Long-Term Debt |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-Term Debt | Long-Term Debt Long-term debt consisted of the following:
The Company’s banking arrangements include three facilities and a revolving credit line with its primary bank. For a full description of these banking arrangements, see Note 15, Long-Term Debt, in the audited consolidated financial statements included in the 2021 Form 10-K. These loans contain customary representations and warranties, reporting covenants, events of default and termination provisions. The affirmative covenants include, among other things, that the Company furnish monthly financial statements, a yearly budget, timely files taxes, maintains good standing and government compliance, maintains liability and other insurance and furnishes audited financial statements no later than the date of delivery to the Board of Directors.
The Company amortizes deferred financing costs over the life of the borrowing. As of September 30, 2022 and December 31, 2021, the remaining unamortized balance of deferred financing costs was less than $0.2 million and less than $0.1 million, respectively, and was included in Debt — current portion on the balance sheets.
Revolving Credit Line — In May 2021, the Company executed the third amended and restated loan and security agreement and a mezzanine loan and security agreement with Silicon Valley Bank, the Company’s primary lender, which included a $10.0 million revolving credit line and an $8.5 million secured equipment loan facility (see below).
In August 2021, the Company drew $3.0 million on revolving credit facility, with a variable interest rate of the greater of 5.75% or Prime plus 2.50% and a term of 10 months. The Company had $27.0 million of the revolving credit line undrawn as of September 30, 2022. The effective interest rate was 5.8% and 5.2% for the three and nine months ended September 30, 2022, respectively. The loan fees were less than $0.2 million as of September 30, 2022.
On May 13, 2022, the Company entered into a first loan modification agreement that made certain modifications to the third amended and restated loan and security agreement. The first loan modification agreement, among other things, extended the maturity date of the revolving line of credit from May 14, 2022 to June 13, 2022, and included a limited waiver of a default related to the Company’s failure to maintain revenue of at least $25 million for the six month period ending March 31, 2022.
On June 13, 2022, the Company entered into a second loan modification agreement that made certain modifications to the third amended and restated loan and security agreement, as amended. The second loan modification agreement, among other things, extended the maturity date of the revolving line of credit from June 13, 2022 to July 14, 2022.
On July 11, 2022, the Company entered into a third loan modification agreement that made certain modifications to the third amended and restated loan and security agreement, as amended. The third loan modification agreement, among other things, extended the maturity date of the Company’s revolving line of credit to September 11, 2022.
On July 25, 2022, the Company entered into a joinder and fourth loan modification agreement that made certain modifications to its third amended and restated loan and security agreement, as amended. The joinder and fourth loan modification agreement, among other things, amended the third amended and restated loan and security agreement to (i) increase the amount of the revolving credit line to $30.0 million, and (ii) extend the maturity date of the revolving credit line to December 31, 2024.
Interest on the outstanding balance of the revolving credit line is payable monthly at an annual rate of the Wall Street Journal Prime Rate plus 0.25% when the Company’s Adjusted Quick Ratio (“AQR”) is less than or equal to 1.50, and plus 0.75% when the Company’s AQR is greater than 1.50.
Equipment Loan — On December 17, 2020, the Company executed the second amended and restated loan and security agreement, which included an equipment loan facility for up to $8.5 million secured by the equipment leased to customers. The facility has a variable interest rate of the greater of Prime rate or 3.25%.
During the year ended December 31, 2021, the Company executed seven additional advances on the facility for $5.6 million secured by equipment leased to customers. For the nine months ended September 30, 2022, $1.6 million in principal payments were paid. As of September 30, 2022, the outstanding balance was $3.5 million. As of September 30, 2022, the deferred loans fees associated with the debt issuance was less than $0.1 million. The effective interest rate was 5.5% and 2.8% for the three months ended September 30, 2022 and 2021, respectively, and 4.1% and 2.4% for the nine months ended September 30, 2022 and 2021, respectively.
The future minimum aggregate payments for the above borrowings are as follows as of September 30, 2022:
Convertible Note Issued in 2021
On January 4, 2021, concurrent with the Legacy Velo3D Series D redeemable convertible preferred stock issuance, the Company issued a convertible note at a principal amount of $5.0 million with a maturity date of January 3, 2023. Interest accrued on the convertible note at 1.28% per annum.
In September 2021, the convertible promissory note agreement was amended to reflect an automatic conversion to Legacy Velo3D Series D redeemable convertible preferred stock upon a change in control. The modification was accounted for as a debt extinguishment per ASC 470-50 Debt and resulted in a $50.6 million fair value adjustment to the $5.0 million convertible promissory note. The convertible note converted automatically in connection with the Merger.
The note conversion price of $0.74 per share resulted in a conversion into 6,820,022 shares of Legacy Velo3D Series D redeemable convertible preferred stock immediately prior to Closing, which were subsequently converted from Legacy Velo3D Series D redeemable convertible preferred stock into Legacy Velo3D common stock and at the Exchange Ratio of 0.8149 for 5,557,864 shares of common stock at the Closing. There was no purchase discount offered to the note holder.
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