Business context and reporting period
This is JAWS Spitfire Acquisition Corporation’s unaudited Form 10-Q for the quarter ended June 30, 2021, filed August 13, 2021. Although the request identifies Velo3D, the registrant in this filing is the SPAC JAWS Spitfire; it had not yet completed its proposed merger with Velo3D and was a shell company with no operating business.
The March 22, 2021 business combination agreement contemplated JAWS becoming a Delaware corporation named Velo3D, Inc., followed by a merger with Velo3D, Inc. The SPAC had until December 7, 2022 to complete a business combination.
Financial results and position
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 / June 30 balance |
|---|---|---|
| Revenue | No operating revenue | No operating revenue |
| General and administrative expenses | $3.19 million | $4.63 million |
| Net income (loss) | $(2.66) million | $13.42 million |
| Interest income from trust investments | $5,210 | $9,910 |
| Gain from decrease in warrant liabilities | $523,000 | $18.04 million |
| Operating cash flow | Not separately reported for the quarter | $(1.25) million |
| Cash outside trust | $145,200 | |
| Trust investments | $345.01 million | |
| Working capital | Deficit of $2.94 million | |
| Total liabilities | $40.64 million, including $25.10 million of warrant liabilities and $12.08 million of deferred underwriting fees |
The six-month net income was driven chiefly by the non-cash reduction in the estimated fair value of warrant liabilities, not operating activity. The company reported no long-term debt. No operating margins are meaningful because it had no operating revenue.
Changes, outlook and risks
- The filing does not present a prior-year comparable income statement period, so year-over-year operating comparisons are unavailable. Cash fell from $1.67 million at December 31, 2020 to $145,200 at June 30, 2021.
- Management said additional capital would be needed through loans or investments from the sponsor, officers or directors. Such financing was not committed; management warned that failure to obtain it could require curtailing operations or suspending the transaction search. The filing states these conditions raise substantial doubt about the company’s ability to continue as a going concern for one year and one day after issuance.
- Public shareholders could redeem shares in connection with a business combination. Approximately 29.99 million Class A shares, valued at $299.89 million, were classified as subject to possible redemption at June 30.
- The company revised prior financial statements after determining that public and private warrants should be recorded as derivative liabilities at fair value rather than equity. It reported a material weakness in disclosure controls related to the prior warrant accounting and described planned remediation. It also corrected March 31 equity balances. Management said the warrant restatement did not affect previously reported cash, total assets, revenue, total shareholders’ equity or cash flows.
- COVID-19 could adversely affect the company’s financial position, operations or target search, but the specific impact was not determinable. The filing reported no material changes to previously disclosed risk factors and no legal proceedings.
- The $12.08 million deferred underwriting fee is payable only if a business combination is completed. If no combination is completed by the deadline, public warrants may expire worthless and public shares are to be redeemed from the trust, subject to the filing’s terms.
Important facts for investors to verify
- Confirm the filing entity and transaction status: this is JAWS Spitfire’s SPAC filing, not Velo3D’s operating-company results.
- Review the merger agreement, closing conditions, redemption levels and any financing or dilution provisions; the proposed transaction was not yet completed as of June 30, 2021.
- Assess the cash shortfall outside the trust, the absence of committed working-capital financing and the going-concern warning.
- Examine the warrant-liability valuation, prior-period restatement and remediation of the disclosed material weakness.
- Distinguish the reported six-month accounting gain from cash generation: operating cash flow was negative and most of the gain reflected warrant remeasurement.