a lower cost. 11 Our software is fully integrated into the design, production and quality control platform with our Sapphire family of systems.
The Sapphire XC printer system is designed with the intent that all recipes and parts 11 designed for the original Sapphire printers are fully compatible with the Sapphire XC printer systems, as the new system line is designed to carry over processes and metrologies.
The Sapphire XC printer system is designed with the intent that all recipes and parts designed for the original Sapphire printers are fully compatible with the Sapphire XC printer systems, as the new system line is designed to carry over processes and metrologies.
However, the 1MZ printers are larger having a 1000 millimeter (one meter) height build module as compared to the 400 millimeter and 550 millimeter height build module for Sapphire and Sapphire XC, respectively.
However, the 1MZ printers are larger having a 1000 millimeter (one meter) height build 12 module as compared to the 400 millimeter and 550 millimeter height build module for Sapphire and Sapphire XC, respectively.
The content of our websites and information that we may post on or provide to online and social media channels, including those mentioned above, and information that can be accessed through our websites or these online and social media channels are not incorporated by reference into this Annual Report or in any other report or document we file with the SEC, and any references to our websites or these online and social media channels are intended to be inactive textual references only. 17
The content of our websites and information that we may post on or provide to online and social media channels, including those mentioned above, and information that can be accessed through our websites or these online and social media channels are not incorporated by reference into this Annual Report or in any other report or document we file with the SEC, and any references to our websites or these online and social media channels are intended to be inactive textual references only. 18
Our IP protection enables us to prevent organizations and individuals from selling or using our systems, apparatuses, devices, and software, practicing our methods, or trading in our produced parts (e.g., 3D objects), as these are all protected by various forms of IP protection including by our patents granted in various jurisdictions and by our trade secrets.
Our IP protection enables us to prevent organizations and individuals from selling or using our systems, apparatuses, devices, and software, practicing our methods, or trading in our produced parts (e.g., 3D objects), as these are all protected by various forms of IP protection including by our patents and trademarks granted in various jurisdictions, by our copyrights, and by our trade secrets.
We review our compensation and benefit policies regularly through industry benchmarks and, we believe we offer competitive compensation and benefits packages, the principal purposes of which are to attract, retain and motivate our employees. Competition We compete with other suppliers of 3D printers, materials and software, as well as with suppliers of traditional metal manufacturing solutions.
We review our compensation and benefit policies and programs regularly through industry benchmarks. We believe we offer competitive benefits and total compensation packages, of which the principal purposes are to attract, retain and motivate our employees. Competition We compete with other suppliers of 3D printers, materials and software, as well as with suppliers of traditional metal manufacturing solutions.
Our machines have the ability to make parts with thousands of composite structures made from various metals including titanium, nickel-alloys, nickel super alloys, copper, steel and steel alloys. In principle, any metal that is cold-weldable is able to be used as a base layer in our machines.
Our machines have the ability to make parts with thousands of composite structures made from various metals including aluminum, titanium, nickel-alloys, nickel super alloys, copper alloys, stainless steel and steel alloys. In principle, any metal that is cold-weldable is able to be used as a base layer in our machines.
Government Regulations We are subject to various laws, regulations and permitting requirements of U.S. federal, state and local and foreign authorities. These include: • regulations promulgated by environmental and health agencies, as described below under “- Environmental Matters ”; • the U.S. Occupational Safety and Health Administration; 15 • the U.S. Foreign Corrupt Practices Act, the U.K.
Government Regulations We are subject to various laws, regulations and permitting requirements of U.S. federal, state and local and foreign authorities. These include: • regulations promulgated by environmental and health agencies, as described below under “- Environmental Matters ”; • the U.S. Occupational Safety and Health Administration; 16 • the U.S. Foreign Corrupt Practices Act, the U.K.
The Sapphire XC has capacity to make parts that are 400% larger and reduce production costs per part by approximately 65% to 80% when compared to the original Sapphire system. All of our Sapphire systems are manufactured in our 80,000+ square foot manufacturing facility in Fremont, California.
The Sapphire XC has capacity to make parts that are 400% larger and reduce production costs per part by approximately 65% to 80% when compared to the original Sapphire system. All of our Sapphire systems are manufactured in our 80,000+ square foot manufacturing facility in Fremont, California in the United States.
We rely on our own sales team, as well as multiple distribution partners, including Taiyo Nippon Sanso (Japan), Avaco (South Korea), and GoEngineer and HarTech Group (North America). These relationships have helped to extend our reach into overseas markets and essentially function as extensions of our sales team.
We rely on our own sales team, as well as multiple distribution partners, including Taiyo Nippon Sanso (Japan), Avaco (South Korea), and GoEngineer (North America). These relationships have helped to extend our reach into overseas markets and essentially function as extensions of our sales team.
We attempt to protect our IP rights, in various jurisdictions (e.g., United States and abroad), through a combination of patents, trademarks, copyrights and trade secrets, as well as nondisclosure and invention assignment agreements with our consultants and employees, and nondisclosure agreements with our contractors, vendors and other business partners.
We attempt to protect our IP rights, in various jurisdictions (e.g., United States and abroad), through a combination of patents, trademarks, copyrights and trade secrets, nondisclosure and invention assignment agreements with our consultants and employees, and nondisclosure agreements with our contractors, vendors and other business partners.
Our technological advances enable our Sapphire family of systems to print metal parts that significantly reduce and often eliminates the need for internal supports, which enables our customers to produce designs that would otherwise be infeasible to make with AM.
Our technological advances enable our Sapphire family of systems to print metal parts that significantly reduce and often eliminates the need for internal supports, which enables our customers to produce designs that would otherwise be infeasible to make with conventional AM technology.
We believe our technology is years ahead of competitors. 6 Our technology is novel compared to other AM technologies based on its ability to deliver high-value metal parts that have complex internal channels, structures, and geometries.
We believe our technology is years ahead of competitors. 7 Our technology is novel compared to other AM technologies based on its ability to deliver high-value metal parts that have complex internal channels, structures, and geometries.
This enables us to effectively reallocate our engineers and salesforce to continue to engage with new potential customers, supporting our efforts to scale our operations rapidly. Deep moat of intellectual property protections We have a strong, multi-layered portfolio protecting our intellectual property (“IP”) rights, which reinforces our competitive advantage.
This enables us to effectively reallocate our engineers and sales force to continue to engage with new potential customers, supporting our efforts to scale our operations rapidly. Deep moat of intellectual property protections We have a strong, multi-layered portfolio protecting our intellectual property (“IP”) rights, which reinforces our competitive advantage.
Increasing customer penetration We adopt a two-step approach to customer relationships, whereby we first aim to validate our technology with customers before working to more fully integrate our technology into customers’ designs and/or production processes.
Ensuring customer success We adopt a two-step approach to customer relationships, whereby we first aim to validate our technology with customers before working to more fully integrate our technology into customers’ designs and/or production processes.
Our largest customer, Space Exploration Technologies Corp. (" SpaceX "), accounted for 28.4% and 27.8% of our revenue for the year ended December 31, 2022 and 2021, respectively. Our customers include both OEMs, as well as CMs who provide service and parts on behalf of OEMs.
Our largest customer, Space Exploration Technologies Corp. (" SpaceX "), accounted for 4.0% and 28.4% of our revenue for the year ended December 31, 2023 and 2022, respectively. Our customers include both OEMs, as well as CMs who provide service and parts on behalf of OEMs.
We invest a significant amount of our resources in R&D because we believe that superior technology is a key to maintaining a leading market position. In the year ended December 31, 2022 and 2021, our R&D expenses were approximately $46.3 million and $27.0 million.
We have historically invested a significant amount of our resources in R&D because we believe that superior technology is a key to maintaining a leading market position. In the year ended December 31, 2023 and 2022, our R&D expenses were approximately $42.0 million and $46.3 million.
We currently have recipes to print from ten different metals (e.g., alloys) and add recipes for additional metals based on customer demand. Our team of materials and metallurgy experts qualify new materials on our Sapphire family of printers based on customer requirements and feedback.
We currently have recipes to print from 14 different metals (e.g., alloys) and add recipes for additional metals based on customer demand. Our team of materials and metallurgy experts qualify new materials on our Sapphire family of printers based on customer requirements and feedback. Flow Developer allows companies to develop parameters for their alloys.
The Sapphire XC 1MZ system has the same functionality of the Sapphire XC with a 1000 millimeter (one meter) height build volume of the Sapphire XC 1MZ system compared to the 550 millimeter height build volume of the Sapphire XC system.
The Sapphire XC 1MZ system has the same functionality of the Sapphire XC, but with a 1000 millimeter (one meter) build height versus the 550 millimeter (0.550 meter) build height of the Sapphire XC system.
The SEC maintains a website, www.sec.gov, that contains annual, quarterly and current 16 reports, proxy and information statements and other information that issuers file electronically with the SEC. Our electronic SEC filings are available to the public at the SEC’s website.
Securities and Exchange Commission (the " SEC "). Our website is www.velo3d.com and our Investor Relations webpage is ir.velo3d.com . The SEC maintains a website, www.sec.gov, that contains annual, quarterly and current reports, proxy and information statements and other information that issuers file electronically with the SEC. Our electronic SEC filings are available to the public at the SEC’s website.
To date, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing. None of our employees are subject to a collective bargaining agreement or are represented by a labor union.
We rely on consultants and outside contractors in roles and responsibilities that include engineering, operations and finance. To date, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing. None of our employees are subject to a collective bargaining agreement or are represented by a labor union.
Our machines are not resalable without consent and software licenses are not transferable to certain geographic markets to protect our IP. 12 Research and Development The high-value metal parts and AM segments are undergoing technological advancements across hardware, software and materials. We continue to dedicate meaningful resources into our ongoing R&D programs to extend our technological leadership.
Our machines are not resalable without consent and software licenses are not transferable to certain geographic markets to protect our IP. 13 Research and Development The high-value metal parts and AM segments are undergoing technological advancements across hardware, software and materials.
We believe that this will enable us to rapidly scale our business model to meet customer demand, without the risks associated with other manufacturing models that require heavy capital expenditures to increase production capacity.
We believe that this will enable us to rapidly scale our business model to meet customer demand, without the risks associated with other manufacturing models that require heavy capital expenditures to increase production capacity. Our Product Platforms Since our founding in 2014, we have focused development on our primary solution, marketed as Sapphire.
These include high-performance metal parts with complex internal geometries, including critical components within jet engines, fuel delivery systems and heat exchangers. These parts are fundamentally out of reach for other AM suppliers serving the high-value metal parts segment because their production process requires internal supports for complex internal geometries, which cannot be removed.
These parts are fundamentally out of reach for other AM suppliers serving the high-value metal parts segment because their production process requires internal supports for complex internal geometries, which cannot be removed.
We manage our inventory based on sales and production forecasts and anticipated lead times for sourcing components and assembly. Intellectual Property Our leadership in the high-value metal parts AM segment depends largely on our differentiated technology, which we seek to protect through a multi-layered IP approach.
Intellectual Property Our leadership in the high-value metal parts AM segment depends largely on our differentiated technology, which we seek to protect through a multi-layered IP approach.
The platform works with a myriad of complex sensors, which allow prompt control modulation of the laser systems of the Sapphire printer line, to calibrate production outcomes within prescribed tolerances.
Assure Assure is an advanced quality control software platform that includes process metrologies to ensure repeatable, consistent part quality. The platform works with a myriad of complex sensors, which allow prompt control modulation of the laser systems of the Sapphire printer line, to calibrate production outcomes within prescribed tolerances.
As of December 31, 2022, we own 58 issued patents of which 40 are issued U.S. patents, and 18 are issued foreign patents. We also have 22 publicly pending patent applications of which seven are pending U.S. patent applications, 13 are pending foreign patent applications, and two are pending Patent Cooperation Treaty ("PCT") patent applications.
As of December 31, 2023, we own 60 issued patents of which 40 are issued U.S. patents, and 20 are issued foreign patents. We also have 46 publicly pending patent applications of which 17 are pending U.S. patent applications, 18 are pending foreign patent applications, and 11 are pending Patent Cooperation Treaty patent applications.
Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this Annual Report. Available Information We file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (the " SEC "). Our website is www.velo3d.com and our Investor Relations webpage is ir.velo3d.com .
Our address is 2710 Lakeview Court, Fremont, CA 94538. Our telephone number is (408) 610-3915. Our website address is https://www.velo3d.com. Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this Annual Report. Available Information We file annual, quarterly and current reports, proxy statements and other information with the U.S.
Existing relationships with blue chip customers across our target end markets We have built relationships with blue chip customers across all of our target industries, including space, aviation and defense, automotive, energy and other industrial applications.
These factors create an uncontested segment in the market with customers we are ideally positioned to serve. 10 Existing relationships with blue chip customers across our target end markets We have built relationships with blue chip customers across all of our target industries, including space, aviation and defense, automotive, energy and other industrial applications.
Finally, our solutions enable the production of high-value, low-volume spare parts on demand, which may result in meaningful reductions to requirements for inventory. These factors create an uncontested segment in the market with customers we are ideally positioned to serve.
Finally, our solutions enable the production of high-value, low-volume spare parts on demand, which may result in meaningful reductions to requirements for inventory.
Our technology produces metal parts by fusing many thousands of very thin layers of metal powder with a precisely controlled laser beam in a sophisticated software defined sequence (or “recipe”) defined by our Flow software. • Assure quality validation software validates the product made by Sapphire to confirm that it is made to the specifications required by the original design.
Our technology produces metal parts by fusing many thousands of very thin layers of metal powder with a precisely controlled laser beam in a sophisticated software defined sequence (or “recipe”) prescribed by our Flow software. • Assure quality assurance software validates the product made by Sapphire printers to confirm that each layer is made to the specifications required by the original design. • Intelligent Fusion is the underlying manufacturing process that binds software and hardware together into a complete manufacturing solution that produces repeatable outcomes across different family of Sapphire systems.
Toxic Substances Control Act, Registration, Evaluation, Authorisation and Restriction of Chemicals (“ REACH ”), the Restriction of Hazardous Substances Directive (“ RoHS ”) and Classification, Labelling and Packaging Regulation (“ CLP ”) in the EU. These and similar laws and regulations require, among others, the registration, evaluation, authorization and labeling of certain chemicals that we use and ship.
Toxic Substances Control Act, Registration, Evaluation, Authorisation and Restriction of Chemicals (“ REACH ”), the Restriction of Hazardous Substances Directive (“ RoHS ”) and Classification, Labelling and Packaging Regulation (“ CLP ”) in the EU.
Following receipt of these subsystems and components, we assemble and calibrate the system. We then conduct a series of process tests culminating in a final factory acceptance test. We have internal teams focused on technology development, engineering and manufacturing. The teams coordinate the design, construction, assembly, testing and shipment of our products.
We then conduct a series of process tests culminating in a final factory acceptance test. We have internal teams focused on technology development, engineering and manufacturing. The teams coordinate the design, construction, assembly, testing and shipment of our products. We currently rely on numerous external suppliers, which we believe have ample capacity to increase supply of our critical components.
Manufacturing and Suppliers We design, assemble, test and ship all of our products and rely on outside manufacturers for component and select subsystems. Production of our systems requires approximately 8 to 15 weeks depending on the Sapphire product within our family of systems. We employ several third-party vendors to supply our core hardware subsystems and components.
Production of our systems requires approximately 8 to 15 weeks depending on the Sapphire product within our family of systems. We employ several third-party vendors to supply our core hardware subsystems and components. Following receipt of these subsystems and components, we assemble and calibrate the system.
We currently rely on numerous external suppliers, which we believe have ample capacity to increase supply of our critical components. For the majority of these suppliers, we believe we can readily source components from competing suppliers on short notice. For several critical subsystems, we have developed multiple suppliers to ensure surety of supply.
For the majority of these suppliers, we believe we can readily source components from competing suppliers on short notice. For several critical subsystems, we have developed multiple suppliers to ensure surety of supply. We manage our inventory based on sales and production forecasts and anticipated lead times for sourcing components and assembly.
Strategy for Growth The key elements for our growth strategy include the following: Focus on uncontested segments of the market We focus our sales efforts on customers with a need for parts which our proprietary L-PBF technology can produce but which cannot be produced by competitors’ AM technology.
Focus on uncontested segments of the market We focus our sales efforts on customers with a need for parts which our proprietary L-PBF technology can produce but which cannot be produced by competitors’ AM technology. These include high-performance metal parts with complex internal geometries, including critical components within jet engines, fuel delivery systems and heat exchangers.
We own 58 issued patents of which 40 are issued U.S. patents, and 18 are issued foreign patents. We also have 22 publicly pending patent applications of which seven are pending U.S. patent applications, 13 are pending foreign patent applications, and two are pending PCT) patent applications.
As of December 31, 2023 we own 60 issued patents of which 40 are issued U.S. patents, and 20 are issued foreign patents. We also have 46 publicly pending patent applications of which 17 are pending U.S. patent applications, 18 are pending foreign patent applications, and 11 are pending Patent Cooperation Treaty patent applications.
Our six trademark types worldwide include four registered U.S. trademarks, 34 registered foreign trademarks, two pending U.S. trademark applications, and 18 pending foreign trademark applications. We also have one U.S. registered copyright. 14 Human Capital Resources We have a strong team of employees who contribute to our success.
Our eight trademark types worldwide include four registered U.S. trademarks, 40 registered foreign trademarks, two pending U.S. trademark applications, and 13 pending foreign trademark applications. We also have one U.S. registered copyright.
Our Product Platforms 10 Since our founding in 2014, we have focused development on our primary solution, marketed as Sapphire. Sapphire is a fully integrated solution including the Flow design software and Assure quality control software.
Sapphire is a fully integrated solution including the Flow design software and Assure quality control software.
We have initiated leadership training in the first quarter of 2023 across the Company to strengthen our Company’s culture it how we manage relationships with employees, suppliers, customers and the communities in which we operate.
In the first quarter of 2023, we launched a leadership development program for global people managers across the Company to strengthen our collective management skills and enhance our culture. The program ran for the duration of 2023 and focused on best practices for managing relationships with employees, suppliers, customers and the communities in which we operate.
As of December 31, 2022 and 2021, we had 294 and 193, respectively, full-time employees, the majority of them based at our headquarters in Campbell, California and our manufacturing facility in Fremont, California. We rely on consultants and outside contractors in roles and responsibilities that include engineering, operations and finance.
Human Capital Resources We have a strong team of employees who contribute to our success. As of December 31, 2023 and 2022, we had 237 and 294, respectively, full-time employees, the majority of them based at our headquarters and manufacturing 15 facility in Fremont, California.
The training is our first step to building a framework and strategy in educating our Company and employees on awareness of the importance of environmental, social and governance issues, such as diversity and inclusion, employee friendly policies, employee retention rates, sustainability, climate-risks, and other important topics that will benefit our Company, employees, customers, suppliers, shareholders and investors.
Through this development program we increased our leadership community and discussion of important micro and macro global topics such as diversity and inclusion, employee friendly policies and practices, employee retention, corporate social responsibility, sustainability, climate-risks, and other important topics that will benefit our Company, employees, customers, suppliers, shareholders and investors.
Our board of directors oversees matters relating to managing our human capital resources. Our human capital resources objectives include identifying, recruiting, retaining, training, incentivizing and integrating our existing and additional employees, as well as emphasizing work place safety.
Our Board of Directors oversees matters relating to managing our human capital resources. Our human capital resources objectives include identifying, recruiting, and hiring qualified talent. We then focus on training, developing, and retaining talent, while ensuring fair compensation and incentives for global employees. We focus heavily on ensuring compliance and workplace safety.
Going forward, we plan to expand our direct sales force and will consider establishing additional distribution partnerships as we continue to implement our strategy with new customers. 13 Our European Headquarters at the Augsburg Innovation Park, located in Augsburg, Germany, includes teams of sales, application engineering and field service engineering personnel, similar to the U.S. office.
Going forward, we plan to expand our direct sales force and will consider establishing additional distribution partnerships as we continue to implement our strategy with new customers. 14 Manufacturing and Suppliers We design, assemble, test and ship all of our products and rely on outside manufacturers for component and select subsystems.
Extend competitive advantage with new products and continued R&D We plan to accelerate our research and development ("R&D") efforts in the future to further extend our technological advantage relative to our competitors. We have spent approximately $87 million over the past three years in R&D.
Extend competitive advantage with higher quality and new products We plan to enhance the quality of newly manufactured Sapphire printers in the future to further extend our technological advantage relative to our competitors. Due to the success of our operational initiatives and product improvements, we have significantly reduced the installation time of Sapphire printers over the last year.
Our six trademark types worldwide include four registered U.S. trademarks, 34 registered foreign trademarks, two pending U.S. trademark applications, and 18 pending foreign trademark applications. We also have one U.S. registered copyright. Capital efficient business model We have an asset-light business model, which will allow us to scale our operations to meet expected customer demand.
Our eight trademark types worldwide include four registered U.S. trademarks, 40 registered foreign trademarks, two pending U.S. trademark applications, and 13 pending foreign trademark applications. We also have one U.S. registered copyright. Our intellectual property is subject to a first lien security interest held by the holders of the Secured Notes.
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Rapidly scale to meet customer demand We plan to scale our business quickly to meet the significant increase in demand that we have seen from our customers by increasing the number of sales representatives and engineers to serve those customers, as well as our production capacity. Our manufacturing operations are limited to the final assembly and test of the system.
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Strategic Review In December 2023, we announced that our Board of Directors had commenced a strategic business review process to explore alternatives in order to maximize stockholder value. Potential strategic alternatives to be explored or evaluated may include, but are not limited to, a strategic transaction, potential merger, business combination or sale.
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Components and sub-assemblies are sourced from suppliers. As a result, we have the ability to scale our manufacturing operations with relatively limited capital investment because we only require additional assembly and warehouse space to increase our manufacturing capacity.
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There can be no assurance that our strategic review process will result in any transaction or other strategic outcome. We do not expect any impact on our operations or our ability to serve our customers during the review process. We remain committed to driving strategic value for our customers, employees, partners and stockholders.
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Further, because our business model is capital efficient, we are able to adapt to shifts in customer demand and calibrate our growth plans to ensure that we maintain the appropriate production capacity at all times.
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We do not intend to disclose further developments on this strategic review process unless and until we determine that such disclosure is appropriate or necessary. Strategy for Growth The key elements listed below are the foundation for our growth plan to support innovation and our customers’ growing demand for additive manufacturing solutions.
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The latest iteration of our product is our Sapphire XC 1MZ system, which launched at the end of 2022. The Sapphire XC 1MZ system has the same functionality of the Sapphire XC with a 1000 millimeter (one meter) height build volume of the Sapphire XC 1MZ system compared to the 550 millimeter height build volume of the Sapphire XC system.
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We remain committed to its “land-and-expand” strategy, whereby satisfied customers continue to purchase Sapphire printers due to the significant capabilities the technology provides to operations, product, and engineering teams.
Removed
We believe this will increase considerably the range of applications where our manufacturing technology will be competitive with traditional metal manufacturing techniques, thereby substantially expanding our addressable market. CONTEXT expects that the market forecast for laser powder bed fusion will grow greater than 30% from 2020 to 2026.
Added
As of March 26, 2024, our sales team has secured approximately $15 million in new order bookings since mid-December 2023, including more than 50% of bookings tied to key strategic accounts, which we believe demonstrates increased customer satisfaction and confidence in our technology.
Removed
Experienced management team Our management team has decades of relevant experience across their respective industries, including materials engineering, technological development, operations, sales, business development and corporate finance.
Added
Additionally, we have increased headcount of our customer service and quality teams to provide on-site support in all major metropolitan areas. Through reliability improvements, system uptime for key customers has increased and we have reduced the time it takes to resolve customer issues.
Removed
Our management team is led by our Chief Executive Officer, Benny Buller, who has had a highly successful career as an engineer, culminating in the highest Israeli Presidential award for one of the projects he led in the Israeli intelligence community, before taking leadership positions in cutting-edge American technology firms, including in First Solar and Applied Materials.
Added
Our intellectual property is subject to a first lien security interest held by the holders of our senior secured notes due 2026, as amended (the “ Secured Notes ”). Capital efficient business model We have an asset-light business model, which will allow us to scale our operations to meet expected customer demand.
Removed
Our Chief Financial Officer, Bill McCombe, has extensive experience as a senior financial officer in public and private technology hardware companies and as a senior investment banker overseeing strategic transactions. Further, we added experienced independent board members during 2021 and 2022 to support our management team.
Added
Flow Developer Flow Developer is available for users of Flow 7.0, the latest version of our print preparation software that turns traditional design files into print files. Developer grants editor-level access to print parameters, giving companies maximum flexibility and control when working with our additive manufacturing solution.
Removed
We are currently working on new materials, such various types of stainless steel, and additional aluminum and copper alloys. Assure Assure is an advanced quality control software platform that includes process metrologies to ensure repeatable, consistent part quality.
Added
With this access, users can import proven parameters they have developed, optimize default parameters for specific application needs, and develop parameter sets supporting new material development for novel solutions and specific applications.
Removed
In connection with the Merger, JAWS Spitfire’s jurisdiction of incorporation was changed from the Cayman Islands to the State of Delaware, and JAWS Spitfire changed its name to Velo3D, Inc. Our address is 511 Division Street, Campbell, CA 95008. Our telephone number is (408) 610-3915. Our website address is https://www.velo3d.com.
Added
The program resulted in increased management alignment, increased skills around communication, cross-functional collaboration, and talent development, and provided us with a management framework for leadership practices going forward.
Added
These and similar laws and regulations require, among others, the registration, evaluation, authorization and labeling of certain chemicals that we use and ship. 17 Corporate Information We were incorporated on September 11, 2020 as a special purpose acquisition company and a Cayman Islands exempted company under the name JAWS Spitfire Acquisition Corporation.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

140 edited+62 added−32 removed275 unchanged
Biggest changeThe trading price of our common stock and our warrants has fluctuated, and is likely to continue to fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • variations in our operating performance and the performance of our competitors in general; • material and adverse impact of the ongoing COVID-19 pandemic on the markets and the broader global economy; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about our or our competitors or our industry; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • our failure or the failure of our competitors to meet securities analysts’ projections or guidance that our or our competitors may give to the market; • changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed, or significantly exceed securities analyst expectations; • additions and departures of key personnel; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities pursuant to the ATM Sales Agreement, under the Shelf Registration Statement or otherwise or the incurrence of additional debt; • the volume of shares of our common stock available for public sale; and • general economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism (including, for example, the ongoing military conflict between Ukraine and Russia and the economic sanctions related thereto).
Biggest changeThe trading price of our common stock and our public warrants has fluctuated, and is likely to continue to fluctuate due to a variety of factors, including: • the period over which we anticipate our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements and our ability to continue as a going concern; • our ability to service and comply with our indebtedness; • our ability to satisfy NYSE listing rules; • changes in the industries in which we and our customers operate; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about our or our competitors or our industry; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • our failure or the failure of our competitors to meet securities analysts’ projections or guidance that our or our competitors may give to the market; • changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed, or significantly exceed securities analyst expectations; • additions and departures of key personnel; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; 48 • changes in our capital structure, such as future issuances of securities pursuant to the ATM Sales Agreement, under the Shelf Registration Statement or otherwise or the incurrence of additional debt including in connection with the exercise by certain affiliated institutional investors of their right to purchase the Additional Secured Convertible Notes; • the volume of shares of our common stock available for public sale; and • general economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism (including, for example, the war in Israel, and the war in Ukraine and the economic sanctions related thereto).
These investments may involve significant time, risks and uncertainties, including the risk that the expenses associated with these investments may affect our margins, operating results and liquidity and that such investments may not generate sufficient revenues to offset liabilities assumed and expenses associated with these new investments.
These investments involve significant time, risks and uncertainties, including the risk that the expenses associated with these investments may affect our margins, operating results and liquidity and that such investments may not generate sufficient revenues to offset liabilities assumed and expenses associated with these new investments.
Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our common stock. However, there is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.
Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our common stock. However, there is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the public warrants may expire worthless.
Among other things, our Certificate of Incorporation and Amended and Restated Bylaws include provisions regarding: • the ability of the Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of, our directors and officers; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders after such date and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; • the requirement that a special meeting of stockholders may be called only by a majority of the entire Board, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; • the ability of the Board to amend the bylaws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to the Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Board, and 49 also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Among other things, our Certificate of Incorporation and Amended and Restated Bylaws include provisions regarding: • the ability of the Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of, our directors and officers; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders after such date and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; • the requirement that a special meeting of stockholders may be called only by a majority of the entire Board, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; • the ability of the Board to amend the bylaws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to the Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Board, and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
If that recurring stream of revenues does not develop as expected, or if our business model changes as the industry evolves, our operating results may be adversely affected. • If demand for additive manufacturing products does not grow as expected, or if market adoption of additive manufacturing technology does not continue to develop, or develops more slowly than expected, our revenues may stagnate or decline, and our business may be adversely affected. • If we fail to meet our customers’ price expectations, demand for our products and product lines could be negatively impacted and our business and results of operations could suffer. • Declines in the prices of our products and services, or in our volume of sales, together with our relatively inflexible cost structure, may adversely affect our financial results. • Defects in our additive manufacturing system or in enhancements to our existing additive manufacturing systems that give rise to part failures for our customers, resulting in product liability or warranty or other claims that could result in material expenses, diversion of management time and attention and damage to our reputation. • The additive manufacturing industry in which we operate is characterized by rapid technological change, which requires us to continue to develop new products and innovations to meet constantly evolving customer demands and which could adversely affect market adoption of our products. • The additive manufacturing industry is competitive.
If that recurring stream of revenues does not develop as expected, or if our business model changes as the industry evolves, our operating results may be adversely affected. • If demand for additive manufacturing products does not grow as expected, or if market adoption of additive manufacturing technology does not continue to develop, or develops more slowly than expected, our revenues may stagnate or decline, and our business may be adversely affected. • If we fail to meet our customers’ price expectations, demand for our products and product lines could be negatively impacted and our business and results of operations could suffer. • Declines in the prices of our products and services, or in our volume of sales, together with our relatively inflexible cost structure, may adversely affect our financial results. • Defects in our additive manufacturing system or in enhancements to our existing additive manufacturing systems that give rise to part failures for our customers, resulting in product liability or warranty or other claims that could result in material expenses, diversion of management time and attention and damage to our reputation. • The additive manufacturing industry in which we operate is characterized by rapid technological change, which requires us to continue to develop new products and innovations to meet constantly evolving customer demands and which could adversely affect market adoption of our products. 19 • The additive manufacturing industry is competitive.
Other risks and uncertainties we face from our global operations include: • limited protection for the enforcement of contract and IP rights in certain countries where we may sell our products or work with suppliers or other third parties; • potentially longer sales and payment cycles and potentially greater difficulties in collecting accounts receivable; • costs and difficulties of customizing products for foreign countries; 28 • challenges in providing solutions across a significant distance, in different languages and among different cultures; • laws and business practices favoring local competition; • being subject to a wide variety of complex foreign laws, treaties and regulations and adjusting to any unexpected changes in such laws, treaties and regulations; • compliance with U.S. laws affecting activities of U.S. companies abroad, including the U.S.
Other risks and uncertainties we face from our global operations include: • limited protection for the enforcement of contract and IP rights in certain countries where we may sell our products or work with suppliers or other third parties; • potentially longer sales and payment cycles and potentially greater difficulties in collecting accounts receivable; • costs and difficulties of customizing products for foreign countries; • challenges in providing solutions across a significant distance, in different languages and among different cultures; • laws and business practices favoring local competition; • being subject to a wide variety of complex foreign laws, treaties and regulations and adjusting to any unexpected changes in such laws, treaties and regulations; • compliance with U.S. laws affecting activities of U.S. companies abroad, including the U.S.
Foreign Corrupt Practices Act (“ FCPA ”), and compliance with anti-corruption laws in other countries, such as the UK Bribery Act (“ Bribery Act ”); • tariffs, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets; • operating in countries with a higher incidence of corruption and fraudulent business practices; • changes in regulatory requirements, including export controls, tariffs and embargoes, other trade restrictions, competition, corporate practices and data privacy concerns; • potential adverse tax consequences arising from global operations; • rapid changes in government, economic and political policies and conditions; and • political or civil unrest or instability, terrorism or epidemics and other similar outbreaks or events.
Foreign Corrupt Practices Act (“ FCPA ”), and compliance with anti-corruption laws in other countries, such as the UK Bribery Act (“ Bribery Act ”); • tariffs, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets; 29 • operating in countries with a higher incidence of corruption and fraudulent business practices; • changes in regulatory requirements, including export controls, tariffs and embargoes, other trade restrictions, competition, corporate practices and data privacy concerns; • potential adverse tax consequences arising from global operations; • rapid changes in government, economic and political policies and conditions; and • political or civil unrest or instability, terrorism or epidemics and other similar outbreaks or events.
We have the ability to redeem outstanding warrants at any time prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our common stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders.
We have the ability to redeem outstanding public warrants at any time prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our common stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders.
These IT deficiencies did not result in a misstatement to the consolidated financial statements, however, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all consolidated financial statement accounts and disclosures that would not be prevented or detected.
These IT deficiencies did not result in a misstatement to the consolidated financial statements, however, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all consolidated financial statement accounts 32 and disclosures that would not be prevented or detected.
For example, the 2017 Tax Cuts and Jobs Act (the “ Tax Act ”) made broad and complex changes to the U.S. tax code, including changes to U.S. federal tax rates, additional limitations on the deductibility of interest, both positive and negative changes to the utilization of future net operating loss (“ NOL ”) carryforwards, allowing for the expensing of certain capital expenditures, and putting into effect the migration from a “worldwide” system of taxation to a more territorial system.
For example, the 2017 Tax Cuts and Jobs Act (the “ Tax Act ”) made broad and complex changes to the U.S. tax code, including changes to U.S. federal tax rates, additional limitations on the deductibility of interest, both positive and negative 34 changes to the utilization of future net operating loss (“ NOL ”) carryforwards, allowing for the expensing of certain capital expenditures, and putting into effect the migration from a “worldwide” system of taxation to a more territorial system.
We have engaged with third-party auditors to identify risk factors based on the NIST SP 800-171 framework (which provides recommended requirements for protecting the confidentiality of controlled unclassified information) that affect data security within our internal network and external products. These audits include compliance reviews and penetration tests where applicable.
We have engaged with third-party auditors to identify risk factors based on the NIST SP 800-171 framework (which provides recommended requirements for protecting the confidentiality of controlled unclassified information) that affect data security within our internal network and external products. These audits include 33 compliance reviews and penetration tests where applicable.
In addition, we may redeem their warrants at any time prior to their expiration at a price of $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants prior to redemption for a number of shares of our common stock determined based on the redemption date and the fair market value of our common stock.
In addition, we may redeem the public warrants at any time prior to their expiration at a price of $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants prior to redemption for a number of shares of our common stock determined based on the redemption date and the fair market value of our common stock.
If warrant holders exercise their public warrants on a cashless basis, they would pay the warrant exercise price by surrendering all of the warrants for that number of common stock equal to the quotient obtained by dividing (x) the product of the number of common stock underlying the warrants, multiplied by the excess of the “fair market value” of our common stock (as defined in the next sentence) over the exercise price of the warrants by (y) the fair market value.
If warrant holders exercise their public warrants on a 46 cashless basis, they would pay the warrant exercise price by surrendering all of the warrants for that number of common stock equal to the quotient obtained by dividing (x) the product of the number of common stock underlying the warrants, multiplied by the excess of the “fair market value” of our common stock (as defined in the next sentence) over the exercise price of the warrants by (y) the fair market value.
Existing and potential competitors may also have substantially greater financial, technical, marketing and sales, manufacturing, distribution and other resources than we do, including name recognition, as well as experience and expertise in IP rights and operating within certain international markets, any of which may enable them to compete effectively against us.
Existing and 28 potential competitors may also have substantially greater financial, technical, marketing and sales, manufacturing, distribution and other resources than we do, including name recognition, as well as experience and expertise in IP rights and operating within certain international markets, any of which may enable them to compete effectively against us.
Our business model is predicated, in part, on building a customer base that will generate a recurring stream of revenues through the use of our additive manufacturing system and service contracts. If that recurring stream of 25 revenues does not develop as expected, or if our business model changes as the industry evolves, our operating results may be adversely affected.
Our business model is predicated, in part, on building a customer base that will generate a recurring stream of revenues through the use of our additive manufacturing system and service contracts. If that recurring stream of revenues does not develop as expected, or if our business model changes as the industry evolves, our operating results may be adversely affected.
We may from time to time become subject to warranty or product liability claims related to product quality issues that could lead us to incur significant expenses. We attempt to include provisions in our agreements and purchase orders with customers that are designed to limit our exposure to potential liability for damages arising from defects or errors in our products.
We may from time to time become subject to warranty or product liability claims related to product quality issues that could lead us to incur significant expenses. 27 We attempt to include provisions in our agreements and purchase orders with customers that are designed to limit our exposure to potential liability for damages arising from defects or errors in our products.
Maintaining adequate insurance and successfully accessing insurance coverage that may be due for a claim can require a significant amount of our management’s time, and we may be forced to spend a substantial amount of money in that process. 31 Changes in tax laws or tax rulings could materially affect our financial position, results of operations and cash flows.
Maintaining adequate insurance and successfully accessing insurance coverage that may be due for a claim can require a significant amount of our management’s time, and we may be forced to spend a substantial amount of money in that process. Changes in tax laws or tax rulings could materially affect our financial position, results of operations and cash flows.
With respect to our pending patent applications, we may not be successful in securing issued patents, or the claims of such patents may be narrowed, any of which may limit our ability to protect inventions that these applications were intended to cover, which could harm our ability to prevent others from exploiting our technologies and commercializing products 41 similar to our products.
With respect to our pending patent applications, we may not be successful in securing issued patents, or the claims of such patents may be narrowed, any of which may limit our ability to protect inventions that these applications were intended to cover, which could harm our ability to prevent others from exploiting our technologies and commercializing products similar to our products.
If one or more of these analysts ceases coverage of us or fails to 48 publish reports on us regularly, our share price or trading volume could decline. While we expect research analyst coverage of our company, if no analysts commence coverage of us, the market price and volume for our shares of common stock could be adversely affected.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline. While we expect research analyst coverage of our company, if no analysts commence coverage of us, the market price and volume for our shares of common stock could be adversely affected.
For example, on November 14, 2022, we filed with the SEC a shelf registration statement (the “ Shelf Registration Statement ”) that was subsequently declared effective on November 21, 2022 and permits us to sell from time-to-time additional shares of our common stock or other securities in one or more offerings in amounts, at prices and on the terms that we will determine at the time of offering for aggregate gross sale proceeds of up to $300.0 million, of which we may offer and sell up to $40.0 million shares of our common stock from time to time pursuant to an “at-the-market” offering sales agreement (the “ ATM Sales Agreement ”) we entered into in February 2023 with Needham & Company, LLC (“ Needham ”), as agent, subject to the terms and conditions described in the ATM Sales Agreement and SEC rules and regulations .
For example, on November 14, 2022, we filed with the SEC a shelf registration statement (the “ Shelf Registration Statement ”) that was subsequently declared effective on November 21, 2022 and permits us to sell from time-to-time additional shares of our common stock or other securities in one or more offerings in amounts, at prices and on the terms that we will determine at the time of offering for aggregate gross sale proceeds of up to $300.0 million, of which we may offer and sell up to $75.0 million shares of our common stock from time to time pursuant to an “at-the-market” offering sales agreement (the “ ATM Sales Agreement ”) we entered into in February 2023 with Needham & Company, LLC (“ Needham ”), as agent, subject to the terms and conditions described in the ATM Sales Agreement and SEC rules and regulations .
We cannot assure that we will be able to do so, that our acquired businesses will perform at levels and on the timelines anticipated by our management or that we will be 24 able to obtain these synergies. In addition, acquired technologies and IP may be rendered obsolete or uneconomical by our own or our competitors’ technological advances.
We cannot assure that we will be able to do so, that our acquired businesses will perform at levels and on the timelines anticipated by our management or that we will be able to obtain these synergies. In addition, acquired technologies and IP may be rendered obsolete or uneconomical by our own or our competitors’ technological advances.
Risks Related to Our Securities Warrant holders may only be able to exercise their public warrants on a “cashless basis” under certain circumstances, and if warrant holders do so, they will receive fewer shares of common stock from such exercise than if they were to exercise such warrants for cash.
Risks Related to Our Common Stock and Our Public Warrants Warrant holders may only be able to exercise their public warrants on a “cashless basis” under certain circumstances, and if such warrant holders do so, they will receive fewer shares of common stock from such exercise than if they were to exercise such warrants for cash.
As a result, the loss of a limited source supplier could adversely affect our relationship with our customers, as well as our results of operations and financial condition. Our facilities as well as our suppliers’ and our customers’ facilities are vulnerable to disruption due to natural or other disasters, strikes and other events beyond our control.
As a result, the loss of a limited source supplier could adversely affect our relationship with our customers, as well as our results of operations and financial condition. Our facility as well as our suppliers’ and our customers’ facilities are vulnerable to disruption due to natural or other disasters, strikes and other events beyond our control.
In addition, the expiration of a patent can result in increased competition with consequent erosion of profit margins. Our confidentiality agreements could be breached or may not provide meaningful protection for at least a portion of our trade secrets or proprietary manufacturing expertise.
In addition, the expiration of a patent can result in increased competition with consequent erosion of profit margins. 42 Our confidentiality agreements could be breached or may not provide meaningful protection for at least a portion of our trade secrets or proprietary manufacturing expertise.
Part of any 43 settlement or other compromise with another party may resolve a potentially costly dispute but may also have future repercussions on our ability to defend and protect our IP rights, which in turn could adversely affect our business.
Part of any settlement or other compromise with another party may resolve a potentially costly dispute but may also have future repercussions on our ability to defend and protect our IP rights, which in turn could adversely affect our business.
We may not be able to develop effective strategies to raise awareness among potential customers of the benefits of additive manufacturing technologies or our products may not address the specific needs or provide the level of functionality required by potential customers to encourage the continuation of this shift towards additive manufacturing.
We may not be able to develop effective strategies to raise awareness among potential customers of the benefits of additive manufacturing 26 technologies or our products may not address the specific needs or provide the level of functionality required by potential customers to encourage the continuation of this shift towards additive manufacturing.
The material weaknesses are as follows: • We did not design and maintain an effective control environment commensurate over our financial reporting requirements. Specifically, we did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting knowledge, experience, and training commensurate with our accounting and financial reporting requirements.
The material weaknesses are as follows: • We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting knowledge, experience, and training commensurate with our accounting and financial reporting requirements.
Any third-party lawsuits or other assertion to which we are subject alleging our infringement of patents, trade secrets or any other IP rights may have a significant adverse effect on our financial condition. 42 We may incur substantial costs enforcing and defending our IP rights.
Any third-party lawsuits or other assertion to which we are subject alleging our infringement of patents, trade secrets or any other IP rights may have a significant adverse effect on our financial condition. We may incur substantial costs enforcing and defending our IP rights.
Risks Related to Operations • We operate primarily at two facilities, and any disruption at one facility could adversely affect our business and operating results. • Maintenance, expansion and refurbishment of our facilities, the construction of new facilities and the development and implementation of new manufacturing processes involve significant risks.
Risks Related to Operations • We operate primarily at one facility, and any disruption at our facility could adversely affect our business and operating results. • Maintenance, expansion and refurbishment of our facilities, the construction of new facilities and the development and implementation of new manufacturing processes involve significant risks.
Moreover, competitors may respond to challenging market conditions by lowering prices and attempting to lure away our customers. We cannot predict the timing, strength, or duration of any economic slowdown or any subsequent recovery generally, or in any industry.
Moreover, 35 competitors may respond to challenging market conditions by lowering prices and attempting to lure away our customers. We cannot predict the timing, strength, or duration of any economic slowdown or any subsequent recovery generally, or in any industry.
ASC Topic 815, provides for the 45 remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations.
ASC Topic 815, provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations.
We expect to face increasing competition in many aspects of our business, which could cause our operating results to suffer. 18 • Our existing and planned global operations subject us to a variety of risks and uncertainties that could adversely affect our business and operating results.
We expect to face increasing competition in many aspects of our business, which could cause our operating results to suffer. • Our existing and planned global operations subject us to a variety of risks and uncertainties that could adversely affect our business and operating results.
We may also face claims alleging noncompliance with open-source license terms or infringement or misappropriation of proprietary software. These claims could result in litigation, require us to purchase a costly license, or remove the software.
We may also face claims alleging noncompliance with open-source license terms or 44 infringement or misappropriation of proprietary software. These claims could result in litigation, require us to purchase a costly license, or remove the software.
If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If and when the public warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
We have limited experience in making investments in other entities, and any such investments may not result in strategic benefits for our business or could expose us to other risks. From time to time, we will consider and may pursue strategic investments.
We have limited experience in making investments in other entities, and any such investments may not result in strategic benefits for our business or could expose us to other risks. From time to time, we may consider and may pursue strategic investments.
While we have not experienced any such claims to date, actual or claimed defects in the products we supply could result in our being named as a defendant in lawsuits asserting potentially large claims.
While we have not experienced any such claims to date, actual or 36 claimed defects in the products we supply could result in our being named as a defendant in lawsuits asserting potentially large claims.
In addition, various state and municipal governments, universities and other investors maintain prohibitions or restrictions on investments in companies that do business with sanctioned countries, persons and entities, which could adversely affect our reputation, business, financial condition and results of operations. 39 We are subject to environmental, health and safety laws and regulations related to our operations and the use of our additive manufacturing systems and consumable materials, which could subject us to compliance costs and/or potential liability in the event of non-compliance.
In addition, various state and municipal governments, universities and other investors maintain prohibitions or restrictions on investments in companies that do business with sanctioned countries, persons and entities, which could adversely affect our reputation, business, financial condition and results of operations. 40 We are subject to environmental, health and safety laws and regulations related to our operations and the use of our additive manufacturing systems and consumable materials, which could subject us to compliance costs and/or potential liability in the event of non-compliance.
Each member of senior management as well as our key employees may terminate employment without notice and without cause or good reason. The members of our senior 29 management are not subject to non-competition agreements.
Each member of senior management as well as our key employees may terminate employment without notice and without cause or good reason. The members of our senior management are not subject to non-competition agreements.
As a result, the exercise price of their warrants could be increased, the exercise period could be shortened and the number of our common stock purchasable upon exercise of a warrant could be decreased, all without their approval.
As a result, the exercise price of their public warrants could be increased, the exercise period could be shortened and the number of our common stock purchasable upon exercise of a public warrant could be decreased, all without their approval.
The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, including because the number of shares of common stock received is capped at 0.365 shares of common stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants.
The value received upon exercise of the public warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may 50 not compensate the holders for the value of the warrants, including because the number of shares of common stock received is capped at 0.365 shares of common stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants.
Redemption of the outstanding warrants could force them to: (i) exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so; (ii) sell their warrants at the then-current market price when they might otherwise wish to hold their warrants; or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants.
Redemption of the outstanding public warrants could force holders to: (i) exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so; (ii) sell their warrants at the then-current market price when they might otherwise wish to hold their warrants; or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants.
Any person or entity purchasing or otherwise acquiring any interest in any of our warrants will be deemed to have notice of and to have consented to the forum provisions in our warrant agreement.
Any person or entity purchasing or otherwise acquiring any interest in any of our public warrants will be deemed to have notice of and to have consented to the forum provisions in our warrant agreement.
We rely on a combination of registered and unregistered IP and protect our rights using patents, trademarks, trade secrets, confidentiality agreements, and assignment of invention agreements and other methods.
We rely on a 43 combination of registered and unregistered IP and protect our rights using patents, trademarks, trade secrets, confidentiality agreements, and assignment of invention agreements and other methods.
The warrant agreement provides that in the following circumstances holders of warrants who seek to exercise their warrants will not be permitted to do for cash and will, instead, be required to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act: (i) if the shares of common stock issuable upon exercise of the warrants are not registered under the Securities Act in accordance with the terms of the warrant agreement; (ii) if we have so elected and the shares of common stock are at the time of any exercise of a warrant are not listed on a national securities exchange such that they satisfy the definition of “covered securities” under Section 18(b)(1) of the Securities Act; and (iii) if we have so elected and we call the public warrants for redemption.
The warrant agreement governing the public warrants and the private placement warrants provides that in the following circumstances holders of the public warrants who seek to exercise their warrants will not be permitted to do for cash and will, instead, be required to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act: (i) if the shares of common stock issuable upon exercise of the warrants are not registered under the Securities Act in accordance with the terms of the warrant agreement; (ii) if we have so elected and the shares of common stock are at the time of any exercise of a warrant are not listed on a national securities exchange such that they satisfy the definition of “covered securities” under Section 18(b)(1) of the Securities Act; and (iii) if we have so elected and we call the public warrants for redemption.
Any investments in other entities may also subject us to the operating and financial risks of such entities, and we rely on the internal controls and financial reporting controls of such entities.
Any investments in other entities may also subject us to the operating and financial risks of such entities, and we will rely on the internal controls and financial reporting controls of such entities.
Production issues can lead to increased costs and may affect our ability to meet product demand, which could adversely impact our business and results from operations. 38 Risks Related to Compliance Matters We are subject to U.S. and other anti-corruption laws, trade controls, economic sanctions and similar laws and regulations.
Production issues can lead to increased costs and may affect our ability to meet product demand, which could adversely impact our business and results from operations. 39 Risks Related to Compliance Matters We are subject to U.S. and other anti-corruption laws, trade controls, economic sanctions and similar laws and regulations.
If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.
If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments or to access financing may be threatened, which could have a material adverse effect on our business and financial condition.
The failure of any such systems or the failure of such systems to scale as our business grows could adversely affect our results of 30 operations.
The failure of any such systems or the failure of such systems to scale as our business grows could adversely affect our results of operations.
Privacy and security laws and regulations may limit the use and disclosure of certain information and require us to adopt 40 certain cybersecurity and data handling practices that may affect our ability to effectively market our services to current, past or prospective customers.
Privacy and security laws and regulations may limit the use and disclosure of certain information and require us to adopt certain 41 cybersecurity and data handling practices that may affect our ability to effectively market our services to current, past or prospective customers.
The interests of persons who control the entities in which we have invested and may invest may differ from our interests, and they may cause such entities to take actions that are not in our best interest, and we may become involved in disputes with such persons.
The interests of persons who control the entities in which we may invest may differ from our interests, and they may cause such entities to take actions that are not in our best interest, and we may become involved in disputes with such persons.
To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our consolidated financial statements with other public companies difficult or impossible. Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our consolidated financial statements with other public companies difficult or impossible. 47 The public warrants and the private placement warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
This material weakness contributed to the following additional material weaknesses. 32 • We did not design and maintain effective controls over the segregation of duties related to journal entries and account reconciliations.
This material weakness contributed to the following additional material weaknesses. 31 • We did not design and maintain effective controls over the segregation of duties related to journal entries and account reconciliations.
Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material. The price of our common stock and our warrants may be volatile.
Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on the public warrants and the private placement warrants each reporting period and that the amount of such gains or losses could be material. The price of our common stock and our public warrants may be volatile.
Our warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.
The warrant agreement governing the public warrants and the private placement warrants designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our public warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.
A major earthquake, fire, tsunami, hurricane, cyclone or other disaster, such as a pandemic, major flood, seasonal storms, nuclear event or terrorist attack affecting our facilities or the area in which they are located, or affecting those of our suppliers or customers, could significantly disrupt our or their operations and delay or prevent product shipment or installation during the time required to repair, rebuild or replace our or their damaged manufacturing facilities.
A major earthquake, fire, tsunami, hurricane, cyclone or other disaster, such as a pandemic, major flood, seasonal storms, nuclear event or terrorist attack affecting our facility or the area in which it is located, or affecting those of our suppliers or customers, could significantly disrupt our or their operations and delay or prevent product shipment or installation during the time required to repair, rebuild or replace our or their damaged manufacturing facilities.
To the extent such warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to the holders of our common stock and increase the number of shares eligible for resale in the public market.
To the extent any of these warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to the holders of our common stock and increase the number of shares eligible for resale in the public market.
We have invested and expect to continue to invest in research and development efforts that further enhance our products. Such investments may affect our operating results and liquidity, and, if the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer.
We have historically invested in research and development efforts that further enhance our products. Such investments may affect our operating results and liquidity, and, if the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer. We have historically invested in research and development efforts that further enhance our products.
As a result, included on our balance sheet as of December 31, 2022 contained elsewhere in this Annual Report are derivative liabilities related to embedded features contained within our warrants.
As a result, included on our balance sheet as of December 31, 2023 contained elsewhere in this Annual Report are derivative liabilities related to embedded features contained within these warrants.
Our warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction will be the exclusive forum for any such action, proceeding or claim.
The warrant agreement governing the public warrants and the private placement warrants provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction will be the exclusive forum for any such action, proceeding or claim.
In particular, we may offer and sell up to $40.0 million shares of our common stock from time to time pursuant to the ATM Sales Agreement that we have entered into with Needham . As of the filing date of this Annual Report, we have sold approximately $11.0 million shares of our common stock pursuant to the ATM Sales Agreement.
In particular, we may offer and sell up to $75.0 million shares of our common stock from time to time pursuant to the ATM Sales Agreement that we have entered into with Needham . As of the filing date of this Annual Report, we have sold approximately $24.6 million shares of our common stock pursuant to the ATM Sales Agreement.
Risks Related to Our Business and Industry • We have in the past and may in the future experience significant delays in the design, production, launch, manufacture, shipment and installation of our additive manufacturing solutions, and we may be unable to successfully commercialize products on our planned timelines. • As part of our growth strategy, we intend to continue to acquire or make investments in other businesses, patents, technologies, products or services.
Risks Related to Our Business and Industry • We have in the past and may in the future experience significant delays in the design, production, launch, manufacture, shipment and installation of our additive manufacturing solutions, and we may be unable to successfully commercialize products on our planned timelines. • We may acquire or make investments in other businesses, patents, technologies, products or services.
Changes in our transaction models and product mix may impact our gross margins and financial performance. Our financial performance may be affected by the mix of transaction models under which we sell during a given period. Different transaction models have different margins in the period in which the transaction occurs and in subsequent periods.
Our financial performance may be affected by the mix of transaction models under which we sell during a given period. Different transaction models have different margins in the period in which the transaction occurs and in subsequent periods.
We may also seek to raise additional capital, including from offerings of our equity or debt securities on an opportunistic basis when we believe there are suitable opportunities for doing so.
We may also seek to raise additional capital, including from offerings of our equity or 22 debt securities on an opportunistic basis when we believe there are suitable opportunities.
These types of investments involve significant challenges and risks, including that the investment does not advance our business strategy, that we do not realize a satisfactory return on our investment, that we acquire unknown liabilities, or that management’s attention is diverted from our core business. These events could harm our operating results or financial condition.
These types of investments involve significant challenges and risks, including that the investment may not advance our business strategy, that we may not realize a satisfactory return on our investment, 25 that we may acquire unknown liabilities, or that management’s attention may be diverted from our core business. These events could harm our operating results or financial condition.
Our ability to raise additional capital when needed may be adversely affected by external factors beyond our control, including changes in the political climate, geopolitical actions, changes in market interest rates or foreign exchange rates, market volatility in the trading prices for our common stock and other technology companies, a recession, depression, high inflation or other sustained adverse market event, and the ongoing COVID-19 pandemic.
Our ability to raise additional capital when needed may be adversely affected by external factors beyond our control, including changes in the political climate, geopolitical actions, changes in market interest rates or foreign exchange rates, market volatility in the trading prices for our common stock and other technology companies, a recession, depression, high inflation or other sustained adverse market event, and the outbreak of epidemic disease.
To the extent the public warrants and the private placement warrants are exercised, it will increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
To the extent any of our outstanding warrants are exercised, it will increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
While we believe that we understand the engineering and process characteristics necessary to successfully design and produce additive manufacturing systems to make high-value metal parts for our customers, our assumptions may prove to be incorrect, and we may be unable to consistently produce additive manufacturing products in an economical manner in commercial quantities.
While we believe that we understand the engineering and process characteristics necessary to successfully design and produce additive manufacturing systems to make high-value metal parts for our customers, our assumptions may prove to be incorrect, and we may be unable to consistently produce additive manufacturing products in an economical manner in commercial quantities. 23 Certain additive manufacturing solutions are still under development.
In addition, concerns about terrorism, the effects of a terrorist attack, political turmoil, labor strikes, war (including the Ukrainian - Russia conflict) or the outbreak of epidemic diseases (including the outbreak of COVID-19 and variants) could have a negative effect on our operations and sales. 37 Risks Related to Operations We operate primarily at two facility locations, and any disruption at one facility could adversely affect our business and operating results.
In addition, concerns about terrorism, the effects of a terrorist attack, political turmoil, labor strikes, war (including the Ukrainian - Russia and the Israel - Hamas conflicts) or the outbreak of epidemic diseases (including the outbreak of COVID-19 and variants) could have a negative effect on our operations and sales. 38 Risks Related to Operations We operate primarily at one facility location, and any disruption at our facility could adversely affect our business and operating results.
These material weaknesses resulted in adjustments to accounts receivable, inventory, other current assets, current and non-current contract liabilities, accrued expenses and other current liabilities, which were recorded prior to the issuance of the consolidated financial statements as of and for the years ended December 31, 2019, 2020 and 2021 and as of and for the interim periods ended September 30, 2021 and December 31, 2021; adjustments to inventory, cost of revenue, research and development expense, contract assets and contract liabilities as of and for the year ended December 31, 2022; and adjustments to current and non-current contract liabilities as of and for the interim period ended March 31, 2022.
These material weaknesses resulted in adjustments to accounts receivable, inventory, other current assets, current and non-current contract liabilities, accrued expenses and other current liabilities which were recorded prior to the issuance of the consolidated financial statements as of and for the years ended December 31, 2019, 2020 and 2021 and as of and for the interim periods ended September 30, 2021 and December 31, 2021.
Specifically, certain personnel have the ability to both (i) create and post journal entries within our general ledger system and (ii) prepare and review account reconciliations. • We did not design and maintain effective controls over inventory.
Specifically, certain personnel have the ability to both (i) create and post journal entries within our general ledger system and (ii) prepare and review account reconciliations. • We did not design and maintain effective controls over the accounting and disclosure for debt and equity instruments.
These customers may be more susceptible to negative impacts from economic downturns, recession, inflation, supply chain shortages and the COVID-19 pandemic than larger, more established businesses, and if they fail to raise enough capital, they may have to shut down operations.
These customers may be more susceptible to negative impacts from economic downturns, recession, inflation, supply chain shortages or the outbreak of epidemic diseases than larger, more established businesses, and if they fail to raise enough capital, they may have to shut down operations.
Certain additive manufacturing solutions are still under development. We have experienced, and may experience in the future, delays in the design, testing, manufacture and commercial release of new products, and any delay in the launch of our products could materially damage our brand, business, growth prospects, financial condition and operating results.
We have experienced, and may experience in the future, delays in the design, testing, manufacture and commercial release of new products, and any delay in the launch of our products could materially damage our brand, business, growth prospects, financial condition and operating results.
Accordingly, we face significant operational risks from doing business internationally. For current and potential international customers whose contracts are denominated in U.S. dollars, the relative change in local currency values creates relative fluctuations in our product pricing. These changes in international end-user costs may result in lost orders and reduce the competitiveness of our products in certain foreign markets.
For current and potential international customers whose contracts are denominated in U.S. dollars, the relative change in local currency values creates relative fluctuations in our product pricing. These changes in international end-user costs may result in lost orders and reduce the competitiveness of our products in certain foreign markets.
We experienced loss from operations of $104.3 million and $57.8 million for the years ended December 31, 2022 and 2021, respectively. We anticipate incurring operating losses and negative cash flow in the near-term as we continue to invest significantly in our business, in particular across our R&D efforts and sales and marketing programs.
We experienced loss from operations of $133.3 million and $106.3 million for the years ended December 31, 2023 and 2022, respectively. We anticipate incurring operating losses and negative cash flow in the near-term as we continue to invest significantly in our business, in particular across our sales and marketing programs.
We had outstanding 192,393,999 shares of common stock on March 15, 2023. We have filed a registration statement (the “ Resale Shelf Registration Statement ”) which registers the offer and sale from time to time by certain selling stockholders of up to 161,028,936 shares of our common stock.
We have filed a registration statement (the “ Resale Shelf Registration Statement ”) which registers the offer and sale from time to time by certain selling stockholders of up to 161,028,936 shares of our common stock.
If any action, the subject matter of which is within the scope of the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “ foreign action ”) in the name of any holder of our warrants, such holder will be 50 deemed to have consented to (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “ enforcement action ”) and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
If any action, the subject matter of which is within the scope of the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “ foreign action ”) in the name of any holder of our public warrants, such holder will be deemed to have consented to (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “ enforcement action ”) and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder. 53 This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage such lawsuits.
However, we may not be able to: • develop cost effective new products and technologies that address the increasingly complex needs of prospective customers; • enhance our existing products and technologies; • respond to technological advances and emerging industry standards and certifications on a cost-effective and timely basis; • adequately protect our IP as we develop new products and technologies; • identify the appropriate technology or product to which to devote our resources; or • ensure the availability of cash resources to fund R&D. 27 Even if we successfully introduce new additive manufacturing products and technologies and enhance our existing products and technologies, it is possible that these will eventually supplant our existing products or that our competitors will develop new products and technologies that will replace our own.
However, we may not be able to: • develop cost effective new products and technologies that address the increasingly complex needs of prospective customers; • enhance our existing products and technologies; • respond to technological advances and emerging industry standards and certifications on a cost-effective and timely basis; • adequately protect our IP as we develop new products and technologies; • identify the appropriate technology or product to which to devote our resources; or • ensure the availability of cash resources to fund R&D.
Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash, shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a warrant. 47 We may redeem their unexpired warrants prior to their exercise at a time that is disadvantageous to them, thereby making their warrants worthless.
Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash, shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a warrant.
Our Certificate of Incorporation and our Amended and Restated Bylaws designate a state or federal court located within the State of Delaware as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders, employees or agents.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Board or management. 52 Our Certificate of Incorporation and our Amended and Restated Bylaws designate a state or federal court located within the State of Delaware as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders, employees or agents.
Because our interests in entities are highly illiquid and not traded in any public market, we may not be able to timely dispose of these interests or may have to sell at less than our carrying value.
Because our interests in entities will be highly illiquid and not traded in any public market, we may not be able to timely dispose of these interests or may have to sell at less than our carrying value. Further, should the value of these investments become impaired, we may be required to reduce the carrying value of these investments.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation City, Country Description Square Footage Owned/Leased 511 Division Campbell, CA, USA Global Headquarters 17,200 Leased Augsburg Innovation Park Augsburg, Germany European Headquarters 5,000 Leased Lakeview Fremont, CA, USA Manufacturing Facility 80,000 Leased McGlincy Campbell, CA, USA Manufacturing Facility 9,100 Leased Division R&D Campbell, CA, USA Research and Development 5,000 Leased See Note 9, Leases to our consolidated financial statements included elsewhere in this Annual Report for additional information on our leased properties.
Biggest changeLocation City, Country Description Square Footage Owned/Leased 511 Division* Campbell, CA, USA Research and Development 17,200 Leased Lakeview Fremont, CA, USA Global Headquarters & Manufacturing Facility 80,000 Leased 530 Division* Campbell, CA, USA Research and Development 5,000 Leased * See Note 8, Leases in the notes to our audited consolidated financial statements included elsewhere in this Annual Report for additional information on our leased properties.
Item 2. Properties. Our global corporate headquarters is located in Campbell, California, and our European headquarters is located in Augsburg, Germany. We conduct final assembly and test of our machines in two manufacturing facilities that are located near our headquarters in California. The lease term, including options to extend, expirations range from 2023 to 2032.
Item 2. Properties. Our global corporate headquarters is located in Fremont, California, and we conduct final assembly and test of our machines in a manufacturing facility that is located at our headquarters. The lease term, including options to extend, expirations range from 2024 to 2032.
Our lease for the McGlincy location will terminate in the first half of 2023. 51
Our lease for the two Campbell locations will terminate in the second half of 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. From time to time, we may be involved in various disputes and litigation matters that arise in the ordinary course of business. We are currently not a party to any material legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 52 PART II
Biggest changeItem 3. Legal Proceedings. From time to time, we may be involved in various disputes and litigation matters that arise in the ordinary course of business. We are currently not a party to any material legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 56 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future determination to declare dividends will be made at the discretion of our Board, subject to applicable laws, and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our board of directors may deem relevant.
Biggest changeAny future determination to declare dividends will be made at the discretion of our Board, subject to applicable laws and the terms of our indebtedness, and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our board of directors may deem relevant.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item will be included in our Proxy Statement for the 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022, and is incorporated herein by reference. Sales of Unregistered Securities None. Use of Proceeds. None.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item will be included in our Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023, and is incorporated herein by reference. Sales of Unregistered Securities None. Use of Proceeds. None.
Holders of Record As of March 15, 2023, there were approximately 21,000 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners of our common stock represented by these record holders.
Holders of Record As of March 27, 2024, there were over 20,000 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners of our common stock represented by these record holders.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs of December 31, 2022 and 2021, there were immaterial foreign income taxes or liabilities. 59 Results of Operations Comparison of the Years Ended December 31, 2022 and 2021: The following table summarizes our historical results of operations and as a percentage of revenue for the periods presented: Year Ended December 31, 2022 2021 Change % (In thousands, except for percentages) Revenue 3D Printer $ 71,346 88.3 % $ 23,015 83.9 % $ 48,331 210.0 % Recurring payment 4,161 5.2 % 1,589 5.8 % 2,572 161.9 % Support services 5,250 6.5 % 2,835 10.3 % 2,415 85.2 % Total Revenue 80,757 100.0 % 27,439 100.0 % 53,318 194.3 % Cost of revenue 3D Printer 68,253 84.5 % 17,560 64.0 % 50,693 288.7 % Recurring payment 2,612 3.2 % 1,112 4.1 % 1,500 134.9 % Support services 6,998 8.7 % 3,809 13.9 % 3,189 83.7 % Total cost of revenue 77,863 96.4 % 22,481 81.9 % 55,382 246.4 % Gross profit 2,894 3.6 % 4,958 18.1 % (2,064) (41.6) % Operating expenses Research and development 46,266 57.3 % 27,002 98.4 % 19,264 71.3 % Selling and marketing 23,907 29.6 % 12,363 45.1 % 11,544 93.4 % General and administrative 36,982 45.8 % 23,352 85.1 % 13,630 58.4 % Total operating expenses 107,155 132.7 % 62,717 228.6 % 44,438 70.9 % Loss from operations (104,261) (129.1) % (57,759) (210.5) % (46,502) 80.5 % Interest expense (372) (0.5) % (2,740) (10.0) % 2,368 (86.4) % Loss on the convertible note modification — — % (50,577) (184.3) % 50,577 (100.0) % (Loss)/gain on fair value of warrants 19,129 23.7 % (5,202) (19.0) % 24,331 (467.7) % Gain on fair value of contingent earnout liabilities 94,073 116.5 % 9,275 33.8 % 84,798 914.3 % Other income (expense), net 1,451 1.8 % (88) (0.3) % 1,539 (1748.9) % Income (loss) before provision for income taxes 10,020 12.4 % (107,091) (390.3) % 117,111 (109.4) % Provision for income taxes — — % — — % — — % Net income (loss) $ 10,020 12.4 % $ (107,091) (390.3) % $ 117,111 (109.4) % 60 Revenue The following table presents the revenue disaggregated by products and service type, as well as the percentage of total revenue.
Biggest changeAs of December 31, 2023 and 2022, there were immaterial foreign income taxes or liabilities. 65 Results of Operations Comparison of the Years Ended December 31, 2023 and 2022: The following table summarizes our historical results of operations and as a percentage of revenue for the periods presented: Year Ended December 31, 2023 2022 Change % (In thousands, except for percentages) Revenue 3D Printer $ 68,938 89.0 % $ 69,295 88.0 % $ (357) (0.5) % Recurring payment 1,676 2.2 % 4,161 5.3 % (2,485) (59.7) % Support services 6,829 8.8 % 5,250 6.7 % 1,579 30.1 % Total Revenue 77,443 100.0 % 78,706 100.0 % (1,263) (1.6) % Cost of revenue 3D Printer 94,448 122.0 % 68,253 86.7 % 26,195 38.4 % Recurring payment 1,291 1.7 % 2,612 3.3 % (1,321) (50.6) % Support services 7,971 10.3 % 6,998 8.9 % 973 13.9 % Total cost of revenue 103,710 133.9 % 77,863 98.9 % 25,847 33.2 % Gross profit (26,267) (33.9) % 843 1.1 % (27,110) (3215.9) % Operating expenses Research and development 42,031 54.3 % 46,266 58.8 % (4,235) (9.2) % Selling and marketing 23,229 30.0 % 23,907 30.4 % (678) (2.8) % General and administrative 41,727 53.9 % 36,982 47.0 % 4,745 12.8 % Total operating expenses 106,987 138.1 % 107,155 136.1 % (168) (0.2) % Loss from operations (133,254) (172.1) % (106,312) (135.1) % (26,942) 25.3 % Interest expense (9,722) (12.6) % (372) (0.5) % (9,350) 2513.4 % Gain (loss) on fair value of warrants 2,338 3.0 % 19,129 24.3 % (16,791) (87.8) % Gain on fair value of contingent earnout liabilities 15,958 20.6 % 94,073 119.5 % (78,115) (83.0) % Gain on fair value of debt derivatives 8,485 11.0 % — — % 8,485 100.0 % Loss on debt extinguishment (19,450) (25.1) % — — % (19,450) (100.0) % Other income (expense), net 506 0.7 % 1,451 1.8 % (945) (65.1) % Income (loss) before provision for income taxes (135,139) (174.5) % 7,969 10.1 % (143,108) (1795.8) % Provision for income taxes — — % — — % — — % Net income (loss) $ (135,139) (174.5) % $ 7,969 10.1 % $ (143,108) (1795.8) % 66 Revenue The following table presents the revenue disaggregated by products and service type, as well as the percentage of total revenue.
Financing Activities Net cash provided by financing activities during the year ended December 31, 2022 was $1.3 million, consisting of repayments of $8.1 million for loan refinance, and repayments of $0.9 million for property and equipment loans, partially offset by $6.7 million of proceeds from the loan refinance, $2.4 million proceeds from new equipment loans, and $1.2 million of proceeds from the issuance of common stock upon exercise of stock options.
Net cash provided by financing activities during the year ended December 31, 2022 was $1.3 million, consisting of repayments of $8.1 million for loan refinance, and repayments of $0.9 million for property and equipment loans, partially offset by $6.7 million of proceeds from the loan refinance, $2.4 million proceeds from new equipment loans, and $1.2 million of proceeds from the issuance of common stock upon exercise of stock options.
Actual results may differ materially from those contained in any forward-looking statements due to, among other considerations, the matters discussed in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” 53 Overview We seek to fulfill the promise of additive manufacturing, also referred to as 3D printing (" AM "), to deliver breakthroughs in performance, cost, and lead time in the production of high-value metal parts.
Actual results may differ materially from those contained in any forward-looking statements due to, among other considerations, the matters discussed in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” Overview We seek to fulfill the promise of additive manufacturing, also referred to as 3D printing (" AM "), to deliver breakthroughs in performance, cost, and lead time in the production of high-value metal parts.
Support Service revenue is recognized over the contract period beginning with customer performance test acceptance. 57 Other revenue included under 3D Printer sales includes parts and consumables, such as filters, powder or build plates, that are sold to customers and recognized upon transfer of control to the customer at shipment.
Support Service revenue is recognized over the contract period beginning with customer performance test acceptance. Other revenue included under 3D Printer sales includes parts and consumables, such as filters, powder or build plates, that are sold to customers and recognized upon transfer of control to the customer at shipment.
We will remain an emerging growth company under the JOBS Act until the earliest of (a) December 31, 2025, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (c) the last date of our fiscal year in which we are deemed to be a “large accelerated filer” under the rules of the SEC or (d) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the previous three years. 70 Implications of Being a Smaller Reporting Company We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.
We will remain an emerging growth company under the JOBS Act until the earliest of (a) December 31, 2025, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (c) the last date of our fiscal year in which we are deemed to be a “large accelerated filer” under the rules of the SEC or (d) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the previous three years. 76 Implications of Being a Smaller Reporting Company We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.
As these meet the definition of a derivative, we recorded these warrants within Warrant liabilities on the consolidated balance sheet at fair value, with subsequent changes in their respective fair values recognized in the consolidated statements of operations and comprehensive loss at each reporting date.
As these meet the definition of a derivative, we recorded these warrants within Warrant liabilities on the consolidated balance sheet at fair value, with subsequent changes in their 80 respective fair values recognized in the consolidated statements of operations and comprehensive loss at each reporting date.
Contingent Earnout Liability In connection with the Reverse Recapitalization and pursuant to the Business Combination Agreement, eligible former Legacy Velo3D equity holders are entitled to receive additional shares of Common Stock upon the 74 Company achieving certain Earnout Triggering Events (as described in the Business Combination Agreement) (the " Earnout Shares ").
Contingent Earnout Liability In connection with the Reverse Recapitalization and pursuant to the Business Combination Agreement, eligible former Legacy Velo3D equity holders are entitled to receive additional shares of Common Stock upon the Company achieving certain Earnout Triggering Events (as described in the Business Combination Agreement) (the " Earnout Shares ").
We continue to focus on reducing our material costs through improved purchasing and inventory planning, accelerating production cycle times and improving efficiencies on the production floor to lower our cost of revenue. 62 We expect our cost of revenue to improve as we address the challenges that impact our production.
We continue to focus on reducing our material costs through improved purchasing and inventory planning, accelerating production cycle times and improving efficiencies on the production floor to lower our cost of revenue. We expect our cost of revenue to improve as we address the challenges that impact our production.
Investing Activities Net cash used in investing activities during the year ended December 31, 2022 was $53.0 million, consisting of property and equipment purchases of $13.8 million, production of equipment for lease to customers of $5.6 million and purchases of available-for-sale investments of $87.7 million consisting primarily of high quality investment-grade securities, offset by $54.1 million of proceeds from maturity of available for sale investments.
Net cash used in investing activities during the year ended December 31, 2022 was $53.0 million, consisting of property and equipment purchases of $13.8 million, production of equipment for the equipment on lease to customers of $5.6 million and purchases of available-for-sale investments of $87.7 million consisting primarily of 74 high quality investment-grade securities, offset by $54.1 million of proceeds from maturity of available for sale investments.
During the year ended December 31, 2022, there were no Public Warrants or Private Placement Warrants exercised. The Public Warrants are publicly traded and are exercisable for cash, unless certain conditions occur, such as redemption by the Company under certain circumstances, at which time the Public Warrants may be exercised on a cashless basis.
During the year ended December 31, 2023, there were no Public Warrants or Private Placement Warrants exercised. The Public Warrants are publicly traded and are exercisable for cash, unless certain conditions occur, such as redemption by the Company under certain circumstances, at which time the Public Warrants may be exercised on a cashless basis.
Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material 73 impact on the valuation of our common stock. An increase of 100-basis points in interest rates would not have a material impact on our stock-based compensation.
Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material 79 impact on the valuation of our common stock. An increase of 100-basis points in interest rates would not have a material impact on our stock-based compensation.
Other Revenue Revenue is recognized for parts sold to customers independent of the 3D Printer sales or Support Services contract is included with 3D Printer sales. Such revenue is recognized upon transfer of control to the customer. Revenue from parts was not material for the years ended December 31, 2022 and 2021.
Other Revenue Revenue is recognized for parts sold to customers independent of the 3D Printer sales or Support Services contract is included with 3D Printer sales. Such revenue is recognized upon transfer of control to the customer. Revenue from parts was not material for the years ended December 31, 2023 and 2022.
A subsequent Extended Support Agreement (" ESA ") is available for renewal after the initial period based on the then fair value of the service. 72 Support Services revenue are recognized evenly over the contract period beginning with customer performance test acceptance.
A subsequent Extended Support Agreement (" ESA ") is available for renewal after the initial period based on the then fair value of the service. 78 Support Services revenue are recognized evenly over the contract period beginning with customer performance test acceptance.
The estimated fair value of the contingent earnout liability was determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over the Earnout Period (as defined in Note 12, Equity Instruments ) prioritizing the most reliable information available.
The estimated fair value of the contingent earnout liability was determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over the Earnout Period (as defined in Note 10, Equity Instruments ) prioritizing the most reliable information available.
Income Taxes No provision for federal and state income taxes was recorded for any periods presented due to projected losses, and we maintained a full valuation allowance on the deferred tax assets as of December 31, 2022 and 2021.
Income Taxes No provision for federal and state income taxes was recorded for any periods presented due to projected losses, and we maintained a full valuation allowance on the deferred tax assets as of December 31, 2023 and 2022.
We will continue to review our conclusions about the appropriate amount of the valuation allowance on a quarterly basis. If we were to generate profits in 2023 and beyond, the U.S. valuation allowance position could be reversed in the foreseeable future.
We will continue to review our conclusions about the appropriate amount of the valuation allowance on a quarterly basis. If we were to generate profits in 2024 and beyond, the U.S. valuation allowance position could be reversed in the foreseeable future.
The timeframe from order to completion of the site acceptance test occurs typically over three to six 71 months. Revenue for the 3D Printer is recognized at a point-in time, which occurs upon transfer of control to the customer at shipment.
The timeframe from order to completion of the site acceptance test occurs typically over three to six months. Revenue 77 for the 3D Printer is recognized at a point-in time, which occurs upon transfer of control to the customer at shipment.
Income Taxes No provision for federal and state income taxes was recorded because we incurred income tax losses for the years ended December 31, 2022 and 2021 and maintained a full valuation allowance on the deferred tax assets as of December 31, 2022 and 2021.
Income Taxes No provision for federal and state income taxes was recorded because we incurred income tax losses for the years ended December 31, 2023 and 2022 and maintained a full valuation allowance on the deferred tax assets as of December 31, 2023 and 2022.
We shipped our first Sapphire system to our largest customer in 2018, and as of December 31, 2022, we have shipped to this customer 26 in total (Sapphire and Sapphire XC systems). We expect our largest customer to remain an important relationship going forward.
We shipped our first Sapphire system to our largest customer in 2018, and as of December 31, 2023, we have shipped to this customer 26 in total (Sapphire and Sapphire XC systems). We expect our largest customer to remain an important relationship going forward.
Our 2022 gross profit reflects the impact of launch customer price concessions for our Sapphire XC systems shipped during 2022. This pricing reduced our gross margin for the year by approximately 7.7% compared to 2021.
Our 2023 gross profit reflects the impact of launch customer price concessions for our Sapphire XC systems shipped during 2023. This pricing reduced our gross margin for the year by approximately 7.7% compared to 2022.
However, our ability to meet our cash requirements depends on, among other things, our operating performance, competitive and industry developments, and financial market conditions, all of which are significantly affected by business, financial, economic, political and other factors, many of which we may not be able to control or influence.
More generally, our ability to meet our cash requirements depends on, among other things, our operating performance, competitive and industry developments, and financial market conditions, all of which are significantly affected by business, financial, economic, political, and other factors, many of which we may not be able to control or influence.
We do not expect these launch customer price concessions to impact gross margins in 2023, as have completed the delivery of the Sapphire XC systems under the related launch customer contract.
We do not expect these launch customer price concessions to impact gross margins in 2024, as have completed the delivery of the Sapphire XC systems under the related launch customer contract.
The Company has elected not to recognize shipping to customers as a separate performance obligation. Revenue from shipping billed to customers for the years ended December 31, 2022 and 2021 was not material.
The Company has elected not to recognize shipping to customers as a separate performance obligation. Revenue from shipping billed to customers for the years ended December 31, 2023 and 2022 was not material.
See “ Risk Factors - Risks Related to Our Financial Position and Need for Additional Capital – We expect to rely on a limited number of customers for a significant portion of our near-term revenue”, and see Note 2, Summary of Significant Accounting Policies - Concentration of Credit Risk and Other Risks and Uncertainties, in the consolidated financial statements included elsewhere in this Annual Report .
See “ Risk Factors–Risks Related to Our Financial Position and Need for Additional Capital – We expect to rely on a limited number of customers for a significant portion of our near-term revenue ” , and see Note 2, Summary of Significant Accounting Policies–Concentration of Credit Risk and Other Risks and Uncertainties , in the notes to the audited consolidated financial statements included elsewhere in this Annual Report .
Recent Accounting Pronouncements For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on Velo3D’s consolidated financial statements, Note 2, Summary of Significant Accounting Policies , in the notes to the consolidated financial statements in this Annual Report.
Recent Accounting Pronouncements For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, Note 2, Summary of Significant Accounting Policies , in the notes to the audited consolidated financial statements in this Annual Report.
See Note 2, Summary of Significant Accounting Policies, in the consolidated financial statements included in this Annual Report for the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the years ended December 31, 2021.
See Note 2, Summary of Significant Accounting Policies, in the notes to the audited consolidated financial statements included in this Annual Report for the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the years ended December 31, 2021.
As we gain experience with Sapphire XC production, we expect to lower our material costs and reduce labor and overhead expenses per unit. Cost of Recurring Payment was $2.6 million and $1.1 million for the years ended December 31, 2022 and 2021, respectively.
As we gain experience with Sapphire XC production, we expect to further lower our material costs and reduce labor and overhead expenses per unit. Cost of Recurring Payment was $1.3 million and $2.6 million for the years ended December 31, 2023 and 2022, respectively.
The increase in the cost of revenue as a percentage was primarily due to the change in our product mix towards more Sapphire XC systems compared to Sapphire systems, and the impact of launch customer pricing for Sapphire XC.
The increase in the cost of revenue as a percentage was primarily due to the change in our product mix towards less Sapphire 1MZ, Sapphire XC, and Sapphire XC 1MZ systems compared to Sapphire systems, and the impact of launch customer pricing for Sapphire XC.
Most of our leases have a 12-month term, though in certain cases the lease term is longer. The Recurring Payment transactions, which are structured as operating leases, were 5.2% and 5.8% of revenue for the years ended December 31, 2022 and 2021, respectively.
Most of our leases have a 12-month term, though in certain cases the lease term is longer. The Recurring Payment transactions, which are structured as operating leases, were 2.2% and 5.3% of revenue for the years ended December 31, 2023 and 2022, respectively.
The carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. The long-term debt (including convertible notes) with variable interest at market rates is carried at amortized cost, which approximates its fair value and was classified as Level 2.
The carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. The long-term debt (including convertible notes) with variable interest at market rates is carried at amortized cost, which approximates its fair value and was classified as Level 2. See Note 9, Long-Term Debt for further information.
As of December 31, 2022, over 50% of our customers have multiple Sapphire family of systems. 61 Cost of Revenue The following table presents the Cost of Revenue disaggregated by product and service type, as well as the percentage of total cost of revenue.
As of December 31, 2023, over 50% of our customers have multiple Sapphire family of systems. 67 Cost of Revenue The following table presents the Cost of Revenue disaggregated by product and service type, as well as the percentage of total cost of revenue.
In conjunction with the joinder and fourth loan modification agreement on July 25, 2022, we issued to Silicon Valley Bank warrants to purchase up to 70,000 shares of the Company's common stock at an exercise price of $2.56 per warrant share (the “ 2022 Private Warrant ” and together with the Public Warrants and the Private Placement Warrants, the “ Common Stock Warrants ”).
In conjunction with the joinder and fourth loan modification agreement on July 25, 2022, we issued to Silicon Valley Bank warrants to purchase up to 70,000 shares of the Company’s common stock at an exercise price of $2.56 per warrant share (the “2022 Private Warrant”).
Following the Merger, 8,625,000 publicly-traded warrants (the “ Public Warrants ”) and 4,450,000 private placement warrants (the “ Private Placement Warrants ”), issued to Spitfire Sponsor, LLC (the " Sponsor "), all of which were issued in connection with JAWS Spitfire’s initial public offering (" IPO "), became exercisable for one share of the Company's Common Stock at an exercise price of $11.50 per share.
Following the Merger, 8,625,000 publicly-traded warrants (the “Public Warrants”) and 4,450,000 private placement warrants (the “Private Placement Warrants”), issued to Spitfire Sponsor, LLC (the “Sponsor”), all of which were issued in connection with JAWS Spitfire’s initial public offering (“IPO”), became exercisable for one share of the Company’s Common Stock at an exercise price of $11.50 per share.
During 2022, supply chain challenges increased our material and shipping costs, resulted in shipping delays and impacted our gross margins. We implemented a number of supply chain and manufacturing improvements in response and intend to continue to focus on driving further operational improvements during 2023 as well as company-wide initiatives to reduce operating costs.
In 2022, supply chain challenges increased our material and shipping costs, resulted in shipping delays and impacted our gross margins. In 2023, we implemented a number of supply chain and manufacturing improvements in response and intend to continue to focus on driving further operational improvements during 2024 as well as our Strategic Realignment to reduce operating costs.
The variable payments are recognized when the event determining the amount of variable consideration to be paid occurs. Sales with variable consideration represented 18% of revenue during the year ended December 31, 2022 and none of our revenue during year ended December 31, 2021. For more information, see “ —Critical Accounting Policies and Significant Estimates—Revenue – Variable Consideration ” below.
The variable payments are recognized when the event determining the amount of variable consideration to be paid occurs. Sales with variable consideration represented 3% of revenue during the year ended December 31, 2023 and 6% of our revenue during year ended December 31, 2022. For more information, see “ —Critical Accounting Policies and Significant Estimates—Revenue – Variable Consideration ” below.
The Company has recognized the estimate of variable consideration to the extent that it is probable that a significant reversal will not occur as a result from a change in estimation. Sales with variable consideration represented 18% of revenue during the year ended December 31, 2022 and none of our revenue during year ended December 31, 2021.
The Company has recognized the estimate of variable consideration to the extent that it is probable that a significant reversal will not occur as a result from a change in estimation. Sales with variable consideration represented 3% of revenue during the year ended December 31, 2023 and 6% of our revenue during year ended December 31, 2022.
During the year ended December 31, 2022, the cost of the Sapphire XC included higher factory overhead costs to scale up operations, production engineering development costs, and higher costs to expedite shipping for manufacturing materials and assemblies related to supply chain disruption in the global markets.
During the year ended December 31, 2023, the cost of the Sapphire 1MZ, Sapphire XC, and Sapphire XC 1MZ systems included lower factory overhead costs to scale up operations, production engineering development costs, and lower costs to expedite shipping for manufacturing materials and assemblies related to supply chain disruption in the global markets.
Warranty accruals were not material as of December 31, 2022 or December 31, 2021.
Warranty accruals were not material as of December 31, 2023 or December 31, 2022.
These provisions preclude us from classifying the Public Warrants and Private Placement Warrants in stockholders’ equity. The 2022 Private Warrants also contain similar provisions on the treatment in the event of a qualifying cash tender offer that preclude us from classifying the 2022 Public Warrants in stockholders' equity.
The 2022 Private Warrant, the RDO Warrants, and Placement Agent Warrants also contain similar provisions on the treatment in the event of a qualifying cash tender offer that preclude us from classifying the 2022 Private Warrants, the RDO Warrants, and the Placement Agent Warrants in stockholders' equity.
General and Administrative Expenses General and administrative expenses consist primarily of salaries and related personnel costs for individuals associated with our executive, administrative, finance, legal, information technology and human resources functions, including stock-based compensation, professional fees for legal, audit and compliance, accounting and consulting 58 services, general corporate costs, facilities, rent, information technology costs, insurance, bad debt expenses and an allocated portion of overhead costs, including equipment and depreciation and other general and administrative expenses.
General and Administrative Expenses General and administrative expenses consist primarily of salaries and related personnel costs for individuals associated with our executive, administrative, finance, legal, information technology and human resources functions, including stock-based compensation, professional fees for legal, audit and compliance, accounting and consulting services, general corporate costs, facilities, rent, information technology costs, insurance, bad debt expenses and an allocated portion of overhead costs, including equipment and depreciation and other general and administrative expenses. 64 Interest Expense Interest expense primarily consists of interest incurred under our outstanding debt and finance leases.
General economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism (including, for example, the ongoing military conflict between Ukraine and Russia and the economic sanctions related thereto), have added uncertainty in timing of customer orders and supply chain constraints.
Macroeconomic Conditions and Other World Events General economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism (including, for example, the ongoing military conflicts in Israel and in Ukraine and the economic sanctions related thereto), have added uncertainty in timing of customer orders and supply chain constraints.
Recurring Payment, structured as an operating lease, was $4.2 million and $1.6 million for the years ended December 31, 2022 and 2021, respectively. The increase was primarily attributed to an increase in the number of 3D Printer systems in service generating Recurring Payment revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Recurring Payment, structured as an operating lease, was $1.7 million and $4.2 million for the years ended December 31, 2023 and 2022, respectively. The decrease was primarily attributed to a decrease in the number of 3D Printer systems in service generating Recurring Payment revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022.
For example, on November 14, 2022, we filed with the SEC a shelf registration statement (the “ Shelf Registration Statement ”) that was subsequently declared effective on November 21, 2022 and permits us to sell from time-to-time additional shares of our common stock or other securities in one or more offerings in amounts, at prices and on the terms that we will determine at the time of offering for aggregate gross sale proceeds of up to $300.0 million, of which we may offer and sell up to $40.0 million shares of our common stock from time to time pursuant to an “at-the-market” offering sales agreement (the “ ATM Sales Agreement ”) we entered into in January 2023 with Needham & Company, LLC (“ Needham ”), as agent, subject to the terms and conditions described in the ATM Sales Agreement and SEC rules and regulations.
For example, on November 14, 2022, we filed with the SEC a shelf registration statement (the “ Shelf Registration Statement ”) that was subsequently declared effective on November 21, 2022, and permits us to sell from time-to-time additional shares of our common stock or other securities in one or more offerings in amounts, at prices and on the terms that we will determine at the time of offering for aggregate gross sale proceeds of up to $300.0 million, of which we may offer and sell up to $75.0 million shares of our common stock from time to time pursuant to the ATM Sales Agreement, subject to the terms and conditions described in the ATM Sales Agreement and SEC rules and regulations.
The increases in research and development expenses in 2022 were related to a $6.3 million increase in components design and engineering testing and validation for the Sapphire XC and development expenses for the product development of the 1MZ larger build volumes for our Sapphire systems, a $8.9 million increase for additional headcount, salaries and employee-related expenses, and a $8.0 million increase in stock-based compensation, offset by a $2.4 million decrease in product development expenses for the Sapphire family of systems.
The decrease in research and development expenses in 2023 were related to a $0.7 million decrease for headcount, salaries and employee-related expenses, a $3.4 million decrease in product development expenses for the Sapphire family of systems, and a $1.8 million decrease in components design and engineering testing and 69 validation for the Sapphire XC and development expenses for the product development of the 1MZ larger build volumes for our Sapphire systems, offset by a $1.6 million increase in stock-based compensation.
Our business requires substantial amounts of cash for operating activities, including salaries and wages paid to our employees, component and subassembly purchases, general and administrative expenses, and others. Our purchase commitments per our standard terms and conditions with our suppliers and vendors are cancellable in whole or in part with or without cause prior to delivery.
Our business requires substantial amounts of cash for operating activities, including salaries and wages paid to our employees, component and sub-assembly purchases, general and administrative expenses, and others. Our purchase commitments per our terms and conditions with our suppliers and vendors are cancellable in whole or in part prior to shipment.
For 3D Printer sale transactions where the support service period have expired, customers have purchased extended support service contracts. 3D Printer sale transactions - fall into two categories: a structured fixed purchase price for the system or a sale and utilization (variable consideration) fee model.
Support services are included with a 3D Printer sale transaction and a recurring payment transaction. For 3D Printer sale transactions where the support service period have expired, customers have purchased extended support service contracts. 3D Printer sale transactions - fall into two categories: a structured fixed purchase price for the system or a sale and utilization (variable consideration) fee model.
We also expect our Cost of Support Services will increase with the delivery of more 3D Printer systems to customers. Cost of revenue as a percentage of revenue was 96.4% and 81.9% for the years ended December 31, 2022 and 2021, respectively.
We also expect our Cost of Support Services will increase with the delivery of more 3D Printer systems to customers. Cost of revenue as a percentage of revenue was 133.9% and 98.9% for the years ended December 31, 2023 and 2022, respectively.
See “Risk Factors - Risks Related to Our Business and Industry–Our business activities have been, and may continue to be, disrupted due to the ongoing COVID-19 pandemic”, “Economic uncertainty or downturns could adversely affect our business and operating results” and “We may be adversely affected by the effects of inflation or possible stagflation.” Climate Change Material pending or existing climate change-related legislation, regulations, and international accords could have an adverse effect on our business, financial condition, and results of operations, including: (1) material past and/or future capital expenditures for climate-related projects, (2) material indirect consequences of climate-related regulation or business trends, such as the following: decreased/increased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources; increased competition to develop innovative new products that result in lower emissions; increased demand for generation and transmission of energy from alternative energy sources; and any anticipated reputational risks resulting from operations or 56 products that produce material greenhouse gas emissions and (3) material increased compliance costs related to climate change.
See “Risk Factors - Risks Related to Our Business and Industry—Market conditions, economic uncertainty or downturns could adversely affect our business and operating results” and “—We may be adversely affected by the effects of inflation or possible stagflation.” Climate Change Material pending or existing climate change-related legislation, regulations, and international accords, including the SEC's recently adopted climate disclosure rules, could have an adverse effect on our business, financial condition, and results of operations, including: (1) material past and/or future capital expenditures for climate-related projects, (2) material indirect consequences of climate-related regulation or business trends, such as the following: decreased/increased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources; increased competition to develop innovative new products that result in lower emissions; increased demand for generation and transmission of energy from alternative energy sources; and any anticipated reputational risks resulting from operations or products that produce material greenhouse gas emissions and (3) material increased compliance costs related to climate change.
Cost of Revenue Our cost of revenue includes the “ Cost of 3D Printers ,” “ Cost of Recurring Payment ” and “ Cost of Support Services .” Cost of 3D Printers includes the manufacturing cost of our components and subassemblies purchased from vendors for the assembly, as well as raw materials and assemblies, shipping costs and other directly associated costs.
Other revenue was not material for the years ended December 31, 2023 and 2022. 63 Cost of Revenue Our cost of revenue includes the “ Cost of 3D Printers ,” “ Cost of Recurring Payment ” and “ Cost of Support Services .” Cost of 3D Printers includes the manufacturing cost of our components and subassemblies purchased from vendors for the assembly, as well as raw materials and assemblies, shipping costs and other directly associated costs.
Gross Profit and Gross Margin Total gross profit was $2.9 million and $5.0 million for the years ended December 31, 2022 and 2021, respectively. As a percentage of revenue, the gross margin was 3.6% and 18.1% for the years ended December 31, 2022 and 2021, respectively.
Gross Profit and Gross Margin Total gross profit was $(26.3) million and $0.8 million for the years ended December 31, 2023 and 2022, respectively. As a percentage of revenue, the gross margin was (33.9)% and 1.1% for the years ended December 31, 2023 and 2022, respectively.
General and Administrative General and administrative expenses were $37.0 million and $23.4 million for the years ended December 31, 2022 and 2021, respectively.
General and Administrative General and administrative expenses were $41.7 million and $37.0 million for the years ended December 31, 2023 and 2022, respectively.
The lower gross profit for the year ended December 31, 2022 was primarily attributable to the change in the mix of Sapphire and Sapphire XC system sales, the impact of launch customer pricing for Sapphire XC, and the higher than expected costs associated with the production of the Sapphire XC , Sapphire 1MZ and Sapphire XC 1MZ systems, and the higher material, labor and overhead costs for the increased number of systems sold in 2022, as compared to 2021.
The lower gross profit for the year ended December 31, 2023 was primarily attributable to the change in the mix of Sapphire and Sapphire XC system sales, the impact of launch customer pricing for Sapphire XC, and the higher than expected costs associated with the production of the Sapphire XC, Sapphire 1MZ and Sapphire XC 1MZ systems, the higher material, labor and overhead costs for the increased number of systems sold in 2023, as compared to 2022, and the large increase in scrapped inventory and inventory reserves for excess and obsolete inventory related to changes in our business strategy due to our Strategic Realignment.
Gain on Fair value of Contingent Earnout Liabilities The change in fair value of the contingent earnout liability was a gain of $94.1 million and $9.3 million for the year ended December 31, 2022 and 2021, respectively, and were related to the non-cash fair value change of the contingent earnout liabilities.
Gain on Fair Value of Warrants The change in fair value of warrants resulted in a gain of $2.3 million, and $19.1 million for the years ended December 31, 2023 and 2022, respectively, and were related to the non-cash fair value change of the warrant liabilities. 70 Gain on Fair value of Contingent Earnout Liabilities The change in fair value of the contingent earnout liability was a gain of $16.0 million and $94.1 million for the year ended December 31, 2023 and 2022, respectively, and were related to the non-cash fair value change of the contingent earnout liabilities.
As discussed above, two of the Recurring Payment revenue systems were converted to 3D Printer sales during the 2022. Our Support Service revenue was $5.3 million and $2.8 million for the years ended December 31, 2022 and 2021, respectively.
Additionally, three Recurring Payment revenue systems were converted to 3D Printer sales during 2023. Our Support Service revenue was $6.8 million and $5.3 million for the years ended December 31, 2023 and 2022, respectively.
We have incurred net profit of $10.0 million and net loss of $107.1 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022 and December 31, 2021, we had $80.2 million and $223.1 million in cash, cash equivalents and short-term investments and an accumulated deficit of $219.8 million and $229.9 million, respectively.
We have incurred a net loss of $135.1 million and net income of $8.0 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, we had $31.1 million and $80.2 million in cash, cash equivalents and short-term investments, respectively, and an accumulated deficit of $357.0 million and $221.9 million, respectively.
We consider this approach a “land and expand” strategy, oriented around a demonstration of our value proposition followed by increasing penetration with key customers. 54 Key Financial and Operational Metrics We believe that our performance and future success depend on many factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Annual Report titled “ Risk Factors .” We regularly evaluate several metrics, including the metrics presented in the table below, to measure our performance, identify trends affecting our business, prepare financial projections, make strategic decisions and establish performance goals for compensation and we periodically review and revise these metrics to reflect changes in our business. 2022 2021 Revenue ($ in millions) for the year ended December 31 $ 81 $ 27 Bookings ($ in millions) for the year ended December 31 71 52 Backlog ($ in millions) as of December 31 43 47 Bookings ($ in millions): Bookings ($ in millions) are defined as a confirmed order for a 3D printer system in contracted dollars.
Without such additional funding, we will not be able to continue operations. 60 Key Financial and Operational Metrics We believe that our performance and future success depend on many factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Annual Report titled “ Risk Factors .” We regularly evaluate several metrics, including the metrics presented in the table below, to measure our performance, identify trends affecting our business, prepare financial projections, make strategic decisions and establish performance goals for compensation and we periodically review and revise these metrics to reflect changes in our business. 2023 2022 Revenue ($ in millions) for the year ended December 31 $ 77 $ 79 Bookings ($ in millions) for the year ended December 31 56 71 Backlog ($ in millions) as of December 31 13 43 Bookings ($ in millions): Bookings ($ in millions) are defined as a confirmed order for a 3D printer system in contracted dollars.
The increase of $13.6 million in the year ended December 31, 2022 in general and administrative expenses as compared to 2021 was attributable to, a $11.2 million increase in additional headcount, salaries and employee-related benefits, a $4.0 million increase in stock-based compensation, and a $5.7 million increase in public company related expenses for advisory, legal and accounting fees and insurance, offset by a $2.9 million decrease in other general and administrative operating expenses.
The increase of $4.7 million in the year ended December 31, 2023 in general and administrative expenses as compared to 2022 was attributable to, a $2.8 million increase in additional headcount, salaries and employee-related benefits, a $1.8 million increase in public company related expenses for advisory, legal and accounting fees and insurance, and a $0.1 million increase in facilities expenses.
We expect to provide cash by financing activities by issuing new equity pursuant to the ATM Sales Agreement, under the Shelf Registration Statement or otherwise or incurring new debt to continue operations. Our future cash requirements and the adequacy of available funds will depend on many factors, including our operating performance, competitive and industry developments, and financial market conditions.
We expect cash provided by financing activities to increase by issuing new equity or incurring new debt to continue operations, subject to our compliance with the covenants in the Secured Notes. Our future cash requirements and the adequacy of available funds will depend on many factors, including our operating performance, competitive and industry developments, and financial market conditions.
Accordingly, we may need to engage in equity or debt financings to secure additional funds if our existing sources of cash and any funds generated from operations do not provide us with sufficient capital, including seeking additional capital from public or private offerings of our equity or debt securities, electing to repay, restructure or refinance our existing indebtedness, or electing to borrow additional amounts under new credit lines or from other sources.
Accordingly, subject to our compliance with the covenants in the Secured Notes, we expect we will need to engage in equity or debt financings to secure additional funds, including seeking additional capital from public or private offerings of our equity or debt securities, electing to repay, restructure or refinance our existing indebtedness, or electing to borrow additional amounts under new credit lines or from other sources.
Off-Balance Sheet Arrangements As of December 31, 2022 and 2021, we did not have any off-balance sheet arrangements. 69 Contractual Obligations The table below summarizes our contractual obligations as of December 31, 2022: Payments Due by Period Less than 1 year 1 – 3 years 3 – 5 years Total (In thousands) Operating leases $ 2,786 $ 7,309 $ 13,670 $ 23,765 Debt principal, interest and fees 2,934 5,422 — 8,356 Purchase commitments 52,441 — — 52,441 Total contractual cash obligations $ 58,161 $ 12,731 $ 13,670 $ 84,562 Purchase commitments (purchase orders) of $52.4 million for parts and assemblies are non-cancellable and are due upon receipts with standard payment terms and will be delivered throughout 2023.
Off-Balance Sheet Arrangements As of December 31, 2023 and 2022, we did not have any off-balance sheet arrangements. 75 Contractual Obligations The table below summarizes our contractual obligations as of December 31, 2023: Payments Due by Period Less than 1 year 1 – 3 years 3 – 5 years Total (In thousands) Operating leases $ 2,806 $ 7,162 $ 11,269 $ 21,237 Debt principal, interest and fees 31,500 12,500 — 44,000 Purchase commitments 13,000 — — 13,000 Total contractual cash obligations $ 47,306 $ 19,662 $ 11,269 $ 78,237 Purchase commitments (purchase orders) of $13.0 million for parts and assemblies are non-cancellable and are due upon receipts with standard payment terms and will be delivered throughout 2024.
There was an increase of $11.5 million for the year ended December 31, 2022 as compared to 2021. 63 The increase in selling and marketing expenses for the year ended December 31, 2022 was attributable to a $6.8 million increase for additional headcount, salaries and employee-related expenses, a $3.7 million increase in stock-based compensation, and a $1.0 million increase in trade show expenses and marketing initiatives and branding expenses.
The decrease in selling and marketing expenses for the year ended December 31, 2023 was attributable to a $0.1 million decrease in trade show expenses, marketing initiatives, and branding expenses and a $3.3 million decrease in European marketing costs, offset by a $1.6 million increase for additional headcount, salaries and employee-related expenses and a $1.1 million increase in stock-based compensation.
This increase of $3.2 million was primarily attributable to the costs for preventative maintenance, costs incurred to enhance system reliability performance, and field service engineering labor costs due to significantly more 3D Printers in service in 2022 compared to 2021.
Cost of Support Services was $8.0 million and $7.0 million, for the years ended December 31, 2023 and 2022, respectively. This increase of $1.0 million was primarily attributable to the costs for preventative maintenance, costs incurred to enhance system reliability performance, and field service engineering labor costs due to more 3D Printers in service in 2023 compared to 2022.
For the year ended December 31, 2022, cost of 3D Printers increased compared to the prior year in 2021, due to higher material, labor and factory overhead costs associated with higher production volumes and the change in our product mix towards more Sapphire XC systems compared to Sapphire systems.
For the year ended December 31, 2023, cost of 3D Printers increased compared to the prior year in 2022, due to a significant increase in scrapped inventory and inventory reserves for excess and obsolete inventory related to changes in our business strategy due to our Strategic Realignment and the change in our product mix towards more Sapphire 1MZ, Sapphire XC, and Sapphire XC 1MZ systems compared to Sapphire systems, offset by lower material, labor and factory overhead costs associated with lower production volumes.
We may require additional funds to respond to business challenges and opportunities, including the need to provide working capital, develop new features or enhance our products, expand our manufacturing capacity, improve our operating infrastructure or acquire complementary businesses and technologies.
We expect that we will need to engage in additional financings to fund our operations and satisfy our obligations in the near-term as well as to respond to business challenges and opportunities, including the need to repay the Secured Notes, provide working capital, develop new features or enhance our products, expand our manufacturing capacity, improve our operating infrastructure, or acquire complementary businesses and technologies.
See Note 18, Subsequent Events - At-the-Market Offering, in the consolidated financial statements included elsewhere in this Annual Report .
See Note 18 Subsequent Events in the notes to our audited consolidated financial statements included elsewhere in this Annual Report for additional information.
Revenue trends from our largest customer have historically been driven by the timing of its major orders for 3D Printers and the timing of the shipments under those orders.
Our focus for revenue has shifted to ensuring customer success and improving system reliability to strengthen our existing customer network and developing new customer networks to increase demand. Revenue trends from our largest customer have historically been driven by the timing of its major orders for 3D Printers and the timing of the shipments under those orders.
Our gross profit and gross margin are influenced by a number of factors, including: • Product mix of Sapphire, Sapphire XC, Sapphire 1MZ and Sapphire XC 1MZ systems; • Trends in materials and shipping costs; • Production volumes that may impact factory overhead absorption; and • Cost of our Support Services and product support may be influenced by product mix changes, including new product introductions, and other factors.
Our gross profit and gross margin are influenced by a number of factors, including: • Product mix of Sapphire, Sapphire XC, Sapphire 1MZ and Sapphire XC 1MZ systems; • Average selling prices for our systems; • Trends in materials and shipping costs; • Production volumes that may impact factory overhead absorption; • System reliability performance; and • Impact of product mix changes, including new product introductions, and other factors on our Cost of Support Services We expect to accelerate production cycle times and improving efficiencies on the production floor to lower our cost of revenue, which we expect will improve our gross profit and gross margins in the second half of 2024.
We sell our fully integrated hardware and software AM solutions through two types of transaction models: a 3D Printer sale transaction and a recurring payment transaction (" Recurring Payment "). Support services are included with a 3D Printer sale transaction and a recurring payment transaction.
Contracts for 3D Printers also include post-sale customer support services (“ Support Services ”), except for our distributor partners, which are qualified to perform support services. 62 We sell our fully integrated hardware and software AM solutions through two types of transaction models: a 3D Printer sale transaction and a recurring payment transaction (" Recurring Payment ").
Interest Expense Interest expense was $0.4 million and $2.7 million, for the years ended December 31, 2022 and 2021, respectively. In the year ended December 31, 2022, there was a decrease of $2.4 million attributable to decreased outstanding debt balances, which was partially repaid during the fourth quarter of 2021.
Interest Expense Interest expense was $9.7 million and $0.4 million, for the years ended December 31, 2023 and 2022, respectively. In the year ended December 31, 2023, there was an increase of $9.3 million attributable to increases in outstanding debt balances, attributable to the Notes.
For more information, see Note 10, Long-Term Debt , in the notes to the consolidated financial statements included elsewhere in this Annual Report.
See Note 8, Leases , in the notes to the audited consolidated financial statements included elsewhere in this Annual Report for further discussion.
Sapphire, Sapphire 1MZ, Sapphire XC and Sapphire XC 1MZ metal AM printer using our L-PBF technology and Assure quality validation software (collectively referred to as the “ 3D Printer ”). Contracts for 3D Printers also include post-sale customer support services (“ Support Services ”), except for our distributor partners, which are qualified to perform support services.
Sapphire, Sapphire 1MZ, Sapphire XC and Sapphire XC 1MZ metal AM printer using our L-PBF technology and Assure quality validation software (collectively referred to as the “ 3D Printer ”).
We also expect our Recurring Payment and Support Service revenue to increase as the number of systems we have in the field increases. As of December 31, 2022, our backlog for firm orders was $43 million for 3D Printers. Our focus for revenue remains on expanding our selling and marketing efforts and developing our existing customer network to increase demand.
We expect our Support Service revenue to increase as the number of systems we have in the field increases. As of December 31, 2023, our backlog for firm orders was $13 million for 3D Printers.
The improvement in revenue was due to a mix of higher production volumes and our change in product mix to include more Sapphire XC systems, resulting in an increase in the average selling price. The 3D Printer sales also included Sapphire XC 1MZ systems sales which have higher selling prices. The 3D Printer sales also included parts and consumables revenue.
The negative revenue performance was due to lower systems sold, mix of lower production volumes and discounted system pricing offset by our change in product mix to include more higher priced systems as discussed previously, resulting in a decrease in the average selling price. The 3D Printer sales also included parts and consumables revenue.
Cost of 3D Printers was $68.3 million and $17.6 million, for the years ended December 31, 2022 and 2021, respectively. The increase of $50.7 million was due to an increase in the number of 3D Printers sold, which included both Sapphire and Sapphire XC systems, compared to the number of 3D Printers sold for the year ended December 31, 2021.
The increase of $26.2 million was due a $27 million increase in Cost of 3D printers related to the valuation of inventory for the year ended December 31, 2023, offset by a decrease in the number of 3D Printers sold, which included both Sapphire and Sapphire XC systems, compared to the number of 3D Printers sold for the year ended December 31, 2022.
Year Ended December 31, 2022 2021 Change % Cost of Revenue (in thousands, except percentages) Cost of 3D Printers $ 68,253 87.7 % $ 17,560 78.1 % $ 50,693 288.7 % Cost of Recurring Payment 2,612 3.4 % 1,112 5.0 % 1,500 134.9 % Cost of Support Services 6,998 9.0 % 3,809 16.9 % 3,189 83.7 % Total Cost of Revenue $ 77,863 100.0 % $ 22,481 100.0 % $ 55,382 246.4 % Total cost of revenue for the years ended December 31, 2022 and 2021 was $77.9 million and $22.5 million, respectively, an increase of $55.4 million, or 246.4%.
Year Ended December 31, 2023 2022 Change % Cost of Revenue (in thousands, except percentages) Cost of 3D Printers $ 94,448 91.1 % $ 68,253 87.6 % $ 26,195 38.4 % Cost of Recurring Payment 1,291 1.2 % 2,612 3.4 % (1,321) (50.6) % Cost of Support Services 7,971 7.7 % 6,998 9.0 % 973 13.9 % Total Cost of Revenue $ 103,710 100.0 % $ 77,863 100.0 % $ 25,847 33.2 % Total cost of revenue for the years ended December 31, 2023 and 2022 was $103.7 million and $77.9 million, respectively, an increase of $25.8 million, or 33.2%.
The noncash charges primarily consisted of the loss on the convertible note modification of $50.6 million and the change in fair value related to the warrants of $5.2 million, and depreciation and amortization and stock-based compensation expense, offset by the change in fair value related to the contingent earnout liabilities of $9.3 million.
The noncash charges primarily consisted of stock-based compensation of $24.9 million, the change in loss on debt extinguishment of $19.5 million, depreciation and amortization of $9.3 million, cost of issuance of common stock warrants of $1.4 million, and realized loss on available for sale securities, partially offset by the change in fair value related to the contingent earnout liabilities of $16.0 million, the change in fair value of debt derivatives of $8.5 million, and fair value related to the warrants of $2.3 million.
Net cash used in operating activities for the year ended December 31, 2021 was $56.4 million, consisting primarily of a net loss of $107.1 million and cash used from net operating assets of $3.2 million, primarily comprised of increases in other assets of $14.5 million, prepaid expenses and other current assets of $7.6 million related to insurance and vendor prepayments, increases in inventories of $8.0 million for Sapphire and Sapphire XC system production, and increases in accounts receivable of $11.5 million due to timing of customer payments, offset by decreases in contract liabilities of $17.6 million, increases in other noncurrent liabilities of $9.4 million, increases in accrued expenses and other current liabilities of $6.9 million, decreases in other operating assets of $4.5 million and noncash charges of $53.9 million.
The cash used from operating assets was primarily comprised of contract liabilities of $10.1 million, accrued expenses and other current liabilities of $9.0 million, and contract assets of $7.2 million, partially offset by a decrease in inventories of $13.7 million for Sapphire and Sapphire XC system production, other assets of $10.2 million, prepaid expenses and other current assets of $2.8 million related to insurance and vendor prepayments, and accounts payable of $2.2 million.
Other Income (Expense), Net 64 Other income (expense), net was $1.5 million and less than ($0.1) million for the years ended December 31, 2022 and 2021, respectively. Interest income earned from cash, cash equivalents and short term investments was $1.4 million for the year ended December 31, 2022.
Other Income (Expense), Net Other income (expense), net was $0.5 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively.
Liquidity and Capital Resources As of December 31, 2022, we had raised net proceeds of $428.3 million, comprised of approximately $278.3 million from the Merger and the PIPE Financing closed on September 29, 2021, and $150.0 million from the issuance of redeemable convertible preferred stock (series A to series D), third-party financing and convertible notes.
Liquidity and Capital Resources As of December 31, 2023, we have raised net proceeds of $517.1 million, comprised of approximately $18 million from the Registered Direct Offering, which closed on December 28, 2023, approximately $66 million from the offering of $70.0 million aggregate principal amount of the Secured Convertible Notes, which closed on August 10, 2023, $22.8 million from our "at-the-market" offering (the " ATM Offering ") (as described below), $278.3 million from the Merger and related private placement of shares of our common stock (the “ PIPE Financing ”), which closed on September 29, 2021, and, prior to the Merger, $150.0 million from the issuance of redeemable convertible preferred stock (series A to series D), third-party financing and convertible notes.
The 2022 Private Warrant is exercisable until July 24, 2034 and allow cashless exercise in whole or part. The Company evaluated the Common Stock Warrants, and concluded that they all do not meet the criteria to be classified within stockholders’ equity.
The RDO Warrants and Placement Agent Warrants are exercisable until December 29, 2028. The Company evaluated the Common Stock Warrants, and concluded that they all do not meet the criteria to be classified within stockholders’ equity.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item. 75
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item. 81

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