VELO 10-K & 10-Q changes, risk factors and insider trading

Our limited operating history and rapidhistory growthof makesoperating evaluatinglosses make it difficult to evaluate our current business and future prospects difficultprospects, and we may increasenot theachieve investmentor risk.maintain profitability.

Much of our growth has occurred in recent periods. Our limited operating history mayand rapid growth make it difficult to evaluate our current business and our future prospects,prospects asand wemay continueincrease tothe growrisk of an investment in our business.securities. OurMuch of our growth has occurred in recent periods, and our ability to forecast our future operating results is subject to a number of uncertainties, including our ability to plan for and model future growth. We have encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly evolving industries as we continue to grow our business. If our assumptions regarding these uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, our business could suffer, and the trading price of our securities may decline.expectations.

It is difficult for us to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. If actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial positioncondition could be materially adversely affected. Furthermore, if our future growth and operating performance fail to meet investor or analyst expectations, or if we have future negative cash flow or losses resulting from our investments in acquiring customers or expanding our operations, this could make it difficult for investors to evaluate our current business and our future prospects and could have a material adverse effect on our business, financial condition and results of operations, as well as cause the trading price of our securities to decline.

Our 3D printer sales occur under purchase orders that are largely governed by our terms and conditions of sale. Our terms and conditions with SpaceX are consistent with all other customers and permit the customer to terminate our services at any time (subject to notice and certain other provisions). Accordingly, the sudden loss of SpaceX or one or more of our other significant customers, the renegotiation of a significant customer contract, a substantial reduction in their orders, their failure to exercise customer options, their unwillingness to extend contractual deadlines if we are unable to meet production requirements, their inability to perform under their contracts or a significant deterioration in their financial condition could harm our business, results of operations and financial condition. If we fail to perform under the terms of these agreements, the customers could seek to terminate these agreements and/or pursue damages against us, including liquidated damages in certain instances, which could harm our business.

We expect to require additional capital to fund our operations in the near-term, and thissuch capital might not be available on acceptable terms, if at all.

We expect that we will need to engage in additional financings to fund our operations and satisfy our substantial debt obligations in the near-term as well as to respond to business challenges and opportunities, including the need to repay our senior secured notes due 2026, as amended (the "Secured Notes"),Notes, provide working capital, continuing to fund payroll, develop new features or enhance our products, expand our manufacturing capacity, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, subject to our compliance with the covenants in the Secured Notes, we expect we will need to engage in equity or debt financings to secure additional funds, including seeking additional capital from public or private offerings of our equity or debt securities, electing to repay, restructure or refinance our existing indebtedness, or electing to borrow additional amounts under new credit lines or from other sources. We may also seek to raise additional capital, including from offerings ofHowever, our equity or debt securities on an opportunistic basis when we believe there are suitable opportunities. Our recent and projected financial results, and the related conditions that raise substantial doubt about our ability to continue as a going concern, and general concerns among potential investors and creditors about our financial well-being may make taking such actions on commercially reasonable terms especially difficult.

If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. Our ability to raise additional capital when needed may be adversely affected by external factors beyond our control, including changes in the political climate, geopolitical actions, changes in market interest rates or foreign exchange rates, market volatility in the trading prices for our common stock and other technology companies, a recession, depression, high inflation or other sustained adverse market event, and the outbreak of epidemic disease. If we are unable to obtain adequate financing or financing on terms satisfactory to us in the near term, we will not be able to continue operations. If we are otherwise unable to obtain additional financing when we require it,financing, our ability to respond to business challenges and opportunities could be significantly impaired, and our business may be adversely affected.affected and we may be required to liquidate and/or file for bankruptcy protection.

We use, and plan to continue using, different pricing models for different products. For example, we lease our 3D printersprinter to certain customers and we also use a sale and utilization fee (variable consideration) model with certain other customers. Our sale and utilization fee model is still relatively new to some of our customers and may not be attractive to them, especially in regions where the model is less common. If customers resist this or any other new pricing models we introduce, our revenue may be adversely affected, and we may need to restructure the way in which we charge customers for our products.

Our products and services, and product outputs from CMs who use our 3D printer and parts systems, are distributed in more than 25a dozen countries around the world.world, primarily in North America and Europe. Accordingly, we face significant operational risks from doing business internationally. For current and potential international customers whose contracts are denominated in U.S. dollars, the relative change in local currency values creates relative fluctuations in our product pricing. These changes in international end-user costs may result in lost orders and reduce the competitiveness of our products in certain foreign markets. As we realize our strategy to expand internationally, our exposure to currency risks may increase.

In addition, additive manufacturing has been identified by the U.S. government as an emerging technology and is currently being further evaluated for national security impacts. We expect additional regulatory changes to be implemented that will result in increased and/or new export controls related to 3D printing technologies, components, and related materials and software. These changes, if implemented, may result in our being required to obtain additional approvals and/or licenses to sell 3D printersprinter and parts in the global market.

We may not manage our growth effectively. For example, during the year ended December 31, 2024, we experienced less annual revenue growth than expected due to the impact of delayed shipmentsshipments, the going concern with the Company, and customer order delays, resulting in an overall decrease in system sales and backlog in the fourth quarter of 2024.As2024. As a result, we determined that our focus on revenue growth had come at the expense of our cash flow and profitability and our commitment to the highest level of customer service and, in Octoberthe 2023,first quarter of 2025, we made a strategic decision to realign our operations to pivot from emphasizing revenue growth to optimizing our free cash flow,profitability, maximizing customer success, reducing expenditures, and improving our operational efficiency. We are undertaking expense reduction and cash savings initiatives as part of a company-wide restructuring and strategic realignment plan to help conserve working capital.

In August and October 2024, we announced a reduction in force to streamline our business operations, reduce costs and create further operating efficiencies, which combined impacted approximately 45% of our workforce. In addition, we have closed onethree facilityfacilities, andmaintaining continueonly the processheadquarters oftoday closingin downFremont, others.California. In connection with these actions, we have incurred and may continue to incur restructuring costs in the near term, including cash expenditures related to severance payments and other benefits. These actions may result in unintended consequences, including employee attrition beyond our intended reduction in force, damage to our corporate culture and decreased employee morale among our remaining employees, diversion of management attention, adverse effects to our reputation as an employer, loss of continuity, institutional knowledge and expertise, and potential failure or delays to meet operational and growth targets. Further, our business may ultimately not be more efficient or effective and we may be unable to achieve anticipated operating enhancements or cost reductions, which would adversely affect our business, competitive position, operating results and financial condition.

We have engaged with third-party auditors to identify risk factors based on the NIST SP 800-171 framework (which provides recommended requirements for protecting the confidentiality of controlled unclassified information) that affect data security within our internal network and external products.products, and a foundation requirement for Cybersecurity Maturity Model Certification (CMMC 2.0). These audits include compliance reviews and penetration tests where applicable. A prioritized list of remediations to strengthen our security posture are in progress, and there are risks associated with unaddressed vulnerabilities in the meantime including risk of data loss, malware, and ransomware. We have taken steps to protect customer data within our products by applying strong encryption to files both in transit and at rest.

The tax regimes we are subject to or operate under, including income and non-income taxes, are unsettled and may be subject to significant change. Changes in tax laws, regulations, or rulings, or changes in interpretations of existing laws and regulations, could materially affect our financial position and results of operations. For example, the 2017 Tax Cuts and Jobs Act (the “Tax Act”) made broad and complex changes to the U.S. tax code, including changes to U.S. federal tax rates, additional limitations on the deductibility of interest, both positive and negative changes to the utilization of future net operating loss (“NOL”) carryforwards, allowing for the expensing of certain capital expenditures, and putting into effect the migration from a “worldwide” system of taxation to a more territorial system. Future guidance from the IRS with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) has already modified certain provisions of the Tax Act. The Inflation Reduction Act of 2022 (the “IRA”), enacted on August 16, 2022, further amended the U.S. tax code, imposing a 15% minimum tax on “adjusted financial statement income” of certain corporations as well as an excise tax on the repurchase or redemption of stock by certain corporations, beginning in the 2023 tax year. The One Big Beautiful Bill Act (the "OBBBA"), enacted on July 4, 2025, makes permanent several provisions that were temporary under the Tax Act, reducing uncertainty. The OBBBA enhances deductions and expensing options, such as the permanent 100% bonus depreciation and increased deduction limits on certain business expenses, which were more restrictive under the Tax Act. The OBBBA also makes some changes to the international tax provisions. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act, the IRAIRA, the OBBA, or any newly enacted federal tax legislation. The issuance of additional regulatory or accounting guidance related to the Tax ActAct, the Cares Act, the IRA and the OBBBA could materially affect our tax obligations and effective tax rate in the period issued. As we continue to expand internationally, we will be subject to other jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have an adverse impact on our liquidity and results of operations. In addition, the authorities in several jurisdictions could review our tax returns and impose additional tax, interest and penalties, which could have an impact on us and on our results of operations. In addition, many countries in Europe and a number of other countries and organizations, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could significantly increase our tax obligations in the countries where we do or intend to do business or require us to change the manner in which we operate our business.

In recent years, the United States and other significant markets have experienced cyclical downturns and worldwide economic conditions remain uncertain, including as a result of outbreaks of epidemic diseases (including COVID-19 and variants), supply chain disruptions, the war in Ukraine and the war in Israel, the ongoing conflict with Iran, instability in the U.S. and global banking systems, rising fuel prices, increasing interest rates or foreign exchange rates, changes in U.S. presidential administrations and government policies and priorities and, as discussed in more detail below, high inflation and the possibility of a recession. Economic uncertainty and associated macroeconomic conditions make it extremely difficult for our customers and us to accurately forecast and plan future business activities, and could cause our customers to slow spending on our products, which could delay and lengthen sales cycles.

A major earthquake, fire, tsunami, hurricane, cyclone or other disaster, such as a pandemic, major flood, seasonal storms, nuclear event or terrorist attack affecting our facility or the area in which it is located, or affecting those of our suppliers or customers, could significantly disrupt our or their operations and delay or prevent product shipment or installation during the time required to repair, rebuild or replace our or their damaged manufacturing facilities. Moreover, extreme weather and other natural disasters may become more intense or more frequent. Any resulting delays from these events could be lengthy and costly. If any of our suppliers’ or customers’ facilities are negatively impacted by such a disaster, production, shipment and installation of our 3D printing machines could be delayed, which can impact the period in which we recognize the revenue related to that 3D printing machine sale. Additionally, customers may delay purchases of our products until operations return to normal. Even if we are able to respond quickly to a disaster, the continued effects of the disaster could create uncertainty in our business operations. In addition, concerns about terrorism, the effects of a terrorist attack, political turmoil, labor strikes, war (including Iran, the Ukrainian - Russia and the Israel - Hamas conflicts) or the outbreak of epidemic diseases (including the outbreak of COVID-19 and variants) could have a negative effect on our operations and sales.

In particular, our operations are subject to U.S. and foreign anti-corruption and trade control laws and regulations, such as the FCPA and the Bribery Act, export controls and economic sanctions programs, including those administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), the State Department’s Directorate of Defense Trade Controls (“DDTC”) and the Bureau of Industry and Security (“BIS”) of the Department of Commerce. As a result of doing business in foreign countries and with foreign customers, we are exposed to a heightened risk of violating anti-corruption and trade control laws and sanctions regulations. In February 2025, President Donald J. Trump issued an executive order directing the U.S. Department of Justice to pause enforcement of the FCPA and to issue new enforcement guidelines that take into consideration U.S. national security and the competitiveness of U.S. companies abroad. It is unclear how this presidential directive may affect our industry as a whole or our business in particular. On June 10, 2025, the U.S. Department of Justice issued new enforcement guidelines which set forth an approach to FCPA enforcement that is explicitly aimed at promoting U.S. economic interests and national security. It is unclear how these new guidelines may affect our industry as a whole or our business in particular.

Our Sapphire Family of Printers give our customers who are in space, aviation, defense, automotive, 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.

We aim to enable our customers to build resilient supply chains for production parts across industries with a clear, reliable path from concept to production through our Rapid Production Solutions ("RPS") offering. RPS utilizes our deep engineering expertise, cutting-edge technology and a fleet of Sapphire XC large-format metal 3D printersprinter and parts to accelerate path to production for our customers.

Notwithstanding the recent debt and equity transactions, as described in “—Liquidity and Capital Resources” and in Note 11, Description of Business and Basis of Presentation—Going Concern, Financial Condition and Liquidity and Capital Resources in the notes to the audited consolidated financial statements included elsewhere in this Annual Report, there continues to be a substantial doubt about our ability to continue as a going concern. We do not have sufficient liquidity to meet our operating needs and satisfy our obligations for at least 12 months from the nextissuance 12date months.of the consolidated financial statements included in this Annual Report on Form 10-K.

In December 2023, our Board of Directors commenced a strategic business review process to explore alternatives in order to maximize stockholder value. The potential strategic alternatives explored or evaluated by our Board of Directors included a potential merger, business combination or sale. The Company's strategic review was concluded on December 24, 2024 at the close of the debt for equity exchange transaction described below On December 9, 2024, Arrayed Notes Acquisition Corp. ("Arrayed"), a subsidiaryDelaware corporation controlled by Arun Jeldi, the Chief Executive Officer and a director of Arrayedthe Additive, Inc.Company, purchased the Senior Secured Notes due 2026 from High Trail Investments ON LLC and HB SPV I Master Sub LLC, the Note Holders. Furthermore, on December 9, 2024, the Company and the Note Holders entered into a forbearance agreement where the Note Holders forbore from taking any enforcement action as a result of the occurrence and/or continuation of any specified events of default.

On December 24, 2024, the Company and Arrayed entered into a debt for equity exchange transaction where the Company issued 185,151,33312,343,423 shares of the Company’s common stock, in exchange for the cancellation of $22.4 million in principal amount of the Company’s Secured Notes plus $0.4 million of accrued interest on the Notes. Arrayed continues to hold $5.0 million in principal amount of the Notes, and as a result of the exchange transaction, became the owner of approximately 95% of the Company’s issued and outstanding common stock.stock as of such date. The Company's strategic review was concluded on December 24, 2024, at the close of the debt for equity exchange transaction.

On January 7, 2025, the Company issued a Senior Secured Convertible Promissory Note in the principal amount of $5,000,000 (the "January Note") to Thieneman Properties, LLC, an Indiana limited liability company. The January Note iswas payable in full on April 7, 2025 in the amount of $5,750,000 and if not paid on or prior to such date, willwould continue to accrue interest at the same rate until paid. The January Note maycould be prepaid in whole or in part at any time without penalty or premium and iswas convertible in the event of default into shares of the Company’s common stock, at a fixed conversion price of $1.56$23.40 per share.

On February 10, 2025, the Company issued a Senior Secured Convertible Promissory Note in the principal amount of $10,000,000 (the "February Note") to Thieneman Construction, Inc, an Indiana corporation, to be funded in two tranches of $5,000,000. The February Note iswas payable in full on the date that is six months from the date such tranche was funded, in the amount of $5,750,000 and if not paid on or prior to such date, willwould continue to accrue interest at the same rate until paid. The outstanding principal amount of the February Note iswas convertible into shares of the Company's common stock upon the occurrence of the Company’s successful listing of shares of its common stock on a national securities exchange or the occurrence and during the continuation of an event of default, into common stock at a fixed conversion price of $1.00$15.00 per share.

2024 Reverse Stock Split

Effective June 13, 2024, we implemented a 1-for-35 reverse stock split of our issued and outstanding common stock. The reverse stock split was effected by the filing of a certificate of amendment (the “June 2024 Amendment”) to our Certificate of Incorporation with the Secretary of State of the State of Delaware, without any change to par value. The June 2024 Amendment became effective upon such filing. No fractional shares were issued in connection with the reverse stock split as all fractional shares were rounded up to the next whole share. All share and per share amounts of our common stock listed in this Annual Report have been adjusted, as applicable, to give effect to the reverse stock split.

Bookings ($ in millions): Bookings ($ in millions) are defined as a confirmed order for a 3D printer system and printed parts in contracted dollars.

Backlog ($ in millions): Backlog ($ in millions) is defined as the unfulfilled 3D printer systems and printed parts to be delivered to customers in contracted dollars as of period end.

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 Financial Position and Need for Additional Capital–We expect to rely on a limited number of customers for a significant portion of our near-termrevenue, revenue”and adverse developments affecting those customers or their industries could materially harm our business, financial condition and results of operations", and see Note 2, Summary of Significant Accounting Policies–Concentration of Credit Risk and Other Risks and Uncertainties, in the notes to the audited consolidated financial statements included elsewhere in this Annual Report.

General economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism (including, for example, the ongoing military conflicts in Israelthe Middle East, including Israel, and in Ukraine and the economic sanctions related thereto), have added uncertainty in timing of customer orders and supply chain constraints. In 2024,2024 and 2025, we implemented a number of supply chain and manufacturing improvements in response and intend to continue to focus on driving further operational improvements during 20252026 to reduce operating costs.

See “Risk Factors - Risks Related to Our Business and IndustryOperations—MarketOur conditions,existing economicand uncertaintyplanned orglobal downturnsoperations subject us to a variety of risks and uncertainties that could adversely affect our businessbusiness, our suppliers and our operating resultsresults.” and “—We may be adversely affected by the effects of inflation or possible stagflation.”

Our revenue is primarily derived from our AM fully integrated hardware and software solution based on our proprietary L-PBF technology. Sapphire, Sapphire 1MZ, Sapphire XC and Sapphire XC 1MZ metal AM printer using our L-PBF technology and Assure quality validation software (collectively referred to as the “3D Printer and parts”). 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.

3D Printer and parts sale transactions - fixed purchase price model. The timeframe from order to completion of the site acceptance test usually occurs normally over three to nine 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 PrintersPrinter and parts 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.

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

Cost of 3D PrintersPrinter and parts 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 PrintersPrinter and parts 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 RPS includes cost of raw materials, typically metal powder feedstock, direct and indirect labor, depreciation of 3D printers and other related equipment and facilities, utilities such as electricity and specialty gases, shipping costs and other directly associated costs. Cost of RPS is included under 3D Printer and parts cost of revenue 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.

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 PrintersPrinter sold and markets served.

LossGain (loss) on Debt Extinguishment

No provision for federal and state income taxes was recorded for any periods presented due to projected losses, and we maintained a full valuation allowance on the deferred tax assets as of December 31, 2024 and 2023. 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 December 31, 20242025 and 2023,2024, there were immaterial foreign income taxes or liabilities.

Total revenue for the years ended December 31, 20242025 and 20232024 was $41.0$46.0 million and $77.4$41.0 million, respectively. Total revenue for the year ended December 31, 20242025 decreasedincreased by $36.4$5.0 million, or 47.1%,12.1%, from the year ended December 31, 2023.2024. Excluding the other revenue for the year ended December 31, 2024, related to the licensing agreement rights of $5.0 million to a customer (SpaceX), the total revenue for the year ended December 31, 2025 increased by $9.4 million or 26.1%, from the year ended December 31, 2024.

3D Printer and parts sales were $25.4$39.2 million and $68.9$25.4 million for the years ended December 31, 20242025 and 2023,2024, respectively, which was primarily attributed to an overall decreaseincrease in higher average selling price of system sales and backlog in the fourth quarter of 2023, offset in part by sales of the higher priced Sapphire 1MZ, Sapphire XC and Sapphire XC 1MZ systems throughout the first three quarters of 2023.2025. The negative revenue performance wasincreased due to lowertiming of systems sold, mix of lower production volumes and discounted system pricing offset by our change in product mix to include more higher priced systems as discussed previously, resulting in aan decreaseincrease in the average selling price. The 3D Printer and parts sales also included parts and consumables revenue.

OtherOur Support Service revenue was $5.0$6.2 million and $0$9.6 million for the years ended December 31, 20242025 and 2023,2024, respectively. The increase in other revenuedecrease was primarily attributed to athe licensing agreement with SpaceXdecrease in Septembersupport 2024,services where SpaceX obtained a non-exclusive license to certain Velo3D patents and technologies for its internal uses only.renewals.

As part of our Strategic Realignment, we have implemented new go-to-market and service strategies to rebuild our bookings and backlog pipeline. As we rebuild our bookings and backlog, we expect the demand for the Sapphire, Sapphire 1MZ, Sapphire XC and Sapphire XC 1MZ to increase our revenue in the future. We expect Recurring Payment revenue to remain flat or decrease as we continue to shift our focus to 3D Printer system sales.sales and RPS for printed parts. We expect our Support Service revenue to increase as the number of systems we have in the field increases. As of December 31, 2024,2025, our backlog for firm orders was $16$31 million for 3D Printers.Printer and printed parts. Our focus for revenue has shifted to ensuring customer success andsuccess, improving system reliability to strengthen our existing customer network andnetwork, developing new customer networks to increase demand.demand and expanding our RPS for printed parts.

Revenue trends from our largest customer have historically been driven by the timing of its major orders for 3D PrintersPrinter and parts and the timing of the shipments under those orders. We shipped our first Sapphire system to our largest customer in 2018, and as of December 31, 2024,2025, we have shipped toover this customer 26 in total (Sapphire and126 Sapphire XCfamily systems).of systems. We expect our largest customer to remain an important relationship going forward. However, the largest customer contribution's as a percentage of our total revenue will depend on the growth of our customer base. As of December 31, 2024,2025, over 50% of our customers have multiple Sapphire family of systems.

Total cost of revenue for the years ended December 31, 20242025 and 20232024 was $43.1$53.4 million and $103.7$43.1 million, respectively, aan decreaseincrease of $60.6$10.3 million, or 58.5%.23.9%.

DuringCost of 3D Printer and parts was $47.2 million and $34.2 million, for the yearyears ended December 31, 2025 and 2024, respectively, included a non-routine $7.0 million, and $7.2 million inventory adjustment for excess and obsolete inventory for the costyears ended December 31, 2025 and 2024, respectively. The increase of the$13.1 Sapphiremillion 1MZ,was Sapphireprimarily XC,due andto Sapphire XC 1MZ systems included lowerincreased factory overhead costs to scale up operations,operations in RPS, production engineering development costs, and lower costs to expedite shipping for manufacturing materials and assemblies related to unlocking the supply chain disruptionto insupport the global2025 markets.production. As we gain experience with Sapphire XC and Sapphire 1MZ XC production, we expect to further lower our material costs and reduce labor and overhead expenses per unit. We expect the cost to manufacture new systems in 2026 to improve as a result of overhead and fixed cost reduction efforts implement in late 2025.

Cost of Recurring Payment was $0.9less than $0.1 million and $1.3$0.9 million for the years ended December 31, 20242025 and 2023,2024, respectively. This decrease of $0.4$0.9 million was due to a decrease in depreciation of thefewer equipment on lease and allocable Cost of Support Services as a result of less 3D PrintersPrinter and parts in service in 20242025 compared to 2023.2024.

There are numerous factors that affect our business and results of operations, many of which are beyond our control. Refer to Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, which contains descriptions of significant risks that have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. ThereExcept as set forth below, there have been no material changes to risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

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. This discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and our unaudited condensed consolidated interim 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” herein. During the fiscal year ended December 31, 2025, we identified immaterial errors in our previously issued financial statements. We have corrected the amounts as presented in this Item 2 accordingly. Refer to Note 2, Summary of Significant Accounting Policies to the unaudited condensed consolidated interim financial statements included in Part I of this Quarterly Report for additional information.information regarding the prior-period corrections.

On February 10, 2025, the Company issued a Senior Secured Convertible Promissory Note in the principal amount of $10,000,000 (the "February Note") to Thieneman Construction, Inc.Inc., an Indiana corporation, to be funded in two tranches of $5,000,000. The February Note bearsbore interest at a rate of 30.0% per annum, iswas payable in full on the date that is six months from the date such tranche was funded,funded (the first tranche and second tranche were received by the Company on February 10, 2025 and March 20, 2025, respectively), in the amount of $5,750,000 and given it was not paid on or prior to such date, willwould continue to accrue interest at the same rate until paid. The outstanding principal amount of the February Note iswas convertible into shares of the Company's common stock upon the occurrence of the Company’s successful listing of shares of its common stock on a national securities exchange or the occurrence and during the continuation of an event of default, into common stock at a fixed conversion price of $15.00 per share.

On February 24, 2025, the Company entered into February Warrant Exchange Agreements with each of: (i) Highbridge Tactical Credit Master Fund, L.P. (“HM”); (ii) Highbridge Tactical Credit Institutional Fund, Ltd. (collectively with HM, the “Highbridge Holders”); (iii) Anson Investments Master Fund LP (“AMF”); (iv) Anson East Master Fund LP (collectively with AMF, the “Anson Holders”); (v) High Trail Investments ON LLC (“HTI”), and (vi) HB SPV I Master LLC (together with HTI, the “High Trail Holders”), pursuant to which: (a) the Highbridge Holders and the Anson Holders agreed to exchange an aggregate of 60,150 registered warrants issued in April 2024 and an aggregate of 99,048 registered warrants issued in August 2024, and (b) the High Trail Holders agreed to exchange an aggregate of 151,808 unregistered warrants issued in April 2024 and July 2024, and an aggregate of 19,048 registered warrants issued in December 2023, for an aggregate of 990,159 shares (the “Acquired Shares”) of the Company’s common stock, respectively, equating in each case to an exchange ratio of three Acquired Shares for each warrant.

On August 14, 2025, the Company amended the January Note (the "January Note Amendment"), which amended certain provisions of the January Note, including: an extension of the maturity date under the January Note to February 14, 2027; a reductionsreduction of the interest rate under the January Note to 12%; and an adjustment of the fixed conversion price to 16.38$16.38 per share. On August 14, 2025, the Company also amended the February Note (the “February Note Amendment”) which, amended certain provisions of the February Note, including: an extension of the maturity dates for each tranche under the February Note to February 14, 2027; a reduction of the interest rate under the February Note to 12%; and an adjustment of the fixed conversion price to 10.50$10.50 per share. The Company has evaluated that the note amendments are both treated as a debt modification under ASC Topic 470, Debt.

On June 27, 2025, the stockholders of the Company, approved an amendment (“the “Written Consent Amendment”) to the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation’Incorporation”), to remove Section 1 of Article VIII of the Certificate of Incorporation, which prohibited stockholder action by written consent without a stockholder meeting. On July 1, 2025, the Written Consent Amendment was filed with the Secretary of State of the State of Delaware, and the Written Consent Amendment became effective on such date. As a result of the Written Consent Amendment, stockholders are now permitted to act by written consent to the extent permitted under the Delaware General Corporation Law.

On April 27, 2026, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cantor Fitzgerald & Co., as underwriter (the “Underwriter”), relating to the offer and sale in a firm commitment underwritten registered direct offering (the “April 2026 Offering”) of 3,571,428 shares (the “Shares”) of the Company’s common stock, par value $0.00001 per share. The Shares were sold at a public offering price per share of $14.00. The gross proceeds from the Offering were approximately $50 million, before deducting underwriting discounts and commissions and other offering expenses.expenses of $3.4 million. The Company currently intends to use the net proceeds of the Offering for working capital and general corporate purposes.

Notwithstanding the recent debt and equity transactions, as described inunder “—Liquidity and Capital Resources” and in Note 1 Description of Business and Basis of Presentation—Going Concern, Financial Condition and Liquidity and Capital Resources in the notes to thethese unaudited condensed consolidated interim financial statements included elsewhere in this Quarterly Report,statements, management believesconcluded that substantial doubt existscontinues to exist about the Company's ability to continue as a going concern. WeAlthough dothe notCompany havesignificantly sufficientimproved its liquidity position during the six months ended June 30, 2026 through equity financings, debt conversions and debt repayments, management expects that additional financing will be required to meetfund our operating needsoperations and satisfy our debt obligations forduring the assessment period due to continued operating losses, negative operating cash flows and ongoing working capital requirements. There can be no assurance that additional financing will be available on acceptable terms, or at leastall. If the next 12 months. The Company willis needunable to engage inobtain additional financingsfinancing toor fundotherwise ourimprove operations,its continueliquidity, to fund payroll for employees, and satisfy our obligations in the near term. Without such additional funding, we will not be able to continue operations andit may be required to significantly reduce or discontinue operations, sell assets, liquidatepursue and/strategic alternatives, restructure its obligations or fileseek forprotection bankruptcy.under applicable bankruptcy laws.

Our operating results for the foreseeable future will continue to depend on sales to a small group of customers. For the three months ended MarchJune 31,30, 2026 and 2025, sales to the top three customers accounted for 60.9%45.9% and 70.7%,65.2%, respectively, of our revenue. Of the top three customers for the three months ended MarchJune 31,30, 2026, all three customers were different from the top three customers for the comparable period in 2025. For the six months ended June 30, 2026 and 2025, sales of the top three customers accounted for 33.9% and 54.6%, respectively, of our revenue. Of the top three customers for the six months ended June 30, 2026, all three customers were different from the top three customers for the comparable period in 2025.

General economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism (including, for example, the ongoing military conflicts in the Middle East, including Israel and in Ukraine and the economic sanctions related thereto), have added uncertainty in timing of customer orders and supply chain constraints. In 2025, we implemented a number of supply chain and manufacturing improvements in response and intend to continue to focus on driving further operational improvements during 2026 to reduce operating costs.

NoThere provisionwas forminimal federal and state income taxestax wasexpense (benefit) recorded forduring anythe periods presented due to projected losses, and we maintained a full valuation allowance on the deferred tax assets as of MarchJune 31,30, 2026 and 2025.

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025:

Total revenue for the three months ended MarchJune 31,30, 2026 and 2025 was $13.8$20.7 million and $9.3$13.6 million, respectively, an increase of $4.5$7.1 million, or 48.2%.52.3%.

3D Printer and parts sales were $12.0$19.0 million and $7.5$12.1 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, an increase of $4.5$6.9 million. The increase in revenue was primarily attributed to an increase in the average selling price, anproduct increase in the number of systems sold,mix, and an increase in RPS revenues related to an increase in production volume for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The 3D Printer and parts sales also included printed parts and consumables revenue.

Recurring Payment revenue, structured as an operating lease, was $0.0 million for the three months ended MarchJune 31,30, 2026 and $0.0less than $0.1 million for the three months ended MarchJune 31,30, 2025.

Our Support Services revenue was $1.3$1.5 million and $1.8$1.4 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, aan decreaseincrease of $0.5less than $0.1 million. Support Services revenue is primarily due to services provided to customers based on the installed base requiring preventive maintenance and other support services.

Other revenue was $0.5$0.2 million and less than $0.1 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, an increase of $0.5$0.1 million.

As part of our Strategic Realignment started in 2025, we have implemented new go-to-market and service strategies to rebuild our bookings and backlog pipeline. As we rebuild our bookings and backlog, we expect the demand for the Sapphire, Sapphire 1MZ, Sapphire XC and Sapphire XC 1MZ to increase our revenue in the future. We expect Recurring Payment revenue to decrease as we continue to shift our focus to 3D Printer system sales and RPS for printed parts. We expect our Support Service revenue to increase as the number of systems we have in the field increases. As of MarchJune 31,30, 2026 our backlog for firm orders was $30$31 million for 3D Printer and printed parts. Our focus for revenue has shifted to ensuring customer success, improving system reliability to strengthen our existing customer network, developing new customer networks to increase demand and expanding our RPS for printed parts.

Cost of 3D Printer and parts was $10.2$15.8 million and $7.5$14.0 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The increase of $2.7$1.8 million wasprimarily duereflected todifferences in product mix and an increase in theRPS number of system sold, offset by efficiency improvements in costs for overhead and laborvolume for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. We expect themanufacturing cost to manufacture new systems and to operate the RPS programs in 2026costs to improve as a percentage of revenue as a result of overhead and fixed cost reduction effortsinitiatives implementimplemented in late 2025 and increases inincreased production volumevolumes leading to economies of scale cost efficiencies.scale.

Cost of Support Services was $1.2$0.5 million and $1.1$1.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Cost of Support Services increaseddecreased by $0.1$0.7 million, dueprimarily toreflected higherlower labordirect customer support costs toand scalechanges thein fieldemployee serviceresponsibilities engineeringsupporting supportexisting teams.customers.

We continue to focus on reducing our material costs through improved purchasing and inventory planning, accelerating production cycle times and improving efficiencies on the production floorfloor. These operational initiatives are expected to lowercontinue ourreducing costmanufacturing ofcosts revenue.and improve gross margins over time.

Total gross profit (loss) was $2.4$4.4 million and $0.7($1.6) million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. As a percentage of revenue, the gross margin was 17.2%21.5% and 7.5%(11.7)% for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The increaseimprovement inprimarily gross profit forreflected the threeimpact monthsof endeda Marchprospective 31, 2026 was primarily attributable to the an increaserefinement in the average selling price, an increase in the numberallocation of systemscertain sold,labor and anoverhead increasecosts inbetween RPScost of revenue and operating expenses to align with current operational activities, as well as efficiencieshigher inaverage improvingselling ourprices, overheada more favorable product mix, increased RPS revenue, and labormanufacturing costs during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.efficiencies.

We expect to accelerate production cycle times and further improvingimprove efficiencies on the production floor to lower our cost of revenue,floor, which we expect will continue to improve our gross profit and gross marginsmargin induring the second half of 2026. Due to the aforementionedOngoing trends in component costs, our gross profittariffs and grosssupplier marginpricing may continue to be negatively impactedimpact gross profit until our financial condition improves.

Research and development expenses were $2.7$4.3 million and $2.1$2.6 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, an increase of $0.6$1.7 million. The increase in research and development expenses was driven by a $0.8$0.6 million increase in headcount, salaries and employee-related expenses, an increase of $0.1$0.6 million in stock-based compensation, offsetand byan a decreaseincrease of $0.3$0.5 million in other costs, primarily drivenreflecting byhigher afacility-related decreasecosts inand softwareoverhead costs.allocations. Research and development projects in 2026 are focused primarily on projects aligned with increasing the reliability experience for customers.

Selling and marketing expenses were $1.7$2.9 million and $1.1$1.5 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, an increase of $0.6$1.4 million. The increase was attributable to $0.7 million increase in facility and overhead costs, an increase of $0.5$0.3 million in headcount, salaries and employee-related expenses, a $0.2$0.3 million increase in stock-based compensation.compensation, and a $0.2$0.1 million increase in marketing costs and initiatives spending, offset by $0.3 million in other costs.spending.

General and administrative expenses were $4.9$8.3 million and $9.1$6.0 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, aan decreaseincrease of $4.2$2.4 million. The decreaseincrease was attributable to aan $2.5increase of $1.2 million decreasein legal and professional services, an increase of $1.0 million in facility and overhead costs and a $0.3 million increase in stock-based compensation, offset by a decrease of $0.8 million in legal, professional fees and general and administrative expenses, decrease of $0.6 million in facilities and other general and administrative expenses, and decrease of $0.3$0.1 million in headcount, salaries and employee-related expenses.

Interest expense was $0.7$0.2 million and $1.1$1.6 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease was due to the reduction of the outstanding balances in the Senior Secured Notes and Convertible Secured Notes.

Gain (loss)Loss on Fair Value of Warrants

The gain (loss) on fair value of warrants was $0.0less than $0.1 million and ($1.0)$0.0 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The change was related to the absencenon-cash fair value change of the warrant cancelationsliabilities ordriven revaluationsby the relative change in theour firststock quarter of 2026.price.