Annual report pursuant to Section 13 and 15(d)

Equity Instruments

v3.24.1
Equity Instruments
 12 Months Ended
Dec. 31, 2023
Equity [Abstract]  
Equity Instruments Equity Instruments
Common stock
The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders but are not entitled to cumulative voting rights, are entitled to receive ratably such dividends as may be declared by the Company’s Board of Directors out of funds legally available therefor subject to preferences that may be applicable to any shares of redeemable convertible preferred stock currently outstanding or issued in the future, are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preference of any then outstanding redeemable convertible preferred stock in the event of the Company’s liquidation, dissolution, or winding up, have no preemptive rights and no right to convert their common stock into any other securities, and have no redemption or sinking fund provisions applicable to the common stock.
On November 28, 2023, the Company issued 10,000,000 shares of Common Stock in connection with the exchange of the Secured Convertible Notes for the Secured Notes. For more information, see Note 9, Long-Term Debt.
On December 29, 2023, the Company issued 36,000,000 shares of Common Stock and warrants to purchase 36,000,000 shares of Common Stock for gross proceeds of $18.0 million in a registered direct offering (the "Registered Direct Offering").
Common Stock Reserved for Future Issuance
Shares of common stock reserved for issuance on an “as if converted” basis were as follows:
December 31,
2023 2022
(share data)
Common stock warrants 50,945,000  13,145,000 
Shares available for future grant under 2021 Equity Incentive Plan 16,041,013  20,861,294 
Reserved for At-the-Market offering 2,825,941  — 
Reserved for employee stock purchase plan 7,371,214  5,495,601 
Total shares of common stock reserved
77,183,168  39,501,895 
In February 2023, the Company entered into a sales agreement (the "ATM Sales Agreement") with Needham & Company, LLC ("Needham"), as agent, pursuant to which the Company may offer and sell, from time to time through Needham, up to $40.0 million shares of its common stock pursuant to a shelf registration statement on Form S-3 (the "Shelf Registration Statement") and the related prospectus supplement and accompanying base prospectus, and in connection therewith, the Company reserved 20,000,000 shares of common stock for issuance under the ATM Sales Agreement. In March 2023, pursuant to the evergreen provisions of the Company’s 2021 Equity Incentive Plan (the “2021 EIP”), the Company registered an additional 9,378,068 shares of common stock for issuance under the 2021 EIP and 1,875,613 shares of common stock for issuance under the 2021 ESPP.
The shares available for future grant under the 2021 EIP are net of any un-exercised stock options (vested and unvested) and unvested restricted stock units (“RSUs”) outstanding that may convert to common stock in the future upon exercise or vesting as of December 31, 2023 and 2022.
Common Stock Warrant liabilities
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 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. The Private Placement Warrants are non-redeemable for cash so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public 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”). The 2022 Private Warrant is exercisable until July 24, 2034 and allow cashless exercise in whole or part.
On December 29, 2023, the Company issued warrants to purchase 36,000,000 shares of Common Stock at an exercise price of $0.57 per warrant share (the "RDO Warrants") in the Registered Direct Offering. Additionally, the Company issued warrants to purchase 1,800,000 shares of Common Stock at an exercise price of $0.62 per warrant share (the "Placement Agent Warrants" and, together with the Public Warrants, the Private Placement Warrants, the 2022 Private Warrant, and the RDO Warrants the “Common Stock Warrants”). 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. The reason of the warrants being classified as a liability is because of "Provision (ii) in the event of a Fundamental Transaction it is not an acceptable measure for the Company’s stock price in a fixed-for-fixed option pricing model." The warrant agreement governing the Public Warrants and Private Placement Warrants includes a provision, the application of which could result in a different settlement value for the Common Stock Warrants depending on their holder. The Private Placement Warrants are not considered to be “indexed to the Company’s own stock.” In addition, the warrant agreement includes a provision that provides that in the event of a tender or exchange offer accepted by holders of more than 50.0% of the outstanding shares of the common stock, all holders of the Public Warrants and the Private Placement Warrants would be entitled to receive cash for all of their Public Warrants and Private Placement Warrants. Specifically, in the event of a qualifying cash tender offer (which could be outside of the Company’s control), all Public Warrant and Private Placement Warrant holders would be entitled to cash, while only certain of the holders of the common stock may be entitled to cash. These provisions preclude us from classifying the Public Warrants and Private Placement Warrants in stockholders’ equity. The 2022 Private Warrant, the RDO Warrants, and the 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.
Warrants for common stock of 50,945,000 and 13,145,000 were exercisable 1-to-1 as of December 31, 2023 and 2022, respectively. The Private Placement Warrants, the 2022 Private Warrant, the RDO Warrants, the Placement Agent Warrants, and the Public Warrants on common stock (as defined below) are liability classified and recorded at fair value on the issue date with periodic remeasurement. Warrants for shares of common stock consisted of the following:
December 31, 2023
Issue Date Expiration Date Number of Warrants Exercise Price per warrant Fair Value on Issue Date per warrant
Fair Value on December 31, 2023
Private Placement Warrants - Common Stock 12/02/2020 09/29/2026 4,450,000  $11.50 $2.00 $ 127 
2022 Private Warrant - Common Stock 07/25/2022 07/24/2034 70,000  $2.56 $2.43 $ 23 
Public Warrants - Common Stock 12/02/2020 09/29/2026 8,625,000  $11.50 $3.30 $ 258 
RDO Warrants - Common Stock 12/29/2023 12/29/2028 36,000,000  $0.57 $0.30 $ 10,891 
Placement Agent Warrants - Common Stock
 12/29/2023 12/29/2028 1,800,000  $0.62 $0.30 $ 536 
50,945,000  $ 11,835 
December 31, 2022
Issue Date Expiration Date Number of Warrants Exercise Price per warrant Fair Value on Issue Date per warrant
Fair Value on December 31, 2022
Private Placement Warrants - Common Stock 12/02/2020 09/29/2026 4,450,000  $11.50 $2.00 $ 888 
2022 Private Warrant - Common Stock 07/25/2022 07/24/2034 70,000  $2.56 $2.43 $ 109 
Public Warrants - Common Stock 12/02/2020 09/29/2026 8,625,000  $11.50 $3.30 $ 1,748 
13,145,000  $ 2,745 
Private Placement Warrants - Common Stock
Concurrently with JAWS Spitfire’s IPO, 4,450,000 Private Placement Warrants were issued to the Sponsor at $2.00 per warrant. Each Private Placement Warrant is exercisable to purchase one share of common stock at a price of $11.50 per share. Subject to certain exceptions, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants. As of December 31, 2023, the number of Private Placement Warrants issued was 4,450,000.
2022 Private Warrant - Common Stock
In conjunction with the joinder and fourth loan modification agreement on July 25, 2022, the Company 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 is exercisable until July 24, 2034 and allows cashless exercise in whole or part.


RDO Warrants - Common Stock
In conjunction with the capital raise on December 29, 2023, the Company issued to multiple institutional investors, warrants to purchase up to 36,000,000 shares of the Company’s common stock at an exercise price of $0.57 per warrant share . The RDO Warrants are exercisable until December 29, 2028 and allows cashless exercise in whole or part.
Placement Agent Warrants - Common Stock
In conjunction with the capital raise on December 29, 2023, the Company issued to the placement agent, warrants to purchase up to 1,800,000 shares of the Company’s common stock at an exercise price of $0.62 per warrant share . The Placement Agent Warrants are exercisable until December 29, 2028 and allows cashless exercise in whole or part.
Public Warrants - Common Stock

In conjunction with the JAWS Spitfire IPO, 34,500,000 units were issued to public investors at $10.00 per unit. Each unit consisted of one JAWS Spitfire Class A ordinary share and one-fourth of one warrant . Each Public Warrant is exercisable to purchase shares of common stock at $11.50 per share. As of December 31, 2023, the number of Public Warrants issued was 8,625,000.
The Public Warrants may only be exercised for a whole number of shares. The Public Warrants became exercisable on December 7, 2021. The Public Warrants will expire 5 years after the completion of the Merger or earlier upon redemption or liquidation.
Common Stock Warrant Liabilities
The liability for warrants on common stock carried at fair value was as follows:
December 31,
2023 2022
(In thousands)
Beginning Balance $ 2,745  $ 21,705 
Issuance of common stock warrant in connection with financing 11,428  170 
Loss on fair value of warrants
 (2,338) (19,130)
Ending Balance $ 11,835  $ 2,745 
The liabilities associated with the Private Placement Warrants, 2022 Private Warrant, RDO Warrants, and Placement Agent Warrants were subject to remeasurement at each balance sheet date using the Level 3 fair value inputs and the Public Warrants were subject to remeasurement at each balance sheet date using the latest trading price of the warrants for the years ended December 31, 2023 and 2022.
Private Placement Warrant - Fair Value Assumption
The fair value assumptions used in the Monte Carlo simulation model for the recurring valuation of the private placement common stock warrant liability were as follows:
As of December 31, 2023
As of December 31, 2022
Current stock price $0.40 $1.79
Expected volatility 105.0% 68.0%
Risk-free interest rate 4.1% 4.1%
Dividend yield —% —%
Expected term (in years) 2.75 3.75
Expected volatility: The volatility is determined iteratively, such that the concluded value of the Public Warrant is equal to the traded price.
Risk-free interest rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities corresponding to the expected term of the common stock warrants.
Expected dividend yield: The expected dividend rate is zero as the Company currently has no history or expectation of declaring dividends on its common stock.
Expected term: The expected term represents the period that the warrants are expected to be outstanding and is determined using the simplified method, which deems the term to be the average of the time to vesting and the contractual life of the common stock warrants.
2022 Private Warrant, RDO Warrants, Placement Agent Warrants - Fair Value Assumptions
The fair value assumptions used in the Black-Scholes simulation model for the recurring valuation of the 2022 Private Warrant, the RDO Warrants, and the Placement Agent Warrants liabilities were as follows:
As of December 31, 2023 As of December 31, 2022
Current stock price $0.40 $1.79
Expected volatility 108.3% 86.9%
Risk-free interest rate 3.8% - 3.9% 3.9%
Dividend rate —% —%
Expected Term (years) 5 - 10.57 11.57
Expected volatility: The expected volatility was derived from the implied volatility of the Company’s publicly traded common stock as of December 31, 2023. As of December 31, 2022, the expected volatility was determined iteratively, such that a blended weighting of a 50% implied public warrant volatility and 50% Company common stock trading volatility weighting was used.
Risk-free interest rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities corresponding to the expected term of the common stock warrants.
Expected dividend yield: The expected dividend rate is zero as the Company currently has no history or expectation of declaring dividends on its common stock.
Expected term: The expected term represents the period that the warrant is expected to be outstanding and is determined using the simplified method, which deems the term to be the average of the time to vesting and the contractual life of the warrant.
Contingent Earnout Liabilities
The contingent earnout liability is for Earnout Shares for pre-closing Legacy Velo3D equity holders (as defined in the Business Combination Agreement as holders of Legacy Velo3D shares, Legacy Velo3D warrants, Legacy Velo3D convertible notes and Legacy Velo3D options immediately prior to the closing date) (“Eligible Legacy Velo3D Equityholders”). The Eligible Legacy Velo3D Equityholders will be entitled to Earnout Shares, pursuant to which they will receive (i) 5.0% of the total number of shares of Common Stock outstanding at the Closing if the shares of Common Stock trade at or above $12.50 for 20 or more trading days in any 30 trading-day period, and (ii) an additional 5.0% of the total number of shares of Common Stock outstanding at the Closing if the shares of Common Stock trade at or above $15.00 for 20 or more trading days in any 30 trading-day period (the “Triggering Events”). The earnout is subject to a five-year earnout period and early trigger upon certain change of control events.
During the time period between Closing and the five-year anniversary of the Closing Date, Eligible Legacy Velo3D Equityholders may receive up to 21,758,148 shares of additional Common Stock, which is based on two tranches or 10,879,074 per tranche as noted above. The Earnout Shares issuable to holders of employee stock options are accounted as stock-based compensation expense as they are subject to forfeiture based on the satisfaction of certain employment conditions. See Note 11, Equity Incentive Plans & Stock Based Compensation, for further discussion.
The estimated fair value of the contingent earnout liabilities at the Closing Date was $120.8 million based on a Monte Carlo simulation valuation model using a distribution of potential outcomes on a monthly basis over the Earnout Period using the most reliable information available. The change in fair value of contingent earnout liabilities are recognized in the consolidated statement of operations and comprehensive income (loss).
The rollforward for the contingent earnout liabilities was as follows:
December 31,
2023 2022
(In thousands)
Beginning Balance $ 17,414  $ 111,487 
Change in fair value of contingent earnout liabilities (15,958) (94,073)
Ending Balance $ 1,456  $ 17,414 
Assumptions used in the fair value of the contingent earnout liabilities are described below.

As of December 31, 2023
As of December 31, 2022
Current stock price $0.40 $1.79
Expected volatility 105.0% 89.9%
Risk-free interest rate 4.1% 4.1%
Dividend yield —% —%
Expected Term (years) 2.75 3.75
Expected volatility: As of December 31, 2023, the expected volatility was derived from the implied volatility of the Company’s publicly traded common stock. As of December 31, 2022, the expected volatility was determined iteratively, such that a blended weighting of a 50% implied public warrant volatility and 50% Company common stock trading volatility weighting was used.
Risk-free interest rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities corresponding to the expected term of the Earnout Shares.
Expected dividend yield: The expected dividend rate is zero as the Company currently has no history or expectation of declaring dividends on its common stock.
Expected term: The expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method, which deems the term to be the average of the time to vesting and the contractual life of the Earnout Shares.