Velo3D, Inc. Form 8-K Summary
Report date: November 28, 2023; earliest event date November 27, 2023. This filing reports a proposed debt exchange, related financing amendments, and withdrawal of previously issued 2023 revenue and gross margin guidance. It does not provide a new income statement, balance sheet, or cash flow statement.
Business Context and Reporting Period
Velo3D develops and sells 3D metal-printing systems. The company reported continuing delays in customer orders and stated that operational realignment, changes to go-to-market and service strategies, and uncertainty surrounding its debt negotiations had affected bookings.
Key Financial and Capital Structure Matters
| Item | Reported terms |
|---|---|
| Prior notes | $70.0 million aggregate principal amount of senior secured convertible notes issued August 14, 2023. |
| Cash repayment | $15.0 million payment to repay $12.5 million of prior-note principal, plus accrued interest calculated at the default interest rate from October 1, 2023. |
| Debt exchange | Remaining prior notes to be exchanged for $57.5 million aggregate principal amount of new senior secured notes and 10.0 million common shares, plus accrued interest. |
| Exchange-note interest | 6.00% annually, payable quarterly in cash beginning January 1, 2024. |
| Maturity | August 1, 2026. |
| Scheduled redemptions | Beginning January 1, 2024, $8.75 million of principal is scheduled for redemption each quarter at a $10.5 million repayment price, plus accrued interest, unless the holder cancels the redemption. |
| Equity-financing redemptions | Subject to exceptions, holders may require use of up to 25% of gross proceeds from certain equity financings to redeem notes at the repayment price plus accrued interest. |
| Collateral | First-priority security interests in substantially all U.S. assets of Velo3D and Velo3D US, including intellectual property, subject to prior liens and exclusions. Additional security documents are generally due within 45 days after closing. |
| Liquidity covenant | Minimum unrestricted cash and cash equivalents of $35 million, plus monthly minimum Available Cash requirements under a rolling three-month test beginning with the period ending December 31, 2023. |
Material Changes Versus the Prior Comparable Position
- The company is replacing a portion of the August 2023 senior secured convertible notes with a smaller stated principal amount of new notes, 10.0 million common shares, and cash payments.
- The new notes impose scheduled quarterly redemptions at a premium, additional redemption rights tied to equity financings, extensive collateral requirements, and cash-burn and minimum-cash covenants.
- The company amended the purchase agreement to extend the period for investors to purchase up to $35 million of additional senior secured convertible notes to two years after the August 14, 2023 closing date.
- The amended form of additional notes removes the prior covenant requiring minimum quarterly revenue through June 30, 2026 and adds the Cash Burn Covenant.
- The company expects its officers and directors to enter voting agreements supporting stockholder approval of shares issuable under the exchange notes.
Guidance, Outlook, Risks, and Unusual Items
- Velo3D withdrew its previously provided fourth-quarter and full-year 2023 revenue and gross margin guidance. Investors should not rely on that guidance.
- Management stated that the proposed closing will not resolve substantial doubt about the company’s ability to continue as a going concern.
- The company expects to seek additional financing after the closing to fund near-term operations.
- Bookings may remain pressured by customer-order delays, operational transition efforts, and uncertainty regarding the company’s financial condition.
- The closing was expected on or about November 28, 2023, subject to customary conditions; the filing does not clearly confirm that the closing had occurred as of the filing date.
- Failure to satisfy the cash, Available Cash, payment, or other covenants could result in an event of default. Holders may accelerate the notes and, if an acceleration amount is not paid, may elect to receive some or all of the amount in common stock under the specified pricing formula.
- The Exchange Notes and Exchange Shares are expected to be issued to existing security holders in reliance on the Section 3(a)(9) exemption from Securities Act registration.
Important Facts for Investors to Verify
- Whether the exchange transaction and related supplemental indenture actually closed and the precise closing date.
- The company’s unrestricted cash, Available Cash, operating cash burn, and compliance with the $35 million minimum-cash and rolling cash-burn covenants.
- The final outstanding principal balance, accrued default-rate interest, and any additional financing required after closing.
- The timing and funding source for the $10.5 million quarterly repayment obligations beginning January 2024.
- The potential dilution from the 10.0 million Exchange Shares and shares issuable upon conversion or default-related settlement of the notes.
- Current bookings, backlog, customer-order delays, and updated revenue and gross-margin expectations, since prior 2023 guidance was withdrawn.
- The company’s going-concern disclosures and whether subsequent financing is obtained on acceptable terms.