Filed pursuant to Rule 424(b)(3)

Registration No. 333-260415

PROSPECTUS SUPPLEMENT NO. 1

(to Prospectus dated October 28, 2021)

Velo3D, Inc.

169,147,569 Shares of Common Stock

4,450,000 Warrants to Purchase Shares of Common Stock

13,075,000 Shares of Common Stock Underlying Warrants

____________________

This prospectus supplement supplements the prospectus dated October 28, 2021 (the “Prospectus”), which forms a part of our registration statement on Form S-1 (No. 333-260415). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our quarterly report on Form 10-Q for the period ended September 30, 2021, filed with the Securities and Exchange Commission on November 16, 2021 (the “Q3 2021 Quarterly Report”). Accordingly, we have attached the Q3 2021 Quarterly Report to this prospectus supplement.

The Prospectus and this prospectus supplement relate to the offer and sale from time to time by the selling securityholders named in the Prospectus (the “Selling Securityholders”) of (A) up to 169,147,569 shares of common stock, par value $0.00001 per share (“common stock”), consisting of (i) up to 15,500,000 shares of our common stock (the “PIPE shares”) issued in a private placement pursuant to subscription agreements each entered into on March 22, 2021 (the “PIPE Financing”); (ii) up to 8,625,000 shares of our common stock (the “Founder Shares”) issued in connection with the consummation of the Business Combination (as defined in the Prospectus), in exchange for our Class B ordinary shares originally issued in a private placement to Spitfire Sponsor LLC (the “Sponsor”); (iii) up to 140,572,569 shares of our common stock issued or issuable to certain former stockholders and equity award holders of Velo3D (the “Velo3D equity holders”) in connection with or as a result of the consummation of the Business Combination, consisting of (a) up to 123,058,137 shares of our common stock; (b) up to 1,902,945 shares of our common stock issuable upon the exercise of certain options; and (c) up to 15,611,487 shares of our common stock (the “Earn-Out Shares”) that certain Velo3D equity holders have the contingent right to receive upon the achievement of certain vesting conditions; and (iv) up to 4,450,000 shares of our common stock issuable upon the exercise of the private placement warrants (as defined below); and (B) up to 4,450,000 warrants (the “private placement warrants”) originally issued in a private placement to the Sponsor.

In addition, the Prospectus and this prospectus supplement relate to the offer and sale of: (i) up to 8,625,000 shares of our common stock that are issuable by us upon the exercise of 8,625,000 warrants (the “public warrants”) originally issued in our initial public offering (the “IPO”); and (ii) up to 4,450,000 shares of our common stock that are issuable by us upon the exercise of the private placement warrants.

Our common stock and public warrants are listed on the New York Stock Exchange (the “NYSE”) under the symbols “VLD” and “VLD WS”, respectively. On November 12, 2021, the last reported sales price of our common stock was $11.77 per share and the last reported sales price of our public warrants was $3.15 per warrant.

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

Investing in our securities involves risks. See the section entitled “Risk Factors” beginning on page 11 of the Prospectus to read about factors you should consider before buying our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is November 16, 2021

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________

FORM 10-Q

_____________________________

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:        001-39757       

______________________________

Velo3D, Inc.

______________________________

(Exact name of registrant as specified in its charter)

Delaware	98-1556965
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
511 Division Street, Campbell, CA	95008
(Address of Principal Executive Offices)	(Zip Code)

(408) 610-3915

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.00001 per share	VLD	New York Stock Exchange
Warrants to purchase one share of common stock, each at an exercise price of $11.50 per share	VLD WS	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.     Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes ☐     No ☒

As of November 12, 2021, the registrant had 183,163,826  shares of common stock, $0.0001 per share outstanding.

TABLE OF CONTENTS

		Page
Part I. Financial Information
Item 1.	Financial Statements	5
	Condensed Balance Sheets as of September 30, 2021 and December 31, 2020 (unaudited)	5
	Condensed Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	6
	Condensed Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three Months and Nine Months Ended September 30, 2021 and 2020 (unaudited)	7
	Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)	10
	Notes to Condensed Financial Statements (unaudited)	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63
Item 4.	Controls and Procedures	63
Part II. Other Information
Item 1.	Legal Proceedings	66
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	98
Item 3.	Defaults Upon Senior Securities	98
Item 4.	Mine Safety Disclosures	98
Item 5.	Other Information	98
Item 6.	Exhibits	99
Signatures		100

Explanatory Note – Certain Defined Terms

Unless otherwise stated in this Quarterly Report or the context otherwise requires, references to:

“Business Combination Agreement” means that certain Business Combination Agreement, dated as of March 22, 2021, by and among JAWS Spitfire, Merger Sub and Legacy Velo3D, as amended by Amendment #1 to Business Combination Agreement dated as of July 20, 2021.

“Common Stock” means the shares of common stock, par value $0.00001 per share, of the Company.

“Closing” means the closing of the Merger.

“Closing Date” means September 29, 2021.

“Domestication” means the domestication contemplated by the Business Combination Agreement, whereby JAWS Spitfire effected a deregistration and a transfer by way of continuation from the Cayman Islands to the State of Delaware, pursuant to which JAWS Spitfire’s jurisdiction of incorporation was changed from the Cayman Islands to the State of Delaware.

“Earnout Shares” means up to 21,758,148 shares of our common stock issuable pursuant to the Business Combination Agreement to certain Legacy Velo3D equity holders upon the achievement of certain vesting conditions.

“Founder Shares” means the 8,625,000 shares of our common stock issued to the Sponsor and the other Initial Stockholders in connection with the automatic conversion of the Class B ordinary shares in connection with the Closing.

“Initial Stockholders” means the Sponsor together with Andy Appelbaum, Mark Vallely and Serena J. Williams.

“IPO” means the Company’s initial public offering, consummated on December 7, 2020, of 34,500,000 units (including 4,500,000 units that were issued to the underwriters in connection with the exercise in full of their over-allotment option) at $10.00 per unit.

"JAWS Spitfire” refers to JAWS Spitfire Acquisition Corporation, a Cayman Islands exempted company, prior to the Closing.

“Legacy Velo3D” means Velo3D, Inc., a Delaware corporation (n/k/a Velo3D US, Inc.), prior to the Closing.

“Legacy Velo3D equity holder” means certain former stockholders and equity award holders of Legacy Velo3D.

“Merger” and “Reverse Recapitalization” mean the merger contemplated by the Business Combination Agreement, whereby Merger Sub merged with and into Legacy Velo3D, with Legacy Velo3D surviving the merger as a wholly-owned subsidiary of the Company on the Closing Date.

“Merger Sub” means Spitfire Merger Sub, Inc., a Delaware corporation.

“PIPE Financing” means the private placement pursuant to which the PIPE Investors collectively subscribed for 15,500,000 shares of our common stock at $10.00 per share, for an aggregate purchase price of $155,000,000, on the Closing.

“PIPE Investors” means certain institutional investors that invested in the PIPE Financing.

1

“private placement warrants” means the 4,450,000 warrants originally issued to the Sponsor in a private placement in connection with our IPO.

“public warrants” means the 8,625,000 warrants included in the units issued in our IPO.

“Sponsor” means Spitfire Sponsor LLC, a Delaware limited liability company.

“Velo3D” refer to Velo3D, Inc., a Delaware corporation (f/k/a JAWS Spitfire Acquisition Corporation, a Cayman Islands exempted company), and its consolidated subsidiary following the Closing.

In addition, unless otherwise indicated or the context otherwise requires, references in this Quarterly Report to the “Company,” “we,” “us,” “our,” and similar terms refer to Legacy Velo3D prior to the Merger and to Velo3D and its consolidated subsidiary after giving effect to the Merger.

2

PART I. FINANCIAL INFORMATION

Certain statements in this Quarterly Report may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future, including those relating to the Merger. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “can,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report may include, for example, statements about:

•our projected financial information, growth rate and market opportunity;

•the ability to maintain the listing of our common stock and the public warrants on the NYSE, and the potential liquidity and trading of such securities;

•the ability to recognize the anticipated benefits of the Merger, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably and retain its key employees;

•costs related to the Merger;

•changes in applicable laws or regulations;

•the inability to develop and maintain effective internal control over financial reporting;

•our ability to raise financing in the future;

•our success in retaining or recruiting, or changes required in, our officers, key employees or directors;

•the period over which we anticipate our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements;

•the potential for our business development efforts to maximize the potential value of our portfolio;

•regulatory developments in the United States and foreign countries;

•the impact of laws and regulations;

•our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•our financial performance;

•the effect of COVID-19 on the foregoing; and

•other factors detailed under the section entitled “Risk Factors”.

The forward-looking statements contained in this Quarterly Report are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking

3

statements. These risks and uncertainties include, but are not limited to, those factors described under the section entitled “Risk Factors”. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Some of these risks and uncertainties may in the future be amplified by the COVID-19 outbreak and there may be additional risks that we consider immaterial or which are unknown. It is not possible to predict or identify all such risks. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

4

Item 1. Financial Statements

Velo3D, Inc.
Condensed Balance Sheets
(Unaudited)

	September 30,		December 31,
	2021		2020
	(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents	$	296,826	$	15,517
Accounts receivable, net	6,558		1,232
Inventories	15,220		7,309
Contract assets	1,510		3,033
Prepaid expenses and other current assets	9,069		807
Total current assets	329,183		27,898
Property and equipment, net	5,001		1,006
Equipment on lease, net	7,748		2,855
Other assets	5,858		932
Total assets	$	347,790	$	32,691
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	33,343	$	1,226
Accrued expenses and other current liabilities	6,552		2,512
Debt – current portion	13,731		3,687
Contract liabilities	17,116		4,702
Total current liabilities	70,742		12,127
Long-term debt – less current portion	14,322		4,316
Contingent earnout liabilities (Note 16)	118,749		—
Warrant liabilities (Note 16)	20,136		181
Other noncurrent liabilities	1,673		184
Total liabilities	225,622		16,808
Commitments and contingencies (Note 19)
Redeemable convertible preferred stock, $0.00001 par value, 10,000,000 and 125,419,265 shares authorized as of September 30, 2021 and December 31, 2020, respectively; 0 and 117,734,383 shares issued as of September 30, 2021 and December 31, 2020, respectively, 0 and 117,734,383 shares outstanding as of September 30, 2021 and December 31, 2020; liquidation preference of $0 and $133,762 as of September 30, 2021 and December 31, 2020, respectively	—		123,704
Stockholders’ equity (deficit):
Common stock, $0.00001 par value – 500,000,000 and 216,000,000 shares authorized at September 30, 2021 and December 31, 2020, 183,163,826 and 16,003,558 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	2		1
Additional paid-in capital	337,605		14,954
Accumulated deficit	(215,439)		(122,776)
Total stockholders’ equity (deficit)	122,168		(107,821)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)	$	347,790	$	32,691

The accompanying notes are an integral part of these condensed financial statements.

5

Velo3D, Inc.
Condensed Statements of Operations and Comprehensive Loss
(Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(in thousands, except share and per share data)
Revenue
3D Printer	$	7,281	$	1,738	$	13,594	$	11,038
Recurring payment	596		146		1,231		146
Support services	834		389		2,204		1,049
Total Revenue	8,711		2,273		17,029		12,233
Cost of revenue
3D Printer	5,692		1,142		10,174		6,852
Recurring payment	418		102		862		102
Support services	1,127		541		2,725		1,286
Total cost of revenue	7,237		1,785		13,761		8,240
Gross profit	1,474		488		3,268		3,993
Operating expenses
Research and development	7,987		4,043		19,081		10,917
Selling and marketing	3,346		1,526		7,706		4,401
General and administrative	5,158		1,941		15,162		6,069
Total operating expenses	16,491		7,510		41,949		21,387
Loss from operations	(15,017)		(7,022)		(38,681)		(17,394)
Interest expense	(986)		(48)		(1,630)		(200)
Loss on the convertible note modification	(50,577)		—		(50,577)		—
Gain/(loss) on fair value of warrants	(1,892)		(2)		(3,633)		5
Gain on fair value of contingent earnout liabilities	2,014		—		2,014		—
Other income (expense), net	(120)		(35)		(156)		(2)
Loss before provision for income taxes	(66,578)		(7,107)		(92,663)		(17,591)
Provision for income taxes	—		—		—		—
Net loss and comprehensive loss	$	(66,578)	$	(7,107)	$	(92,663)	$	(17,591)
Net loss per share attributable to common stockholders, basic and diluted	$	(3.36)	$	(0.44)	$	(5.34)	$	(1.13)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	19,793,863		15,994,154		17,348,557		15,503,475

The accompanying notes are an integral part of these condensed financial statements.

6

Velo3D, Inc.
Condensed Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)

	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’Equity (Deficit)
(in thousands, except share data)	Shares	Amount		Shares	Amount
Balance as of June 30, 2020	103,201,832	$	118,374	15,972,659	$	1	$	14,234	$	(111,452)	$	(97,217)
Issuance of common stock upon exercise of stock options	—	—		30,900	—		14		—		14
Stock-based compensation	—	—		—	—		466		—		466
Net loss	—	—		—	—		—		(7,107)		(7,107)
Balance as of September 30, 2020	103,201,832	$	118,374	16,003,559	$	1	$	14,714	$	(118,559)	$	(103,844)
Balance as of June 30, 2021	117,734,383	$	123,704	16,168,582	$	1	$	16,446	$	(148,861)	$	(132,414)
Conversion of warrants into preferred stock, net settlement	126,802	899		—	—		—		—		—
Conversion of convertible notes into preferred stock	6,820,022	55,577		—	—		—		—		—
Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization	(124,681,207)	(180,180)		126,310,700	—		180,180		—		180,180
Conversion of warrants into common stock, net settlement	—	—		239,992	—		3,635		—		3,635
Issuance of contingent earnout liability upon the reverse recapitalization	—	—		—	—		(120,763)		—		(120,763)
Issuance of warrants upon the reverse recapitalization	—	—		—	—		(21,051)		—		(21,051)
Issuance of common stock upon the reverse recapitalization, net of issuance costs	—	—		40,409,132	1		278,270		—		278,271
Issuance of common stock upon exercise of stock options	—	—		35,420	—		30		—		30
Issuance of common stock warrants in connection with financing	—	—		—	—		182		—		182
Stock-based compensation	—	—		—	—		676		—		676
Net loss	—	—		—	—		—		(66,578)		$	(66,578)
Balance as of September 30, 2021	—	$	—	183,163,826	$	2	$	337,605	$	(215,439)	$	122,168

The accompanying notes are an integral part of these condensed financial statements.

7

Velo3D, Inc.
Condensed Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity Deficit
(Unaudited)

	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ (Deficit)
(in thousands, except share data)	Shares	Amount		Shares	Amount
Balance as of December 31, 2019	27,967,896	$	101,858	14,721,524	$	1	$	13,195	$	(114,019)	$	(100,823)
Issuance of Series D redeemable convertible preferred stock, net of issuance costs	75,660,962	28,278		—	—		—		—		—
Exchange of convertible notes and accrued interest for Series D redeemable convertible preferred stock	4,029,222	1,512		—	—		—		—		—
Extinguishment of redeemable convertible preferred stock	(4,456,248)	(13,274)		1,210,513	—		223		13,051		13,274
Issuance of common stock upon exercise of stock options	—	—		71,522	—		53		—		53
Stock-based compensation	—	—		—	—		1,243		—		1,243
Net loss	—	—		—	—		—		(17,591)		(17,591)
Balance as of September 30, 2020	103,201,832	$	118,374	16,003,559	$	1	$	14,714	$	(118,559)	$	(103,844)
Balance as of December 31, 2020	117,734,383	$	123,704	16,003,558	$	1	$	14,954	$	(122,776)	$	(107,821)
Conversion of warrants into preferred stock, net settlement	126,802	899		—	—		—		—		$	—
Conversion of convertible notes into preferred stock	6,820,022	55,577		—	—		—		—		$	—
Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization	(124,681,207)	(180,180)		126,310,700	—		180,180		—		$	180,180
Conversion of warrants into common stock, net settlement	—	—		239,992	—		3,635		—		$	3,635
Issuance of contingent earnout liability upon the reverse recapitalization	—	—		—	—		(120,763)		—		$	(120,763)
Issuance of warrants upon the reverse recapitalization	—	—		—	—		(21,051)		—		$	(21,051)
Issuance of common stock upon the reverse recapitalization, net of issuance costs	—	—		40,409,132	1		278,270		—		$	278,271
Issuance of common stock upon exercise of stock options	—	—		200,444	—		313		—		$	313

8

Issuance of common stock warrants in connection with financing	—	—		—	—		316		—		$	316
Stock-based compensation	—	—		—	—		1,751		—		$	1,751
Net loss	—	—		—	—		—		(92,663)		$	(92,663)
Balance as of September 30, 2021	—	$	—	183,163,826	$	2	$	337,605	$	(215,439)	$	122,168

The accompanying notes are an integral part of these condensed financial statements.

9

Velo3D, Inc.
Condensed Statements of Cash Flows
(Unaudited)

	Nine months ended September 30,
	2021		2020
	(In thousands)
Cash flows from operating activities
Net loss	$	(92,663)	$	(17,591)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation	1,276		851
Stock-based compensation	1,751		1,243
Loss on the convertible note modification	50,577		—
Gain/(loss) on fair value of warrants	3,633		(5)
Gain on fair value of contingent earnout liabilities	(2,014)		—
Changes in assets and liabilities
Accounts receivable	(5,326)		(790)
Inventories	(3,022)		(1,383)
Contract assets	1,523		(133)
Prepaid expenses and other assets	(4,174)		491
Accounts payable	(252)		(624)
Accrued expenses and other liabilities	3,400		(1,239)
Contract liabilities	12,414		(669)
Other noncurrent liabilities	1,611		(46)
Net cash used in operating activities	(31,266)		(19,895)
Cash flows from investing activities
Purchase of property and equipment	(1,534)		(225)
Production of equipment for lease to customers	(6,919)		(2,954)
Net cash used in investing activities	(8,453)		(3,179)
Cash flows from financing activities
Proceeds from issuance of Series D redeemable convertible preferred stock, net of issuance costs	—		28,278
Proceeds from Merger	143,183		—
Proceeds from PIPE financing	155,000		—
Proceeds from loan refinance	19,339		—
Repayment of term loan	(4,997)
Repayment of property and equipment loan	(833)		—
Proceeds from term loan revolver facility	3,000		—
Proceeds from equipment loans	5,419		1,550
Repayment of equipment loans	(1,878)		(370)
Proceeds from convertible notes	5,000		5,415
Issuance of common stock upon exercise of stock options	313		53
Net cash provided by financing activities	323,546		34,926
Net change in cash and cash equivalents	283,827		11,852
Cash and cash equivalents and restricted cash at beginning of period	15,517		9,815
Cash and cash equivalents and restricted cash at end of period	$	299,344	$	21,667
Supplemental disclosure of cash flow information
Cash paid for interest	$	857	$	187
Supplemental disclosure of non-cash information
Extinguishment of redeemable convertible preferred stock	$	—	$	13,274
Conversion of warrants into redeemable convertible preferred stock, net settlement	$	899	$	—

10

Conversion of convertible notes to Series D redeemable convertible preferred stock	$	5,000	$	1,512
Conversion of redeemable convertible preferred stock into common stock	$	180,180	$	—
Conversion of warrants into common stock, net settlement	$	3,635	$	—
Reclassification of warrants liability upon the reverse recapitalization	$	21,051	$	—
Reclassification of contingent earnout liability upon the reverse recapitalization	$	120,763	$	—
Issuance of common stock warrants in connection with financing	$	316	$	—
Unpaid liabilities related to property and equipment	$	3,231	$	103
Unpaid merger transactional costs	$	19,913	$	—

The accompanying notes are an integral part of these condensed financial statements.

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Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

1. Description of Business and Basis of Presentation

Velo3D, Inc., a Delaware corporation (“Velo3D” ), formerly known as JAWS Spitfire Acquisition Corporation (“JAWS Spitfire”), produces metal additive three dimensional printers (“3D Printers”) which enable the production of components for space rockets, jet engines, fuel delivery systems and other high value metal parts, which it sells or leases to customers for use in their businesses. The Company also provides support services (“Support Services”) for an incremental fee. Velo3D’s subsidiary, Velo3D US, Inc., formerly known as Velo3D, Inc. (“Legacy Velo3D”), was founded in June 2014 as a Delaware corporation headquartered in Campbell, California. The first commercially developed 3D Printer was delivered in the fourth quarter of 2018.

Unless otherwise stated herein or unless the context otherwise requires, references in these notes to the “Company” refer to (i) Legacy Velo3D prior to the consummation of the Merger (as defined below); and (ii) Velo3D and its consolidated subsidiary following the consummation of the Merger.

On September 29, 2021 (the “Closing Date” or the “Reverse Recapitalization Date”), JAWS Spitfire completed the previously announced merger with Legacy Velo3D, with Legacy Velo3D surviving as a wholly-owned subsidiary of JAWS Spitfire (the “Merger” or the “Reverse Recapitalization”). In connection with the Merger, JAWS Spitfire was renamed “Velo3D, Inc.”, and Legacy Velo3D was renamed “Velo3D US, Inc.”

Please refer to Note 3, Reverse Recapitalization, for further details of the Merger.

Accordingly, all historical financial information presented in the unaudited condensed financial statements of Velo3D represents the accounts of Legacy Velo3D. The shares and Net loss per share attributable to common stockholders, basic and diluted, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio (the “Exchange Ratio”) established in the Merger (0.8149 shares of Velo3D common stock for 1 share of Legacy Velo3D common stock, par value $0.00001 (the “Common Stock”). All fractional shares were rounded.

Basis of Presentation

The condensed financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. Accordingly, these condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020 and the related notes included in our prospectus filed pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended, with the SEC on October 28, 2021, which provides a more complete discussion of the Company’s accounting policies and certain other information. The condensed balance sheet as of December 31, 2020 has been derived from the audited financial statements of the Company. These condensed financial statements have been prepared on the same basis as its annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021, or for any other interim period or for any other future year.

Financial Condition and Liquidity and Capital Resources

The accompanying financial statements are unaudited and have been prepared on the basis of continuity of operations, the realization of assets and satisfaction of liabilities in the ordinary course of business. On September 29, 2021, the Company consummated the Merger, which resulted in the Company receiving approximately $278.3 million in total net proceeds, including $155.0 million from the PIPE Financing (as defined in Note 3,

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Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

Reverse Recapitalization). Since inception, the Company has not achieved profitable operations or generated positive cash flows from operations. The Company’s operating plan may change as a result of many factors currently unknown and there can be no assurance that the current operating plan will be achieved in the time frame anticipated by the Company, and it may need to seek additional funds sooner than planned. If adequate funds are not available to the Company on a timely basis, it may be required to delay, limit, reduce, or terminate certain commercial efforts, or pursue merger or acquisition strategies, all of which could adversely affect the holdings or the rights of the Company’s stockholders. The Company has incurred net operating losses and negative cash flows from operations in every year since inception and expects this to continue for the foreseeable future. As of September 30, 2021, the Company had an accumulated deficit of $215.4 million.

As of November 16, 2021, the issuance date of the accompanying financial statements, the Company believes that the cash and cash equivalents on hand and cash the Company obtained from the Merger and the PIPE Financing, together with cash the Company expects to generate from future operations, will be sufficient to meet the Company’s working capital and capital expenditure requirements for a period of at least twelve months.

2. Summary of Significant Accounting Policies

Other than policies noted below, there have been no significant changes to the significant accounting policies disclosed in Note 2 of the audited condensed financial statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020 and 2019.

Use of Estimates

The preparation of the unaudited accompanying financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results and outcomes could differ significantly from the Company’s estimates, judgments, and assumptions. Significant estimates include determining useful lives of long-lived assets, the determination of the incremental borrowing rate used for operating lease liabilities, standalone selling price for performance obligations in contracts with customers, the valuation of redeemable convertible preferred stock warrants and common stock warrants, the fair value of common stock and other assumptions used to measure stock-based compensation, the fair value of contingent earnout liabilities, inventory reserves, and the valuation of deferred income tax assets and uncertain tax positions.

These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. As future events and their effects cannot be determined with precision, actual results could materially differ from these estimates and assumptions.

Concentration of Credit Risk and Other Risks and Uncertainties

The Company’s financial instruments that potentially expose the Company to concentration of credit risk consist mainly of cash and cash equivalents and accounts receivable, net. The Company maintains its cash and cash equivalents in domestic cash accounts with large, creditworthy financial institutions. The Company has not experienced any losses on its deposits of cash and cash equivalents through deposits with federally insured commercial banks and at times cash balances may be in excess of federal insurance limits.

13

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

The customer concentration for balances greater than 10% of revenues and 10% of accounts receivables, net, respectively, are presented below:

	Total Revenue				Total Revenue				Accounts Receivable, Net
	Three months ended September 30,				Nine months ended September 30,				September 30		December 31
	2021		2020		2021		2020		2021		2020
	(as a percentage)				(as a percentage)				(as a percentage)
Customer 1	53.9	%	10.0	%	31.4	%	<10%		<10%		<10%
Customer 2	17.2	%	—	%	<10%		—	%	<10%		—	%
Customer 3	15.1	%	—	%	16.6	%	—	%	<10%		—	%
Customer 4	<10%		17.7	%	11.5	%	58.5	%	55	%	85.6	%
Customer 5	<10%		<10%		10.8	%	13.3	%	<10%		—	%
Customer 6	<10%		<10%		<10%		13.1	%	—	%	<10%
Customer 7	<10%		<10%		<10%		10.8	%	<10%		<10%
Customer 8	<10%		<10%		<10%		<10%		17.4	%	—	%

The Company relies on four key suppliers for products and services. While alternative providers could be identified, the Company is subject to supply and pricing risks.

Impact of COVID-19

The Company continues to operate its business through the COVID-19 pandemic and has taken additional precautions to ensure the safety of its employees, customers, and vendors with which it operates. The impact of COVID-19 on the Company’s operating results has added uncertainty in timing of customer orders creating longer lead times for sales and marketing.

Fair Value Measurements

The Company has applied the framework for measuring fair value which requires a fair value hierarchy to be applied to all fair value measurements. Assets and liabilities measured at fair value are classified into one of three levels in the fair value hierarchy based on the inputs used to measure fair value as follows:

Level 1 — Quoted prices observed in active markets for identical assets or liabilities;

Level 2 — Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly; and

Level 3 — Significant unobservable market inputs for the asset or liability.

As of September 30, 2021 and December 31, 2020, warrants for redeemable convertible preferred stock, common stock warrants and contingent earnout liabilities were the only liabilities measured at fair value on a recurring basis.

The carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. The long-term debt (including convertible notes) with variable interest at market rates is carried at amortized cost, which approximates its fair value and was classified as Level 2. Please refer to Note 14, Long-Term Debt and Note 15, Convertible Notes Payable, for further information. Warrants for redeemable convertible preferred stock and convertible notes payable were classified as Level 3.

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Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

Cash and Cash Equivalents and Restricted Cash

All highly liquid investments with an original maturity of three months or less, when purchased, are classified as cash equivalents. Cash equivalents may be invested in money market funds and are carried at cost, which approximates their fair value.

In June 2021, in conjunction with the new 80,000+ square foot facility to begin production of the Company’s Sapphire XC in late 2021, the Company issued a one-year letter of credit for $1.2 million to the landlord to secure the agreement. The Company has restricted cash to secure the letter of credit and the agreement will allow for reductions to the letter of credit limit based on the Company’s revenue achievements.

In September 2021, in connection with a 3D Printer system delivery, a customer requested a bank guarantee to be issued for $1.3 million as a condition of delivery acceptance to protect the customers prepayment of $1.3 million (included in Contract Liabilities). The bank guarantee expires upon the return of the bank guarantee document to the issuance bank or on October 10, 2021. Subsequent to September 30, 2021, the restricted cash in other assets was returned to operating cash and cash equivalents.

	September 30, 2021		December 31, 2020
	(In thousands)
Cash and cash equivalents	$	296,826	$	15,517
Restricted cash (Other assets)	2,518		—
Total cash and cash equivalents, and restricted cash	$	299,344	$	15,517

Information by Segment and Geography

The Company manages its operations and allocates resources as a single operating segment. Further, the Company manages, monitors, and reports its financial results as a single reportable segment. The Company’s chief operating decision-maker (“CODM”) is its Chief Executive Officer, who reviews financial information presented on an entity-wide basis for purposes of making operating decisions, assessing financial performance, and allocating resources. The Company has no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels of components below the entity- wide level.

The Company currently sells its products in the United States and other locations. No long-lived assets are located outside the U.S. Revenue by geographic area based on the billing address of the customers were as follows:

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(In thousands)
United States	$	7,103	$	659	$	15,349	$	9,290
Other	1,608		1,614		1,680		2,943
Total	$	8,711	$	2,273	$	17,029	$	12,233

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Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

The following table summarizes revenue disaggregated by products and service type:

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(In thousands)
3D Printers	$	7,281	$	1,738	$	13,594	$	11,038
Recurring Payment (defined below)	596		146		1,231		146
Support services	834		389		2,204		1,049
Total	$	8,711	$	2,273	$	17,029	$	12,233

Contracts Assets and Contract Liabilities

Contract assets consist of unbilled receivables and are recorded when revenue is recognized in advance of scheduled billings to the Company’s customers. A contract asset is recognized when products or services are transferred to a customer and the right to consideration is conditional on something other than the passage of time. Contract liabilities include amounts billed or collected which is related to remaining performance obligations. Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied. It includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods

The amount of revenue recognized during the three months ended September 30, 2021 included in contract liabilities as of June 30, 2021 was $0.3 million. The amount of revenue recognized during the three months ended September 30, 2020 that was included in contract liabilities as of June 30, 2020 was $0.2 million.

The amount of revenue recognized during the nine months ended September 30, 2021 included in contract liabilities as of December 31, 2020 was $0.8 million. The amount of revenue recognized during the nine months ended September 30, 2020 that was included in contract liabilities as of December 31, 2019 was $0.7 million.

Common Stock Warrants Liabilities

The Company assumed 8,625,000 publicly-traded warrants (the “Public Warrants”) and 4,450,000 private placement warrants (the “Private Placement Warrants” and, together with the Public Warrants, the “Common Stock Warrants”) issued to Spitfire Sponsor, LLC (the “Sponsor”) upon the Merger, all of which were issued in connection with JAWS Spitfire’s initial public offering (“IPO”) and subsequent over-allotment and entitles the holder to purchase one share of the Company’s Common Stock at an exercise price of $11.50 per share. During the three and nine months ended September 30, 2021, 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.

The Company evaluated the Common Stock Warrants and concluded that they do not meet the criteria to be classified within stockholders’ equity. The warrant agreement governing the Common Stock Warrants includes a provision, the application of which could result in a different settlement value for the Common Stock Warrants depending on their holder. Because the holder of an instrument is not an input into the pricing of a fixed-for-fixed option on the Common Stock, 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 Common Stock Warrants (both the Public Warrants and the Private Placement Warrants) would be entitled to receive cash for all of their Common Stock Warrants. Specifically, in the event of a qualifying cash tender offer (which could be outside of the Company’s control), all Common Stock Warrant holders would be entitled to cash,

16

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

while only certain of the holders of the Common Stock may be entitled to cash. These provisions preclude the Company from classifying the Common Stock Warrants in stockholders’ equity.

The Company classifies its Public Warrants and Private Placement Warrants as liabilities in accordance with ASC Topic 815 “Derivatives and Hedging–Contracts in Entity’s Own Equity”. As the Common Stock Warrants meet the definition of a derivative, the Company recorded these warrants within Warrant liabilities on the condensed balance sheet at fair value, with subsequent changes in their respective fair values recognized in the condensed statements of operations and comprehensive loss at each reporting date.

Contingent Earnout Liability

In connection with the Reverse Recapitalization and pursuant to the Business Combination Agreement, eligible former Legacy Velo3D equity holders are entitled to receive additional shares of Common Stock upon the Company achieving certain Earnout Triggering Events (as described in the Business Combination Agreement) (the “Earnout Shares”). The Earnout Shares are not indexed to the Common Stock and therefore are accounted for as a liability at the Reverse Recapitalization Date and subsequently remeasured at each reporting date with changes in fair value recorded as a component of gain on fair value of contingent earnout liabilities in the condensed statements of operations and comprehensive loss. The estimated fair value of the contingent earnout liability was determined using a Monte Carlo simulation using a distribution of potential outcomes on a monthly basis over the Earnout Period (as defined in Note 16) prioritizing the most reliable information available. The assumptions utilized in the calculation are based on the achievement of certain stock price milestones, including the current Company Common Stock price, expected volatility, risk free rate, expected term and dividend rate. The contingent earnout liability is categorized as a Level 3 fair value measurement (see “Fair Value Measurements” as described above) because the Company estimates projections during the Earnout Period utilizing unobservable inputs. Contingent earnout liabilities involve certain assumptions requiring significant judgment and actual results may differ from assumed and estimated amounts.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) — Simplifying the Accounting for Income Taxes (“Topic 740”), which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in Accounting Standards Codification 740, Income Taxes. It also clarifies certain aspects of the existing guidance to promote more consistent application. This standard is effective for the Company in fiscal year 2021, and early adoption is permitted. The Company adopted the new guidance effective January 1, 2020 and there is no material impact on its condensed financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Topic 848”),” which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications, hedging relationships, and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The guidance was effective for the Company beginning on March 12, 2020 and the amendments will be applied prospectively through December 31, 2022. The Company adopted the new guidance effective January 1, 2021 and there is no material impact on its condensed financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP.

Consequently, more convertible debt instruments will be reported as a single liability instrument and more redeemable convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (“EPS”) calculation in certain areas. ASU 2020-06 is effective for fiscal years

17

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

beginning after December 15, 2023 including interim periods within those fiscal years. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company early adopted the new guidance effective January 1, 2021 using the modified retrospective method. Adoption of this guidance did not have a material impact on the Company’s financial statements and disclosures.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“Topic 326”)”, and has since released various amendments including ASU No. 2019-04. The guidance modifies the measurement of expected credit losses on certain financial instruments. This guidance is effective for the Company for the fiscal year beginning after December 15, 2022. Early adoption is permitted. The Company is currently assessing the impact of the guidance on its financial statements and disclosures.

In July 2021, the FASB issued ASU 2021-05, “Leases (“Topic 842”) Lessors — Certain Leases with Variable Lease Payments”, that amends the lessor’s lease classification for leases that include any amount of variable lease payments that are not variable lease payments that do not depend on an index or a rate as an operating lease at lease commencement if classifying the lease as a sales-type lease or a direct financing lease would result in the recognition of a selling loss. This guidance is effective for the Company for the fiscal year beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact of the guidance on its financial statements and disclosures.

3. Reverse Recapitalization

On September 29, 2021, Merger Sub merged with Legacy Velo3D, with Legacy Velo3D surviving as a wholly-owned subsidiary of Velo3D. Immediately prior to the closing of the Merger:

• all issued and outstanding 6,738,651 shares of Legacy Velo3D outstanding Series A redeemable convertible preferred stock was converted into an equivalent number of shares of Legacy Velo3D common stock on a 1:2.178 basis:

• all issued and outstanding 8,386,456 shares of Legacy Velo3D outstanding Series B redeemable convertible preferred stock was converted into an equivalent number of shares of Legacy Velo3D common stock on a 1:2.273 basis:

• all issued and outstanding 8,513,343 shares of Legacy Velo3D outstanding Series C redeemable convertible preferred stock was converted into an equivalent number of shares of Legacy Velo3D common stock on a 1:2.372 basis:

• all issued and outstanding 101,042,757 shares of Legacy Velo3D outstanding Series D redeemable convertible preferred stock was converted into an equivalent number of shares of Legacy Velo3D common stock on a 1:1.000 basis:

In connection with the Merger, shares of Legacy Velo3D redeemable convertible preferred stock were converted into an equivalent number of shares of Legacy Velo3D common stock at their respective conversion ratios and concurrently recast into 126,310,700 shares of Common Stock.

As of September 30, 2021 and after giving effect to the Exchange Ratio, there were 183,163,826 shares of Common Stock outstanding, comprised of the 126,310,700 shares of Common Stock issued in respect of the Legacy Velo3D redeemable convertible preferred stock, 16,443,994 shares of Common Stock issued in respect of Legacy

18

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

Velo3D common stock, and 40,409,132 shares of Common Stock issued to public shareholders of JAWS Spitfire, the JAWS Spitfire initial shareholders, and third-party PIPE Investors (as defined below).

At the Merger, eligible former Legacy Velo3D equity holders received or had the right to receive shares of Common Stock at a deemed value of $10.00 per share after giving effect to the Exchange Ratio of 0.8149 as defined in the Merger Agreement. Accordingly, immediately following the consummation of the Merger, Legacy Velo3D common stock exchanged into 142,754,694 shares of Common Stock, 66,830,878 shares of Common Stock were reserved for the issuance of Common Stock upon the potential future exercise of Legacy Velo3D stock options, common stock warrants, and shares of Common Stock issuable under the Company’s employee stock purchase plan.

In connection with the execution of the Merger Agreement, JAWS Spitfire entered into separate subscription agreements (each a “Subscription Agreement”) with a number of investors (each a “PIPE Investor”), pursuant to which the PIPE Investors agreed to purchase, and JAWS Spitfire agreed to sell to the PIPE Investors, an aggregate of 15,500,000 shares of Common Stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $155.0 million, in a private placement pursuant to the Subscription Agreements (the “PIPE Financing”). The PIPE Financing closed simultaneously with the consummation of the Merger.

In connection with the Merger, 8,625,000 of JAWS Spitfire Class B ordinary shares originally purchased by the Sponsor were exchanged for shares of Common Stock prior to the Closing (the “Founder Shares”).

Pursuant to JAWS Spitfire’s Articles of Association, JAWS Spitfire’s public shareholders were entitled to elect to redeem their public shares for cash even if they had approved the Merger. As of September 24, 2021, the final day of the redemption period, public shareholders had redeemed 18,215,868 Class A ordinary shares of JAWS Spitfire for cash at the redemption price of $10.00 per share, based on funds held in the trust account for an aggregate payment of $182.2 million (the “Redemptions”).

The number of shares of Common Stock issued immediately following the consummation of the Merger was:

	Shares
Public shares, outstanding prior to Merger	34,500,000
Less redemption of public shares	(18,215,868)
Public shares following redemptions	16,284,132
Shares issued in PIPE Financing	15,500,000
Public shares and PIPE Financing Shares	31,784,132
Founder Shares	8,625,000
Legacy Velo3D shares (1)	142,754,694
Total shares of Common Stock immediately after Merger	183,163,826

(1) Upon consummation of the Merger, 175,173,445 Legacy Velo3D shares were exchanged at the Exchange Ratio and fractional shares were rounded to whole shares.

The Merger was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, JAWS Spitfire was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of Velo3D are represented as a continuation of the financial statements of Legacy Velo3D, with the Merger being treated as the equivalent of Legacy Velo3D issuing stock for the net assets of JAWS Spitfire, accompanied by a recapitalization. The net assets of JAWS Spitfire are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Merger are those of Legacy Velo3D in future reports.

Legacy Velo3D has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances as of the Closing: (1) Legacy Velo3D’s stockholders have a majority of the voting power of

19

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

Velo3D; (2) the board of directors of Velo3D initially has twelve members, and Legacy Velo3D has the ability to nominate the majority of the initial members of the board of directors; (3) Legacy Velo3D’s senior management is the senior management of Velo3D and is responsible for day-to-day operations; (4) Velo3D has assumed the Velo3D name; and; (5) the current strategy and operations of Velo3D continue to be Legacy Velo3D’s strategy and operations to develop the next generation of AM printers.

In connection with the Merger and the PIPE Financing, the Company received $298.2 million of gross proceeds including the contribution of $345.0 million of cash held in JAWS Spitfire’s trust account from its IPO, redemptions of JAWS Spitfire public shareholders of $182.2 million, and $155.0 million of cash in connection with the PIPE Financing. The gross proceeds were net of $19.6 million of costs incurred by JAWS Spitfire prior to the Closing. The Company incurred $19.9 million of transaction costs, consisting of banking, legal, and other professional fees, of which $19.1 million was recorded as a reduction to additional paid-in capital of proceeds (“APIC”), and the remaining $0.8 million was expensed in the condensed statements of operations. The total net cash proceeds to the Company were $278.3 million.

4. Basic and Diluted Net Loss per Share

The following table sets forth the computation of the Company’s basic and diluted net loss per share to common stockholders:

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(In thousands, except share data)
Numerator:
Net loss	$	(66,578)	$	(7,107)	$	(92,663)	$	(17,591)
Denominator:
Weighted average shares used in computing net loss per share – basic and diluted	19,793,863		15,994,154		17,348,557		15,503,475
Net loss per share – basic and diluted.	$	(3.36)	$	(0.44)	$	(5.34)	$	(1.13)

The following potentially dilutive shares of common stock equivalents “on an as-converted basis” were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have had an antidilutive effect:

	Nine months ended September 30,
	2021	2020
	(per share data)
Redeemable convertible preferred stock	—	108,642,440
Convertible promissory note	—	3,283,548
Redeemable convertible preferred stock warrants	—	332,893
Common stock warrants	13,075,000	51,847
Common stock options issued and outstanding	21,342,660	19,134,310
Total potentially dilutive common share equivalents	34,417,660	131,445,038

Total potentially dilutive common share equivalents for the nine months ended September 30, 2021, excludes 21,758,148 shares related to the earnout liability as these shares are contingently issuable upon meeting certain triggering events.

5. Fair Value Measurements

The Company’s assets and liabilities that were measured at fair value on a recurring basis were as follows:

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Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

	Fair Value Measured as of September 30, 2021
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets
Money market funds	$	296,826	$	—	$	—	$	296,826
Total financial assets	$	296,826	$	—	$	—	$	296,826
Liabilities
Common stock warrant liabilities (Public)	$	13,283	$	—	$	—	$	13,283
Common stock warrant liabilities (Private Placement)	—		—		6,853		6,853
Contingent earnout liabilities	—		—		118,749		118,749
Total financial liabilities	$	13,283	$	—	$	125,602	$	138,885
	Fair Value Measured as of December 31, 2020
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets
Money market funds	$	15,517	$	—	$	—	$	15,517
Total financial assets	$	15,517	$	—	$	—	$	15,517
Liabilities
Redeemable convertible preferred stock warrant liability	$	—	$	—	$	181	$	181
Total financial liabilities	$	—	$	—	$	181	$	181

The money market funds were classified as cash and cash equivalents on the condensed balance sheets. The aggregate fair value of the Company’s money market funds approximated amortized cost and, as such, there were no unrealized gains or losses on money market funds as of September 30, 2021 and December 31, 2020. Realized gains and losses, net of tax, were not material for any of the periods presented.

As of September 30, 2021 and December 31, 2020, the Company had no investments with a contractual maturity of greater than one year.

21

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

The following table presents a summary of the changes in the fair value of the Company’s Level 3 financial instruments:

	Redeemable convertible preferred stock warrant liabilities		Private placement warrant liabilities		Contingent earnout liabilities
	(In thousands)
Fair value as of January 1, 2021	$	181	$	—	$	—
Private placement warrant liabilities acquired as part of the reverse recapitalization	—		7,165		—
Contingent earnout liabilities recognized upon the closing of the reverse recapitalization	—		—		120,763
Change in fair value	718		(312)		(2,014)
Issuance of warrants	—		—		—
Exercise of warrants	(899)		—		—
Fair value as of September 30, 2021	$	—	$	6,853	$	118,749
	Redeemable convertible preferred stock warrant liabilities		Private placement warrant liabilities		Contingent earnout liabilities
	(In thousands)
Fair value as of January 1, 2020	$	185	$	—	$	—
Change in fair value	(5)		—		—
Issuance of warrants	—		—		—
Exercise of warrants	—		—		—
Fair value as of September 30, 2020	$	180	$	—	$	—

The fair value of the private placement warrant liability, redeemable convertible preferred stock warrant liability and contingent earnout liability are based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. In determining the fair value of the private placement warrant liability, the Company used the Binomial-Lattice Model that assumes optimal exercise of the Company’s redemption option at the earliest possible date. In determining the fair value of the redeemable convertible preferred stock warrant liability, the Company used the Black-Scholes option pricing model to estimate the fair value using unobservable inputs including the expected term, expected volatility, risk-free interest rate and dividend yield (please refer to Note 16, Equity Instruments). In determining the fair value of the contingent earnout liability, the Company used the 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 (please refer to Note 16, Equity Instruments).

6. Accounts Receivable, Net

Accounts receivable, net consisted of the following:

	September 30,		December 31,
	2021		2020
	(In thousands)
Trade Receivables	$	6,625	$	1,299
Less: Allowances for Doubtful Accounts	(67)		(67)
Total	$	6,558	$	1,232

22

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

7. Inventories

Inventories consisted of the following:

	September 30,		December 31,
	2021		2020
	(In thousands)
Raw materials	$	7,122	$	1,948
Work-in-progress	8,098		5,361
Total	$	15,220	$	7,309

8. Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following:

	September 30,		December 31,
	2021		2020
	(In thousands)
Prepaid insurance and other	$	1,011	$	525
Vendor prepayments	8,058		282
Total	$	9,069	$	807

9. Property and Equipment, Net

Property and equipment, net consisted of the following:

	September 30,		December 31,
	2021		2020
	(In thousands)
Computers and software	$	1,075	$	510
R&D lab equipment	1,266		469
Furniture and fixtures	69		40
Leasehold improvements	1,999		1,828
Construction in progress	3,003		—
Total property, plant and equipment	7,412		2,847
Less accumulated depreciation and amortization	(2,411)		(1,841)
Property, plant and equipment, net	$	5,001	$	1,006

Depreciation expense for the three months ended and nine months ended September 30, 2021 and 2020 was $0.4 million for both three months periods, $0.8 million and $0.7 million, respectively.

10. Equipment on Lease, Net

The equipment leased to customers had a cost basis of $8.4 million and accumulated depreciation of $0.7 million as of September 30, 2021. Total lease revenue earned for the three and nine months ended September 30, 2021 was $0.6 million and $1.2 million, respectively. The total depreciation expense was $0.2 million and $0.5 million and included in cost of revenue for the three and nine months ended September 30, 2021, respectively. The total depreciation expense was $0.1 million for both the three and nine months ended September 30, 2020. The total lease revenue earned for the three and nine months ended September 30, 2020 was $0.1 million for both periods.

23

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

As of December 31, 2020, there were four 3D Printers (equipment) leased to customers. The equipment leased to customers had a cost basis of $3.0 million and accumulated depreciation of $0.2 million as of December 31, 2020.

The Company entered into debt secured by certain leased equipment to customers. The proceeds received were recognized as a financial liability under long-term debt. Remaining lease payments of $0 and $1.3 million were due as of September 30, 2021 and December 31, 2020, respectively. The financial liability was fully repaid in August 2021. Please refer to Note 14, Long-term Debt, for a description of these financing arrangements.

For the nine months ended September 30, 2021, principal payments of $2.1 million were paid for equipment lease loans. For the nine months ended September 30, 2020 principal payments of $0.1 million were paid for equipment lease loans.

11. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	September 30,		December 31,
	2021		2020
	(In thousands)
Accrued expenses	$	2,476	$	787
Accrued salaries and benefits	3,395		1,231
Lease liability – current portion	681		494
Total Accrued expenses and other current liabilities	$	6,552	$	2,512

12. Other Noncurrent Liabilities

Other noncurrent liabilities consisted of the following:

	September 30,		December 31,
	2021		2020
	(In thousands)
Lease liabilities - noncurrent portion	$	1,235	$	232
Other noncurrent liabilities	438		(48)
Total other noncurrent liabilities	$	1,673	$	184

Please refer to Note 16, Equity Instruments, for further details of the contingent earnout liability and warrant liabilities.

13. Leases

The Company leases its office and manufacturing facilities under two non-cancellable operating leases which expire in November 2024 and January 2023, respectively. The leases provide for base rent and certain reimbursement of lessor’s operating expenses. The agreements include a provision for renewal at the then market rate for terms specified in each lease.

24

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

During the nine months ended September 30, 2021, the Company signed two new leases for manufacturing and R&D facilities.

On July 1, 2021, the Company’s lease commenced for a 5,000+ square foot R&D facility. The lease has a term of 36 months and with a contractual obligation of $0.5 million in base rent and certain reimbursement of lessor’s operating expenses.

On November 1, 2021, the Company’s lease commenced for an 80,000+ square foot facility. The lease has a term of 65 months and with a contractual obligation of $10.9 million in base rent and certain reimbursement of lessor’s operating expenses. As of September 30, 2021, the Company has have invested $3.0 million into factory equipment and leasehold improvements.

As of September 30, 2021, the manufacturing facility lease obligations was not recorded on the balance sheet, and only included under operating leases as a future contractual obligation. As set forth under ASC 842, Leases, the delivery of the building has not been completed as of September 30, 2021, as the landlord was still completing improvements to the facility as per the terms of the agreement. As noted above, the lease commenced on November 1, 2021.

Total Right-of-Use (“ROU”) assets (recorded in Other Assets) and lease liabilities (recorded in Accrued expenses and other current liabilities and Other noncurrent liabilities) are as follows:

	September 30,		December 31,
	2021		2020
	(In thousands)
Right-of-use assets:
Net book value (Other assets)	$	1,849	$	633
Operating lease liabilities:
Current (Accrued expense and other current liabilities)	$	648	$	494
Noncurrent (Other noncurrent liabilities)	1,186		232
	1,834		726
Financing lease liabilities:
Current (Accrued expense and other current liabilities)	$	33	$	—
Noncurrent (Other noncurrent liabilities)	49		—
	$	82	$	—
Total lease liabilities	$	1,916	$	726

ROU assets are considered long-lived assets and are tested for impairment as described above under the heading, “Impairment of Long-lived Assets.” There were no impairments recorded related to these assets as of September 30, 2021 and December 31, 2020. Management evaluates its long-lived assets, on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC Topic 360, Property, Plant and Equipment.

25

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

Information about lease-related balances were as follows:

	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
	(In thousands)
Operating lease expense	$	208		$	143		$	511		$	428
Financing lease expense	9			—			22			—
Short-term lease expense	41			14			76			46
Total lease expense	$	258		$	157		$	609		$	474
Cash paid for leases	$	178		$	136		$	805		$	395
Weighted – average remaining lease term – operating leases (years)	2.9			1.8			2.9			1.8
Weighted – average discount rate – operating leases	4.4		%	4.5		%	4.4		%	4.5		%

Future lease payments under non-cancellable operating leases as of September 30, 2021 are as follows:

	(In thousands)
Remainder of 2021	$	153
2022	743
2023	657
2024	524
Total operating lease payments	$	2,077
Less portion representing imputed interest	(161)
Total operating lease liabilities	$	1,916
Less current portion	681
Long-term portion	$	1,235

14. Long-Term Debt

Long-term debt consisted of the following:

	September 30,		December 31,
	2021		2020
	(In thousands)
Term loan	$	20,000	$	5,150
Revolving credit line	3,000		—
Property and equipment loan	—		833
Equipment loan	5,622		2,081
Deferred financing costs	(569)		(61)
Total	$	28,053	$	8,003
Debt – current portion	13,731		3,687
Long-term debt – less current portion	$	14,322	$	4,316

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.

26

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

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

27

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

$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:

	(In thousands)
Remainder of 2021	$	2,058
2022	14,706
2023	10,467
2024	822
	$	28,053

28

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

15. Convertible Notes Payable

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.

16. Equity Instruments

Redeemable Convertible Preferred Stock

Redeemable convertible preferred stock consisted of the following:

	As of September 30, 2021
	Authorized	Issued and Outstanding	Original issue price per share		Liquidation Preference		Carrying value
	(In thousands, except share and per share data)
Redeemable Convertible Preferred Stock	10,000,000	—	$	—	$	—	$	—

	As of December 31, 2020
Redeemable Convertible Preferred Stock	Authorized	Issued and Outstanding	Original issue price per share		Liquidation Preference		Carrying value
	(In thousands, except share and per share data)
Series A	8,906,694	6,726,134	$	2.928	$	19,696	$	17,030
Series B	10,385,804	8,386,456	$	3.851	32,300		32,176
Series C	8,848,760	8,399,058	$	5.524	46,400		39,378
Series D	97,278,007	94,222,735	$	0.375	35,366		35,120
	125,419,265	117,734,383			$	133,762	$	123,704

As of September 30, 2021, there were no issued and outstanding redeemable convertible preferred stock. As of December 31, 2020, redeemable convertible preferred stock totaling 117,734,383 shares were convertible into 147,876,672 shares of common stock.

29

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

Conversion of Redeemable Convertible Preferred Stock into Common Stock at a conversion ratio of 3:1 and Issuance of Series D Redeemable Convertible Preferred Stock

In March and early April 2020, the Company notified the existing holders of the redeemable convertible preferred stock of (i) a planned initial closing of Legacy Velo3D Series D redeemable convertible preferred stock and (ii) the amount assigned to each of them based on their pro rata holdings in the Company’s outstanding equity on a fully diluted basis. In addition, these existing holders were notified that, as a condition of the Legacy Velo3D Series D redeemable convertible preferred stock financing, the Company would amend its articles to implement a special mandatory conversion provision if the holders failed to invest their pro rata amount in such initial financing of Legacy Velo3D Series D redeemable convertible preferred stock.

On April 13, 2020, in connection with the Company’s issuance of Legacy Velo3D Series D redeemable convertible preferred stock, the Company amended its articles to implement the special mandatory conversion provision and, contemporaneously, certain existing holders of redeemable convertible preferred stock who failed to invest their full pro rata amount or did not participate in the financing were automatically converted into the Company’s common stock at a conversion ratio of three to one. The amendment and forced conversion were recognized as an extinguishment of the redeemable convertible preferred stock.

As a result, 2,167,198 shares of Legacy Velo3D Series A redeemable convertible preferred stock, 1,999,348 shares of Legacy Velo3D Series B redeemable convertible preferred stock and 289,702 shares of Legacy Velo3D Series C redeemable convertible preferred stock were converted into 1,210,513 shares of Legacy Velo3D common stock. The carrying value of the converted shares of the redeemable convertible preferred stock is $13.3 million, whereas the fair value of the shares of common stock issued in the conversion was $0.2 million. Because the fair value of the consideration transferred (i.e., the fair value of the shares of common stock issued) was less than the carrying amount of the shares of the redeemable convertible preferred stock surrendered, the Company recognized an extinguishment of the redeemable convertible preferred stock converted in the amount of $13.1 million. The $13.1 million was a deemed capital contribution to the holders of the Company’s common stock that was a decrease to the net loss attributable to common stockholders and a decrease to accumulated deficit. Accordingly, the Company recorded a decrease of $13.3 million to redeemable convertible preferred stock, and a corresponding increase of $0.2 million in additional paid-in capital and a decrease of $13.1 million in accumulated deficit.

In addition, on April 13, 2020, the Company issued 44,794,885 shares of Legacy Velo3D Series D redeemable convertible preferred stock at $0.37534 per share for gross proceeds of $16.8 million.

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, have the right to appoint two directors to the Company’s Board of Directors, 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.

30

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

Common Stock Reserved for Future Issuance

Shares of common stock reserved for issuance on an “as if converted” basis were as follows:

	September 30,	December 31,
	2021	2020
	(share data)
Redeemable convertible preferred	—	147,876,672
Redeemable convertible preferred stock warrants	—	408,729
Common stock warrants	13,075,000	214,032
Common stock options issued and outstanding	21,342,660	21,471,321
Shares available for future grant under 2014 Equity Incentive Plan	—	5,887,008
Shares available for future grant under 2021 Equity Incentive Plan	21,423,388	—
Reserved for employee stock purchase plan	10,989,830	—
Total shares of common stock reserved	66,830,878	175,857,762

    Total potentially dilutive common share equivalents for the nine months ended September 30, 2021, excludes 21,758,148 shares related to the earnout liability as these shares are contingently issuable upon meeting certain triggering events.

Warrant liabilities

Common Stock Warrants

Warrants for shares of common stock consisted of the following:

	September 30, 2021
	Issue Date	Expiration Date	Number of Warrants	Exercise Price per warrant		Fair Value on Issue Date per warrant		Fair Value on September 30, 2021
								(In thousands)
Private placement warrants - Common Stock	12/02/2020	09/29/2026	4,450,000	$	11.50	$	2.00	$	6,853
Public warrants - Common Stock	12/02/2020	09/29/2026	8,625,000	$	11.50	$	3.30	$	13,283
			13,075,000					$	20,136

	December 31, 2020
	Issue Date	Expiration Date	Number of Warrant	Exercise Price per warrant		Fair Value on Issue Date per warrant		Fair Value on December 31, 2020 (1)
								(In thousands)
Warrants - Common Stock	12/02/2015	12/02/2025	11,132	$	0.87	$	0.70	$	—
Warrants - Common Stock	07/02/2018	07/02/2028	40,715	$	2.47	$	2.00	$	—
Warrants - Common Stock	12/17/2020	12/17/2030	162,186	$	0.18	$	0.17	$	—
Total outstanding			214,033					$	—

(1) Legacy Velo3D Warrants - Common Stock: As of December 31, 2020, warrants on common stock are equity classified and recorded at fair value on the issue date without further remeasurement. The level 3 fair value assumptions used in the Black-Scholes model to calculate fair value of the warrant for common stock granted during

31

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

the nine months ended September 30, 2020 were as follows: volatility of 35.0% to 45.0%, term of 0.2 years, and risk-free interest rate of 0.1% to 1.0%.

Warrants for common stock of 13,075,000 and 214,033 were exercisable 1-to-1 as of September 30, 2021 and December 31, 2020, respectively. Warrants to purchase a total of 13,075,000 shares of common stock were initially recognized as a liability recorded at fair value upon issuance and were subject to remeasurement to fair value at each balance sheet date. As part of the Merger, all Legacy Velo3D common stock warrants were exercised for shares of common stock in accordance with their terms for the number of exercisable shares, each adjusted using the Exchange Ratio. At that time, the Legacy Velo3D common stock warrants were remeasured and reclassified to Legacy Velo3D additional paid-in capital.

Private placement warrants and public warrants on common stock (as defined below) are liability classified and recorded at fair value on the issue date with periodic remeasurement.

Private Placement Warrants

Concurrently with JAWS Spitfire’s IPO, 4,450,000 Private Placement Warrants were issued to the Sponsor at $2.00 per unit. 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 September 30, 2021, the number of Private Placement Warrants issued was 4,450,000.

Public Warrants

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 share of Common Stock at $11.50 per share. As of September 30, 2021, the number of Public Warrants issued was 8,625,000.

Public Warrants may only be exercised for a whole number of shares. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of the Merger and (b) 12 months from the closing of the IPO on December 7, 2020. The Public Warrants will expire five years after the completion of a Merger or earlier upon redemption or liquidation.

Warrant Liabilities - Common Stock

The liability associated with the Private Placement Warrants was subject to remeasurement at each balance sheet date using the Level 3 fair value inputs and the Public Warrants was subject to remeasured at each balance sheet date using Level 1 fair value inputs for the three and nine months ended September 30, 2020.

32

Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

Redeemable Convertible Preferred Stock Warrants

As of September 30, 2021, the warrants for shares of Legacy Velo3D Series A and Series C redeemable convertible preferred stock were converted into redeemable convertible preferred stock in connection with the Reverse Recapitalization. Warrants for shares of Legacy Velo3D Series A and Series C redeemable convertible preferred stock consisted of the following (dollars in thousands, except share and per share amounts):

	December 31, 2020
	Issue Date	Expiration Date	Number of Warrant	Exercise Price per Warrant	Fair Value on Issue Date per Warrant
Series A redeemable convertible preferred stock	11/14/2014	11/13/2024	13,362	$1.12	$1.25
Series C redeemable convertible preferred stock	04/18/2019	04/18/2029	160,000	$5.52	$1.05
Total outstanding			173,362

For the nine months ended September 30, 2021, all warrants for redeemable preferred stock were converted prior to the Merger into 13,362 shares of Legacy Velo3D Series A redeemable convertible preferred stock and 160,000 shares of Legacy Velo3D Series C redeemable preferred stock. The shares of redeemable preferred stock were net settled and converted into Legacy Velo3D common stock for Series A on a 1:2.178 basis and Series C of 1:2.372 basis.

As of December 31, 2020, warrants for redeemable convertible preferred stock was 173,362. After the conversion to common stock and Exchange Ratio, the impact of dilution triggered by the warrants for redeemable convertible preferred stock if converted into common stock was 243,195 shares of common stock.

Warrants on redeemable convertible preferred stock were issued to lenders in connection with borrowings. The fair value on the date of issue is recorded as a debt issue cost (contra-liability) and a liability because the warrant was liability classified. The fair value of the warrants are remeasured each reporting period using Level 3 inputs with the increase or decrease recorded in other income (expense), net in the statements of operations.

The liability for warrants on redeemable convertible preferred stock (carried at fair value) was as follows for the three and nine months ended September 30, 2021 and 2020:

Rollforward of the liability for warrants on redeemable convertible preferred stock:

Warrants on redeemable convertible preferred stock	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(in thousands)
Beginning Balance	$	1,922	$	178	$	181	$	185
Issuance of new warrant	—		—		—		—
Change in fair value (Other income (expense), net)	(1,023)		2		718		(5)
Exercise of warrants (Redeemable preferred convertible stock)	(899)		—		(899)		—
Ending Balance	$	—	$	180	$	—	$	180

As of September 30, 2021, the fair value of the warrants for shares of Legacy Velo3D Series A and Series C redeemable convertible preferred stock was $9.23 and $8.35, respectively. The fair value of the redeemable convertible preferred stock warrant liability was estimated using an option pricing model that takes into account the contract terms as well as multiple unobservable inputs such as the aggregate equity value, risk-free interest rates, and

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Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

expected volatility. The level 3 fair value assumptions used in the Black-Scholes model for the recurring valuation of the redeemable convertible preferred stock warrant liability were as follows:

	Nine months ended September 30,
	2021	2020
Expected volatility	30.0% - 40.0%	35.0% - 45.0%
Risk-free interest rate	0.1% - 1.0%	0.1% - 0.8%
Dividend yield	—	—

The expected term for the Series A warrants and the Series C warrants as of September 30, 2021 was 0.2 years for both warrants, respectively.

The expected term for the Series A warrants and the Series C warrants as of September 30, 2020 was 1.6 years and 9.0 years, respectively.

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 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 was a gain of $2.0 million recognized in the condensed statement of operations for the three and nine months ended September 30, 2021. As of September 30, 2021 the contingent earnout liabilities were $118.7 million.

Assumptions used in the valuation are described below.

	As of September 30, 2021			Closing Date September 29, 2021
Current stock price	$	8.37		$	8.44
Expected volatility	45.0% - 55.0%			45.0% - 55.0%
Risk-free interest rate	0.1% - 1.0%			0.1% - 1.0%
Dividend rate	—		%	—		%
Expected Term (years)	5.0			5.0

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Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

17. Stock Option Plan and Stock-Based Compensation

Upon the consummation of the Merger, the Company adopted its 2021 Equity Incentive Plan (the “2021 EIP”) which provides for the granting of stock options, restricted stock awards and stock appreciation rights to employees, directors, and consultants of the Company. As of September 30, 2021, the Company has reserved 42,766,048 shares of its common stock for issuance under the 2021 EIP.

In addition, the Company adopted its 2021 Employee Stock Purchase Plan (“2021 ESPP”). As of September 30, 2021, the Company has reserved 10,989,830 shares of its common stock for issuance under the 2021 ESPP.

Awards granted under both the 2021 EIP and the Company’s 2014 Equity Incentive Plan (the “2014 Plan”) generally expire 10 years from the date of grant, or earlier if services are terminated. The exercise price of stock options grants shall not be less than 110% of the estimated fair value of the shares on the date of grant, respectively, as determined by the Company’s Board of Directors. Awards generally vest based on continuous service over four years. Awards forfeited, cancelled, or repurchased generally are returned to the pool of shares of common stock available for issuance under the 2021 Plan and 2014 Plan, respectively.

Stock options

Activity under the Company’s stock option plans is set forth below:

	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term in years
	(In thousands)	(Per Share Data)		(Years)
Outstanding as of December 31, 2019	4,846	$	0.98	8.1
Granted	18,944	$	0.26
Exercised	(55)	$	0.98
Forfeited or expired	(1,772)	$	0.93
Outstanding as of September 30, 2020	21,963	$	0.36	9.3
Options vested and expected to vest as of September 30, 2020	21,963	$	0.36
Vested and exercisable as of September 30, 2020	2,524	$	0.97
Outstanding as of December 31, 2020	21,471	$	0.33	9.3
Granted	1,024	$	6.69
Exercised	(200)	$	1.56
Forfeited or expired	(951)	$	0.61
Outstanding as of September 30, 2021	21,344	$	0.61	8.5
Options vested and expected to vest as of September 30, 2021	21,344	$	0.61
Vested and exercisable as of September 30, 2021	7,776	$	0.58

The aggregate intrinsic value of options outstanding was $151.2 million and $3.9 million, respectively, as of September 30, 2021 and December 31, 2020. Intrinsic value of options exercised for the nine months ended September 30, 2021 and 2020 was $0.5 million and less than $0.1 million, respectively. The weighted-average grant date fair value of options granted in the nine months ended September 30, 2021 and 2020 was $3.58 per share and $0.14 per share, respectively. The total grant date fair value of options vested was $0.9 million and $0.2 million for the nine months ended September 30, 2021 and 2020.

Prior to the Company’s shares of common stock being publicly traded, the Company’s inputs for the intrinsic value are based on a third-party valuation of the Company’s stock, which increased from $0.40 per share to $8.15

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Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

per share, as of December 31, 2020 and September 29, 2021, the Closing Date, respectively. Prior to the consummation of the Merger, valuation methodologies in determining the fair market value of the Company’s stock considered the pending Merger.

Stock-based Compensation Associated with Awards

For the nine months ended September 30, 2021 and 2020, the Company used the Backsolve, or Option Pricing Method (the “OPM”), which is the preferred method when recent securities transactions are considered a relevant input in determining the valuation of a company because it takes into account the economic rights of the recently issued security in relation to the rights of other equity securities within the capital structure.

The weighted-average assumptions in the Black-Scholes option-pricing model used to determine the fair value of stock options granted were as follows:

	Nine months ended September 30,
	2021		2020
Expected volatility	59	%	60	%
Risk-free interest rate	0.9% – 1.0%		0.3% – 0.8%
Dividend yield	—	%	—	%
Expected term (in years)	5.72		6.05

Stock-based Compensation Expense

The following sets forth the total stock-based compensation expense for the stock options included in the statements of operations:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In thousands)				(In thousands)
Research and development	$	211	$	219	$	598	$	601
Selling and marketing	105		145		280		358
General and administrative	360		102		873		284
	$	676	$	466	$	1,751	$	1,243

As of September 30, 2021, total unrecognized compensation cost related to stock awards was $3.4 million and is expected to be recognized over a weighted-average period of 2.52 years.

18. Income Taxes

The income tax provision is calculated for an interim period by distinguishing between elements recognized in the income tax provision through applying an estimated annual effective tax rate (the “ETR”) to a measure of year-to-date operating results referred to as “ordinary income (or loss),” and discretely recognizing specific events referred to as “discrete items” as they occur. The income tax provision or benefit for each interim period is the difference between the year-to-date amount for the current period and the year-to date amount for the period prior. Under ASC 740-270-30-36, entities subject to income taxes in multiple jurisdictions should apply one overall ERT instead of separate ETRs for each jurisdiction when calculating the interim-period income tax or benefit related to ordinary income (or loss) for the year-to-date interim period, except in certain circumstances. The Company’s effective tax rates for the three and nine months ended September 30, 2021 and 2020 differ from the federal statutory rate of 21% principally as a result of valuation allowances expected to be applied to net operating loss carry-forwards which will not meet the threshold for recognition as deferred tax assets.

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Velo3D, Inc.
Notes to Condensed Financial Statements
(Unaudited)

19. Commitments and Contingencies

The Company may be involved in various lawsuits, claims, and proceedings, including intellectual property, commercial, securities, and employment matters that arise in the normal course of business. The Company accrues a liability when management believes information available prior to the issuance of the financial statements indicates it is probable a loss has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. The Company adjusts its accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Legal costs are expensed as incurred. As of September 30, 2021 and December 31, 2020, the Company is not aware of any litigation, claim or assessment in which the outcome, individually or in the aggregate, would have a material adverse effect on its financial positions, results of operations, cash flows or future earnings.

The Company’s purchase obligations per terms and conditions with suppliers and vendors are cancellable in whole or in part prior to shipment. If inventory is shipped, the Company will accrue a liability under accrued expenses. The Company has no other commitment and contingencies, except for the operating leases. Please refer to Note 13, Leases, for further discussion.

Certain Sapphire XC purchase obligations (purchase orders) of $26.8 million for parts and assemblies are non-cancellable and are due upon receipts with standard payment terms and will primarily be delivered in the fourth quarter of 2021 and the first quarter of 2022.

20. Employee Defined-Contribution Plans

Accrued salaries and benefits included accruals related to the 401(k) plans the Company offers to its employees. In order to qualify for these plans, employees must meet the minimum age requirement (21 years) and begin participating on their entry date which is the first paycheck date in the month following the month of eligibility described above. Employee and employer contributions are immediately 100.00% fully vested. The plans offer employer contributions of 3.0% of an employee’s eligible compensation following safe-harbor rules. The Company’s contribution to the 401(k) plan was $0.2 million and $0.1 million, respectively, for the three months ended September 30, 2021 and 2020, and $0.4 million and $0.3 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company has a defined-contribution plan intended to qualify under Section 401 of the Internal Revenue Code (the “401(k) Plan”). The Company contracted with a third-party provider to act as a custodian and trustee, and to process and maintain the records of participant data. Substantially all of the expenses incurred for administering the 401(k) Plan are paid by the Company. The Company has paid all matching contributions as of December 31, 2020.

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

The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with (i) Legacy Velo3D’s historical audited annual financial statements as of and for the years ended December 31, 2020 and 2019 and the related notes included in our prospectus filed pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended, with the Securities and Exchange Commission (the “SEC”) on October 28, 2021, related to the Merger and (ii) our unaudited condensed financial statements included elsewhere in this Quarterly Report. This discussion contains forward-looking statements based upon our current expectations, estimates and projections, and involves numerous risks and uncertainties. Actual results may differ materially from those contained in any forward-looking statements due to, among other considerations, the matters discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We seek to fulfill the promise of additive manufacturing, also referred to as 3D printing (“AM”), to deliver breakthroughs in performance, cost and lead time in the production of high-value metal parts.

We produce a full-stack hardware and software solution based on our proprietary powder bed fusion (“PBF”) technology, which enables support-free production. Our technology enables the production of highly complex, mission-critical parts that existing AM solutions cannot produce without the need for redesign or additional assembly. Our products give our customers who are in space, aviation, defense, energy, and industrial markets the freedom to design and produce metal parts with complex internal features and geometries that had previously been considered impossible for AM. We believe our technology is years ahead of competitors.

Our technology is novel compared to other AM technologies based on its ability to deliver high-value metal parts that have complex internal channels, structures and geometries. This affords a wide breadth of design freedom for creating new metal parts and it enables replication of existing parts without the need to redesign the part to be manufacturable with AM. Because of these features, we believe our technology and product capabilities are highly valued by our customers. Our customers are primarily original equipment manufacturers (“OEMs”) and contract manufacturers who look to AM to solve issues with traditional metal parts manufacturing technologies. Those traditional manufacturing technologies rely on processes, including casting, stamping and forging, that typically require high volumes to drive competitive costs and have long lead times for production. Our customers look to AM solutions to produce assemblies that are lighter, stronger and more reliable than those manufactured with traditional technologies. Our customers also expect AM solutions to drive lower costs for low-volume parts and substantially shorter lead times. However, many of our customers have found that legacy AM technologies failed to produce the required designs for the high-value metal parts and assemblies that our customers wanted to produce with AM. As a result, other AM solutions often require that parts be redesigned so that they can be produced and frequently incur performance losses for high-value applications. For these reasons, AM solutions of our competitors have been largely relegated to tooling and prototyping or the production of less complex, lower-value metal parts.

In contrast, our technology can deliver complex high-value metal parts with the design advantages, lower costs and faster lead times associated with AM, and generally avoids the need to redesign the parts. As a result, our customers have increasingly adopted our technology into their design and production processes. We believe our value is reflected in our sales patterns, as most customers purchase a single machine to validate our technology and purchase additional systems over time as they embed our technology in their product roadmap and manufacturing infrastructure. We consider this approach a “land and expand” strategy, oriented around a demonstration of our value proposition followed by increasing penetration with key customers.

Recent Developments

Closing of Merger

On September 29, 2021, we consummated the transactions contemplated by the Business Combination Agreement. In particular, on the Closing Date, JAWS Spitfire filed a notice of deregistration with the Cayman

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Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which JAWS Spitfire was domesticated and continued as a Delaware corporation. Further, on the Closing Date, Merger Sub was merged with and into Legacy Velo3D, with Legacy Velo3D surviving the Merger as a wholly-owned subsidiary of JAWS Spitfire. Legacy Velo3D was renamed “Velo3D US, Inc.” and JAWS Spitfire was renamed “Velo3D, Inc. In addition, the PIPE Investors, purchased an aggregate of 15,500,000 shares of common stock concurrently with the Closing for an aggregate purchase price of $155,000,000.

In connection with the Merger and the PIPE Financing, the Company received $298.2 million of gross proceeds including the contribution of $345.0 million of cash held in JAWS Spitfire’s trust account from its IPO, redemptions of JAWS Spitfire public shareholders of $182.2 million, and $155.0 million of cash in connection with the PIPE Financing. The gross proceeds were net of $19.6 million of costs incurred by JAWS Spitfire prior to the Closing. The Company incurred $19.9 million of transaction costs, consisting of banking, legal, and other professional fees, of which $19.1 million was recorded as a reduction to APIC, and the remaining $0.8 million was expensed in the condensed statements of operations. The total net cash proceeds to the Company were $278.3 million.

Pursuant to JAWS Spitfire’s Articles of Association, JAWS Spitfire’s public shareholders were entitled to elect to redeem their public shares for cash even if they had approved the Merger. As of September 24, 2021, the final day of the redemption period, public shareholders had redeemed 18,215,868 Class A ordinary shares of JAWS Spitfire for cash at the redemption price of $10.00 per share, based on funds held in the trust account for an aggregate payment of $182.2 million (the “Redemptions”).

The number of shares of common stock issued immediately following the consummation of the Merger was:

	Shares
Public shares, outstanding prior to Merger	34,500,000
Less redemption of public shares	(18,215,868)
Public shares following Redemptions	16,284,132
Shares issued in PIPE Financing	15,500,000
Public shares and PIPE Financing shares	31,784,132
Founder Shares	8,625,000
Legacy Velo3D shares (1)	142,754,694
Total shares of common stock immediately after Merger	183,163,826

(1) Upon consummation of the Merger, 175,173,445 Legacy Velo3D shares were exchanged at the exchange ratio established in connection with the Merger (0.8149 shares of Legacy Velo3D common stock for 1 share of Velo3D common stock) (the “Exchange Ratio”) and fractional shares were rounded to whole shares.

On the Closing Date, all existing redeemable convertible preferred stock and common stock of Legacy Velo3D was recapitalized into 142,754,694 shares of common stock of Velo3D. Pursuant to the terms of the Business Combination Agreement, each stockholder of Legacy Velo3D, after applying the Exchange Ratio, received shares of Velo3D common stock and the contingent right to receive up to 21,758,148 shares of Velo3D common stock (the “Earnout Shares”), for each share of Legacy Velo3D common stock, owned by such Legacy Velo3D stockholder that was outstanding immediately prior to the Closing.

The Legacy Velo3D equity holders will be entitled to the earnout, pursuant to which they will receive (i) 10,879,074 shares of common stock 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 10,879,074 shares of common stock if the shares of

39

common stock trade at or above $15.00 for 20 or more trading days in any 30 trading-day period. The earnout is subject to a five-year earnout period and early trigger upon certain change of control events.

The number of shares of redeemable convertible preferred stock and common stock presented in the financial statements included elsewhere in this Quarterly Report for periods prior to the Reverse Recapitalization have been retroactively adjusted to reflect the conversion ratio similar to the presentation of a stock-split.

Key Factors Affecting Operating Results

We believe that our performance and future success depend on many factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Quarterly Report titled “Risk Factors.”

Shipments

For the nine months ended September 30, 2021, we shipped 15 3D Printers (seven 3D Printers sold to customers and eight 3D Printers leased under the Recurring Payment model described below). For the nine months ended September 30, 2020, we shipped nine 3D Printers (seven 3D Printers sold to customers and two 3D Printers leased under the Recurring Payment model).

Commercial Launch of the Sapphire XCTM System

Our Sapphire XCTM system (“Sapphire XC”) is in the late stages of development and scheduled to begin commercial shipments at the end of fiscal year 2021. We expect the new Sapphire XC to have capacity to make parts that are 400% larger and reduce production costs per part by approximately 65% to 80% when compared to the existing Sapphire system. Prior to commercialization, we must complete final testing and manufacturing ramp-up at our in-house assembly location in Campbell, CA, and complete our assembly facilities expansion.

The XC system will be manufactured in a new 80,000+ square foot facility. On November 1, 2021, our lease for this facility commenced with a term of 65 months and a contractual obligation of $10.9 million in base rent and certain reimbursement of lessor’s operating expenses. As of September 30, 2021, we have invested $3.0 million into lab equipment and leasehold improvements. We will invest an additional $4.0 million to $7.0 million in factory equipment and leasehold improvements to begin production of our Sapphire XC systems. Any delays in successful completion of these steps may impact our ability to generate revenue from these products.

As of September 30, 2021, the manufacturing facility lease obligations was not recorded on the balance sheet, and only included under operating leases as a future contractual obligation. We are currently constructing and outfitting the building. As set forth under ASC 842, Leases, the delivery of the building has not been completed as of September 30, 2021, as the landlord was still completing improvements to the facility as per the terms of the agreement.

As of September 30, 2021, we have received customer deposits for 14 firm orders and a further 21 reservations with deposits for manufacturing slots for the Sapphire XC system. These deposits were $12.6 million and $3.2 million as of September 30, 2021 and December 31, 2020, respectively, and are included within contract liabilities. As we bring our products to market, we pay particular attention to forecasts by industry analysts and the adoption curve of new technologies. If we fail to anticipate or respond to market adoption of AM, it could result in decreased revenue.

Adoption of Additive Manufacturing with New and Existing Customers

We work closely with our customers to understand their product roadmaps and strategies. Our customers continuously develop new complex metal parts and explore solutions where production is either outsourced to contract manufacturers or performed in-house. The selection process for AM solutions is lengthy, typically 12 to 24 months, and may require us to incur costs in pursuing opportunities with no assurance that our solutions will be selected, which are included in selling and marketing expenses and research and development expenses. As a result,

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the loss of any key customers to adopt our solutions or any significant delay in commercialization of our products could impact our business and future revenue.

Customer Concentration

Our operating results for the foreseeable future will continue to depend on sales to a small group of customers. For the three months ended September 30, 2021, sales to our top three customers accounted for more than 86.2% of revenue. For the nine months ended September 30, 2021, sales to the same three customers accounted for 48.0% of our revenue. While our objective is to diversify our customer base, we believe that we could continue to be susceptible to risks associated with customer concentration. See “Risk Factors - Risks Related to Our Business - Risks Related to Our Financial Position and Need for Additional Capital - We expect to rely on a limited number of customers for a significant portion of our near-term revenue”, and see Note 2, Summary of Significant Accounting Policies - Concentration of Credit Risk and Other Risks and Uncertainties in the financial statements included elsewhere in this Quarterly Report.

Continued Investment and Innovation

Since our founding, we have been a customer-focused company working to develop innovative solutions to address customers’ needs. We believe this process has contributed significantly to our development of the most advanced metal AM systems in the world. We focus on our customers to identify the most impactful areas for research and development as we seek to further improve the capabilities of our AM solutions. We believe that continued investments in our products are important to our future growth and, as a result, we expect our research and development expenses to continue to increase, which may adversely affect our near-term profitability.

On July 1, 2021, our lease commenced for a 5,000+ square foot R&D facility. The lease has a term of 36 months and with a contractual obligation of $0.5 million in base rent and certain reimbursement of lessor’s operating expenses.

Components of Results of Operations

Revenue

Our revenue is primarily derived from our AM full-stack solution product, which includes the Flow™ print preparation software, Sapphire® metal AM printer using our support-free 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.

We sell our AM full-stack solution product through two types of transaction models: a 3D Printer sale transaction and a recurring payment transaction (“Recurring Payment”). We define our Recurring Payment transactions as operating leases. 3D Printer sale transactions are structured as a payment of a fixed purchase price for the system. The timeframe from order to completion of the site acceptance test occurs normally over three to six months. As we scale our production, we expect to reduce this timeframe. Contract consideration allocated to the 3D Printer is recognized at a point in time, which occurs upon transfer of control to the customer at shipment.

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.

The Recurring Payment transactions, which are structured as operating leases, were a small percentage of revenue during 2021 and 2020. 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.

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Support Services are included with most 3D Printer sale transactions and Recurring Payment transactions. Support services consist of field service engineering, phone and email support, preventative maintenance, and limited on and off-site consulting support. A subsequent Support Service contract is available for renewal after the initial contract period based on the then-fair value of the service, which is paid for separately. Support Service revenue is recognized over the contract period beginning with customer performance test acceptance.

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 when the customer takes title to the product. Other revenue was not material for the nine months ended September 30, 2021 and 2020.

Cost of Revenue

Our cost of revenue includes the “Cost of 3D Printers,” “Cost of Recurring Payment” and “Cost of Support Services.”

Cost of 3D Printers includes the manufacturing cost of our components and subassemblies purchased from vendors for the assembly, as well as raw materials and assemblies, shipping costs and other directly associated costs. Cost of 3D Printers also includes allocated overhead costs from headcount-related costs, such as salaries, stock-based compensation, depreciation of manufacturing related equipment and facilities, and information technology costs.

Cost of Recurring Payment includes depreciation of the leased equipment over the useful life of five years less the residual value, and an allocated portion of Cost of Support Services.

Cost of Support Services includes the cost of spare or replacement parts for preventive maintenance, installation costs, headcount-related costs such as salaries, stock-based compensation, depreciation of manufacturing related equipment and facilities, and information technology costs. The headcount-related costs are directly associated with the engineers dedicated to remote and on-site support, training, travel costs and other services costs.

Gross Profit and Gross Margin

Our gross profit is revenue less cost of revenue and our gross margin is gross profit as a percentage of revenue. The gross profit and gross margin for our products are varied and are expected to continue to vary from period to period due to the mix of products sold through either a 3D Printer sale transaction or a Recurring Payment transaction, new product introductions and efforts to optimize our operational costs. Other factors affecting our gross profit include changes to our material costs, assembly costs that are themselves dependent upon improvements to yield, and any increase in assembly overhead to support a greater number of 3D Printers sold and markets served.

Research and Development Expenses

Our research and development expenses represent costs incurred to support activities that advance the development of innovative AM technologies, new product platforms and consumables, as well as activities that enhance the capabilities of our existing product platforms. Our research and development expenses consist primarily of salaries and related personnel costs for individuals working in our research and development departments, including stock-based compensation, prototypes, design expenses, information technology costs and software license amortization, consulting and contractor costs, and an allocated portion of overhead costs, including depreciation of property and equipment used in research and development activities.

Selling and Marketing Expenses

Sales and marketing expenses consist primarily of salaries and related personnel costs for individuals working in our sales and marketing departments, including stock-based compensation, costs related to trade shows and events, advertising, marketing promotions, travel costs and an allocated portion of overhead costs, including information technology costs and costs for customer validation.

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General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related personnel costs for individuals associated with our executive, administrative, finance, legal, information technology and human resources functions, including stock-based compensation, professional fees for legal, audit and compliance, accounting and consulting services, general corporate costs, facilities, rent, information technology costs, insurance, bad debt expenses and an allocated portion of overhead costs, including equipment and depreciation and other general and administrative expenses.

Interest Expense

Interest expense primarily consists of interest incurred under our outstanding debt and finance leases.

Loss on the Convertible Note Modification

Loss on the convertible note modification relates to the convertible note agreement modification that occurred in September 2021.

Gain/(Loss) on Fair Value of Warrants

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.

Gain on Fair Value of Contingent Earnout Liabilities

Loss on valuation of contingent earnout liabilities relates to the changes in the fair value of contingent earnout liabilities related to the Earn-Out Shares, which are subject to remeasurement at each balance sheet date.

Other Income (Expense), Net

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

Income Taxes

Provision for income taxes consists of an estimate of federal and state and income taxes based on enacted federal and state tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in tax law. Due to the level of historical losses, we maintain a full valuation allowance against U.S. federal and state deferred tax assets as we have concluded it is more likely than not that these deferred tax assets will not be realized. We do not believe that there is objectively verifiable evidence that the improvement in our results of operations is sustainable to support the release of the remaining valuation allowance. As of September 30, 2021, there was no foreign income taxes or liabilities.

43

Results of Operations

Comparison of the Three Months Ended September 30, 2021 and 2020:

The following table summarizes our historical results of operation for the periods presented:

	Three months ended September 30,
	2021				2020				Change		%
	(In thousands, except for percentages)
Revenue
3D Printer	$	7,281	83.6	%	$	1,738	76.5	%	$	5,543	318.9	%
Recurring payment	596		6.8	%	146		6.4	%	450		308.2	%
Support services	834		9.6	%	389		17.1	%	445		114.4	%
Total Revenue	8,711		100.0	%	2,273		100.0	%	6,438		283.2	%
Cost of revenue
3D Printer	5,692		65.3	%	1,142		50.2	%	4,550		398.4	%
Recurring payment	418		4.8	%	102		4.5	%	316		309.8	%
Support services	1,127		12.9	%	541		23.8	%	586		108.3	%
Total cost of revenue	7,237		83.1	%	1,785		78.5	%	5,452		305.4	%
Gross profit	1,474		16.9	%	488		21.5	%	986		202.0	%
Operating expenses
Research and development	7,987		91.7	%	4,043		177.9	%	3,944		97.6	%
Selling and marketing	3,346		38.4	%	1,526		67.1	%	1,820		119.3	%
General and administrative	5,158		59.2	%	1,941		85.4	%	3,217		165.7	%
Total operating expenses	16,491		189.3	%	7,510		330.4	%	8,981		119.6	%
Loss from operations	(15,017)		(172.4)	%	(7,022)		(308.9)	%	(7,995)		113.9	%
Interest expense	(986)		(11.3)	%	(48)		(2.1)	%	(938)		1954.2	%
Loss on the convertible note modification	(50,577)		(580.6)	%	—		—	%	(50,577)		100.0	%
Gain/(loss) on fair value of warrants	(1,892)		(21.7)	%	(2)		(0.1)	%	(1,890)		94500.0	%
Gain on fair value of contingent earnout liabilities	2,014		23.1	%	—		—	%	2,014		100.0	%
Other income (expense), net	(120)		(1.4)	%	(35)		(1.5)	%	(85)		242.9	%
Loss before provision for income taxes	(66,578)		(764.3)	%	(7,107)		(312.7)	%	(59,471)		836.8	%
Provision for income taxes	—		—