Company: VLDXW
Filing Date: 2025-08-20
Form Type: 424B4
Source: 0001641172-25-024892
Chunk: 116

Company: Velo3D, Inc.
Filing Date: 2025-08-20
Form: 424B4
Chunk 116
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 the Reverse Recapitalization
and pursuant to the Business Combination Agreement, eligible former Legacy Velo3D equity holders are entitled to receive the Earnout
Shares upon the Company achieving certain Earnout Triggering Events (as described in the Business Combination Agreement). 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 consolidated 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 a five-year earnout
period (the “Earnout Period”), 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 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.

Fair Value Measurements

We have 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.

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. See Note 9, Long-Term Debt for further information.

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Material Weaknesses in Internal Control over Financial Reporting

As described Part II, Item 9A. “Controls and Procedures”