|6 Months Ended|
Jun. 30, 2023
|Subsequent Events [Abstract]|
|Subsequent Events||Subsequent Events
Offering of Senior Secured Convertible Notes
On August 10, 2023, the Company entered into the Securities Purchase Agreement with the Investor pursuant to which the Company agreed to issue and sell in the Offering up to $105 million aggregate principal amount of Notes.
On August 14, 2023 (the “Initial Closing Date”), the Company issued $70 million aggregate principal amount of the Initial Notes to the Investor. In addition, the Company has granted the Investor the right to purchase up to an additional $35 million aggregate principal amount of the Notes (the “Additional Notes”) so long as the notice to exercise such option is provided no later than the first anniversary of the Initial Closing Date.
The Company estimates the net proceeds from the sale of the Initial Notes will be approximately $66 million, after deducting estimated fees and expenses payable by the Company. On the Initial Closing Date, the Company used approximately $22 million of the net proceeds from the Offering to repay in full the outstanding indebtedness
under the Loan Agreement. The Company plans to use the remaining net proceeds for working capital, capital expenditures and general corporate purposes.
The Notes are senior secured obligations of the Company and will be effectively senior to all of the Company’s unsecured indebtedness to the extent of the collateral securing the Notes. Aside from the foregoing, the Notes will rank pari passu with all of the Company’s other senior indebtedness and senior to any of the Company’s subordinated indebtedness.
As of the Initial Closing Date, the Notes are secured by a first lien security interest in the Company’s and its wholly-owned subsidiary Velo3D US, Inc.’s assets, including, but not limited to, the Company’s intellectual property (subject to prior liens and other customary exclusions, in each case, acceptable to the collateral agent for the Notes (the “Collateral Agent”) in its sole discretion) other than the Company’s and such subsidiary’s non-U.S. assets and the Company’s and such subsidiary’s bank accounts (collectively, the “Initial Collateral”). The Notes provide that at or before 30 days after the Initial Closing Date (which period may be extended in the reasonable discretion of the Collateral Agent), the Company will deliver to the Collateral Agent such additional security documents, in form and substance reasonably acceptable to the Collateral Agent, which perfect a first lien security interest in all the Company’s remaining assets (subject to prior liens and other customary exclusions, in each case, acceptable to the Collateral Agent in its sole discretion).
The Notes bear interest at 6.00% per annum, payable quarterly in cash on January 1, April 1, July 1 and October 1 of each year, commencing on October 1, 2023, and will mature on August 1, 2026 (the “Maturity Date”). When the Company repays principal on the Notes pursuant to the terms of the Notes, it will be required to pay 115% of the principal amount repaid (the “Repayment Price”) plus accrued interest.
On the first day of each three-month period beginning on January 1, 2024 (a “Partial Redemption Date”), holders of the Notes may require the Company to redeem a portion of the principal amount of the Notes at the Repayment Price plus accrued interest. The aggregate principal amount of the Initial Notes that will be redeemable on a Partial Redemption Date will be $8,750,000 for a Repayment Price of $10,062,500.
Subject to certain exceptions, upon the completion of certain equity financings at a price below the conversion price of the Notes, holders of the Notes will have the right to require the Company to use up to 15% of the gross proceeds of the equity financing to redeem a portion of the principal amount of the Notes at the Repayment Price plus accrued interest.
Holders of the Notes will also have the right to require the Company to repurchase all or a portion of their Notes upon the occurrence of certain corporate events constituting a “fundamental change” at the greater of (a) 110% of the conversion value (calculated based on the 5-day volume-weighted-average price (“VWAP”) of the Company’s common stock during the period beginning on the later of the five VWAP trading days prior to the effective date of such fundamental change and the five VWAP trading days prior to the public announcement of such fundamental change) and (b) 100% of the Repayment Price plus accrued interest.
Holders of the Notes may convert their Notes into shares of the Company’s common stock at any time prior to the Maturity Date. The Notes have an initial conversion rate of 475.1722 shares of the Company’s common stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $2.10 per share of the Company’s common stock). The initial conversion price will adjust to 110% of the average of the three daily VWAPs of the Company’s common stock during the three trading day period ending on and including August 17, 2023, if such average is lower than the initial conversion price, with a corresponding adjustment to the conversion rate. The conversion rate will also be subject to customary anti-dilution adjustments and adjustments for certain corporate events. Subject to certain conditions, the Company can require conversion of the Notes if the closing price of the Company’s common stock exceeds 175% of the conversion price for at least 20 VWAP trading days in a 30 consecutive VWAP trading day period.
The Notes contain customary affirmative and negative covenants (including covenants that limit the Company’s ability to incur debt, make investments, transfer assets, engage in certain transactions with affiliates and merge with other companies, in each case, other than those permitted by the Notes) and events of default. Furthermore, the Company will be required to maintain a minimum of $30 million of unrestricted cash and cash equivalents and tomaintain minimum levels of quarterly revenue through the quarter ended June 30, 2026 specified in the Notes. If an event of default occurs, the holders of the Notes may declare the Notes due and payable for cash in an amount equal to the Event of Default Acceleration Amount (as defined in the Notes).
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef