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 (noted below). 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. On May 17, 2021, the Company incurred $0.6 million of deferred financing costs related to its Term loan financing. As of September 30, 2021 and December 31, 2020, the remaining unamortized balance of deferred financing costs was $0.6 million and less than $0.1 million respectively, and was included in Debt — current portion on the balance sheets.
Term Loan — On December 17, 2020, the Company executed the second amended and restated loan and security agreement to extend the payment terms with a variable interest rate of Prime plus 0.25% and a term of two years. As of December 31, 2020, the outstanding term loan balance was $5.2 million. There were zero principal payments paid during the fiscal year 2020.
In May 2021, the Company executed the third amended and restated loan and security agreement and a mezzanine loan and security agreement with its primary lender and another financing institution for a total of $53.5 million of debt facilities. These were comprised of a $35.0 million term loan, a $10.0 million revolving credit line (see below) and an $8.5 million secured equipment loan facility (see below). Prior to May 2021, $0.9 million in principal payments were paid against the outstanding term loan balance under the second amended and restated loan and security agreement.
The term loan had a variable interest rate of the greater of 9.00% or Prime plus 5.75% and a term of thirty months. The loan included a deferral of principal payments for the first five months. The refinancing was accounted for as a debt modification under ASC Topic 470, Debt. The outstanding balance in May 2021 was $4.3 million and fully repaid using proceeds from the mezzanine loan and security agreement. The remaining deferred loan fees of $0.1 million were written off to interest expense.
In May 2021, the Company borrowed $15.0 million from the term loan facility, and an additional $5.0 million in July 2021. As of September 30, 2021, the outstanding term loan balance was $20.0 million, and the Company has $15.0 million of the Term Loan facility undrawn, the availability of which is subject to the Company achieving certain financial performance targets. There were no principal payments paid under the mezzanine loan and security agreement as of September 30, 2021. As of September 30, 2021, the deferred loans fees with the debt issuance was $0.6 million.
The Term Loan’s effective interest rate was 9.2% and 3.6% for the three months ended September 30, 2021 and 2020, respectively, and 4.3% and 3.9% for the nine months ended September 30, 2021 and 2020, respectively.
On October 29, 2021, the Company re-paid $20.7 million of its term loan, comprising a principal payment, interest and fees related to the loan.
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 (see further discussion above). In August 2021, the Company drew $3.0 million on the $10.0 million revolving credit facility, with a variable interest rate of the greater of 5.75% or Prime plus 2.50% and a term of ten months. The Company has $7.0 million of the revolving credit line undrawn as of September 30, 2021. The effective interest rate was 4.7% for the both the three and nine months ended September 30, 2021. The deferred loan fees were less than $0.1 million as of September 30, 2021.
Property and Equipment Loan — On July 2, 2018, the Company executed a loan facility for $2.0 million. On September 26, 2018, $2.0 million was drawn down with a variable interest rate of Prime plus 1.00% and a term of three years. This facility was refinanced on December 17, 2020 with a new loan facility for $0.9 million with a variable interest rate of Prime plus 1% and a term of three years. As of December 31, 2020, the outstanding property and equipment loan was $0.8 million.
In May 2021, the Company executed the third amended and restated loan and security agreement and a mezzanine loan and security agreement (see further discussion above). The outstanding balance in May 2021 was $0.6 million and fully repaid using proceeds from the mezzanine loan and security agreement. The deferred loan fees of less than $0.1 million were written off to interest expense. Prior to May 2021, principal payments of
$0.2 million were paid against the outstanding Property and Equipment Loan balance under the second amended and restated loan and security agreement.
The effective interest rate was 0.0% and 4.3% for the three months ended September 30, 2021 and 2020, respectively, and 5.9% and 4.8% for the nine months ended September 30, 2021 and 2020, respectively.
Equipment Loan — The equipment loan outstanding balance is comprised of two different equipment loan facilities.
Equipment Loan First Facility: On December 17, 2020, the Company executed the second amended and restated loan and security agreement which included an equipment loan facility for $8.5 million secured by the equipment leased to customers. As of December 31, 2020, the equipment loan outstanding balance was $0.8 million. The facility had a variable interest rate of the greater of Prime rate or 3.25%. The effective interest rate was 2.8% for the three months ended September 30, 2021 and 2.4% for the nine months ended September 30, 2021.
In May 2021, the Company executed the third amended and restated loan and security agreement and a mezzanine loan and security agreement (see further discussion above). There were no principal payments paid against the Equipment Loan from the proceeds from the mezzanine loan and security agreement.
During the nine months ended September 30, 2021, the Company executed seven additional advances on the first facility for $5.6 million secured by equipment leased to customers. All seven advances of the first facility are with a variable interest rate of the greater of Prime rate or 3.25%. For the nine months ended September 30, 2021, $0.8 million in principal payments were paid. As of September 30, 2021, the outstanding balance for the first facility was $5.6 million. The Company has $2.9 million of the secured equipment loan facility undrawn as of September 30, 2021. As of September 30, 2021, the deferred loans fees with the debt issuance was $0.2 million.
Equipment Loan Second Facility: The equipment loans on the second facility was entered in June 2020 with another third-party financing institution. The second facility was for $1.6 million with a fixed interest rate of 6.00%. All facilities had terms of three years. The effective interest rate was 6.5% and 8.0% for the three months ended September 30, 2021 and 2020, respectively, and 5.9% and 8.0% for the nine months ended September 30, 2021 and 2020, respectively.
There was $0.3 million in principal payments paid during the fiscal year 2020. As of December 31, 2020, the outstanding balance on the second facility was $1.3 million.
In August 2021, the Company paid in full the outstanding balance of $1.0 million on the second facility and sold the units to the lease customer when the customer exercised their purchase options. Prior to August 2021, principal payments of $0.3 million were paid against the outstanding balance on the second facility. As of September 30, 2021, there was no outstanding balance on the second facility. The deferred loan fees of less than $0.1 million were written off to interest expense with the repayment.
The future minimum aggregate payments for the above borrowings are as follows as of September 30, 2021:
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. There was no convertible notes payable as of September 30, 2021 and December 31, 2020.
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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