Velo3D Inc

Previous wording

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Current wording

nalysis of Financial Condition and Results of Operations

Previous wording

•On November 28, 2023, we (i) made a $15.0 million cash payment, together with accrued and unpaid interest, to the holders of the Secured Convertible Notes to repay $12.5 million of aggregate principal amount thereof, (ii) exchanged the remaining Secured Convertible Notes for (A) $57.5 million aggregate principal amount of senior secured notes due 2026 (the “Secured Notes”) and (B) 10,000,000 shares of common stock, and (iii) made a cash payment of accrued and unpaid interest on the remaining Secured Convertible Notes that were exchanged;

Current wording

On November 28, 2023, we (i) made a $15.0 million cash payment, together with accrued and unpaid interest, to the holders of the Secured Convertible Notes to repay $12.5 million of aggregate principal amount thereof, (ii) exchanged the remaining Secured Convertible Notes for (A) $57.5 million aggregate principal amount of senior secured notes due 2026 (the “Secured Notes”) and (B) 285,715 shares of common stock, and (iii) made a cash payment of accrued and unpaid interest on the remaining Secured Convertible Notes that were exchanged;

Previous wording

•During December 2023, we offered and sold approximately 8,941,494 shares of our common stock for gross proceeds of approximately $5.0 million pursuant to our “at-the-market” offering sales agreement (the “ATM Sales Agreement”) with Needham & Company, LLC (“Needham”), as agent;

Current wording

During December 2023, we offered and sold approximately 255,472 shares of our common stock for gross proceeds of approximately $5.0 million pursuant to our “at-the-market” offering sales agreement (the “ATM Sales Agreement”) with Needham & Company, LLC (“Needham”), as agent;

Previous wording

•On December 29, 2023, we issued 36,000,000 shares of common stock and warrants to purchase 36,000,000 shares of common stock (the “RDO warrants”) for gross proceeds of $18.0 million in a registered direct offering (our “Registered Direct Offering”); and

Current wording

On December 29, 2023, we issued 1,028,572 shares of common stock and warrants to purchase 1,028,572 shares of common stock (the “RDO warrants”) for gross proceeds of $18.0 million in a registered direct offering (our “Registered Direct Offering”); and

Previous wording

On April 1, 2024, we made a cash payment of $5.5 million to redeem approximately $4.2 million of aggregate principal amount of the Secured Notes, together with accrued and unpaid interest, we made a cash payment of $5.5 million on April 15, 2024 to repay approximately $4.6 million of principal of the Secured Notes, together with accrued and unpaid interest, we amended certain other terms of the Secured Notes, and we issued the holders of the Secured Notes warrants to purchase up to an aggregate of 21,949,079 shares of common stock. On April 10, 2024, we sold (such sale and issuance, the “Offering”) an aggregate of: (i) 34,285,715 shares of common stock and (ii) immediately exercisable warrants to purchase up to 34,285,715 shares of common stock at $0.35 per share. The offering price per share of common stock and accompanying warrant was $0.35 and resulted in gross proceeds to us of approximately $12 million. We intend to use the net proceeds from the Offering primarily for funding working capital and capital expenditures and other general corporate purposes, including repayment of our Secured Notes. See Note 17 Subsequent Events in the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information. As of May 9, 2024, the Company had approximately $11.1 million in accounts receivable and $5.7 million in cash and investments.

Current wording

On April 1, 2024, we made a cash payment of $5.0 million to redeem approximately $4.2 million of aggregate principal amount of the Secured Notes, together with accrued and unpaid interest, we made a cash payment of $5.5 million on April 15, 2024 to repay approximately $4.6 million of principal of the Secured Notes, together with accrued and unpaid interest, we amended certain other terms of the Secured Notes, and we issued the holders of the Secured Notes warrants to purchase up to an aggregate of 627,117 shares of common stock.

Previous wording

Notwithstanding the recent debt and equity transactions, as described in “—Liquidity and Capital Resources” and in Note 1 Description of Business and Basis of Presentation—Going Concern, Financial Condition and Liquidity and Capital Resources in the notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report, there continues to be a substantial doubt about our ability to continue as a going concern. We do not have sufficient liquidity to meet our operating needs and satisfy our debt obligations for at least the next 12 months. We expect that we will need to engage in additional financings to fund our operations and satisfy our obligations in the near-term. Without such additional funding, we will not be able to continue operations and may be required to sell assets, liquidate and/or file for bankruptcy.

Current wording

Notwithstanding the recent debt and equity transactions, as described in “—Liquidity and Capital Resources” and in Note 1 Description of Business and Basis of Presentation—Going Concern, Financial Condition and Liquidity and Capital Resources in the notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report, there continues to be a substantial doubt about our ability to continue as a going concern. We do not have sufficient liquidity to meet our operating needs and satisfy our debt obligations for at least the next 12 months. As of June 30, 2024, the Company had approximately $3.2 million in cash and short-term investments and $8.3 million in accounts receivable. This amount is insufficient to satisfy the Company's short term obligations including accounts payable of $14.0 million and $24.6 million in Secured Notes as of June 30, 2024. The Company will need to consider and implement significant cost cutting measures, including further reductions in force. We need to engage in additional financings to fund our operations, continue to fund payroll for employees, and satisfy our obligations in the near-term. Without such additional funding, we will not be able to continue operations and may be required to sell assets, liquidate and/or file for bankruptcy.

Previous wording

Our operating results for the foreseeable future will continue to depend on sales to a small group of customers. For the three months ended March 31, 2024 and 2023, sales to the top three customers accounted for 49.9% and 44.9%, respectively, of our revenue. Of the top three customers for the three months ended March 31, 2024, one customer was different from the top three customers for the comparable period in 2023.

Current wording

Our operating results for the foreseeable future will continue to depend on sales to a small group of customers. For the three months ended June 30, 2024 and 2023, sales to the top three customers accounted for 66.4% and 47.0%, respectively, of our revenue. Of the top three customers for the three months ended June 30, 2024, one customer was different from the top three customers for the comparable period in 2023. For the six months ended June 30, 2024 and 2023, sales to the top three customers accounted for 53.7% and 33.0%, respectively. Of the top three customers for the three months ended June 30, 2024 all customers were different from the top three customers for the comparable period in 2023.

Previous wording

While our objective is to diversify our customer base, we could continue to be susceptible to risks associated with customer concentration.

Current wording

While our objective is to diversify our customer base, we continue to be susceptible to risks associated with customer concentration.

Previous wording

General economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism (including, for example, the ongoing military conflicts in Israel and in Ukraine and the economic sanctions related thereto), have added uncertainty in timing of customer orders and supply chain constraints. In 2022, supply chain challenges increased our material and shipping costs, resulted in shipping delays and impacted our gross margins. In 2023, we implemented a number of supply chain and manufacturing improvements in response and intend to continue to focus on driving further operational improvements during 2024 as well as our Strategic Realignment to reduce operating costs.

Current wording

General economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism (including, for example, the ongoing military conflicts in Israel and in Ukraine and the economic sanctions related thereto), have added uncertainty in timing of customer orders and supply chain constraints. In 2022, supply chain challenges increased our material and shipping costs, resulted in shipping delays and impacted our gross margins. In 2023, we implemented a number of supply chain and manufacturing improvements in response and intend to continue to focus on driving further operational improvements during the remainder of 2024 as well as our Strategic Realignment to reduce operating costs.

Previous wording

Our revenue is primarily derived from our AM fully integrated hardware and software solution based on our proprietary L-PBF technology. Sapphire, Sapphire 1MZ, Sapphire XC and Sapphire XC 1MZ metal AM printer using our L-PBF technology and Assure quality validation software (collectively referred to as the “3D Printer”). Contracts for 3D Printers also include post-sale customer support services (“Support Services”), except for our distributor partners, which are qualified to perform support services.

Current wording

Our revenue is primarily derived from our AM fully integrated hardware and software solution based on our proprietary L-PBF technology. Our products include Sapphire, Sapphire 1MZ, Sapphire XC and Sapphire XC 1MZ metal AM printer using our L-PBF technology and Assure quality validation software (collectively referred to as the “3D Printer”). Contracts for 3D Printers also include post-sale customer support services (“Support Services”), except for our distributor partners, which are qualified to perform support services.

Previous wording

3D Printer sale transactions -can be divided into two categories: structured fixed purchase price and sale and utilization (variable consideration) fee model. In the sale and utilization fee model, customers pay a partial amount upfront to acquire the system, which is less than the full purchase price. This amount is then complemented by an hourly usage fee for the duration of the system's life. The variable payments are recognized when there is an event that determines the amount of variable consideration to be paid. There was no revenue related to variable consideration during the three months ended March 31, 2024 and 2023.

Current wording

3D Printer sale transactions -can be divided into two categories: structured fixed purchase price and sale and utilization (variable consideration) fee model. In the sale and utilization fee model, customers pay a partial amount upfront to acquire the system, which is less than the full purchase price. This amount is then complemented by an hourly usage fee for the duration of the system's life. The variable payments are recognized when there is an event that determines the amount of variable consideration to be paid.

Previous wording

The initial sales of 3D Printers and Support Services are included in one contract and are invoiced together. Contract consideration is allocated between the two performance obligations based on relative fair value. This allocation involves judgement and is periodically updated as new relevant information becomes available.

Current wording

The initial sales of 3D Printers and Support Services are included in one contract and are invoiced together. Contract consideration is allocated between the two performance obligations based on relative fair value. This allocation involves judgment and is periodically updated as new relevant information becomes available.

Previous wording

Other revenue included under 3D Printer sales includes parts and consumables, such as filters, powder or build plates, that are sold to customers and recognized upon transfer of control to the customer at shipment. Other revenue was not material for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Other revenue included under 3D Printer sales includes parts and consumables, such as filters, powder or build plates, that are sold to customers and recognized upon transfer of control to the customer at shipment.

Previous wording

The Recurring Payment transactions, structured as operating leases, were 4.8% and 2.2% of revenue for the three months ended March 31, 2024 and 2023, respectively. Under this model, the customer typically pays a base rent and variable payments based on usage in excess of a defined threshold. Most of our leases have a 12-month term, though in certain cases the lease term is longer.

Current wording

Under this model, the customer typically pays a base rent and variable payments based on usage in excess of a defined threshold. Most of our leases have a 12-month term, though in certain cases the lease term is longer.

Previous wording

Gain (loss) on valuation of warrant liabilities relates to the changes in the fair value of warrant liabilities, including liabilities related to the public warrants and private placement warrants, which are subject to remeasurement at each balance sheet date.

Current wording

Gain (loss) on valuation of warrant liabilities relates to the changes in the fair value of warrant liabilities which are subject to remeasurement at each balance sheet date.

Previous wording

Gain (loss) on valuation of contingent earnout liabilities relates to the changes in fair value of the contingent earnout liabilities in connection with the earnout shares, which are subject to remeasurement at each balance sheet date. See Note 10, Equity Instruments—Contingent Earnout Liabilities, in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

Gain (loss) on valuation of contingent earnout liabilities relates to the changes in fair value of the contingent earnout liabilities in connection with the earnout shares, which are subject to remeasurement at each balance sheet date.

Previous wording

Other income (expense), net includes interest earned on our bank sweep account, gains and losses on disposals of fixed assets and other miscellaneous income/expenses.

Current wording

Other income (expense), net includes interest earned on our bank sweep account, gains and losses on disposals of fixed assets, transaction costs related to the BEPO Offering and other miscellaneous income/expenses.

Previous wording

3D Printer sales were $7.7 million and $24.4 million for the three months ended March 31, 2024 and 2023, respectively, a decrease of $16.8 million. The decrease in revenue was primarily attributed to a fewer number of systems sold, mix of lower production volumes and discounted system pricing offset by our change in product mix to include more lower priced systems, resulting in a decrease in the average selling price. The 3D Printer sales also included parts and consumables revenue.

Current wording

3D Printer sales were $8.7 million and $23.2 million for the three months ended June 30, 2024 and 2023, respectively, a decrease of $14.5 million. The decrease in revenue was primarily attributed to a fewer number of systems sold, offset by a change in product mix to include more higher priced systems. The 3D Printer sales also included parts and consumables revenue.

Previous wording

Cost of 3D Printers was $9.4 million and $22.2 million for the three months ended March 31, 2024 and 2023, respectively. The decrease of $12.8 million was due to a decrease in number of systems sold for the three months ended March 31, 2024, compared to 2023 and due to a change in our product mix towards more Sapphire XC systems, which have a higher total per system cost compared to the Sapphire, for the three months ended March 31, 2024 compared to 2023.

Current wording

Cost of 3D Printers was $10.7 million and $20.1 million for the three months ended June 30, 2024 and 2023, respectively. The decrease of $9.3 million was due to a decrease in number of systems sold for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Previous wording

Cost of Recurring Payment was $0.3 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively. This decrease of $0.1 million was due to a decrease in depreciation of the equipment on lease and allocable Cost of Support Services as a result of fewer 3D Printers in service in March 31, 2024, compared to March 31, 2023.

Current wording

Cost of Recurring Payment was $0.2 million and $0.3 million for the three months ended June 30, 2024 and 2023, respectively. This decrease of $0.1 million was primarily due to a decrease in depreciation of the equipment on lease and allocable Cost of Support Services as a result of fewer 3D Printers in service in the three months ended June 30, 2024, compared to the three months June 30, 2023.

Previous wording

In addition, field service engineering support cost has increased specifically with the ramp of Sapphire XC systems and introduction of the Sapphire 1MZ and Sapphire XC 1MZ systems in the field. We expect this to decrease on a per unit basis as the Sapphire XC, Sapphire 1MZ and Sapphire XC 1MZ system performance improves. We also expect our Cost of Support Services will increase with the delivery of more 3D Printer systems to customers.

Current wording

In addition, field service engineering support cost has increased specifically with regard to increasing sales of Sapphire XC systems and introduction of the Sapphire 1MZ and Sapphire XC 1MZ systems in the field. We expect this to decrease on a per unit basis as the Sapphire XC, Sapphire 1MZ and Sapphire XC 1MZ system performance improves. We also expect our Cost of Support Services will increase with the delivery of more 3D Printer systems to customers.

Previous wording

Total gross profit (loss) was $(2.8) million and $2.5 million for the three months ended March 31, 2024 and 2023, respectively. As a percentage of revenue, the gross margin was (28.8)% and 9.5% for the three months ended March 31, 2024 and 2023, respectively. The lower gross profit for the three months ended March 31, 2024 was primarily attributable to the change in the mix of Sapphire and Sapphire XC system sales, the impact of launch customer pricing for Sapphire XC, the higher than expected costs associated with the production of the Sapphire XC, Sapphire 1MZ and Sapphire XC 1MZ systems, and higher material, labor and overhead costs, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Current wording

Total gross profit (loss) was $(2.9) million and $2.5 million for the three months ended June 30, 2024 and 2023, respectively. As a percentage of revenue, the gross margin was (28.0)% and 10.1% for the three months ended June 30, 2024 and 2023, respectively. The decrease in gross profit for the three months ended June 30, 2024 was primarily attributable to the outsized impact of fixed costs on lower volume of 3D printer sales, to the change in the mix of Sapphire and Sapphire XC system sales, the higher than expected costs associated with the production of the Sapphire XC, Sapphire 1MZ and Sapphire XC 1MZ systems, and higher material, labor and overhead costs, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

Previous wording

Research and development expenses were $5.0 million and $10.4 million for the three months ended March 31, 2024 and 2023, respectively, a decrease of $5.4 million. The decrease in research and development expenses in 2024 was driven by a $1.4 million decrease in purchased materials, a $2.4 million decrease in headcount, salaries and employee-related expenses, a decrease of $0.3 million in miscellaneous expenses, and a decrease of $1.4 million in stock-based compensation .

Current wording

Research and development expenses were $4.5 million and $12.2 million for the three months ended June 30, 2024 and 2023, respectively, a decrease of $7.7 million. The decrease in research and development expenses was driven by a $3.4 million decrease in purchased materials, a $2.3 million decrease in headcount, salaries and employee-related expenses, a decrease of $0.3 million in miscellaneous expenses, and a decrease of $1.7 million in stock-based compensation .

Previous wording

We expect research and development costs to continue to decrease in 2024 due to the maturation of our Sapphire family of systems and reduction in research and development projects due to our Strategic Realignment and to increase in the long term as we continue to invest in enhancing and advancing our portfolio of AM solutions.

Current wording

We expect research and development costs to continue to decrease in the remainder of 2024 due to the maturation of our Sapphire family of systems and reduction in research and development projects due to our Strategic Realignment and to increase in the long term as we continue to invest in enhancing and advancing our portfolio of AM solutions.

Previous wording

Selling and marketing expenses were $4.8 million and $6.2 million for the three months ended March 31, 2024 and 2023, respectively, a decrease of $1.4 million. The decrease was attributable to a decrease of $0.5 million in stock-based compensation, an $1.0 million decrease in European marketing costs, and a $0.6 million decrease in general marketing initiatives, offset by a $0.7 million increase in headcount, salaries and employee-related expenses.

Current wording

Selling and marketing expenses were $4.3 million and $6.1 million for the three months ended June 30, 2024 and 2023, respectively, a decrease of $1.8 million. The decrease was attributable to a decrease of $0.7 million in stock-based compensation, an $1.1 million decrease in European marketing costs, and a $0.6 million decrease in general marketing initiatives, offset by a $0.6 million increase in headcount, salaries and employee-related expenses.

Previous wording

We expect selling and marketing expenses to continue to decrease during 2024 as we continue to implement our realignment strategy. During 2024, we intend to continue our focus on certain markets that show strong attendance at additive manufacturing conferences to build product awareness.

Current wording

We expect selling and marketing expenses to continue to decrease during the remainder of 2024 as we continue to implement our realignment strategy. During the remainder of 2024, we intend to continue our focus on certain markets that show strong attendance at additive manufacturing conferences to build product awareness.

Previous wording

General and administrative expenses were $8.8 million and $10.2 million for the three months ended March 31, 2024 and 2023, respectively, a decrease of $1.4 million. The decrease was attributable to a $0.8 million decrease in facilities expenses, a $0.9 million decrease in headcount, salaries and employee-related expenses, offset by a $0.8 million increase in public company-related expenses in advisory, legal and accounting fees and insurance, and a $0.1 million increase in stock-based compensation.

Current wording

General and administrative expenses were $8.8 million and $9.9 million for the three months ended June 30, 2024 and 2023, respectively, a decrease of $1.1 million. The decrease was attributable to a $0.2 million decrease in facilities expenses, and a $0.9 million decrease in headcount, salaries and employee-related expenses, and a $0.2 million increase in public company-related expenses in advisory, legal and accounting fees and insurance, offset by a $0.2 million increase in stock-based compensation.

Previous wording

The change in fair value of warrants resulted in a loss of $2.6 million and $2.6 million for the three months ended March 31, 2024 and 2023, respectively, and was related to the non-cash fair value change of the warrant liabilities driven by the change in our stock price.

Current wording

The change in fair value of warrants resulted in a gain of $25.3 million and $0.8 million for the three months ended June 30, 2024 and 2023, respectively, and was related to the non-cash fair value change of the warrant liabilities driven by the relative change in our stock price.

Previous wording

Interest expense was $3.9 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Other expense and income, net was $(1.3) million and $0.2 million for the three months ended June 30, 2024 and 2023, respectively. The increase in other expense was due to transaction costs related to the BEPO Offering.

Previous wording

We will continue to review our conclusions about the appropriate amount of the valuation allowance on a quarterly basis. If we were to generate profits in 2024 and beyond, the U.S. valuation allowance position could be reversed in the foreseeable future. We expect a benefit to be recorded in the period the valuation allowance reversal is recorded and a higher effective tax rate in periods following the valuation allowance reversal.

Current wording

We will continue to review our conclusions about the appropriate amount of the valuation allowance on a quarterly basis. If we were to generate profits in the remainder of 2024 and beyond, the U.S. valuation allowance position could be reversed in the foreseeable future. We expect a benefit to be recorded in the period the valuation allowance reversal is recorded and a higher effective tax rate in periods following the valuation allowance reversal.

Previous wording

Recurring Payment, structured as an operating lease, was $0.5 million and $0.6 million for the three months ended March 31, 2024 and 2023, respectively. The decrease was primarily attributable to a decrease in the number of 3D Printer systems in service generating Recurring Payment revenue as of March 31, 2024, compared to the number of 3D Printer systems in service as of March 31, 2023.

Current wording

Recurring Payment, structured as an operating lease, was $0.8 million and $0.6 million for the six months ended June 30, 2024 and 2023, respectively. The increase was primarily attributable to a revenue reduction related to increased bad debt expense in the six months ended June 30, 2023.

Previous wording

As discussed above, due to the impact of customer order delays in the fourth quarter of 2023 and our bookings to date, we expect additional contraction of revenue growth in the near term, as we focus on the implementation of our operational realignment initiatives and go-to-market and service strategies. In addition, we believe customers may be hesitant to do business with us because of the uncertainty regarding our financial situation as a result of the Secured Notes. In the medium term, we expect the demand for the Sapphire family of systems, primarily the Sapphire XC to drive future revenue growth. We also expect our Recurring Payment and Support Service revenue to increase as the number of systems we have in the field increases. As of March 31, 2024, our backlog for firm orders was $22 million for 3D Printers compared to $13 million as of December 31, 2023. We expect our new sales strategy, especially in the defense and aerospace industries, will yield positive results for the rest of the year 2024.

Current wording

As discussed above, due to the impact of customer order delays and our bookings to date, we expect additional contraction of revenue growth in the near term, as we focus on the implementation of our operational realignment initiatives and go-to-market and service strategies. In addition, we believe customers may be hesitant to do business with us because of the uncertainty regarding our financial situation as a result of the Secured Notes. In the medium term, we expect the demand for the Sapphire family of systems, primarily the Sapphire XC to drive future revenue growth. We also expect our Recurring Payment and Support Service revenue to increase as the number of systems we have in the field increases. As of June 30, 2024, our backlog for firm orders was $17 million for 3D Printers compared to $13 million as of December 31, 2023. We expect our new sales strategy, especially in the defense and aerospace industries, will improve results in the second half of 2024.

Previous wording

Cost of Support Services was $2.9 million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively. Cost of Support Services increase by $1.4 million, was primarily attributable to the costs for preventative maintenance, costs incurred to enhance system reliability performance, and field service engineering labor costs due to more 3D Printers in service in March 31, 2024, compared to March 31, 2023.

Current wording

Cost of Support Services was $5.2 million and $3.8 million for the six months ended June 30, 2024 and 2023, respectively. The increase of $1.4 million, was primarily attributable to the costs for preventative maintenance, costs incurred to enhance system reliability performance, and field service engineering labor costs due to more 3D Printers in service in the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Previous wording

We expect general and administrative expenses to decrease as a result of savings from our reduction in force and consolidation of our facilities in late 2023. We continue to focus on our company-wide initiatives to reduce operating costs for 2024 as we continue to implement our Strategic Realignment by reducing our general and administrative expenses through reducing our reliance on outside consultants, managing facility costs and negotiating with vendors for improved pricing.

Current wording

We expect general and administrative expenses to decrease as a result of savings from our reduction in force and consolidation of our facilities in late 2023. We continue to focus on our company-wide initiatives to reduce operating costs for the remainder of 2024 as we continue to implement our Strategic Realignment by reducing our general and administrative expenses through reducing our reliance on outside consultants, managing facility costs and negotiating with vendors for improved pricing.

Previous wording

The change in fair value of the contingent earnout liability was a loss of $0.4 million and $9.7 million for the three months ended March 31, 2024 and 2023, respectively, and was related to the non-cash fair value change of the contingent earnout liabilities driven by the change in our stock price.

Current wording

The change in fair value of the contingent earnout liability was a gain of $1.4 million and a loss of $7.8 million for the six months ended June 30, 2024 and 2023, respectively, and was related to the non-cash fair value change of the contingent earnout liabilities driven by the relative change in our stock price.

Previous wording

Even with the April 2024 offering, we require additional funding to continue operations and satisfy our obligations under our Secured Notes. Without such additional funding, we will not be able to continue operations and may be required to sell assets, liquidate and/or file for bankruptcy.

Current wording

We require additional funding to continue operations and satisfy our obligations, including ensuring we have sufficient liquidity for payroll. Without such additional funding, we will not be able to continue operations and may be required to sell assets, liquidate and/or file for bankruptcy. The Company will need to consider and implement significant cost cutting measures, including further reductions in force in order to continue operations.

Previous wording

During the three months ended March 31, 2024, we experienced less revenue growth than expected due to the impact of delayed shipments and customer order delays, resulting in an overall decrease in system sales in the first quarter of 2024, however, our backlog has begun to recover with $22 million as of March 31, 2024 compared to $13 million as of December 31, 2023. As such, based our bookings to date, we expect revenue growth to continue in the second half of 2024 and thereafter. Although we expect revenue to continue to recover, we do not have sufficient working capital to meet our financial needs for the twelve-month period following the filing date of this unaudited condensed consolidated financial statements. As such, we believe that there is substantial doubt about our ability to continue as a going concern for the twelve-month period following the issuance of these condensed consolidated financial statements. See Note 1 Description of Business and Basis of Presentation—Going Concern, Financial Condition and Liquidity and Capital Resources in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

During the six months ended June 30, 2024, we experienced less revenue growth than expected due to the impact of delayed shipments and customer order delays, resulting in an overall decrease in system sales in the 2024, however, our backlog has begun to recover with $17 million as of June 30, 2024 compared to $13 million as of December 31, 2023. As such, based our bookings to date, we expect revenue to be higher in the second half of 2024 compared to the first half of 2024. Although we expect revenue to continue to recover, we do not have sufficient working capital to meet our financial needs for the twelve-month period following the filing date of these unaudited condensed consolidated financial statements. As such, we believe that there is substantial doubt about our ability to continue as a going concern for the twelve-month period following the issuance of these condensed consolidated financial statements. See Note 1 Description of Business and Basis of Presentation—Going Concern, Financial Condition and Liquidity and Capital Resources in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Previous wording

As of March 31, 2024, we had raised net proceeds of $517.1 million, comprised of approximately $18 million from the Registered Direct Offering, which closed on December 28, 2023, approximately $66 million from the offering of $70.0 million aggregate principal amount of Notes (the “Initial Notes”), which closed on August 10, 2023, $22.8 million from the ATM Offering (described below), $278.3 million from the Merger and related private placement of shares of our common stock (the “PIPE Financing”), which closed on September 29, 2021, and $150.0 million from the issuance of redeemable convertible preferred stock (series A to series D), third-party financing and convertible notes. We have incurred net losses of $28.3 million and $36.3 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, we had $10.9 million and $31.1 million in cash, cash equivalents and short-term investments, respectively, and an accumulated deficit of $385.4 million and $357.0 million, respectively. Our business requires substantial amounts of cash for operating activities, including salaries and wages paid to our employees, component and sub-assembly purchases, general and administrative expenses, and others.

Current wording

As of June 30, 2024, we had raised net proceeds of $529.1 million, comprised of approximately $12.0 million from the BEPO Offering, which closed on April 12, 2024, $18.0 million from the Registered Direct Offering, which closed on December 28, 2023, approximately $66.0 million from the offering of $70.0 million aggregate principal amount of Notes (the “Initial Notes”), which closed on August 10, 2023, $22.8 million from the ATM offering (described below), $278.3 million from the Merger and related private placement of shares of our common stock (the “PIPE Financing”), which closed on September 29, 2021, and $150.0 million from the issuance of redeemable convertible preferred stock (series A to series D), third-party financing and convertible notes. We have incurred net losses of $28.5 million and $59.5 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, we had $3.2 million and $31.1 million in cash, cash equivalents and short-term investments, respectively, and an accumulated deficit of $385.5 million and $357.0 million, respectively. Our business requires substantial amounts of cash for operating activities, including salaries and wages paid to our employees, component and sub-assembly purchases, general and administrative expenses, and others.

Previous wording

Our purchase commitments per terms and conditions with suppliers and vendors are cancellable in whole or in part prior to shipment. Non-cancellable purchase commitments (purchase orders) of $21.5 million for parts and assemblies are due upon receipt and will primarily be delivered in the first half of 2024. If inventory is shipped, we will accrue a liability under accrued expenses. We have no other commitment and contingencies, except for the operating leases and Secured Notes. See Note 8, Leases, in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for further discussion.

Current wording

Our purchase commitments per terms and conditions with suppliers and vendors are cancellable in whole or in part prior to shipment. Non-cancellable purchase commitments (purchase orders) of $12.0 million for parts and assemblies are due upon receipt and will primarily be delivered throughout the remainder 2024. If inventory is shipped, we will accrue a liability under accrued expenses. We have no other commitments and contingencies, except for the operating leases and Secured Notes. See Note 8, Leases, in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for further discussion.

Previous wording

See Note 17, Subsequent Events for further information regarding the Second Note Amendment and the offering.

Current wording

On July 1, 2024, we entered into the Third Note Amendment with the holders of the Secured Notes, which deferred the July 1, 2024 partial redemption payment of $10.5 million over a period of ten equal monthly payments commencing August 1, 2024. Additionally, we issued the holders of the Secured Notes warrants to purchase up to an aggregate of 1,650,000 shares of common stock. See Note 17, Subsequent Events for further information regarding the Third Note Amendment.